Petitioner Industrial Timber Corporation (ITC) was leased a plywood plant located at Butuan City for a period of 5 years by Industrial Plywood Group Corporation (IPGC). Thereafter, ITC commenced operation of the plywood plant and hired 387 workers. Sometime after, ITC notified DOLE and its workers of the plant’s shutdown due to the non-renewal of the anti-pollution permit and the alleged lack of logs for milling constrained ITC to lay off all its workers until further notice. A final notice of closure or cessation of business operations followed advising the workers to collect the benefits due them under the law and CBA. Later, IPGC took over the plywood plant and was issued a permit to operate coincidentally the same day the ITC ceased operation of the plant. This prompted respondents to file a complaint for illegal dismissal and unfair labor practice alleging that the cessation of ITC’s operation was intended to bust the union and that both corporations are one and the same entity. LA dismissed the complaint. On appeal, NLRC first ordered the reinstatement of employees but later on, ruled to dismiss herein respondent’s complaints. CA set aside the decision.
Whether respondents were illegally dismissed due to the closure of ITC’s business.
The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code. Under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher.
We find that ITC’s closure or cessation of business was done in good faith and for valid reasons. The records reveal that the decision to permanently close business operations was arrived at after a suspension of operation for several months precipitated by lack of raw materials used for milling operations, the expiration of the anti-pollution permit, and the termination of the lease contract with IPGC over the plywood plant. Having established that ITC’s closure of the plywood plant was done in good faith and that it was due to causes beyond its control, the conclusion is inevitable that said closure is valid.
Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with the notice requirement. While an employer is under no obligation to conduct hearings before effecting termination of employment due to authorized cause, however, the law requires that it must notify the DOLE and its employees at least one month before the intended date of closure.
In the case at bar, ITC notified its employees and the DOLE of the ‘no plant operation’ due to lack of raw materials. This was followed by a ‘shut down’ notice due to the expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its employees that they could return to work once the renewal is acted upon by the DENR. Then, ITC sent its employees a final notice of closure or cessation of business operations to take effect on the same day it was released. We find that this falls short of the notice requirement for termination of employment due to authorized cause considering that the DOLE was not furnished and the notice should have been furnished both the employees and the DOLE at least one month before the intended date of closure.
Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employer’s exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.