Philippine Engineering Corporation vs. CIR

Reinstatement of discriminatorily dismissed employees is not legally permissible when the employer has permanently closed the business establishment and dismantled its operations, rendering the former positions non-existent, even if the closure was motivated by anti-union animus; however, back wages may still be awarded as penalty for the unfair labor practice.

• Petitioner Philippine Engineering Corporation, engaged in the purchase, sale, installation, and repair of machineries, operated a machine shop at 888 Raon Street, Quiapo, Manila, where its marine and other departments were located.
• Petitioner had a collective bargaining agreement with respondent Free Labor Union effective from January 1, 1960, to December 31, 1963.
• After the CBA expired, the union repeatedly sought negotiations for a new agreement through letters and personal representations from January 1964 onwards, but management consistently deferred execution citing busy schedules or promised to send drafts that never materialized.
• On February 1, 1965, employees were served written notice that their services would be terminated within February 1965, though regular employees would be paid until March 31, 1965.
• The union filed two complaints with the Department of Labor; during the second complaint, management representatives assured the union in the presence of a labor conciliator that no final decision on closing the shop had been made, prompting the union to withdraw its complaint.
• On May 31, 1965, petitioner closed the Raon Street machine shop, dismantled the machineries, and transferred equipment to its bodega at Carpena Street.
• Effective June 1, 1965, approximately 70% of union members (about 57 employees) were dismissed, while 30% were retained for maintenance of customers' equipment.
• Petitioner began selling its machineries from the Raon shop but continued accepting machine jobs and repair works, subcontracting these to other machine shops.
• Before and after the closure, petitioner hired new employees and gave salary increases to remaining staff.
• The retained union members were subsequently dismissed on October 31, 1965, after which petitioner gave promotions and salary increases to other employees.

• The machine shop was closed due to genuine financial losses for at least two years prior to closure, evidenced by delays in wage payments, adoption of a rotation system, unpaid rentals amounting to P125,747.61, uncollected customer accounts, failure to remit SSS contributions totaling P120,000.00, and loss of major distributorships, constituting legitimate cessation of business.
• The dismissal of employees was not due to union membership or activities, as evidenced by the retention of 30% of union members after the closure, and the CIR's finding relied on biased testimonies of union officers.
• The charge of unfair labor practice should have been dismissed because the quantum of proof required is proof beyond reasonable doubt, which was not established.
• Reinstatement could not be ordered because the machine shop had been closed, machineries dismantled and sold, and the specific positions (welders, drill press operators, lathemen, tinsmiths, carpenters) no longer existed.
• Back wages could not extend beyond the closure of the business on May 31, 1965, and earnings of employees during the dismissal period should have been deducted.
• The Court of Industrial Relations lacked jurisdiction because the case involved termination of service under Republic Act No. 1787 due to economic reasons, not unfair labor practice.

• The finding that the machine shop was not closed due to financial losses is a factual determination by the CIR which is conclusive upon the Supreme Court on appeal.
• The complaint alleged unfair labor practice, and jurisdiction is determined by the allegations in the complaint, which clearly fall within the CIR's jurisdiction under Republic Act No. 875.
• The evidence established that the dismissal was discriminatorily motivated by the employees' union activities and demands for a new collective bargaining agreement.

• Procedural Issues:
  • Whether the Court of Industrial Relations had jurisdiction over the case given petitioner's claim that it involved termination due to economic reasons rather than unfair labor practice.
• Substantive Issues:
  • Whether the closure of the machine shop was due to genuine financial losses or was motivated by anti-union animus.
  • Whether the dismissal of the 57 union members constituted unfair labor practice under Republic Act No. 875.
  • Whether reinstatement could be ordered after the permanent closure and dismantling of the business establishment.
  • Whether the award of back wages was proper despite the closure of the business.

• Procedural:
  • The Court held that the Court of Industrial Relations had jurisdiction over the case because jurisdiction over the subject matter is determined by the allegations in the complaint, which explicitly charged unfair labor practice under Section 4(a) of Republic Act No. 875, falling within the CIR's exclusive jurisdiction under Section 5(a) of the same Act.
• Substantive:
  • The Court affirmed the CIR's factual finding that the closure was not due to financial losses, noting that petitioner failed to present its books of account, profit and loss statements, or accountant testimony, giving rise to the presumption of suppression of unfavorable evidence, while evidence showed continued overtime work, hiring of casuals, purchase of spare parts worth $349,068.71, and continued acceptance of job orders after the alleged closure.
  • The Court upheld the finding of unfair labor practice, ruling that it is not necessary to prove that dismissal was exclusively motivated by union activities; it is sufficient that anti-union discrimination was a contributing factor, citing the timing of closure after union demands for a new CBA and the continued hiring of new employees after dismissing union members.
  • The Court ruled that reinstatement could not be ordered because reinstatement presupposes that the previous position still exists or that there is an unfilled position of similar nature; since the machine shop was permanently closed, machineries dismantled and sold, there were no positions to which the employees could return, applying the principle "ad impossible nemo tenetur."
  • The Court affirmed the award of three months' back wages as penalty for dismissal without just cause, citing precedent that back wages may be awarded even where reinstatement is impossible due to business closure.

• Contributing Factor Test in Unfair Labor Practice — It is not necessary to prove that dismissal was entirely and exclusively motivated by union activities; it is sufficient to establish that anti-union discrimination was a contributing factor to constitute unfair labor practice.
• Impossibility of Performance (Ad Impossibile Nemo Tenetur) — The law cannot exact compliance with what is impossible; reinstatement cannot be ordered when the business establishment has been permanently closed and the specific positions no longer exist.
• Substantial Evidence Standard — Unfair labor practice cases require only substantial evidence, not proof beyond reasonable doubt or preponderance of evidence, as the Industrial Peace Act mandates the CIR to ascertain facts speedily and objectively without regard to technicalities.
• Conclusiveness of Factual Findings — Findings of the Court of Industrial Relations on questions of fact, if supported by substantial evidence, are conclusive upon the Supreme Court, particularly regarding credibility of witnesses and weight of evidence.

• "Reinstatement refers to a restoration to a state from which one has been removed, or a return to the position from which one was taken out. Reinstatement presupposses that the previous position from which one had been removed still exists, or that there is an unfilled position more or less of similar nature as the one previously occupied by the employee."
• "It is not necessary to support a finding that a particular discharge constitutes an unfair labor practice to demonstrate that the dismissal was entirely and exclusively motivated by the employee's union activities or affiliations. It is enough to denounce the discharge if it is established that the discrimination motive was a contributing factor."
• "If it can be established that the true and basic inspiration for the employer's act is derived from the employee's union affiliation or activities, the assignment by the employer of another reason, whatever its semblance of validity, is unavailing."
• "The law itself can not exact compliance with what is impossible. 'Ad impossible nemo tenetur.'"

• Sta. Cecilia Sawmills, Inc. vs. Court of Industrial Relations — Cited as precedent for awarding three months' backpay where reinstatement was not possible by way of penalty for dismissal without just cause.
• Visayan Bicycle Manufacturing Co., Inc. vs. National Labor Union — Cited for the principle that if the true inspiration for dismissal is union affiliation, the employer's assignment of another valid reason is unavailing.
• Cromwell Commercial Employees and Laborers Union (PTUC) vs. Court of Industrial Relations — Cited for the rule that discriminatorily dismissed employees can be ordered reinstated with or without back pay pursuant to Section 5(c) of the Industrial Peace Act.
• C. Chuan and Sons, Inc. vs. Nahag — Cited for the principle that matters regarding financial condition of a company to justify closing are questions of fact.
• Yellow Taxi and Pasay Transportation Workers Unions vs. Manila Yellow Taxicab Co. — Cited for the rule that financial condition of a company is a question of fact.

• Republic Act No. 875 (Industrial Peace Act), Section 4(a), sub-paragraphs 1 and 4 — Defines unfair labor practices, specifically discrimination in regard to hire or tenure of employment to encourage or discourage membership in any labor organization, and discharge of employees for union activities.
• Republic Act No. 875, Section 5(b) — Provides that rules of evidence prevailing in courts of law shall not be controlling in unfair labor practice proceedings, and the CIR shall use every reasonable means to ascertain facts speedily and objectively without regard to technicalities.
• Republic Act No. 875, Section 5(c) — Authorizes the CIR to issue cease and desist orders and affirmative action including reinstatement with or without back pay if of the opinion that unfair labor practice has been engaged in.
• Republic Act No. 875, Section 6 — Provides that findings of the CIR on questions of fact supported by substantial evidence shall be conclusive, and appeal to the Supreme Court limited to questions of law.
• Section 5, paragraph (d), Rule 131 of the Rules of Court — Presumption that evidence willfully suppressed would be adverse if produced, applied to petitioner's failure to present books of account.