SECOND DIVISION
|
WATERFRONT CEBU CITY HOTEL, Petitioner, -versus- MA. MELANIE P. JIMENEZ, JACQUELINE C. BAGUIO,
LOVELLA V. CARILLO, and MAILA G. ROBLE,
Respondents. |
G.R. No. 174214 Present:
CARPIO, J.,
Chairperson,
BRION,
PEREZ,
SERENO, and
REYES, JJ. Promulgated: June 13, 2012 |
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D E C I S I O N
PEREZ, J.:
The closure of a
department or division of a company constitutes retrenchment by, and not
closure of, the company itself.[1]
It is upon this principle
that both parties to this case, the employer Hotel and the complaining
employees repose their argument.
Assailed in this petition
for review on certiorari under Rule
45 of the Rules of Court are the
The factual milieu
follows:
Respondents Ma. Melanie P. Jimenez, Jacqueline C.
Baguio, Lovella V. Carillo, and Maila G. Roble were
hired for Club Waterfront (the Club), a division under petitioner Waterfront
Cebu City Hotel (the Hotel) which catered to foreign high stakes gamblers,[3]
for different positions and dates as indicated below:
|
NAME |
POSITIONS |
DATE HIRED |
MONTHLY SALARY |
|
Ma. Melanie P. Jimenez |
Guest Services Assistant |
|
|
|
Jacqueline Cosep Baguio |
Treasury Supervisor |
|
|
|
Lovella V. Carillo |
Guest Services Assistant |
|
|
|
Maila G. Roble |
Pit Supervisor |
|
|
On
On the
following day, petitioner served the notice of suspension of business with the
Department of Labor and Employment (DOLE).
The dismissed employees were
offered separation pay equivalent to half-month pay for every year of
service. The Clubs closure took effect
on
On
Respondents
refused to believe that the Club was suffering from losses because they knew
exactly the number of arrivals as well as junket clients of the Club. They presented documents[6]
to show the arrival of foreign guests at the Club.
Respondents
maintained that upon the other hand, they are employees of petitioner assigned
to the Club, hence they should have been allowed to work in other departments
of the hotel.
Oppositely,
petitioner averred that since April 2002, the Club has been incurring losses
that it had to temporarily cease its operations effective
On
WHEREFORE, premises considered judgment is hereby
rendered ordering Waterfront Cebu City Hotel and Casino to pay the complainants
as follows:
1. Maria Melanie P. Jimenez P53,020.00
2. Josephine C. Baguio P56,286.00
3. Evangeline A. Balazuela P24,678.00
4. Sydel Agatha E. Binghay P54,782.00
5. Lovella V. Carillo P29,680.00
6. May T. Flores P29,650.00
7. Maila G. Roble P32,904.00
Attorneys fee P28,001.00
Total Award P309,002.00
The
other claims and the case against individual respondents are dismissed for lack
of merit.[7]
Respondents
appealed to the NLRC[8]
which issued a Decision affirming the ruling of the Labor Arbiter. The NLRC observed that petitioner was able to
substantiate the losses suffered by the Club through financial statements
properly audited by an independent auditor.
After the denial of
respondents motion for reconsideration, they elevated the case to the Court of
Appeals.
Respondents
argued that the NLRC should have considered the financial statements of the petitioner
Hotel and not merely of the Club, which is only a division of the Hotel. According to respondents, the permanent
closure of the Club resulted in retrenchment but petitioner failed to prove
that it complied with the standards for retrenchment.
On
WHEREFORE, premises considered, the petition for
certiorari is hereby GRANTED. The
decision dated
A
new decision is hereby entered directing Waterfront Cebu City Hotel and Casino,
Inc. to pay full backwages from date of illegal dismissal until date of
reinstatement, plus 13th month pay, holidy pay, service incentive leave pay and
moral damages equivalent to 10% of the compensable amount, to petitioners Ma.
Melanie P. Jimenez, Jacqueline C. Baguio, Evangeline Balazuela, Sydel Agatha
Binghay, Lovella Carillo, May T. Flores, Meila G. Roble.
At
the election of the petitioners, full backwages, 13th month pay, holiday pay,
service incentive leave pay and separation pay at one month for every year of
service, plus moral damages equivalent to 10% of the compensable amount.
Attorneys
fees of 10% of the total compensable amount is also awarded.
The
Labor Arbiter is directed to compute the amounts herein awarded.[9]
The
appellate court found that petitioner Hotel is the actual employer of
respondents, thus the evidence of losses and closure of the Club is immaterial
and irrelevant. The appellate court
stated that there is no independent evidence on record that petitioner Hotel incurred
losses sufficient to sustain the termination of respondents. Absent a clear, valid and legal cause for the
termination of employment, the appellate court opined that there is illegal
dismissal. The appellate court
disregarded the audited financial statement of Waterfront Promotions, Ltd. on
the ground that said statement does not prove that the Club has become a losing
proposition because it was not shown that the Club is a division of Waterfront
Promotions. Neither was it proven that
Waterfront Promotions and petitioner are one and the same.[10]
Petitioner filed a motion
for reconsideration but it was denied in a Resolution dated
Hence, this petition for
review on certiorari imputes the following errors on the Court of Appeals, to
wit:
I.
When it ruled that evidence of losses and
closure of Club Waterfront is immaterial and irrelevant to the termination of
petitioners;
II.
When it ruled that the audited financial
statement of Waterfront Promotions, Ltd. is not proof to show that respondent
incurred losses or that Club Waterfront has become a losing proposition;
III.
When it ruled that there is no evidence on
record that Waterfront Cebu City Hotel and Casino, Inc. incurred losses
sufficient to sustain the termination of herein respondents from employment;
IV.
When it found that respondents are entitled
to full backwages and reinstatement without loss of seniority rights and moral
damages;
V.
When it ruled in the dispositive portion that
its decision was effective for Balazuela, Binghay and Flores.[11]
Initially,
the respondents were laid off as a result of the suspension of the Clubs
operation. Under Art. 286 of the Labor
Code,[12]
a bona fide suspension of business
operations for not more than six (6) months does not terminate employment. After six (6) months, the employee may be
recalled to work or be permanently laid off.
In this case, more than six (6) months have elapsed from the time the
Club ceased to operate. Hence,
respondents termination became permanent.
Petitioner anchors its
arguments mainly on the thesis that retrenchment to prevent losses was
undertaken to justify the dismissal of respondents. Petitioner likened the closure of the Club,
which it deemed as a division/department, to retrenchment. Acting on the same premise that the Club is a
division of petitioner, respondents demanded that they should be transferred to
another department of petitioner, instead of being dismissed from
employment. Respondents also claim that
petitioner failed to prove losses to support retrenchment.
At the outset, it should be
stated that the respondents cannot be accommodated in other departments of the
Hotel. The duties and functions they
perform are peculiar to the positions they hold in the Club. It is likewise undisputed that the Club
remained closed and there is no other department in the Hotel similar to the
Club and which catered to foreign high stakes gamblers. Verily, reinstatement cannot
be and could not have been an option for petitioner Hotel.
For the purpose of proving
financial losses, petitioner presented the financial statements of Waterfront
Promotion, Ltd. which petitioner describes as the company which promotes,
markets and finances the Club.[13]
A review of the corporate
structure of the Club as contained in the financial statements submitted by
petitioner reveals that it is actually a wholly-owned subsidiary of Waterfront
Promotion, Ltd. Their corporate
relationship is described as follows:
Waterfront Promotion Ltd (WPL) and its
wholly-owned subsidiary, Club Waterfront International Limited (CWIL), were
incorporated in the
WPL and CWIL invite and organize groups of
foreign casino players to play in Philippine casinos pursuant to certain
agreements entered into with the Philippine Amusement and Gaming Corporation
(PAGCOR) under the latters Foreign Highroller Marketing Program (the
Program).
To support the Program, WPL and CWIL
entered into several agreements with certain parties also known as junket
operators to market and promote the Philippine casinos to foreign casino players. In consideration for marketing and promoting
the Philippine casinos, these operators receive certain incentives such as free
hotel accommodations, free airfares, and rolling commissions from WPL and CWIL.
The financial statements have been prepared
on a going concern basis, which assumes that WPL and CWIL will continue in
existence. The validity of this
assumption is dependent upon WPL and CWIL to meet their financing requirements
on a continuing basis and the success of their future operations. Management continues to look for other
business opportunities and intends to run WPL and CWIL as going concerns.
At present, both WPL and CWIL have
temporarily stopped their operations.
The Management decided to temporarily cease the operations of WPL and
CWIL on June 2003 and November 2001 respectively, due to unfavorable economic
conditions. However, the Management of
Waterfront
WPLs principal office is located in
In turn, Waterfront Promotion, Ltd. is a wholly-owned
subsidiary of Waterfront
We find the consolidated financial statements that
were prepared in the name of Waterfront Promotion refer to the casino
operations of the Club. A consolidated
financial statement is usually prepared for a parent company and its
subsidiaries, the purpose of which is to provide an overview of the financial
condition of the group of companies as a single entity. The Club, being a wholly-owned subsidiary of Waterfront
Promotion, Ltd. operates under the management, supervision and control of Waterfront
Promotion, Ltd. The relationship between
these two companies is so intertwined that the Club is practically considered a
department or division of Waterfront Promotion, Ltd.
A review of the consolidated financial statement shows
that for the fiscal years 2002 and 2003, the parent company and the
consolidated companies reflect the same amounts of losses: United States (U.S.)
$2,791,104.00 for 2002 and U.S. $765,222.00 for 2003. This proves petitioners assertion that the losses
there reflected refer to the losses of the Club.
The consolidated financial statement and the corporate
relationships it indicates, cannot, however, be relied upon by petitioner to
avoid this particular labor dispute because, as already stated, petitioner
itself has been claiming from the very beginning that the Club is only a division/department
of the hotel.
Verily, retrenchment and not closure was effected to
warrant the valid dismissal of respondents.
Petitioner has not totally ceased its operations. It merely closed down a department.
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.[16] 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.[17]
In case of retrenchment,
proof of financial losses becomes the determining factor in proving its legitimacy. In establishing a unilateral 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. The condition of business
losses justifying retrenchment is normally shown by audited financial documents
like yearly balance sheets and profit and loss statements as well as annual
income tax returns.[18]
Retrenchment is subject to
faithful compliance with the substantative and procedural requirements laid
down by law and jurisprudence.[19] 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 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.[20]
All these elements were successfully proven by
petitioner. First, the huge losses
suffered by the Club for the past two years had forced petitioner to close it
down to avert further losses which would eventually affect the operations
of petitioner. 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.[21]
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.[22]
As a matter of fact, as of
this writing, the Club has not resumed operations. Neither is there a showing that petitioner
carried out the closure of the business in bad faith. No labor dispute existed between management
and the employees when the latter were terminated.
Finally, we affirm the NLRCs award and computation of
separation pay in favor of respondents.
WHEREFORE, the petition is hereby GRANTED. The
SO ORDERED.
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|
JOSE
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WE CONCUR:
ANTONIO T. CARPIO
Senior
Associate Justice
Chairperson
ARTURO
D. BRION MARIA
Associate Justice Associate Justice
BIENVENIDO L. REYES
Associate Justice
C E R T I F I C A T I O N
I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)
[1] Construction and Development Corporation of the
[2] Penned
by Associate Justice Vicente L. Yap with Associate Justices Isaias P. Dicdican
and Romeo F. Barza, concurring. Rollo, pp. 24-34.
[3]
[4]
[5]
[6] Records,
pp. 279-352.
[7] Rollo, pp. 42-43.
[8] Penned
by Presiding Commissioner Gerardo C. Nograles with Commissioners Oscar S. Uy
and Aurelio D. Menzon, concurring.
[9]
[10]
[11]
[12] ART.
286. When employment not deemed terminated. - The bona fide
suspension of the operation of a business or undertaking for a period not
exceeding six (6) months, or the fulfillment of the employee of a military or
civic duty shall not terminate employment. In all such cases, the employer
shall reinstate the employee to his former position without loss of seniority
rights if he indicates his desire to resume his work not later than one (1)
month from the resumption of operations of his employer or from his relief from
the military or civic duty.
[13] Rollo, p. 131.
[14]
[15] Taken
from Waterfront
[16] Anabe v. Asian Construction (ASIAKONSTRUKT), G.R. No. 183233, 23 December
2009, 609 SCRA 213, 217-218 citing Mobilia
Products, Inc. v. Demecillo, G.R. No. 170669, 4 February 2009, 578 SCRA 39,
47.
[17] Polymart Paper Industries v. National Labor Relations Commission, G.R. No. 118973, 12 August
1998, 294 SCRA 159, 166 citing Uichico v.
National Labor Relations Commission, G.R. No. 121434, 2 June 1997, 273 SCRA
35, 42; LVN Pictures Employees and
Workers Association v. LVN Pictures, Inc., G.R. No. L-23495,
[18] Flight Attendants and Stewards Association of the Philippines v.
Philippine Airlines, Inc., G.R. No. 178083, 22 July 2008, 559 SCRA 252, 277 citing TPI Philippines Cement Corporation v.
Cajucom VII, 518 Phil. 637, 645-646 (2006); Danzas Intercontinental, Inc. v. Daguman, 496 Phil. 279, 288 (2005).
[19] Sari-Sari Group of Companies, Inc. v. Piglas Kamao (Sari-Sari Chapter), G.R. No. 164624, 11 August
2008, 561 SCRA 569, 591-592 citing Central
Azucarera de la Carlota v. National Labor Relations Commission, G.R. No.
100092, 29 December 1995, 251 SCRA 589, 595.
[20]
[21] Rollo, pp. 262-265.
[22] Danzas Intercontinental Inc. v. Daguman,
supra note 18 at 289 citing Reahs Corporation v. National Labor Relations Commission, 337 Phil. 698, 708
(1997).