North Davao Mining Corporation vs. NLRC

An employer that closes its business due to serious business losses is not legally required to pay separation benefits under Article 283 of the Labor Code, and the grant of a lesser amount of separation pay than the company's prior practice does not constitute impermissible discrimination when the reduction is dictated by financial bankruptcy rather than a wrongful exercise of management prerogative.

North Davao Mining Corporation was incorporated in 1974 as a privately-owned company, with the Philippine National Bank later acquiring equity through conversion of a portion of North Davao's loans. On June 30, 1986, PNB transferred its loans and equity to the national government, which turned them over to the Asset Privatization Trust pursuant to Proclamation No. 50 dated December 8, 1986. As of December 31, 1990, the national government held 81.8% of the common stock and 100% of the preferred stock. The company operated in a region plagued by insurgency and peace and order problems, requiring employees to collect salaries at a bank in Tagum, Davao del Norte, approximately 58 kilometers and 2½ hours of travel from the workplace.

North Davao Mining Corporation was incorporated in 1974 as a wholly privately-owned company. The Philippine National Bank later became a part owner through conversion into equity of a portion of loans obtained by North Davao. On June 30, 1986, PNB transferred all its loans and equity in North Davao to the national government, which subsequently turned them over to the Asset Privatization Trust by virtue of Proclamation No. 50 dated December 8, 1986. As of December 31, 1990, the national government held 81.8% of the common stock and 100% of the preferred stock of the corporation.

From the beginning of its operations in 1981 until its closure in 1992, North Davao had maintained a company practice of granting separation pay equivalent to thirty days' pay for every year of service. Because the region where it operated was plagued by insurgency and other peace and order problems, employees had to collect their salaries at a bank in Tagum, Davao del Norte, some 58 kilometers from the workplace and about 2½ hours of travel time by public transportation; this arrangement lasted from 1981 to 1990.

North Davao completely ceased operations on May 31, 1992, due to serious business reverses. From 1988 until its closure, the company suffered net losses averaging P3 billion per year for each of the five years prior to closure. As of December 31, 1991, its total liabilities had exceeded its assets by P20.392 billion, as shown by financial statements audited by the Commission on Audit. When it ceased operations, the remaining employees were separated and given the equivalent of 12.5 days' pay for every year of service, computed on basic monthly pay, in addition to commutation of unused vacation and sick leaves — less than the 30 days per year previously granted as company practice.

Respondent Wilfredo Guillema and 271 other separated employees filed a complaint with the Labor Arbiter seeking additional separation pay of 17.5 days per year of service, backwages equivalent to two days a month, transportation allowance, hazard pay, housing allowance, food allowance, post-employment medical clearance, and future medical allowance, totaling P58,022,878.31 as computed by private respondent. On May 6, 1993, the Labor Arbiter ordered North Davao to pay additional separation pay of 17.5 days per 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, amounting to P10,240,517.75, plus 10% attorney's fees. The NLRC affirmed the decision in toto and denied the motion for reconsideration.

• Grave Abuse of Discretion on Separation Pay: Petitioner argued that the NLRC acted with grave abuse of discretion in affirming without legal basis the award of additional separation pay to employees separated due to serious business losses, since Article 283 of the Labor Code does not obligate an employer to pay separation benefits when closure is due to serious business losses or financial reverses.
• Insufficient Factual Basis for Backwages and Transportation: Petitioner contended that the NLRC acted with grave abuse of discretion in affirming the award of backwages and transportation expenses without sufficient factual basis, asserting that the time spent collecting wages at Tagum was on official time and that transportation expenses were incurred by the complainants themselves.
• No Adequate Remedy: Petitioner maintained that there was no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law, warranting the petition for certiorari.

• Company Policy as Obligation: Respondent NLRC ruled that since North Davao had been paying separation pay equivalent to 30 days' pay per year of service, knowing fully well that the law provides for a lesser amount, such company policy had ripened into an obligation, and depriving private respondent and others similarly situated of the same benefits would be discriminatory.
• Reliance on BISSI Doctrine: Respondents relied on Businessday Information Systems and Services, Inc. vs. NLRC, arguing that petitioners may not pay separation benefits unequally, as such discrimination breeds resentment and ill-will among those treated less generously than others.
• Protection Under Article 283: Respondents cited Abella vs. NLRC as authority for the proposition that Article 283 of the Labor Code protects workers in case of closure of establishment.
• Compensable Travel Time and Transportation Expenses: Respondent NLRC held that no evidence had been presented to support petitioners' assertion that wage collection at Tagum was on official time, and that petitioners should have submitted payrolls or transportation vouchers to prove their claims; the burden of proving compliance with labor standards law rested on petitioners.
• Government Solvency: The Solicitor General argued that since North Davao's assets were transferred to the national government and held in trust by APT, it would be incongruous to declare that the National Government, presumed to be solvent, could not pay the money claims.

• Separation Pay in Closure Due to Losses: 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.
• Compensability of Wage Collection Time: 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.
• Entitlement to Transportation Expenses: Whether private respondents are entitled to transportation expenses in the absence of evidence that these expenses were incurred.

• Separation Pay in Closure Due to Losses: No. Article 283 of the Labor Code does not obligate an employer to pay separation benefits when closure is due to serious business losses or financial reverses; the reduced separation pay was dictated by financial bankruptcy, not discrimination.
• Compensability of Wage Collection Time: Yes. Under Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code, time spent by employees in collecting wages at a place other than the workplace, where free transportation is not provided, is considered compensable hours worked.
• Entitlement to Transportation Expenses: Yes. The NLRC's factual findings on transportation expenses, supported by substantial evidence and uncontradicted by petitioners beyond bare denials, are binding on the Court.

• Separation Pay in Closure Due to Losses: Article 283 of the Labor Code expressly provides that the obligation to pay separation pay equivalent to one month pay or at least one-half month pay per year of service applies only to closures "not due to serious business losses or financial reverses." Where closure is due to business losses — as in this case, where aggregate losses exceeded P20 billion — the Labor Code imposes no obligation to pay separation benefits. The basis for the employees' claim of additional separation pay was alleged discrimination under Article 248(e) of the Labor Code, relying on Businessday Information Systems and Services, Inc. vs. NLRC. That case was distinguished: in BISSI, the company could afford to pay more generous separation benefits to the second batch of employees at the time of closure, meaning it was also in a position to pay the same amount to those earlier laid off, making the unequal treatment impermissible discrimination. In North Davao's case, the company's practice of giving one month's pay per year of service could no longer be continued precisely because the company could not afford it; the total cessation of operations due to accumulated losses was a supervening fact that prevented continuation of the more generous amount. The lesser separation pay was dictated by sheer financial bankruptcy, not by discriminatory management prerogative. The fact that North Davao voluntarily paid 12.5 days' separation pay — though not required by law — should have been recognized rather than condemned. The Solicitor General's argument that the national government, as majority stockholder, should be presumed solvent and required to pay was rejected: a stockholder is not directly, individually, or personally liable for the indebtedness of the corporation, and no basis for piercing the corporate veil was shown. The national government was not the employer of the complainants.

• Compensability of Wage Collection Time: Section 4, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code provides that payment in a place other than the workplace is permissible when peace and order conditions deteriorate, but the time spent by employees in collecting their wages shall be considered compensable hours worked. It was undisputed that for security reasons, North Davao paid workers at a bank in Tagum, 2½ hours of travel from the workplace, and such travel time was not official. A DOLE inspection on February 12, 1992 found violations of labor standards law, including the place of payment of wages. The Regional Director's Order dated April 14, 1992 directed North Davao to comply with Section 4. The NLRC's findings on this matter were factual and supported by substantial evidence, and the Court is bound by such findings absent grave abuse of discretion.

• Entitlement to Transportation Expenses: The award of transportation expenses was likewise based on factual findings of the NLRC, which are accorded respect and even finality. The burden of proving compliance with labor standards law rested on petitioners, who offered only bare denials. The uncontradicted findings justified the award of P40.00 round-trip fare during pay days. Citing Maya Farms Employees Organizations vs. NLRC, the Court reaffirmed that findings of fact of administrative and quasi-judicial bodies with specialized expertise are binding unless there is a showing of grave abuse of discretion, arbitrariness, or disregard of evidence on record.

• Closure Due to Serious Business Losses — No Separation Pay Obligation — Under Article 283 of the Labor Code, an employer is not obligated to pay separation benefits when the closure of the establishment is due to serious business losses or financial reverses. The obligation to pay separation pay equivalent to one month pay or at least one-half month pay per year of service applies only to closures not due to serious business losses or financial reverses. The Court applied this by holding that North Davao, having closed due to accumulated losses exceeding P20 billion, was not legally required to pay any separation benefits at all, and its voluntary payment of 12.5 days per year of service was sufficient.

• Distinction Between Discriminatory Reduction and Bankruptcy-Driven Reduction of Benefits — A company's reduction of separation pay below its established company practice does not constitute impermissible discrimination under Article 248(e) of the Labor Code when the reduction is dictated by sheer financial bankruptcy and complete inability to continue operations, rather than by a wrongful exercise of management prerogatives. The Court distinguished Businessday Information Systems and Services, Inc. vs. NLRC, where the employer could afford to pay more generous benefits at closure but chose to skimp on earlier-separated employees.

• Finality of Factual Findings of Quasi-Judicial Bodies — Findings of fact of administrative agencies and quasi-judicial bodies with specialized expertise are accorded respect and even finality, and are binding upon the Supreme Court unless there is a showing of grave abuse of discretion, arbitrariness, or disregard of evidence on record. The Court applied this doctrine to affirm the NLRC's findings on backwages and transportation allowance.

• Employer's Burden to Prove Compliance with Labor Standards — The burden of presenting evidence of compliance with labor standards law rests on the employer, not on the employees to prove non-compliance. Petitioners' bare denials were insufficient to overturn the NLRC's factual findings.

• Stockholder Not Liable for Corporate Indebtedness — A stockholder, even a majority stockholder such as the national government, is not directly, individually, or personally liable for the indebtedness of the corporation, absent grounds for piercing the corporate veil. The solvency of the national government as majority stockholder was immaterial to the corporation's obligation.

• "Where, however, the closure was due to business losses — as in the instant case, in which the aggregate losses amounted to over P20 billion — the Labor Code does not impose any obligation upon the employer to pay separation benefits, for obvious reasons." — This passage states the ratio decidendi on the first issue, establishing that Article 283 does not require separation pay when closure is due to serious business losses.

• "The total cessation of operation due to mind-boggling losses was a supervening fact that prevented the company from continuing to grant the more generous amount of separation pay." — This passage articulates the distinction between discriminatory reduction and bankruptcy-driven reduction, explaining why the BISSI doctrine does not apply.

• "Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land." — This metaphor encapsulates the Court's reasoning that an employer cannot be required to pay benefits it can no longer afford upon business death.

• "(T)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer." — This frequently cited formulation, drawn from Manila Trading & Supply Co. vs. Zulueta and reiterated in subsequent cases, defines the boundary of labor protection against employer viability.

• Businessday Information Systems and Services, Inc. vs. NLRC, 221 SCRA 9 (April 5, 1993) — Distinguished. In BISSI, the employer could afford to pay more generous separation benefits to the second batch of employees at closure but gave less to the first batch, constituting impermissible discrimination. The Court distinguished this case because North Davao's reduced separation pay was due to financial bankruptcy, not discriminatory management prerogative.

• Abella vs. NLRC, 152 SCRA 141 (July 20, 1987) — Cited by respondents for the proposition that Article 283 protects workers in case of closure. The Court did not rely on it for its ruling.

• Manila Trading & Supply Co. vs. Zulueta, 69 Phil. 485 (January 30, 1940) — Followed and reiterated. The Court quoted its formulation that the law, in protecting laborer's rights, authorizes neither oppression nor self-destruction of the employer.

• San Miguel Corporation vs. NLRC, 115 SCRA 329 (July 20, 1982) — Followed. The Court reiterated the principle from Manila Trading through this case.

• Allied Banking Corporation vs. Castro, 156 SCRA 789 (December 22, 1987) — Followed. The Court further reiterated the same principle through this case.

• Maya Farms Employees Organizations vs. NLRC, 239 SCRA 508 (December 28, 1994) — Followed. The Court relied on this case for the doctrine that factual findings of quasi-judicial bodies are accorded respect and finality absent grave abuse of discretion.

• Article 283, Labor Code — Governs closure of establishment and reduction of personnel. The provision distinguishes between closures due to serious business losses and those not due to such losses: separation pay is required only in the latter. The Court held that since North Davao's closure was due to accumulated losses exceeding P20 billion, no separation pay was legally required.

• Article 248(e), Labor Code — Proscribes discrimination in the payment of separation benefits as an unfair labor practice. The Court held that the reduced separation pay was not discriminatory but was dictated by financial bankruptcy.

• Section 4, Rule VIII, Book III, Omnibus Rules Implementing the Labor Code — Provides that the place of payment shall be at or near the place of undertaking, and that payment elsewhere is permissible only under specified circumstances, including deterioration of peace and order conditions, with the time spent by employees in collecting wages considered compensable hours worked. The Court applied this to affirm the award of backwages for travel time to collect salaries at Tagum.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco, and Hermosisima, Jr., JJ., concur.