Philippine Engineering Corporation vs. CIR

Reinstatement may not be ordered when the employer's business establishment has permanently closed and the positions no longer exist, even if the dismissal constitutes unfair labor practice; however, back wages may still be awarded as affirmative relief.

Petitioner operated a machine shop under a collective bargaining agreement with the Free Labor Union that expired in December 1963. The union sought renegotiation for a new agreement, but management repeatedly deferred discussions while allegedly implementing a rotation system of work and issuing notices of financial losses.

• Filed with the CIR by the acting prosecutor on July 28, 1965 (Case No. 3415-ULP)
• Decision of the CIR rendered on May 10, 1967, finding ULP and ordering reinstatement with back wages
• Motion for reconsideration denied by the CIR en banc on July 6, 1967
• Elevated to the SC via petition for review

• Petitioner Philippine Engineering Corporation, engaged in machinery sales and repair, operated a machine shop at 888 Raon St., Quiapo, Manila
• Maintained a collective bargaining agreement with respondent Free Labor Union effective January 1, 1960 to December 31, 1963
• After expiry, union officers repeatedly requested negotiations for a new CBA starting January 1964; management deferred or ignored these requests
• February 1, 1965: Management served written notice terminating machine shop employees effective February, though regular employees were paid until March 31, 1965
• Union filed two complaints with the Department of Labor; management representatives assured the conciliator that the closure was not final, prompting withdrawal of the complaints
• May 31, 1965: Corporation closed the Raon St. machine shop, dismantled machineries, and transferred equipment to a bodega at Carpena St.
• June 1, 1965: Approximately 57 employees (70% of union members) dismissed; 30% retained for maintenance of customer equipment
• Despite the closure, the corporation continued accepting machine jobs and repair works, subcontracting these to other machine shops while hiring new employees
• July 28, 1965: Union filed complaint with the CIR charging unfair labor practice under Section 4(a)(1) and (4) of RA 875, alleging discriminatory dismissal due to union membership and activities

• The machine shop was closed due to genuine financial losses evidenced by delayed wage payments, rotation system implementation, rental arrears, uncollected accounts, failure to remit SSS contributions, and loss of major distributorships; thus, dismissal was due to legitimate cessation of business, not union animus
• The dismissal was not discriminatorily motivated by union activity because 30% of union members were retained, and the CIR relied on biased testimony from union officers
• The charge of unfair labor practice should have been dismissed for insufficiency of evidence, as proof beyond reasonable doubt is required in criminal-like ULP prosecutions
• The CIR erred in ordering reinstatement because the shop had closed, machinery was sold, and no positions existed for the dismissed welders, drill press operators, lathemen, tinsmiths, and carpenters; reinstatement of employees no longer needed would create redundancy
• The CIR erred in awarding back wages extending beyond the closure date and without deducting earnings the discharged workers may have obtained during the dismissal period
• The CIR lacked jurisdiction because the case involved simple termination of employment under RA 1787, not unfair labor practice, and an employer has the undisputed right to close business for economic reasons

• The CIR's finding that the closure was not due to financial losses is a question of fact supported by substantial evidence, which the SC cannot review on appeal
• The CIR correctly found that anti-union animus was a contributing factor to the dismissal, constituting unfair labor practice
• Jurisdiction is determined by the complaint's allegations; since the complaint alleged unfair labor practice, the CIR has exclusive jurisdiction under Section 5(a) of RA 875

• Procedural Issue: Whether the CIR has jurisdiction over the case when the employer claims the dispute involves mere termination due to business closure rather than unfair labor practice
• Substantive Issues:
  • Whether the dismissal of the 57 employees constitutes unfair labor practice (discrimination due to union membership/activities) or was justified by financial losses and legitimate business cessation
  • Whether proof beyond reasonable doubt is required to establish unfair labor practice
  • Whether reinstatement may be ordered when the business establishment has permanently closed and the positions no longer exist
  • Whether back wages may be awarded when reinstatement is impossible

• Procedural: The CIR has jurisdiction. Jurisdiction over subject matter is determined by the allegations in the complaint. The complaint explicitly alleged unfair labor practice under Section 4(a) of RA 875, bringing it within the CIR's exclusive cognizance under Section 5(a) of the same Act. The employer's defense of business closure does not divest the CIR of jurisdiction to determine if the closure was a pretext for ULP.
• Substantive:
  • Unfair Labor Practice: The dismissal constitutes unfair labor practice. The SC upheld the CIR's factual finding, supported by substantial evidence, that the machine shop was not closed due to financial losses. Evidence showed continuous work, overtime, new hires, purchase of spare parts, and subcontracting of jobs after the alleged closure. The CIR properly gave credence to evidence that the closure was a reaction to union demands for a new CBA and a systematic approach to dampen union enthusiasm.
  • Quantum of Evidence: Proof beyond reasonable doubt is not required in unfair labor practice cases. Under Section 6 of RA 875, only substantial evidence is required for factual findings. Section 5(b) mandates that the CIR ascertain facts without regard to technical rules of evidence.
  • Reinstatement: Reinstatement may not be ordered. Reinstatement presupposes that the previous position still exists or that an unfilled position of similar nature is available. Since the machine shop was closed, machineries dismantled and sold, and the specific positions for welders, drill press operators, and mechanics no longer exist, reinstatement is impossible. The principle ad impossibilia nemo tenetur applies—the law cannot exact compliance with what is impossible.
  • Back Wages: Back wages may be awarded as penalty even when reinstatement is impossible. The SC affirmed the three-month back wages award, citing Sta. Cecilia Sawmills, Inc. vs. CIR as precedent for such penalty where reinstatement is precluded by business closure.

• Conclusiveness of Factual Findings — Questions involving the weight and sufficiency of evidence and credibility of witnesses are questions of fact. Under Section 6 of RA 875, CIR findings of fact supported by substantial evidence are conclusive upon the SC, limiting appeal to questions of law only.
• Contributing Factor Test for ULP — It is not necessary to prove that union activity was the exclusive cause of dismissal to establish unfair labor practice. If anti-union animus is a contributing factor, the discharge is tainted. If the true inspiration for the employer's act is the employee's union affiliation, other reasons assigned by the employer, however valid they appear, are unavailing.
• Reinstatement Presupposes Existence of Position — Reinstatement means restoration to the position from which one was removed. It presupposes either that the previous position still exists or that there is an unfilled position of similar nature. Where the business establishment has permanently closed, reinstatement is a physical and legal impossibility.
• Ad Impossibilia Nemo Tenetur — No one is bound to do impossible things. The law does not require the performance of acts that cannot be done.
• Substantial Evidence Standard — In unfair labor practice cases, proof beyond reasonable doubt is not required. The Industrial Peace Act requires only substantial evidence—such relevant evidence as a reasonable mind may accept as adequate to support the conclusion.

• "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."
• "Reinstatement presupposes 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."
• "Ad impossible nemo tenetur." (No one is held to the impossible.)
• "The findings of the Court with respect to question of fact if supported by substantial evidence on the record shall be conclusive." (Section 6, RA 875)

• Cuyugan v. Santos (34 Phil. 100) — Cited for the rule that matters touching on weight and sufficiency of evidence are questions of fact.
• Visayan Bicycle Manufacturing Co., Inc. vs. NLU (L-19997, May 19, 1965) — Cited for the doctrine that if the true inspiration for dismissal is union affiliation, other reasons assigned are unavailing.
• Sta. Cecilia Sawmills, Inc. vs. CIR (L-19273-74, May 25, 1964) — Cited as precedent for awarding three months backpay as penalty where reinstatement is impossible due to business closure.
• C. Chuan and Sons, Inc. vs. Nahag (95 Phil. 837) — Cited for the rule that financial condition of a company is a question of fact.
• Cano v. CIR (109 Phil. Rep. 1086) — Cited to distinguish that ULP proceedings, though prosecuted like criminal offenses, do not require proof beyond reasonable doubt.

• Section 4(a)(1) and (4) of Republic Act No. 875 (Industrial Peace Act) — Defines unfair labor practice as including discrimination in regard to hire or tenure to discourage union membership, and terminating the services of employees to discourage union membership.
• Section 5(a) of RA 875 — Grants the CIR exclusive jurisdiction over unfair labor practice cases.
• Section 5(b) of RA 875 — Provides that technical rules of evidence shall not control CIR proceedings; the CIR must use every reasonable means to ascertain facts speedily and objectively.
• Section 5(c) of RA 875 — Authorizes the CIR to issue cease and desist orders and require affirmative action including reinstatement and back pay.
• Section 6 of RA 875 — Provides that CIR findings of fact supported by substantial evidence are conclusive.
• Section 5(d), Rule 131 of the Rules of Court — Applied by the CIR (and cited by SC) regarding the presumption that the suppression of evidence (failure to produce books of account) suggests the evidence would be unfavorable.

• N/A (Justices Concepcion, C.J., Dizon, Makalintal, Castro, Barredo, Villamor and Makasiar concurred in the result without separate written opinions.)

• N/A (Justices Reyes, J.B.L., Fernando and Teehankee took no part.)