Almirante: Closure of business

Dominador A. Almirante

PETITIONER ABS-CBN Broadcasting Corp. is a domestic corporation primarily engaged in the business of international and local broadcasting of television and radio content. Its Scenic Department initially handled the design, construction and provision of the props and sets for its different shows and programs. Subsequently, it engaged the services of independent contractors, one of whom was Edmund Ty.

In 1995, CCI was formed and incorporated by Ty together with some officers of petitioner, namely Eugenio Lopez III, Charo Santos-Concio, Felipe S. Yalong and Federico M. Garcia to handle practically the same functions as petitioner’s Scenic Department which was abolished.

On March 6, 1995, respondent Honorato C. Hilario was hired by CCI as designer. In April 1999 respondent Dindo B. Banting was hired as metal craftsman.

In June 2003, Ty retired as managing director of CCI. In August 2003, he organized and created Dream Weaver Visual Exponents Inc. (DWVEI) with the same functions as CCI.

Subsequently, respondents Banting and Hilario were served their respective notices of the closure of CCI effective Oct. 5, 2003.

In a case for illegal dismissal and money claims, the Labor Arbiter (LA), the National Labor Relations Commission (NLRC) and the Court of Appeals (CA) arrived at a common finding that respondents Banting and Hilario were illegally dismissed from the service.

Is their finding justified?

Ruling: Yes.

Based on the foregoing provision (Article 298), there are three requirements for a valid cessation of business operations: (a) service of a written notice to the employees and to the Department of Labor and Employment at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment of 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.

While the CCI has complied with the requirements of service of notice of cessation of operations one month before the intended date of closure and the payment of termination pay, it was not sufficiently proven that its closure of business was done in good faith. As correctly noted by both the LA and the NLRC, as well as the appellate court, CCI failed to satisfactorily show that its closure of business or cessation of operations was bona fide in character and not intended to defeat or circumvent the tenurial rights of employees.

A closure or cessation of business or operations as ground for the termination of an employee is considered invalid when there was no genuine closure of business but mere simulations which make it appear that the employer intended to close its business or operations when in truth, there was no such intention.

To unmask the true intent of an employer when effecting a closure of business, it is important to consider not only the measures adopted by the employer prior to the purported closure but also the actions taken by the latter after the act.

However, both the labor tribunals and the CA found that the purported closure of business operation of CCI was undertaken for the purpose of circumventing the provisions of the Labor Code which guarantees security of tenure of respondents and all other employees of CCI. We are not inclined to depart from the uniform findings which are substantially supported by the evidence on records. The Court is not a trier of facts and will not review factual findings of the lower tribunals as these are generally binding and conclusive.

Here, suspicions were raised when CCI decided to immediately cease its business operations when one its officers, Ty, retired and decided to form his own company to engage in the same business as CCI. It becomes even more evident that the closure of CCI was done in bad faith and with the intention of circumventing the laws when petitioner dropped CCI and instead hired and engaged the services of Ty as consultant, and subsequently Ty’s new company DWVEI for the props and set design of its various programs, thereby resulting in the termination of respondents and the other employees of CCI.

Apparently, CCI’s purported closure was a ploy to get rid of some employees and there was actually a plan to continue with the business operations under the guise of a new corporation DWVEI, which merely transferred and rehired most of the employees of CCI, to the prejudice of herein respondents who were terminated.

Clearly, respondents’ termination of employment was illegal as it was done in bad faith and in circumvention of the law. (ABS-CBN Broadcasting Corp. vs. Honorato C. Hilario, et al., G.R. 193136, July 10, 2019).