Republic of the Philippines

Complainants

-versus-

Respondents

POSITION PAPER

COMES NOW the Complainants, (hereinafter referred to as the

“Complainants” for brevity), by and through the undersigned counsel,
most respectfully submits this Position Paper.

PREFATORY STATEMENT

This is a complaint for non-payment of separation pay in accordance

with Art. 298 of the Labor Code, as renumbered, filed by the Complainants.

BRIEF STATEMENT OF THE FACTS

1. The subject matter of this case are the twelve (12) security guards
employed by Respondent.
2. Respondent is a security agency granted authority to operate as such
by the National Police Commission on under Private Security Agency
Regular License to Operate No..

3. The Complainants are all regular employees of Respondent as

evidenced by a Duty Detail Order issued by Respondent1.
4. Due to this license to operate as a private security, Respondent hired
the Complainants as its staff of security guards. The Complainants
started working for Respondent as follows:

5. Sometime in 2018, the Complainants have been hearing talks that the
management of Respondent intend to incorporate under Batas
Pambansa Blg. 68, otherwise known as the Corporation Code.
6. The suspicions of the Complainants have been confirmed when
representatives of the management of Respondent communicated to
the Complainants that it will indeed incorporate with the assurance
that the Complainants will be absorbed by the new company. The
said representatives assured the Complainants that Respondent and
the new company are just one and the same and that the latter will
just be a continuation of the first.
7. True to their word, Respondent incorporated into. On Respondent
was authorized by the National Police Commission to operate as a
private security agency under Private Security Agency Regular
License To Operate No.2.
8. Upon the incorporation of Respondent Mega, the Complainants were
then absorbed by Respondent Mega3.
9. However, upon the incorporation of Respondent Mega, Respondent
ceased its operations and have officially terminated the employment

1 A copy of Duty Detail Order No. 2018-02-050 issued by Security Agency is attached herein as Annex “B”
2A copy of Private Security Agency Regular License To Operate No. PSA-R-14-165296-1713 is attached
herein as Annex “C”
3Copies of the identification cards of the Complainants issued by Respondent Mega are attached herein
as Annex “D series”

 of the Complainants. Despite the termination of said employment, no

separation pay was given to them.

CAUSE OF ACTION

10. The Complainants are all employees of Respondent as the latter

exercises control over the former. The Supreme Court has stated the
most determinative test in determining the existence of employer-
employee relationship is the control test, to wit:
“ T h e c o n t ro l t e s t i s t h e m o s t
important test our courts apply in
distinguishing an employee from an
independent contractor. This test is
based on the extent of control the hirer
exercises over a worker. The greater
the supervision and control the hirer
exercises, the more likely the worker is
deemed an employee. The converse
holds true as well – the less control the
hirer exercises, the more likely the
worker is considered an independent
contractor.4“
11. In this case, Respondent has exercised control over the Complainants
as it has determined the method and the means by which the
Complainants should execute their work.
12. In Duty Detail Order No., herein Annex “B”, issued by Respondent ,
it details the obligation of the Complainants to render post security
services in SM City Bicutan. The same duty detail order instructs the
Complainants to wear their prescribed uniform and carry their
company issued firearms only when they are in the performance of
their guard duty. The same likewise details specific instructions to the
Complainants whenever they will be escorting cash or valuables.

4 Sonza vs. ABS-CBN Broadcasting Corp., G.R. No. 138501, 10 June 2004

13. These specific instructions and procedures show that Respondent

has the right and has exercised said right to control and dictate the
means and methods by which to accomplish the guard duty of the
Complainants. They clearly show that Respondent has control over
the Complainants as the former has communicated to the
Complainants on how they should carry out a specific part of their
job description and that the same is “for strict compliance”.
14. Since Respondent has exercised control over the Complainants, the
latter are the employees of the former.
15. Respondent , in terminating the employment of the Complainants,
have violated the express provisions of Article 298 of the Labor Code,
as renumbered, by not paying separation pay to the Complainants.
16. Under Article 298 of the Labor Code, as renumbered, when the
dismissal of the employees has been effected through the cessation of
business operations not because of financial losses, the employer is
obligated to pay their employees separation pay, to wit:
“Article 298 [283]. Closure of
establishment and reduction of personnel.
The employer may also terminate the
employment of any employee due to
the installation of labor-saving
devices, redundancy, retrenchment to
prevent losses or the closing or
cessation of operation of the
establishment or undertaking unless
the closing is for the purpose of
circumventing the provisions of this
Title, by serving a written notice on
the workers and the Ministry of Labor
and Employment at least one (1)
month before the intended date
thereof. In case of termination due to
the installation of labor-saving devices
or redundancy, the worker affected
t h e re b y s h a l l b e e n t i t l e d t o a

 separation pay equivalent to at least

his one (1) month pay or to at least one
(1) month pay for every year of
service, whichever is higher. In case of
retrenchment to prevent losses and in
cases of closures or cessation of
operations of establishment or
undertaking not due to serious
business losses or financial reverses,
the separation pay shall be
equivalent to one (1) month pay or at
least one-half (1/2) month pay for
every year of service, whichever is
higher. A fraction of at least six (6)
months shall be considered one (1)
whole year.”
17. Respondent , by ceasing to operate and to conduct its business, and
by endorsing the Complainants to be employed with another
company, Respondent Mega, has effectively terminated the
employment contract with them. It is clear that all of the means by
which the termination of the employment of the Complainants, the
incorporation of Respondent and the cessation of its business, has all
been orchestrated and executed by Respondent . It is Respondent
who was control on whether it would incorporate and transform into
a new entity. It is also Respondent who has any right to determine
whether it will continue its business or not. Thus, the termination of
the employment was done by Respondent .
18. This termination due to cessation of business operations was not due
to any serious business losses. In fact, Respondent has continued its
business in the form of Respondent Mega. A perusal of Annex “A”
would reveal that the expiration of the license to operate as a private
security agency of Respondent will expire on. A perusal of Annex
“C” would reveal that the license to operate as a private security
agency of Respondent Mega was granted on, a full month before the
expiration of the license to operate of Respondent . It would be an
amazing stroke of luck to have the license of a soon-to-be-closed

 business to expire a full month before the granting of another license

to operate to another newly built business with a very similar name.
It is also very curious that Respondent has not only endorsed its
employees, including the Complainants, to Respondent Mega for
them to absorbed into the latter but has assured that Respondent
Mega is a mere continuation of the business of Respondent .
19. From the foregoing, it is abundantly clear that the cessation of
business and operations of Respondent was not due to serious
financial losses or business reverses as it is beyond human logic and
experience to continue a business that is experiencing serious
financial losses that it had to close down that it will suddenly up and
continue a few months after its closing. The only logical explanation
is that the closure of the business and operations of Respondent was
not brought about by serious financial reverses.
20. Considering the same, Respondent , as the former employer of the
Complainants, have the obligation to give the latter separation pay in
accordance with the provisions of Article 298 of the Labor Code, as
renumbered.
21. For reference, the salary of the Complainants at the time of their
termination by Respondent is as follows:

Name of Employee Salary Years of Service

PhP 537.00 per day 11
PhP 537.00 per day 13
PhP 537.00 per day 16
PhP 537.00 per day 16
PhP 537.00 per day 14
PhP 537.00 per day 12
PhP 537.00 per day 15
PhP 537.00 per day 11

 Name of Employee Salary Years of Service

PhP 537.00 per day 12
PhP 537.00 per day 5
PhP 537.00 per day 4

22. Respondent Mega is solidarily liable with Respondent to the

Complainants for the separation pay of the Complainants on the
basis of the doctrine of piercing the veil of corporate fiction.
23. The Supreme Court has described the doctrine of piercing the veil of
corporate fiction in this wise:
“[t]he doctrine of alter ego is based
upon the misuse of a corporation by
an individual for wrongful or
inequitable purposes, and in such case
the court merely disregards the
corporate entity and holds the
individual responsible for acts
knowingly and intentionally done in
the name of the corporation." This,
Santos has done in this case. Santos
formed I/AME, using the non-stock
corporation, to evade paying his
judgment creditor, Litton.

The piercing of the corporate veil may

apply to corporations as well as
n a t ur al p er sons i nvol ved wi t h
corporations. This Court has held that
the "corporate mask may be lifted and
the corporate veil may be pierced
when a corporation is just but the alter

 ego of a person or of another

corporation.5”

24. In this case, it is obvious that Respondent has misused the corporate
vehicle by using the same as a tool to further its business without
giving to its employees, including the Complainants, the separation
pay mandated by law while still retaining its employees.
25. In this case, Respondent , obviously wanted to incorporate to further
its business. For this purpose, it created Respondent Mega, however,
seeing that the latter has just attained juridical personality and has
not started to operate, it required the manpower to do so. Thus,
Respondent Mega absorbed the employees of Respondent Sinai to
save the former the trouble of going out and finding and hiring
employees. Respondent Mega then applied, and was granted, a
license to operate as a Private Security Agency, as evidenced by
Annex “C”. Thus, Respondent Mega is now in the same business as
Respondent .
26. The identity between Respondent and Respondent Mega is
emphasized by the fact that a former client of Respondent is now a
client of Respondent Mega. In Annex “B”, Respondent instructs the
Complainants to render post security duty in SM City Bicutan. The
same is bolstered by Service Invoice No. dated , indicating that SM
City Bicutan, under SM Prime Holdings Inc. is a client of
Respondent . In a document entitled “Extract”6, Respondent Mega
has authorized its employee to resume his guard duty at SM City
Bicutan. From this, it is evident that SM City Bicutan under SM Prime
Holdings Inc., has now become the client of Respondent Mega.
Furthering the fact that Respondent Mega is a mere continuation of
Respondent .
27. Aside from the similarities of the Respondents stated earlier, there are
also physical similarities to them. The first is the names of the
Respondents. The only difference between the names of Respondent

5International Academy of Management and Economics vs. Litton and Company, Inc., G.R. No. 191525,
13 December 2017

 and Respondent Mega is the insertion of the word “Mega” in the first
word of the name of the latter and the insertion of the word “Inc.”.
The insertion of the word “Inc.” however, is not much of a difference
as the same is required by law to be added to indicate that the
juridical person is a corporation7. The logos used by both of the
Respondents are also identical. A perusal of Annexes “B”, “C” and “D
series” would reveal that the logo used by Respondnet is a triangular
in shape with a lightning bolt shape at the left side with an “L” shape
connected to it. A perusal of Annex “E” would reveal that the same
triangular logo with a lightning bolt shape at the left side with an “L”
shape connected to it is being used by Respondent Mega. These
physical similarities taken together with all the other similarities
pointed out earlier only lead to one logical conclusion, that
Respondent Mega is a mere continuation of the business and
operations of Respondent .
28. From this, it is clear that the corporate vehicle, in the form of
Respondent Mega, has been abused and misused by Respondent and
its management as the former was used to evade the obligation of
Respondent to give separation pay to the Complainants. The
corporate vehicle was cleverly used to mask the cessation of
operations of Respondent . The incorporation of Mega was used so
that the employees of Respondent , including the Complainants,
would have a new employer and would distract them from the fact
that their old employer has terminated their employment due to the
cessation of its business operations. All in an effort to evade the
obligation of Respondent under Article 298 of the Labor Code, as
renumbered. Clearly, the corporate vehicle has been misused to effect
an evasion of a positive duty under law, triggering the application of
the doctrine of piercing the veil of corporate fiction.
29. However, it is admitted that the application of the doctrine is unusual
as the Complainants labor to pierce the corporate veil to reach
corporate assets. However, the Supreme Court has allowed the use of

7 Sec. 14 of Republic Act No. 11232

 the same in the case of International Academy of Management and

Economics vs. Litton and Company, Inc.8, to wit:
“We borrow from American parlance
what is called reverse piercing or
reverse corporate piercing or piercing
the corporate veil "in reverse."
As held in the U.S. Case, C.F. Trust,
Inc., v. First Flight Limited Partnership,
"in a traditional veil-piercing action, a
court disregards the existence of the
corporate entity so a claimant can
reach the assets of a corporate insider.
In a reverse piercing action, however,
the plaintiff seeks to reach the assets of
a corporation to satisfy claims against
a corporate insider."

" R e v e r s e - p i e rc i n g f l o w s i n t h e
opposite direction (of traditional
corporate veil-piercing) and makes the
corporation liable for the debt of the
shareholders."

It has two (2) types: outsider reverse

piercing and insider reverse piercing.
Outsider reverse piercing occurs when
a party with a claim against an
individual or corporation attempts to
be repaid with assets of a corporation
owned or substantially controlled by
the defendant. In contrast, in insider
reverse piercing, the controlling
members will attempt to ignore the
corporate fiction in order to take
advantage of a benefit available to the
corporation, such as an interest in a

8 supra footnote 7

 lawsuit or protection of personal

assets.”

30. The applicable form of reverse piercing in this case is outsider reverse
piercing. From the above-quoted decision “Outsider reverse piercing
occurs when a party with a claim against an individual or
corporation attempts to be repaid with assets of a corporation owned
or substantially controlled by the defendant.” In this case the
Complainants seek to have the liability of Respondent be satisfied by
the assets of Respondent Mega. Making outsider reverse piercing
applicable.
The Complainants are entitled to
moral and exemplary damages
and attorney’s fees
31. The Complainants are entitled to moral and exemplary damages as
their termination was done through fraud and in a manner contrary
to labor, to wit:
“Moral damages is awarded to an
illegally dismissed or suspended
employee when the employer acted in
bad faith or fraud, or in such manner
oppressive to labor or contrary to
morals, good customs or public policy
xxx.
Such grant of exemplary damages is
deemed necessary to deter employers
from committing the same or similar
acts. The award of attorney's fees is
likewise sustained since exemplary
damages is awarded here, and
considering further that respondent
has been compelled to file this case
and incurred expenses to protect her
interest.9”

9 Leo’s Restaurant and Bar Café et al. vs. Bensing, G.R. No.

 32. Respondent has acted in a manner clearly contrary to labor and good
customs. It has employed fraud and ingenuity to evade its duty
under the Labor Code to pay separation pay. It has used the
corporate vehicle against its unsuspecting employees, most of whom
have rendered more than ten (10) years of service to it. Respondent
has the gall and audacity to deny what the Complainants are entitled
to when the latter have not only shown loyalty and unwavering
service to Respondent .
33. This scheme of setting up a corporation to avoid the payment of
separation pay to unsuspecting and innocent employees is absolutely
against labor as it outrightly denies wha the law has reserved for the
Complainants.
34. In this regard it is also proper to award exemplary damages to deter
other employers from following the footsteps of Respondents. To rule
otherwise would give a license to other unscrupulous employers to
mimic and proliferate this kind of scheme.
35. The Complainants are also entitled to attorney’s fees as they were
compelled to engage the services of counsel to protect their rights
enshrined in the Labor Code.
36. At the outset, it should be noted that the Complainants are security
guards who are paid at the minimum wage or barely above
minimum wage. Thus, to engage in litigation and the services of
counsel is at the bottom of their priorities. However, the
Complainants have banded together and have sought the aid of this
Honorable Office to breath life into the noble and illustrious
provisions of the Labor Code.

PRAYER

WHEREFORE, the foregoing circumstances being considered, it is

respectfully prayed for that the Respondents be adjudged SOLIDARILY
LIABLE to the Complainants for the payment of separation pay, computed
in accordance with the provision of Article 298 of the Labor Code, as
renumbered, moral and exemplary damages and attorney’s fees.

 Other matters just and equitable under the circumstances are likewise
prayed for.

Pasig City for Quezon City, 0.

Respectfully submitted.

For:

LU MAMAÑGUN JUCO & ALAMIS LAW OFFICE

Counsel for the Complainants
Unit 2305 Antel Global Corporate
Center,
#3 Julia Vargas Avenue, Ortigas Center,
Pasig City

by:

Copy furnished:

COMPLIANCE/EXPLANATION

Copies of the foregoing “Position Paper” are filed and served via
courier service owing to the distance involved between the parties and the
lack of messengerial personnel to effect personal service.

 ATTY. ROBERT JOHN P. JUCO