Manila Mining Corp. Employees Association-Federation of Free Workers Chapter vs. Manila Mining Corp. et al.

A bona fide temporary lay-off due to a faultless suspension of business operations is valid and does not constitute unfair labor practice, but when the suspension exceeds six months, the employer is liable for separation pay under Article 283 of the Labor Code even if the closure or cessation is not due to serious business losses.

Manila Mining Corporation (MMC) is a publicly-listed corporation engaged in large-scale mining for gold and copper ore, required by law to maintain a tailings containment facility to store waste material from its mining operations. It constructed several tailings dams, including Tailings Pond No. 7 (TP No. 7), which was constructed in 1993 and operated under a permit issued by the DENR through its Environmental Management Bureau in Butuan City, Agusan del Norte. The Union, MMC-Makati Employees Association-Federation of Free Workers Chapter, is a labor organization of MMC rank-and-file employees. The dispute implicates the Labor Code provisions on bona fide suspension of business operations, closure of establishment, separation pay, and the duty to bargain collectively.

Respondent Manila Mining Corporation (MMC) is a publicly-listed corporation engaged in large-scale mining for gold and copper ore. It constructed Tailings Pond No. 7 (TP No. 7) in 1993 to treat and store waste materials, operating it under a permit issued by the DENR through its Environmental Management Bureau in Butuan City, Agusan del Norte. On 10 January 2000, eleven rank-and-file employees of MMC attended the organizational meeting of the MMC-Makati Employees Association-Federation of Free Workers Chapter (Union). On 3 March 2000, the Union filed with the DOLE all the requirements for its registration, and it acquired legitimate registration status on 30 March 2000. The Union subsequently submitted letters to MMC relating its intention to bargain collectively, and on 11 July 2001, it submitted its Collective Bargaining Agreement (CBA) proposal to MMC.

Upon expiration of the tailings permit on 25 July 2001, DENR-EMB did not issue a permanent permit due to MMC's inability to secure an Environmental Compliance Certificate (ECC). An essential component of an ECC is social acceptability or the consent of the residents in the community to allow TP No. 7 to operate, which MMC failed to obtain. MMC was therefore compelled to temporarily shut down its mining operations, resulting in the temporary lay-off of more than 400 employees in the mine site. On 30 July 2001, MMC called for the suspension of negotiations on the CBA with the Union until resumption of mining operations.

Among the employees laid-off, complainants Samuel Zuñiga, Myrna Maquio, Doroteo Torre, Arsenio Mark Perez, Edmundo Galvez, Diana Ruth Rellores, Jonathan Araneta, Teresita Lagman, Reynaldo Anzures, Gerardo Opena, and Edwin Tuazon, together with the Union, filed a complaint before the labor arbiter on even date praying for reinstatement, recognition of the Union as the sole and exclusive representative of its rank-and-file employees, and payment of moral and exemplary damages and attorney's fees.

In their Position Paper, complainants challenged the validity of their lay-off on the averment that MMC was not suffering from business losses. They alleged that MMC did not want to bargain collectively with the Union, so that instead of submitting their counterproposal to the CBA, MMC decided to terminate all union officers and active members. Petitioners questioned the timing of their lay-off and alleged that first, there was no showing that cost-cutting measures were taken by MMC; second, no criteria were employed in choosing which employees to lay-off; and third, the individuals laid-off were those who signed the attendance sheet of the union organizational meeting. Petitioners likewise claimed that they were denied due process because they were not given a 30-day notice informing them of the lay-off, and neither was the DOLE informed of the lay-off as mandated by law. Respondents justified the temporary lay-off as bona fide in character and a valid management prerogative pending the issuance of the permit to continuously operate TP No. 7.

The labor arbiter ruled in favor of MMC and held that the temporary shutdown of the mining operation, as well as the temporary lay-off of the employees, is valid. On appeal, the NLRC modified the judgment of the labor arbiter and ordered the payment of separation pay equivalent to one month pay for every year of service, reasoning that the temporary lay-off, which exceeded more than six months, had the effect of severance of the employer-employee relationship. The NLRC also ordered attorney's fees equivalent to 10% of the award. In an Order dated 31 May 2004, the NLRC affirmed its Resolution. Both parties separately filed their petitions for certiorari with the Court of Appeals. In its Decision dated 30 June 2006, the Court of Appeals modified the NLRC ruling by setting aside the award of attorney's fees and maintaining the monetary award of separation pay but modifying it from one month pay for every year of service to one-half month pay for every year of service, with a fraction of at least six months considered as one whole year. Both parties filed their respective motions for reconsideration, but in a Resolution dated 30 May 2007, the Court of Appeals denied the motions for lack of merit. Only the Union elevated the case to the Supreme Court via the instant petition for review on certiorari.

The labor arbiter, NLRC, and Court of Appeals sustained in unison the validity of the temporary suspension and the temporary lay-off. The Court of Appeals found that MMC's suspension of mining operations was bona fide and supported by substantial evidence; that MMC could not conduct mining operations without a tailings disposal system; that it operated TP No. 7 under a valid permit, with a Temporary Authority to Construct and Operate issued on January 25, 2001 valid for six months or until July 25, 2001; that MMC timely filed an application for renewal of its permit but the renewal permit was not immediately released by DENR-EMB; and that the suspension was not due to MMC's fault nor necessitated by financial reasons, but by the non-issuance of the permit without which MMC could not resume milling and mining operations.

• Bad Faith and Constructive Dismissal: The Union attributed bad faith on the part of MMC in implementing the temporary lay-off resulting in the complainants' constructive dismissal, alleging that the failure to obtain a permit to operate TP No. 7 was largely due to MMC's failure to comply with DENR-EMB's conditions.
• Notice to DOLE: The Union claimed that the temporary lay-off was effected without any proper notice to the DOLE as mandated by Article 283 of the Labor Code.
• Selection Criteria: The Union maintained that MMC did not observe the jurisprudential criteria in the selection of the employees to be laid-off.
• Unfair Labor Practice: The Union insisted that MMC was guilty of unfair labor practice when it unilaterally suspended the negotiation for a CBA, and averred that the lay-off and subsequent termination of complainants were due to the formation of the union at MMC.

• Management Prerogative: MMC defended the temporary lay-off of the employees as valid and done in the exercise of management prerogative.
• Article 286 / Six-Month Period: MMC conceded that upon expiration of the 6-month period, coupled with losses suffered by MMC, the complainants were constructively dismissed, but took exception to the application of Article 286 of the Labor Code in that the 6-month period cannot and will not apply to consider the employees terminated and to support the payment of separation pay; MMC explained that the 6-month period does not refer to a situation where the employer does not have any control over the nature, extent and period of the temporary suspension of operations, and added that the suspension of MMC's operations is left primarily to the discretion of the DENR-EMB, which has the authority to issue MMC's permit to operate TP No. 7.
• Serious Business Losses: MMC submitted that where the closure is due to serious business losses, such as in this case where the aggregate losses amounted to over P880,000,000.00, the law does not impose any obligation upon the employer to pay separation benefits.
• Unfair Labor Practice: MMC averred that it merely deferred responding to the Union's letter-proposal until the resumption of its mining operations, and claimed that the employment relationship between the parties was suspended at the time the request to bargain was made.

• Validity of Temporary Lay-off: Whether the temporary suspension of MMC's mining operations and the resulting temporary lay-off of employees were valid and not illegal or unfair labor practice.
• Unfair Labor Practice in CBA Negotiations: Whether MMC committed unfair labor practice when it suspended CBA negotiations with the Union until resumption of mining operations.
• Separation Pay Despite Valid Lay-off: Whether MMC is liable to pay separation pay to the laid-off employees notwithstanding the validity of the temporary lay-off.
• Application of Article 286: Whether the six-month period under Article 286 of the Labor Code applies to MMC's suspension of operations, or whether Article 283 governs and requires separation pay.

• Validity of Temporary Lay-off: Yes. The temporary suspension and lay-off were valid because MMC's failure to secure the DENR-EMB permit was faultless and the suspension was bona fide; the lay-off was neither illegal nor unfair labor practice.
• Unfair Labor Practice in CBA Negotiations: No. The request to suspend CBA negotiations until resumption of operations did not amount to refusal to bargain; the Union failed to prove bad faith.
• Separation Pay Despite Valid Lay-off: Yes. Although the lay-off was valid, MMC is liable for separation pay under Article 283 because the cessation of operations was bona fide but not due to serious business losses; the CA's award of one-half month pay per year of service was affirmed.
• Application of Article 286: No. Article 286 covers only bona fide suspension not exceeding six months; it is silent beyond that period, and MMC's suspension exceeded six months, so Article 283 applies and separation pay is due.

• Validity of Temporary Lay-off: The labor tribunals and the Court of Appeals sustained in unison the validity of the temporary suspension and the temporary lay-off. MMC's suspension was bona fide and supported by substantial evidence. MMC could not conduct mining operations without a tailings disposal system; it operated TP No. 7 under a valid permit, with a Temporary Authority to Construct and Operate issued on January 25, 2001 valid for six months or until July 25, 2001. Although MMC timely filed an application for renewal, DENR-EMB did not immediately release the renewal permit. MMC's failure to obtain the consent of the residents, a condition for the permanent permit, was faultless. The suspension was not due to MMC's fault nor necessitated by financial reasons; it was brought about by the non-issuance of the permit without which MMC could not resume milling and mining operations. The lay-off was therefore neither illegal nor unfair labor practice.
• Unfair Labor Practice in CBA Negotiations: Article 252 defines the duty to bargain collectively as the mutual obligation to meet and convene promptly and expeditiously in good faith for the purpose of negotiating an agreement with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting grievances or questions arising under such agreements, if requested by either party, but such duty does not compel any party to agree to a proposal or to make any concession. For a charge of unfair labor practice to prosper, it must be shown that the employer was motivated by ill-will, bad faith or fraud, or was oppressive to labor; the employer must have acted in a manner contrary to morals, good customs, or public policy causing social humiliation, wounded feelings or grave anxiety. MMC merely sought a suspension of the CBA negotiations until it resumed operations and expressed willingness to negotiate once mining operations resumed. There was valid reliance on the suspension of mining operations for the suspension of the CBA negotiation. The Union failed to prove bad faith in MMC's actuations. Thus, no unfair labor practice was committed.
• Separation Pay Despite Valid Lay-off: The validity of the act of suspending operations did not excuse MMC from paying separation pay. Article 286 allows the bona fide suspension of operations for a period not exceeding six months; during the suspension, an employee is not deemed terminated and is entitled to reinstatement once the employer resumes operations within the six-month period. Article 286, however, is silent with respect to the rights of the employee if the suspension lasts for more than six months. MMC's view that the employment should not be deemed terminated beyond six months as long as the continued suspension is due to a cause beyond the employer's control was rejected. The decision to suspend operation ultimately lies with the employer, who, in its desire to avert possible financial losses, declares suspension of operations. Article 283 applies. Under Article 283, an employee dismissed due to cessation of business operation is entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, with a fraction of at least six months considered one whole year. Separation pay should also be paid even if the closure or cessation of operations is not due to losses. MMC's claim of severe financial losses did not exempt it: first, MMC did not appeal the Court of Appeals decision affirming the NLRC's award of separation pay, making the award final; second, the non-issuance of the permit forced MMC to permanently cease its business operations. The cessation was bona fide and not impelled by a motive to defeat or circumvent the tenurial rights of employees. Separation pay was therefore due.
• Application of Article 286: Article 286 covers only a bona fide suspension of operations for a period not exceeding six months. It does not address a suspension lasting more than six months. MMC's suspension exceeded six months, and its argument that the six-month period should not apply because the suspension was beyond its control was rejected. The decision to suspend operations ultimately lies with the employer. Article 283 therefore governed, and separation pay was required.

• Bona fide suspension of business operations and temporary lay-off — Under Article 286 of the Labor Code, a bona fide suspension of the operation of a business or undertaking for a period not exceeding six months does not terminate employment; the employer must reinstate the employee to his former position without loss of seniority rights if the employee indicates his desire to resume work not later than one month from the resumption of operations. The provision is silent on suspensions exceeding six months. In this case, MMC's suspension was bona fide and due to the non-issuance of a permit, but because it exceeded six months, the employment relationship was effectively severed and separation pay was due under Article 283.
• Management prerogative to suspend operations — An employer may suspend operations to avert possible financial losses, and the decision to suspend ultimately lies with the employer. However, the validity of the suspension does not excuse the employer from paying separation pay when the cessation of operations is bona fide but not due to serious business losses. Here, MMC validly suspended operations but remained liable for separation pay.
• Unfair labor practice and duty to bargain collectively — Article 252 defines the duty to bargain collectively as the mutual obligation to meet and convene promptly and expeditiously in good faith for negotiating terms and conditions of employment, but it does not compel any party to agree to a proposal or make a concession. For a charge of unfair labor practice to prosper, it must be shown that the employer was motivated by ill-will, bad faith or fraud, or was oppressive to labor, and acted contrary to morals, good customs, or public policy causing social humiliation, wounded feelings or grave anxiety. MMC's suspension of CBA negotiations pending resumption of operations did not amount to refusal to bargain because it merely sought suspension and expressed willingness to negotiate later; no bad faith was proven.
• Separation pay in closure or cessation of operations not due to serious business losses — Under Article 283 of the Labor Code, in cases of closure or cessation of operations not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, with a fraction of at least six months considered one whole year. Separation pay is due even if the closure or cessation is not due to losses. The employer may lawfully close shop if the cessation is bona fide and not impelled by a motive to defeat or circumvent the tenurial rights of employees, provided termination pay corresponding to length of service is paid. Here, MMC's cessation was bona fide but not due to serious losses, and it did not appeal the award, making it final.
• Finality of judgment — A party's failure to appeal a decision makes the award final, and it can no longer seek affirmative relief. MMC did not appeal the Court of Appeals decision affirming the NLRC's award of separation pay, so it could no longer claim exemption from separation pay based on alleged severe financial losses.

• "The lay-off is neither illegal nor can it be considered as unfair labor practice." — This is the core holding on the validity of MMC's temporary lay-off, rejecting the Union's claim that the lay-off was illegal and constituted unfair labor practice.
• "For a charge of unfair labor practice to prosper, it must be shown that the employer was motivated by ill-will, bad faith or fraud, or was oppressive to labor." — This states the standard for unfair labor practice, which the Union failed to meet when MMC merely suspended CBA negotiations pending resumption of operations.
• "The validity of its act of suspending its operations does not excuse it from paying separation pay." — This is the ratio on MMC's continuing liability despite the valid suspension, anchoring the award of separation pay under Article 283.
• "Under Article 283, the employer can lawfully close shop anytime as long as cessation of or withdrawal from business operations is bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees, and as long as he pays his employees their termination pay in the amount corresponding to their length of service." — This defines the conditions for a lawful closure and the employer's obligation to pay termination pay, which the Court applied to MMC's bona fide cessation.

• Union of Filipro Employer-Drug, Food and Allied Industries Unions-Kilusang Mayo Uno vs. Nestle Philippines, Incorporated, G.R. Nos. 158930-31, 3 March 2008, 547 SCRA 323, 333-334 — Cited to support the rule that the duty to bargain collectively does not compel a party to agree to a proposal or make a concession, and that unfair labor practice requires bad faith or ill-will.
• Eastridge Golf Club, Inc. vs. Eastridge Golf Club, Inc. Labor Union-Super, G.R. No. 166760, 22 August 2008, 563 SCRA 93, 106-107 — Cited for the rule that separation pay should be paid to employees even if the closure or cessation of operations is not due to losses.
• J.A.T. General Services vs. National Labor Relations Commission, G.R. No. 148340, 26 January 2004, 421 SCRA 78, 89-90 — Cited alongside Eastridge for the same rule on separation pay in closure or cessation not due to losses.
• Industrial Timber Corporation vs. Ababon, G.R. No. 164518, 25 January 2006, 480 SCRA 171, 185-186 — Cited for the rule that an employer may lawfully close shop if the cessation is bona fide and not impelled by a motive to defeat or circumvent the tenurial rights of employees, provided termination pay is paid.

• Article 252, Labor Code — Defines the duty to bargain collectively as the mutual obligation to meet and convene promptly and expeditiously in good faith for negotiating an agreement with respect to wages, hours of work and all other terms and conditions of employment, including proposals for adjusting grievances or questions arising under such agreements, if requested by either party, but such duty does not compel any party to agree to a proposal or to make any concession. Applied: MMC's suspension of CBA negotiations was not refusal to bargain because the duty does not compel agreement or concession; no bad faith was shown.
• Article 283, Labor Code — Governs closure of establishment and reduction of personnel. It provides that in cases of retrenchment to prevent losses and in cases of closures or cessation of operations not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, with a fraction of at least six months considered one whole year. Applied: MMC's cessation of operations due to non-issuance of a permit was bona fide but not due to serious business losses; separation pay was due, and the Court of Appeals' award of one-half month pay per year of service was affirmed.
• Article 286, Labor Code — Provides that the bona fide suspension of the operation of a business or undertaking for a period not exceeding six months, or the fulfillment by the employee of a military or civic duty, shall not terminate employment, and the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume work not later than one month from the resumption of operations. Applied: Article 286 covers only a bona fide suspension not exceeding six months; it is silent beyond that period. MMC's suspension exceeded six months, so Article 283 applied and separation pay was required.

Corona, C.J. (Chairperson), Velasco, Jr., Leonardo-De Castro, and Del Castillo, JJ.