University of the Philippines College of Law

J00D
c. Separation Pay – When proper – Legal Termination due to Authorized Causes

Case Name NATIONAL FEDERATION OF LABOR (NFL), CENON BANGA,

ROGELIO VILLACORTE, NAZARIO HATAM, JULIO CUGAL,
JUANITO GAVIOLA, BONIFACIO MANLAPAZ, TOMAS FABILLAR,
BERNARD SIASON, WILFREDO SANTOS, MARCIANO NAPAL, FIDEL
ABALOS, PEDRO INANA, SIMPLICIO QUIMSON, HERMINIGILDO
DELOS SANTOS, FRANCISCO MANONGONG, RODRIGO DOMINGO,
MARCELINO GUILLANO, JR., VALERIANO BRIONES, RAMON
PUNTOD, SIMON MORO, ROLANDO BANGA, PABLO NUEZ,
ALBERTO LADERO, BENEDICTO SUMALINOG, ISMAEL MOLAS,
FIDEL CONSTANCIA, CASIANO PLAD, MARCELO SUMALINOG,
NESTOR GARCIA, FELICIANO LOZANO, CORNELIO TUMAMBUS,
ANASTACIO RODRIGUEZ GIPUNAN UNDING, CRESENCIO LASIT,
FEDERICO BASILIO, LEONARDO BARREDO, ABELARDO GARCIA,
ESTANISLAO PUREZA, RAUL LINIANG, LEONCIO PALAR, NICASIO
CABANERO, LEONARDO PULGAR, ROMUALDO BACTONG, ABDUL
BORJAL, MAGDINO ANSOG, JACARIA ASSANUDDIN, HERCULANO
DAGOY, MARIO TULABING, ROBERTO MAHUSAY, BENGAY MAJID,
ZOSIMO TUGAHAN, SALVADOR LUBIANO, ABDULMAJID
ALIMUDDIN, POLICARPIO WAHING, EFREN CRUZ, MELCHOR
LOMONGGO, ASPALON CUEVAS, MARCIAL SERUNDO, GENER
MARTALLA, FRANCISCO BUHIAN, ROMULO GANGE, RICARDO
CRUZ, ODITO TARROZA, CATALINO MOLEJON, EUSTACIO
MANLAPAZ, BIENVENIDO ALBURO, DIOSCORO MOLOS, JUAN
SIMAURIO, LUCIANO BASACA, ROMANTICO SAN LUIS, PERPITO
REVILLA, SERVANDO SINGSON, WILFREDO DEMCO, JIBRON
GARCIA, JOSE SACRISTAN, MANUEL SAYSON, GAUDIOSO
DUMAYO, FELIX PLAZA, NESTOR GARCIA, ANDRES GAMUTAN,
VALERIANO LUBIANO, WILFREDO MAHUSAY, DIONESIO SALISIG,
ANTONIO SUMALINOG, PATRICIO RUALES, LEODEGARIO
MANONGONG DONATO LADERO, WILFREDO BASILIO,
EMMANUEL EVANGELISTA, BIENVENIDO CRUZ, CELESTINO
BACOR, HENRY GARCIA, CRISTINO ESCUDERO, CECILIO
MANAHAN, REYNALDO LOPEZ, ROGELIO AMPATIN,ALEXANDER
REMILLETE, AURELIO CACHUELA, EUTIQUIO FRONTAL, FABIAN
DURAN, EXPEDITO BARRERA, CENISO BUENO JOVENCIO VELITA,
VICENTE ELEMIA, ROGELIO MIRONTOS, CESAR ALAJAS,
ANTONIO FORASTEROS, RESTITUTO DAMILES, WILFREDO ORTIZ,
GERUNDIO TORINO, TEOFISTO CALUNOD, ROGELIO CUEVAS,
CASMIRO BASILIO, ELMO PEDLO, RAFAEL LAURENO, AGAPITO
CARINO, EDUARDO TUGAHAN, ANASTACIO TORINO, REIMBERTO
ACOSTA, CESAR MALALIS, WINEFREDA SARENO, FILADELFO
 RABINA, ANGEL YU, VICENCIO SACRISTAN, JR., CESAR AWYAN,
QUIRINO RAMOS, ELEUTERIO INFANTE, JOSE MAGONCIA, JESUS
GAROTE, GODOFREDO UYAO, EXEQUIEL GREGANA, SALUSTIANO
FLORES, ADALAIDA PORLARES, SOFRIANO EDIM, ALFREDO
CERIALES, GODOFREDO DEMCO, CIPRIANO PIOQUINTO,
ANTONIO JOSE FORASTEROS, FILOMENO MOLAS, SOLIG TOTO,
FRANCISCO SOLON, AMADO ENRIQUEZ, AMADO BUCOY, ARTURO
AJON, FORTIBILLAR NABI, JUAN BAYOCA, WILFREDO ORPIANA,
VICTORIANO IMBO and SABDURANI MABLIA, Petitioners

v.

THE HON. COURT OF APPEALS (8th DIV.), NATIONAL LABOR

RELATIONS COMMISSION, EXECUTIVE LABOR ARBITER RHETT
JULIUS J. PLAGATA, SIME DARBY PILIPINAS, INC., AMERICAN
RUBBER COMPANY, INC., SEAN O'KELLEY and/or EXPEDITO
DOQUILLO, SR., Respondents.

DN | Date
[G.R. No. 149464 | October 19, 2004.]
Ponente CALLEJO, SR., J
Court of Appeals
Petitioner/s
American Rubber Company
National Federation of Labor (NFL) – Representing former employees of SDPI,
work partner of ARCI
American Rubber Company (ARCI) – Hired SDPI for cultivation of its rubber
Respondent/s plantations
Sime Darbi Pilipinas Inc. (SDPI) – employer of petitioners, work partner of
ARCI for cultivation of its rubber plantation.

Petitioners were rank and file employees of private respondent, ARCI. They were
dismissed due to closure of business (authorized causes). They were paid
separation pay under the computation provided in the Labor Code. They filed
Case a complaint, assailing the computation, claiming that under company policy a
computation of one month per year of service should have been implemented.
Summary
SC dismissed the case, ruling that LC 283 is controlling in the absence of express
provisions in the CBA requiring such computation and lack of proof that such
a company practice exists.
ART. 283. Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee due to installation
Doctrine of labor saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a
 written notice on the workers and the Ministry of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination due to
installation of labor saving devices or redundancy, the worker affected thereby
shall be entitled to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year.

RELEVANT FACTS
1. Private respondent, American Rubber Company is the owner of various rubber
plantations in Basilan,Tumajubong and Ito-ito.
a. July 21 1986 - ARCI entered into a Farm Management Agreement (FMA) with
SDPI, a domestic corporation over its Latuan rubber plantation. SDPI was given
the right to manage, administer, develop, cultivate and improve the rubber
plantations for a period of (25) years.
2. Private respondent, National Federation of Labor was the bargaining representative of
SDPI’s rank and file employees (petitioners) in the Latuan rubber plantation. NFL and
SDPI entered a CBA where they agreed that in the case of any lay-offs 1 SDPI’s workers
would be entitled to termination pay.
3. June 15 1988 – the Comprehensive Agrarian Reform Law (CARL) took effect. Under
CARL, lands of ARCI were to be subjected to immediate compulsory acquisition and
distribution2 not later than (10) years after the effectivity of CARL.
4. Prior to the June 30 1998 deadline, SDPI terminated the FMA with ARCI. ARCI ceased
operations of its rubber plantation in Latuan as well, effective January 17 1988. ARCI
served formal notices of termination on Dec. 17, 1997 which were sent simultaneous with
a letter to DOLE Region IX office.
a. Separation pay was computed under the CBA provisions.
5. Jan 10 1988 – (150) rank and file employees of ARCI, members of NFL met and
requested SDPI that separation pay benefits for its members be segregated from other
benefits. Also requested that separation pay should be computed under company policy
of (30) days per year of service as opposed to (1) month per year of service.

1
Either permanent or temporary
2
Section 8 thereof mandated that all lands of public domain leased, held
or possessed by multinational corporations or association or private non-governmental
corporations, devoted to agro-industrial enterprises shall be subjected to immediate
compulsory acquisition and distribution upon the applicable lease, management, grower or
service contracts in effect as of August 29, 1987 or otherwise upon its valid termination,
whichever comes sooner but not later than after ten years following the effectivity of Rep.
Act No. 6657.
 6. Jan 17 1998 – each of the petitioners received separation pay equivalent to ½ month pay
for every year of service, lumped together with other benefits. They executed individual
release and quitclaims on the same day after the Executive Labor Arbiter, respondent
Plagata explained the nature and effects of such quitclaims.
Case Trail
7. April 2 1988 – Petitioners filed a complaint for illegal dismissal, reinstatement,
deficiency in separation pay and other money claims before the Regional Arbitration
branch of the NLRC in Zamboanga. They claim that the computation for separation pay
should be based on company policy, even in the absence of stipulation in the CBA. This
was because previous employees of SDPI that were terminated were paid according to
(30) days per year of service computation i.e. one month pay per year of service.
a. Nov 24 1998 – Executive Labor Arbiter dismissed the complaints. Finding that
dismissal was due to closure of SDPI which was a consequence of the
implementation of CARL. Thus, authorized cause. Separation pay should be paid
pursuant to LC 283 which mandates ½ month pay per year of service. Finally,
petitioners were estopped because of the quitclaims.
8. May 19 1999 – NLRC affirmed the decision of the ELnA.
9. May 7 2001 – CA affirmed NLRC and ELA
a. Ruled that under LC 283, business closures not due to business losses warranted
only separation pay equivalent to ½ month pay per year of service or ½ month
pay, whichever was higher.
10. Led to current appeal.

Issue/s Ratio Decidendi

1. W/N  Labor Code – Under LC 283i, when employees are dismissed due to
petitioner closure of business not due to insolvency, they are entitled to separation
s are pay equivalent to either one-month pay or, ½ month pay per year of
entitled to service whichever is higher. In any case, a fraction of at-least six months is
separatio considered as a whole year.
n pay  1995 CBA – the CBA between SDPI and its rank and file employees did
equivalen not have a specific provision that mandates separation pay equivalent to 1
t to one month per year of service. Instead, they opted to be bound by the
month per provisions of the Labor Code. It was this CBA that was in effect at the
year of time of their termination.
service?– o Petitioners never assailed the CBA prior to the current case. If they
NO believed that there was a diminution of their benefits due to lack of
stipulation re: separation pay, they should have just rejected the
CBA during the renegotiation proceedings.
o Evidence – No substantial evidence to support the claim that a
similar practice for separation pay was made in the case of
monthly-paid employees. Similarly, no evidence as to another CBA
governing monthly-paid employees.
  Quitclaim – petitioner voluntarily and knowingly signed the quitclaim.
Union officers were present when they signed, and they were made to
understand consequences of signing the same.
o While quitclaims are frowned upon in labor claims, this applies
only when the consideration is unconscionably low. In the case,
quitclaim was both voluntarily and willingly executed +
consideration was substantial, equivalent to what was mandated in
LC 283.
 Form of Payment – Payment of quitclaims was made by means of check.
Strictly speaking, this violated LC 102ii which mandates payment in legal
tender unless circumstances for payment by check are sufficiently
established.
o However, SC points out that considering the amount of money
paid, payment in check was the most convenient for both parties.
Finally, petitioners are estopped from questioning the legality of
payment by check because the issue was raised only for the first
time on appeal to the NLRC.

RULING

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision and
resolution of the Court of Appeals in CA-G.R. SP No. 56230 are AFFIRMED.

SO ORDERED.

Notes
i
ART. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the
employment of any employee due to installation of labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers
and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever
is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall
be equivalent to one (1) month pay or to at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
ii
Art. 102. Forms of payment. — No employer shall pay the wages of an employee by means of promissory
notes, vouchers, coupons, tokens, tickets, chits or any object other than legal tender, even when expressly
requested by the employee. Payment of wages by check or money order shall be allowed when such payment
is customary on the date of effectivity of this Code, or is necessary because of special circumstances as
specified in appropriate regulations to be issued by the Secretary of Labor or a stipulation in a collective
bargaining agreement.

xxx xxx xxx

Payment by check — payment of wages by bank checks, postal checks or money orders is allowed where such
manner of wage payment is customary on the date of the effectivity of the Code, where it is stipulated in a
collective bargaining agreement, or where all of the following conditions are met:
1. There is a bank or other facility for encashment within a radius of one (1) kilometer from the workplace;
2. The employer, or any of his agents or representatives, does not receive any pecuniary benefit directly or
indirectly from the arrangement;
3. The employee are given reasonable time during banking hours to withdraw their wages from the bank which
time shall be considered as compensable hours worked if done during working hours; and
4. The payment by check is with the written consent of the employees concerned if there is no collective
agreement authorizing the payment of wages by bank checks.