Source: http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/45795
Timestamp: 2019-04-21 02:14:22+00:00

Document:
EMCO PLYWOOD CORPORATION AND JIMMY LIM, PETITIONERS, VS. PERFERIO ABELGAS, ARTURO ABELLANA, FLORENCIO ABEQUIBEL, FELIZARDO AGUELO, NECERATO ALCALA, PEDRO ALIVIO JR., RODOLFO ALDAYA, ABELARDO AMANTE, NELSON ANGAC, ALEJO ANTOLIJAO, JOHN ALEX ARABEJO, REYNALDO ARBOLONIO, RODRIGO ARSILUM, RONALDO BABAYLAN, LEOPOLDO BAGA, AGRIPINO BARON, FELIPE BAHIAN, JOEL BADILLA, NARCISO BANTILLAN, FELIPE BANDIBAS, ERNESTO BEDRA, ROGELIO BONGATO, ADOLFO BUCAL, DOMINADOR BUSTILLO, PLUTARCO CABREROS, FELIPE CAMBARIHAN, PABLO CASANIA, PERFECTO CASTANES, FERDINAND CASTILLO, ISIDRO CERRO, MARCEDINO CELOCIA, LEODEGARIO CLARO, ALFREDO CLAVANO, EDILBRETO CUABO, EDILBERTO CURILAN, ANGELA DATIG, EDDIE DE LA CRUZ, DOMINO DELA CRUZ, SEGUNDO DELIGERO, RAYMUNDO DESAMPARADO, GAUDISIO DEVEYRA, HENRY ENERIO, ANTONIO ENCISO, ANSELMO FELIAS JR., JULIAN GANZAN, ALLAN HONCULADA, BIENVENIDO IBALANG, FREDERICK JANOPOL, SAMUEL JUMAMOY, ISABELO LOREN, PROCORIO LOLOR, RESTITUTO LOMOCSO, PEDRO LOZADA, PEDRO LOZAGA, PASTOR MAGARO, ALLAN MANAGA, SIMPLICIO MANDAS, SATURNINO MANISAN, DIOSDADO MATA, EMMANUEL MATUTOD, MAXIMO MEDALLE, MARCELINO MINOZA, NORBERTO MORDEN, ARNOLD MORDEN, WILLIAM MORADA, RAYMUNDO MORAGAS, RODRIGO MOSQUIDA, BENITO NEMENO JR., RICO OGCANG, EMELIANO ONDAP, FRANCISCO PANDAWATAN, ALFREDO PAIGAN, VENANCIO PAJO, ELY QUINONES, ALEJANDRO QUIPET, BENIGNO REPOLIDO, PABLO SUMIDO, JOSE SUMALINOG, SAMUEL TABLA, OSCAR TABANAO, MARIO TELIN, MANOLITO TIMTIM, FELIX TINDUGAN, DANILO VELUESTO, ALEJANDRO VILVESTRE, TEOFILO ZAPANTA, RODULFO ALCALA, PERCY ALIPIN, ANGELO AMADA, PAQUITO ANCAJAS, EDGARD ARBISO, PERFECTO ARABACA, JUDITH BALMORIA, JOHANNES BONGATO, NARCISO BULLECER JR., BERNADITA BURDEOS, WENCESLAO BUSA, RODRIGO CABAL, DONALD CADILINA, JOSE CAINGHOG, RODOLFO CATUBIG, GADIOSO CASTRODES, VIRGINIA CERRO, FORTUNATO CELETONA, JUAN CELLO, MARCIANO CORTEZ, ROLANDO CUMBA, ALMAR DAPAR, MARISA DELA CRUZ, SIMEON DELIGERO, DIOSDADO DOMINISE, FLORENTINO DUNCANO, CLAUDIO DUMO, MARIDEL EFREN, ROMUALDO ESTRETO, JAIME FLORES, ESMERALDO GALOPE, PROCESSO HERNANDO, ALFREDO JAVIER, CRISPINO JUGARAP, DANIEL LABRICA, ERNESTO LABADAN, AURELIO LINOGAO, BENALDO LOPEZ, AMADOR LUMONGSOD, FRESCO LUNOY, FLORENCIO MAGLASANG, EUTIQUEO MAJAIT, ALBINO MANLA, FELIPE MANTILLA, CASIANO MELICOR, ANECITA MENDOZA, NEMERIANO NACA, ZACARIAS NALAM, SIXTO NAPAL JR., ALMAQUIO OBEDENCIO, GODOFREDO OLAIZ, VIRGILIA OSORIO, ELEUTRIO PAGADOR, ARDEN PASILANG, DIONESIO PASILANG, ADELAIDO PAQUIPOT, FERNANDO PATINDOL, VIRGILIO PENDICA, FRANKLIN PILOTON, GIL PILOTON, CHARLITA PLAZA, EUFRACIA PLAZA, TORIBEO PUSA, FRANCISCO RAMIRA, BELEN ROJAS, ALFONSO SABANDAL, CARMEN SABELLANO, ROGELIO SIMPRON, CENIA SUMILE, ESPEREDION TABIQUE, ARECIO TAGHOY, SILVANA TAPALES, JEMCIE TIMTIM, ELENO TORILLO, THOMAS TERRECAMPO, FE VALENZUELA, FLORENCIO ABEQUIBEL, EFREN LUMINARIO, JULITO ONDAP, RESPONDENTS.
Not every loss incurred or expected to be incurred by employers can justify retrenchment. They must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert those losses.
“WHEREFORE, the petition for certiorari is GRANTED and the challenged Orders of the National Labor Relations Commission are hereby declared NULL and VOID.
The assailed Resolution denied petitioners’ Motion for Partial Reconsideration.
“[Respondents], the retrenched employees of [petitioner] seek the review and reversal of the resolutions of the National Labor Relations Commission (‘NLRC’), dated February 11, 1997 and March 25, 1997, respectively.
“The first resolution dismissed [respondents’] appeal for lack of merit and affirmed the decision of the Labor Arbiter, dated July 24, 1996, which, in turn, dismissed [respondents’] complaint against EMCO and the latter’s general manager, [petitioner] Jimmy N. Lim (‘Lim’), for illegal dismissal, damages and attorney’s fees. The second resolution assailed by the [respondents] consists of the NLRC’s denial of their motion for reconsideration of the earlier mentioned February 11, 1997 resolution.
“EMCO is a domestic corporation engaged in the business of wood processing, operating through its sawmill and plymill sections where [respondents] used to be assigned as regular workers.
“Per EMCO’s notice to the DOLE, one hundred four (104) workers were proposed for inclusion in its retrenchment program. As it turned out, though, EMCO terminated two hundred fifty (250) workers. Among them were herein [respondents].
“[Respondents] received their separation pay in the amount of four thousand eight hundred fifteen pesos (P4,815.00) each. Deductions were, nevertheless, made by EMCO purportedly for the attorney’s fees payable to [respondents’] lawyer, for the latter’s effort in purportedly renegotiating, sometime in 1993, the three peso (P3.00) increase in the wages of [respondents], as now contained in the Collective Bargaining Agreement.
‘I, ___________ of legal age and a resident of _______________, for and in consideration of the amount of (P____), the receipt of which, in full, is hereby acknowledged, forever discharge and release x x x EMCO PLYWOOD CORPORATION and all its officers men agents and corporate assigns from any and all forms of actions/suits, debts, sums of money, unpaid wages, overtime pay allowances, overtime pay or an other liability of any nature by reason of my employment which has ceased by this date.
“About two (2) years later, [respondents], through their labor union, lodged a compliant against EMCO for illegal dismissal, damages and attorney’s fees.
“In the main, [respondents] questioned the validity of their retrenchment and the sufficiency of the separation pay received by them.
“EMCO countered by interposing the defense of lack of cause of action, contending that [respondents], by signing the quitclaims in favor of EMCO, had, in fact, waived whatever claims they may have against the latter.
“Finding for EMCO, the Labor Arbiter dismissed [respondents’] complaint.
’The pivotal issue brought to fore is whether or not the quitclaims/waivers executed by [respondents] are valid and binding. The other issues raised by [respondents] are either related to mere technicality, or are merely ancillary or dependent on the main issue.
“In passing, the NLRC likewise affirmed EMCO’s deductions of attorney’s fees from the separation pay received by the [respondents].
The CA held that the evidence was insufficient to justify a ruling in favor of EMCO, which had not complied with the one-month prior notice requirement under the Labor Code. The appellate court added that the corporation had not served on the employees the required notice of termination. It opined that the Memorandum, having merely provided the guidelines on the conduct of the intended lay-off, did not constitute such notice. Furthermore, the Memorandum was not addressed to the workers, but to the foremen, the department supervisors and the section heads. Moreover, there was no proper notice to DOLE. The corporation terminated the services of 250 employees but included only 104 of them in the list it filed with DOLE. EMCO’s argument that the 146 unlisted employees had voluntarily resigned was brushed aside by the appellate court.
The CA also held that before EMCO resorted to retrenchment, the latter had failed to adduce evidence of its losses and to prove that it had undertaken measures to prevent the occurrence of its alleged actual or impending losses.
Moreover, the CA ruled that the corporation had not paid the legally prescribed separation pay, which was equal to one-month pay or at least one-half month pay for every year of service, whichever was higher. Deducting attorney’s fees from the supposed separation pay of the employees was held to be in clear violation of the law. Such fees should have been charged against the funds of their union.
The appellate court further held that the cause of action of the employees had not yet prescribed when the case was filed, because an action for illegal dismissal constituted an injury to their rights. The CA added that the provision applicable to the case was Article 1146 of the New Civil Code, according to which the prescriptive period for such causes of action was four (4) years. The Complaint, having been filed by the employees only two years after their dismissal, had not prescribed.
All in all, the appellate court concluded that the retrenchment was illegal, because of EMCO’s failure to comply with the legal requirements.
Whether or not respondent Court of Appeals seriously erred in reversing the factual findings of both the Labor Arbiter and the NLRC that petitioners had substantially complied with the requisites for a valid retrenchment?
Whether or not respondent Court manifestly erred in reversing the factual findings of both the Labor Arbiter and the NLRC that private respondents had voluntarily executed their respective Quitclaims?
Simply put, petitioners are insisting on the validity of the retrenchment and the enforceability of the Quitclaims. They are also questioning whether or not the appellate court may disturb the findings of the labor arbiter and the NLRC.
Retrenchment is one of the authorized causes for the dismissal of employees. Resorted to by employers to avoid or minimize business losses, it is recognized under Article 283 of the Labor Code.
“x x x Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs other than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called ‘golden parachutes,’ can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing ‘full protection’ to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means – e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. – have been tried and found wanting.
To prove that the retrenchment was necessary to prevent substantial losses, petitioners present their audited financial statements for the years 1991 and 1992. These statements show that EMCO’s net income of P1,052,817.00 for 1991 decreased to P880,407.85 in 1992. They allege that this decrease was due to low market demand, lack of raw materials, frequent breakdown of old equipment and high cost of operations. The financial statements also demonstrate that EMCO’s liability then increased from P106,507,214.14 to P123,901,838.30. Petitioners cite several cases in which this Court has held that audited financial statements constitute the normal method of proof of the profit-and-loss performance of a company. These statements allegedly partake the nature of public documents, because they have been audited and duly filed with the Bureau of Internal Revenue. As such, they enjoy the presumption of regularity and validity.
Petitioners further argue that EMCO undertook preventive measures to prevent the occurrence of imminent losses. To accommodate and save all its employees, it allegedly implemented a scheme in which they would work on a rotation basis -- on at least a three-day-work per employee per week schedule. This arrangement was, however, short-lived to prevent a strike that the union and its members then threatened to stage.
Petitioners also contend that the 146 employees not included in the list submitted to DOLE voluntarily resigned, not solely on the ground that the company’s permit to operate its sawmill department had expired, but also because of a period of uncertainty brought about by the aforementioned factors that allegedly justified the retrenchment program.
The Court is not persuaded. “Not every loss incurred or expected to be incurred by a company will justify retrenchment. The losses must be substantial and the retrenchment must be reasonably necessary to avert such losses.” The employer bears the burden of proving the existence or the imminence of substantial losses with clear and satisfactory evidence that there are legitimate business reasons justifying a retrenchment. Should the employer fail to do so, the dismissal shall be deemed unjustified.
The Court further held therein that “[i]n the analysis of financial statements, ‘(o)ne particular percentage of relationship may not be too significant in itself ’; that is, it may not suffice to point out those unfavorable characteristics of the company that would require immediate or even drastic action.” Petitioners have failed to prove that their alleged losses were substantial, continuing and without any immediate prospect of abating; hence, the nature of the retrenchment is seriously disputable.
Retrenchment is a management prerogative consistently recognized and affirmed by this Court. It is, however, subject to faithful compliance with the substantive and the procedural requirements laid down by law and jurisprudence. It must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting.
The only less drastic measure that EMCO undertook was the rotation work scheme: the three-day-work per employee per week schedule. It did not try other measures, such as cost reduction, lesser investment on raw materials, adjustment of the work routine to avoid the scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file, improvement of manufacturing efficiency, trimming of marketing and advertising costs, and so on. The fact that petitioners did not resort to other such measures seriously belies their claim that retrenchment was done in good faith to avoid losses.
For a valid termination due to retrenchment, the law requires that written notices of the intended retrenchment be served by the employer on the worker and on the Department of Labor and Employment at least one (1) month before the actual date of the retrenchment. The purpose of this requirement is to give employees some time to prepare for the eventual loss of their jobs, as well as to give DOLE the opportunity to ascertain the verity of the alleged cause of termination.
There is no showing that such notice was served on the employees in the present case. Petitioners argue that on January 20, 1993, Petitioner Jimmy Lim gave the DOLE a formal notice of the intended retrenchment and furnished the EMCO Labor Association and its general membership copies of the notice by posting it on the bulletin boards of their respective departments. On March 2, 1993, EMCO sent DOLE another written notice. The next day, Lim sent a Memorandum to the foremen, the section heads, the supervisors and the department heads instructing them to retrench some of the workers based on certain guidelines. Petitioners aver that the Memorandum also served as a written notice to all the employees concerned. Clearly, it is not the notice contemplated by law. The written notice should have been served on the employees themselves, not on their supervisors.
The Notice sent to DOLE was defective, because it stated that EMCO would terminate the services of 104 of its workers. The corporation, however, actually dismissed 250. Petitioners aver that the 146 employees not listed in the Notice sent to DOLE voluntarily resigned; hence, the latter were not retrenched. This assertion does not deserve any consideration. Petitioners reiterate that those workers voluntarily resigned because of the atmosphere of uncertainty, which occurred after the Sawmill Department had been temporarily shut off in February 1993. The renewal of the permit on March 31, 1993, however, removed the alleged shroud of uncertainty.
Moreover, resignation is the voluntary act of employees who are compelled by personal reasons to dissociate themselves from their employment. It must be done with the intention of relinquishing an office, accompanied by the act of abandonment. Therefore, it would have been illogical for respondents to resign and then file a Complaint for illegal dismissal. Resignation is inconsistent with the filing of the Complaint.
The appellate court aptly ruled that petitioners had not complied with this statutory requirement. They deducted the amount of attorney’s fees that had allegedly accrued as a result of the renegotiations for a new collective bargaining agreement. Without denying that they deducted those fees, petitioners argue that the deduction was made with the prior approval of respondents.
The obligation to pay attorney’s fees belongs to the union and cannot be shunted to the individual workers as their direct responsibility. The law has made clear that any agreement to the contrary shall be null and void ab initio. Thus, petitioners’ deduction of attorney’s fees from respondents’ separation pay has no basis in law.
Petitioners argue that the Quitclaims signed by respondents enjoy the presumption of regularity, and that the latter had the burden of proving that their consent had been vitiated. They further maintain that aside from Eddie de la Cruz, the other respondents did not submit their respective supporting affidavits detailing how their individual consents had been obtained. Allegedly, such documents do not constitute the clear and convincing evidence required under the law to overturn the validity of quitclaims.
We hold that the labor arbiter and the NLRC erred in concluding that respondents had voluntarily signed the Waivers and Quitclaim Deeds. Contrary to this assumption, the mere fact that respondents were not physically coerced or intimidated does not necessarily imply that they freely or voluntarily consented to the terms thereof. Moreover, petitioners, not respondents, have the burden of proving that the Quitclaims were voluntarily entered into.
Furthermore, in Trendline Employees Association-Southern Philippines Federation of Labor (TEA-SPFL) v. NLRC and Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, similar retrenchments were found to be illegal, as the employers had failed to prove that they were actually suffering from poor financial conditions. In these cases, the Quitclaims were deemed illegal, as the employees’ consents had been vitiated by mistake or fraud.
These rulings are applicable to the case at bar. Because the retrenchment was illegal and of no effect, the Quitclaims were therefore not voluntarily entered into by respondents. Their consent was similarly vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous employers minded to evade legal responsibilities.
As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel. The amounts already received by the present respondents as consideration for signing the Quitclaims should, however, be deducted from their respective monetary awards.
Petitioners aver that in a special civil action for certiorari, the appellate court is limited to reviewing only questions related to jurisdiction or grave abuse of discretion. As in the present case, however, the lower tribunals’ factual findings will not be upheld where there is a showing that such findings were totally devoid of support, or that the judgment was based on a misapprehension of facts.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs against petitioners.
 Eighth Division. Penned by Justice Eriberto U. Rosario Jr., with the concurrence of Justices Ramon Mabutas Jr. (Division chairman) and Roberto A. Barrios (member).
 Assailed Decision, p. 15; rollo, p. 60.
 Assailed Decision, pp. 4-8; id., pp. 52-56.
 The case was deemed submitted for decision on October 9, 2002, upon this Court’s receipt of respondents’ Memorandum, which was signed by Atty. Danilo P. Rubio. Petitioners’ Memorandum, signed by Attys. Gregorio M. Batiller Jr. and Gavino F. Reyes, was received by the Court on September 12, 2002.
 Petitioners’ Memorandum, pp. 12-13; rollo, pp. 173-174.
 AG & P United Rank and File Association v. NLRC, 332 Phil. 937, 944, November 29, 1996; citing Precision Electronics Corporation v. NLRC, 178 SCRA 667, October 23, 1989.
 ART. 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 worker 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 thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or 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 closure 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 as one (1) whole year.
 Saballa v. NLRC, 329 Phil. 511, 526-527, August 22, 1996, per Panganiban, J.; citing Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA 179, 186-187, August 30, 1990, per Feliciano, J.
 Edge Apparel, Inc. v. NLRC, 349 Phil. 972, 983, February 12, 1998, per Vitug, J.; citing Guerrero v. NLRC, 329 Phil. 1069, 1076, August 30, 1996, per Puno, J.
 Petitioners’ Memorandum, p. 20; rollo, p. 181.
 Id., pp. 21 & 182.
 Id., pp. 21-22 & 182-183.
Guerrero v. NLRC, supra, p. 1075.
 Somerville Stainless Steel Corporation v. NLRC, 350 Phil. 859, 872, March 11, 1998; citing San Miguel Jeepney Service v. NLRC, 332 Phil. 804, 851, November 28, 1996.
 Id., citing Sebuguero v. NLRC, 248 SCRA 532, 544, September 27, 1995.
 Id., p. 873, per Panganiban, J.; citing Philippine School of Business Administration (PSBA Manila) v. NLRC, 223 SRCA 305, June 8, 1993, per Romero, J.
 Somerville Stainless Steel Corporation v. NLRC, supra, p. 874, per Panganiban, J.; citing Moore, Carl L. and Jaedicke, Robert K., Managerial Accounting (1967), p. 169.
 Lopez Sugar Corporation v. Federation of Free Workers, supra;Anino v. NLRC, 352 Phil. 1098, May 21, 1998; Edge Apparel, Inc. v. NLRC, supra; Philippine Tuberculosis Society, Inc. v. NLU & NLRC, 356 Phil. 63, August 25, 1998.
 Article 283 of the Labor Code of the Philippines; Fuentes v. NLRC, 334 Phil. 22, January 2, 1997.
 Serrano v. NLRC, 380 Phil. 416, 445, January 27, 2000 .
 Dosch v. NLRC, 123 SCRA 296, July 5, 1983; Magtoto v. NLRC, 140 SCRA 58, November 18, 1985; Molave Tours Corporation v. NLRC, 250 SCRA 325, November 24, 1995, citing Intertrod Maritime, Inc. v. NLRC, 198 SCRA 318, June 19, 1991.
 Valdez v. NLRC, 349 Phil. 760, 767, February 9, 1998; Santos v. NLRC, 166 SCRA 759, October 28, 1988; Hua Bee Shirt Factory, v. NLRC, 186 SCRA 586, June 18, 1990; Dagupan Bus Company, Inc. v. NLRC, 191 SCRA 328, November 9, 1990.
 Petitioners’ Memorandum, p. 28; rollo, p. 189.
 Bank of the Philippine Islands Employees Union-ALU v. NLRC, 171 SCRA 556, March 31, 1989.
 Petitioners’ Memorandum, p. 30; rollo, p. 191.
 Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation, 340 SCRA 383, 394, September 14, 2000.
 Salonga v. NLRC, 324 Phil. 330, February 23, 1996.
 338 Phil. 681, May 5, 1997.
 Ibid., citing Talla v. NLRC, 175 SCRA 479, 480-481, July 19, 1989.
 Villar v. NLRC, 387 Phil. 706, 717, May 11, 2000; Olacao v. NLRC, 177 SCRA 38, August 29, 1989; Lopez Sugar Corporation v. Federation of Free Workers, supra.

References: v. 
 v. 
 v. 
 v. 
 ART. 283
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.