B,

GR

Facts:

Petitioners assail the decision of the NLRC which reversed the findings of the Labor Arbiter who
ruled in favor of petitioners holding that their dismissals were illegal entitling them to reinstatement and
other benefits. Private respondent Atlantic, Gulf and Pacific Company (AGPC) terminated services of
several hundreds of employees on the ground of financial losses and distress from 1978 to 1990 requiring
them to resort to retrenchment. The issue was submitted for arbitration wherein a decision was rendered
finding the company in financial constraints and thereby coming to an agreement of temporary lay-offs.

However, sometime in 1991, the petitioners filed a complaint of illegal dismissal and unfair labor
practice contending that AGPC failed to establish financial losses for 1991 to justify their continued
retrenchment and failure to recall them for work. The Labor Arbiter found in favor of herein petitioners
but was reversed by the NLRC finding justification for the continued lay-offs the company made.

Issue:

Whether or not the retrenchment AGPC did even in 1991 is justified considering the absence of
proof of financial distress for the assailed year.

Ruling:

Yes, the Court held the temporary lay-off is valid and justified and Court deemed the failure to
recall said retrenched employees to be a permanent termination thereby entitling said employees to
separation pay. As evidenced by the agreement entered into by herein petitioners following the labor
arbiter’s decision, the lay-offs were understood to be in series by reason of the company’s financial
distress which was substantially and sufficiently established and such agreement constituted as an
admission of such distress on petitioner’s part. Moreover, proof of actual losses incurred by the company
is not a necessary condition in order for a company to exercise retrenchment programs.
Although not all possibility of loss warrant reduction of personnel, for loss is but a natural risk
inherent in the course of business, the law allows the employer to undertake retrenchment sometime
before the anticipated loss actually take place and not wait for losses to materialize. The employer is
burdened with the obligation to prove that such anticipated loss warrant the reduction of personnel
through clear and convincing evidence, as in the present case, AGPC successfully did.