North Davao Mining Corporation v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: Petitioner North Davao Mining Corporation (North Davao) ceased operations on May 31, 1992, due to serious business reverses, having incurred average annual net losses of P3 billion from 1988 to 1992, with total liabilities exceeding assets by P20.392 billion as of December 31, 1991. Upon closure, employees were separated and paid 12.5 days' pay for every year of service, plus unused leave commutation. Prior to closure, North Davao had a policy of giving separation pay equivalent to 30 days' pay for every year of service. Procedural History: Respondent Wilfredo Guillema and 271 other employees filed a complaint for additional separation pay, back wages, transportation allowance, hazard pay, housing allowance, food allowance, post-employment medical clearance, and future medical allowance. The Labor Arbiter ordered North Davao to pay additional separation pay of 17.5 days for every year of service, backwages equivalent to two days a month (not exceeding three years), and transportation allowance at P80 a month (not exceeding three years), plus attorney's fees. The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's decision in toto. The NLRC reasoned that North Davao's prior policy of giving 30 days' separation pay had ripened into an obligation and that denying this to the private respondents would be discriminatory. The NLRC also justified the award of backwages and transportation allowance by citing the time employees spent collecting wages and the lack of evidence from the employer to disprove these claims. The Petition: Petitioners North Davao Mining Corporation and Asset Privatization Trust filed a petition for certiorari, arguing that the NLRC acted with grave abuse of discretion in affirming the award of additional separation pay, backwages, and transportation expenses without legal or factual basis. They questioned whether an employer closing due to serious business losses is obliged to pay separation pay and whether time spent collecting wages and transportation expenses are compensable.
Issue(s)
Whether an employer whose business operations ceased due to serious business losses or financial reverses is obliged to pay separation pay to its employees separated by reason of such closure. Whether time spent in collecting wages in a place other than the place of employment is compensable notwithstanding that the same is done during official time. Whether private respondents are entitled to transportation expenses in the absence of evidence that these expenses were incurred.
Ruling
The Supreme Court modified the assailed Resolution by setting aside and deleting the award for "additional separation pay of 17.5 days for every year of service," and affirmed it in all other aspects.
Ratio Decidendi
On the obligation to pay separation pay upon closure due to serious business losses: The Court held that Article 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to serious business losses or financial reverses. In this case, North Davao suffered substantial losses, making it impossible to continue its prior practice of paying 30 days' separation pay. The Court distinguished this from the Businessday Information Systems and Services, Inc. (BISSI) case, where the employer could afford to pay higher benefits to later-terminated employees, indicating discrimination. Here, the reduced payment was due to financial bankruptcy, not discriminatory management choice. The Court emphasized that the law does not authorize the oppression or self-destruction of the employer. The fact that North Davao voluntarily paid 12.5 days' separation pay, though not legally required, should be viewed positively. The Court also clarified that the national government's ownership of shares in North Davao did not make the government liable for the corporation's debts, as the corporate veil was not pierced. On compensability of time spent collecting wages: The Court affirmed the NLRC's findings on backwages, holding that these are factual issues best left to the NLRC, whose findings are binding if supported by substantial evidence. The Court noted that North Davao's policy of paying wages at a bank in Tagum, Davao del Norte, which took employees about 2.5 hours of travel, was found to be a violation of labor standards. Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code states that time spent collecting wages in a place other than the workplace shall be considered compensable hours worked under certain circumstances, including when peace and order conditions or emergencies prevent payment at the workplace. The Court found that the Labor Arbiter correctly considered the travel time and risks as justifying backwages. On entitlement to transportation allowance/expenses: The Court affirmed the NLRC's findings on transportation allowance, holding that these are factual issues best left to the NLRC, whose findings are binding if supported by substantial evidence. The Labor Arbiter correctly considered the travel time and risks as justifying transportation expenses, and placed the burden on the employer to prove compliance with labor standards.
Main Doctrine
An employer whose business operations ceased due to serious business losses or financial reverses is not legally obligated to pay separation benefits to its employees, as Article 283 of the Labor Code does not impose such a requirement. The payment of lesser separation benefits upon closure due to financial reverses, compared to a prior company policy, does not constitute discrimination if such action was necessitated by the company's inability to pay, rather than a discriminatory management choice.