San Felipe Neri School of Mandaluyong, Inc. v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Petitioners, as incorporators, stockholders, and/or trustees of San Felipe Neri School of Mandaluyong, Inc., sold the school's real and personal properties to the Roman Catholic Archbishop of Manila (RCAM) via a Deed of Absolute Sale on April 18, 1981. Private respondents, who were former teacher employees of the school, reported for work in May 1981 to discover the school under new ownership and management. They were required by the new administration (RCAM) to re-apply as new employees, with their past services not recognized, leading them to seek recourse from the former owners. Procedural History: The private respondents filed a complaint before the Labor Arbiter against the petitioners and RCAM for separation pay and other claims. The Labor Arbiter, on March 26, 1984, ruled in favor of the private respondents, ordering the petitioners to pay separation pay, dismissing the complaint against RCAM and certain other claims. The petitioners appealed this decision to the National Labor Relations Commission (NLRC), arguing lack of jurisdiction and employer-employee relationship with the individual petitioners. On February 12, 1987, the NLRC affirmed the Labor Arbiter's decision, ruling that the sale constituted a closure and the award of separation pay was lawful. A motion for reconsideration was denied by the NLRC on April 7, 1987. The Petition: This case comes before the Supreme Court via a petition for certiorari, seeking to review and set aside the resolutions of the NLRC. The petitioners contend that the sale of the school's assets did not constitute a termination of employment, as the business operations continued under RCAM, and that the individual petitioners were not the direct employers of the private respondents, but rather the school corporation itself. They argue that the NLRC erred in awarding separation pay, citing that there was no cessation of employment and no employer-employee relationship with the individual petitioners.
Issue(s)
Whether the private respondents are entitled to separation pay due to the change of ownership and the requirement to re-apply as new employees. Whether the change of ownership of the school constituted a termination of employment justifying separation pay. Whether the individual petitioners, as incorporators, stockholders, and/or trustees, are solidarily liable for the separation pay.
Ruling
The petition is devoid of merit. The appealed decision and resolution are affirmed, with modification that only petitioner San Felipe Neri School of Mandaluyong is liable, as the school has a separate and distinct personality from the other petitioners.
Ratio Decidendi
On the entitlement to separation pay and termination of employment: The Court held that a change in ownership or management of an establishment is not a just cause for termination of employment. However, in this case, the sale of the school's properties and assets to RCAM, which then required the respondent teachers to re-apply as new employees subject to probation and without recognition of their past services, effectively terminated their employment. The records showed that RCAM expressly manifested its unwillingness to absorb the employees or recognize their prior service, leading to the conclusion that there was in effect a closure of the establishment from the perspective of the original employees. The Court emphasized that the negotiations for the sale were held behind the back of the private respondents, who were surprised by the change and were not formally notified of the sale or its consequences on their employment. This lack of notice of termination, coupled with the failure to apprise employees of the consequences of the sale, entitled them to separation pay. The Court cited Central Azucarera del Danao vs. Court of Appeals and Philippine Refining Company vs. Garcia to support the principle that failure to serve notice of termination renders the employer answerable for termination pay. On whether the change of ownership constituted termination: As stated above, the sale of the school's properties and assets to RCAM, which then required the respondent teachers to re-apply as new employees subject to probation and without recognition of their past services, effectively terminated their employment. The lack of notice of termination, coupled with the failure to apprise employees of the consequences of the sale, entitled them to separation pay. On the liability of individual petitioners: The Court clarified that while the school corporation, San Felipe Neri School of Mandaluyong, Inc., is liable, the individual petitioners (incorporators, stockholders, and/or trustees) are not solidarily liable. This is based on the principle that a corporation has a personality separate and distinct from those composing it. Therefore, only the petitioner school, as the employer, is liable to the private respondents for separation pay.
Main Doctrine
A change in ownership or management of an establishment does not automatically terminate the employment of its employees. However, if the sale results in the closure of the establishment or the termination of employment, and the employees are not given proper notice or their past services are not recognized by the new owner, they are entitled to separation pay.