termination of employment; termination of employment by employer; substantive requirements; other causes; change of ownership

ELCEE v NLRC 25 January 2007 Chico-Nazario, ponente petition for review on certiorari of an NLRC decision SHORT VERSION: Elcee Farms leased Hacienda Trinidad to Garnele, which in turn subleased it to HILLA. Under HILLAs management, the farm workers hired under Elcee were dismissed. They asked for separation pay and damages, and ultimately, Elcee Farms was held liable. An employer whose lease agreement had already expired was still required to pay separation pay due its former employees even if these employees were terminated by the new employer. It also showed bad faith in simulating the lease with Garnele. FACTS: Pampelo Semillano and 143 other respondents, represented by the labor union Sugar Agricultural Industrial Labor Organization (Sailo), were allegedly regular farm workers in Hacienda Trinidad, owned and operated by Elcee Farms (petitioner). o Corazon Saguemuller (petitioner) was allegedly Elcees president, but the records showed that it was her son Konrad. o Some of the workers had allegedly been working there since 1960. 27 April 1987: Elcee entered into a lease agreement with Garnele Aqua Culture Co. o Most of the farm workers continued to work there, with payrolls and SSS forms showing Elcee as their employer. 15 November 1990: Garnele subleased Hacienda Trinidad to Daniel Hilado, who operated HILLA. o The lease contract stipulated the continued employment of 120 of Garneles employees by Hilado, but it didnt state the benefits which might accrue to the employees as a consequence of their employment with Elcee. o The workers were allowed to continue working in Hacienda Trinidad under HILLA management. o Hilado entered into a collective bargaining agreement with the United Sugar Farmers Organization (Usfo), which contained a closed shop provision, stating that employees who werent members of Usfo would be required by HILLA to join it within 30 days; failure to do so would cause their dismissal. o The 144 workers refused to join Usfo, and were terminated by HILLA. 26 Dec 1990: Sailo and the workers filed a complaint for illegal dismissal against Elcee, Corazon, HILLA and its officers. o The Labor Arbiter noted that only three workers testified and 28 signed the joint affidavit supporting their claims, so the LA dropped those who didnt sign from the complaint. o The LA ruled that the 28 employees were HILLAs regular employees entitled to separation pay equivalent to one months pay. It dismissed the workers claim for damages and denied all claims made against Elcee, Corazon and HILLAs officers. o The NLRC affirmed the award of separation pay, but held Elcee, Corazon and HILLAs officers liable for its payment, with moral damages. o Upon motion for reconsideration with the NLRC, Elcee and Corazon were held liable, while HILLA and its officers were absolved of liability. The NLRC said the lease contract between Elcee and Garnele was simulated, and Elcee continued to act as the workers employer even after the lease was executed. The NLRC also granted the claims of 131 employees, not just the 28 in the LA decision.

ISSUE: should Elcee and Corazon Saguemuller be held liable for the workers claims? YES FOR ELCEE. REASONING: Records showed that Elcee was the employer named in the payrolls and SSS forms at the time Hacienda Trinidad was supposed to be leased to Garnele. o Elcee failed to submit opposing evidence despite the time granted to do so. The Elcee-Garnele lease was a haphazardly drafted two-page document which only provided for a uniform minimal rent for 15 years and didnt provide for the employment status of Elcees employees. Elcee and Garneles corporate officers came from the same family. The workers were not informed of the lease agreement and they werent paid separation pay at the time Garnele supposedly took over the hacienda. o Even after the Elcee-Garnele lease, Elcee continued to act as the employer of Hacienda Trinidads farm workers. o The employer-employee relationship was only severed when Garnele, acting in behalf of Elcee, entered into a lease agreement with HILLA and took over the hacienda on Nov 1990. o The workers claims against Elcee had not yet prescribed when they filed their complaint on 26 Dec 1990. The workers were entitled to the separation pay and moral damages. o Moral damages: recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy. o Exemplary damages: recoverable when the dismissal was done in a wanton, oppressive, or malevolent manner. o Elcee showed bad faith by simulating the lease agreement with Garnele and did not pay any separation benefits to its workers after the lease to both Garnele and HILLA. o Labor Code Art. 283 provided the liability for separation pay, including for cessation of business operations, which had the ff. requirements: 1) service of a written notice to the employees and to the Secretary of Labor and Employment at least one month before the intended date thereof; 2) the cessation of or withdrawal from business operations must be bona fide in character; and 3) payment to the employees of termination pay amounting to at least one-half month pay for each year of service, or one month pay, whichever is higher. o Elcee stopped operating and managing Hacienda Trinidad when it leased it to Hilado through Garnele, which terminated the employer-employee relationship between Elcee and the workers. The Garnele-Hilado lease identified workers who would work under the new management and stipulated that others would not be employed under the lease. o Abella v NLRC: An employer whose lease agreement had already expired was still required to pay separation pay due its former employees even if these employees were terminated by the new employer. o The change in the number of workers awarded separation benefits and damages was supported by evidence, namely Semillanos testimony identifying who were bona fide employees of the hacienda. o However, Corazon shouldnt be held subsidiarily liable as a corporation has a separate and distinct personality from the persons composing it. There was no proof that Corazon was Elcees president or even actively managing Elcee. RULING: petition partially granted; award of separation pay and moral damages to 131 workers granted, but Corazon Saguemuller not subsidiarily liable.