THIRD DIVISION

[G.R. Nos. 75700-01. August 30, 1990.]

LOPEZ SUGAR CORPORATION , petitioner, vs. FEDERATION OF FREE

WORKERS, PHILIPPINE LABOR UNION ASSOCIATION (PLUA-NACUSIP)
and NATIONAL LABOR RELATIONS COMMISSION , respondents.

Sicangco, Diaz, Ortiz and Lapak for petitioner.

Reynaldo J. Gulmatico for private respondents.

DECISION

FELICIANO , J : p

In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision
dated 2 July 1986 of public respondent National Labor Relations Commission ("NLRC")
which a rmed the decision of the Labor Arbiter dated 30 September 1983. The Labor
Arbiter (a) had denied petitioner's application to retrench some of its employees and
(b) had ordered the reinstatement of twenty-seven (27) employees and to pay them full
backwages from the time of termination until actual reinstatement.
Petitioner, allegedly to prevent losses due to major economic problems, and
exercising its privilege under Article XI, Section 2 of its 1975-1977 Collective
Bargaining Agreement ("CBA") entered into between petitioner and private respondent
Philippine Labor Union Association ("PLUA-NACUSIP"), caused the retrenchment and
retirement of a number of its employees.
Thus, on 3 January 1980, petitioner led with the Bacolod District O ce of the
then Ministry of Labor and Employment ("MOLE") a combined report on retirement and
application for clearance to retrench, dated 28 December 1979, 1 affecting eighty-six
(86) of its employees. This was docketed as NLRC Case No. A-217-80. Of these eighty-
six (86) employees, fty-nine (59) were retired effective 1 January 1980 and twenty-
seven (27) were to be retrenched effective 16 January 1980 "in order to prevent
losses."
Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"),
as the certi ed bargaining agent of the rank-and- le employees of petitioner, led with
the Bacolod District O ce of the MOLE a complaint dated 27 December 1979 for
unfair labor practices and recovery of union dues, docketed as NLRC Case No. A-198-
80. In said complaint, FFW claimed that the terminations undertaken by petitioner were
violative of the security of tenure of its members and were intended to "bust" the union
and hence constituted an unfair labor practice. FFW claimed that after the termination
of the services of its members, petitioner advised 110 casuals to report to its
personnel o ce. FFW further argued that to justify retrenchment, serious business
reverses must be "actual, real and amply supported by su cient and convincing
evidence." FFW prayed for reinstatement of its members who had been retired or
retrenched.

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 Petitioner denied having hired casuals to replace those it had retired or
retrenched. It explained that the announcement calling for 110 workers to report to its
personnel o ce was only for the purpose of organizing a pool of extra workers which
could be tapped whenever there were temporary vacancies by reason of leaves of
absence of regular workers. LLphil

On 22 January 1980, another report on retirement affecting an additional twenty-

five (25) employees effective 1 February 1980 was filed by petitioner. 2
On 3 March 1980, petitioner led its Position Paper in NLRC Case No. A-217-80
contending that certain economic factors jeopardizing its very existence rendered the
dismissals necessary. Petitioner explained:
"As a business rm, the Applicant must earn [a] fair return of (sic) its
investment. Its income is generated from the sales of the Central's shares of
sugar and molasses production. It has however no control of the selling price of
both products. It is of common knowledge that for the past years the price of
sugar has been very low. In order to survive, the Applicant has effected several
forms of cost reduction. Now that there is hope in the price of sugar the
applicant is again faced with two major economic problems, i.e., the stoppage
of its railway operation and the spiralling cost of production.
The Applicant was forced to stop its railway operation because the
owners of the land upon which the Applicant's railway lines traverse are no
longer willing to allow the Applicant to make further use of portions of their
lands. . . .
The other economic problem that confronted the Applicant is the using
cost of labor, materials, supplies, equipment, etc. These two major economic
problems the rising cost of production and the stoppage of its railway facilities,
put together pose a very serious threat against the economic survival of the
Applicant. In view of this, the Applicant was constrained to touch on the last
phase of its cost reduction program which is the reduction of its workforce.

xxx xxx xxx

The Applicant as a business proposition must be allowed to earn income

in order to survive. This is the essence of private enterprise. Being plagued with
two major economic problems, the applicant is not expected to remain
immobile. It has to react accordingly. As many other business rms have
resorted to reduction of force in view of the present economic crisis obtaining
here and abroad, the applicant was likewise compelled to do the same as a last
alternative remedy for survival." 3
In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's
application for clearance to retrench its employees on the ground that for retrenchment
to be valid, the employer's losses must be serious, actual and real and must be amply
supported by su cient and convincing evidence. The application to retire was also
denied on the ground that petitioner's prerogative to so retire its employees was
granted by the 1975-77 collective bargaining agreement which agreement had long ago
expired. Petitioner was, therefore, ordered to reinstate twenty-seven retired or
retrenched employees represented by private respondent Philippine Labor Union
Association ("PLUA") and FFW and to pay them full backwages from the time of
termination until actual reinstatement. LibLex

Both dissatis ed with the Labor Arbiter's decision, petitioner and respondent
FFW appealed the case to public respondent NLRC. On appeal, the NLRC, nding no
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 justi able reason for disturbing the decision of the Labor Arbiter, a rmed that decision
on 2 July 1986. 5
Hence, this Petition for Certiorari making the following arguments:
1. That portions of the decision of public respondent NLRC dated
July 2, 1986 a rming the decision of Labor Arbiter Ethelwoldo Ovejera dated
September 30, 1983 are contrary to law and jurisprudence;
2. That said decision subject of this petition are in some respects not
supported by evidence and self-contradictory;
3. That said decision subject of this petition were rendered with
grave abuse of discretion and in excess of jurisdiction;
4. That the dismissals at bar are valid and based on justi able
grounds. 6
Petitioner contends that the NLRC acted with grave abuse of discretion in
denying its combined report on retirement and application for clearance to retrench.
Petitioner argues that under the law, it has the right to reduce its workforce if made
necessary by economic factors which would endanger its existence, and that for
retrenchment to be valid, it is not necessary that losses be actually sustained. The
existence of valid grounds to anticipate or expect losses would be su cient
justi cation to enable the employer to take the necessary actions to prevent any threat
to its survival.
Upon the other hand, the Solicitor General argued that the Decision rendered by
the Labor Arbiter and a rmed by the NLRC is supported by substantial evidence on
record; that, therefore, no grave abuse of discretion was committed by public
respondent NLRC when it rendered that Decision.
Article 283 of the Labor Code provides:
"Article 283. Closure of establishment and reduction of personnel. —
The employer may also terminate the employment of any employee due to the
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 the installation of labor saving devices or redundancy, the
worker affected thereby shall be entitled to a separation pay equivalent 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 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." (Emphasis supplied).
In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or
termination of the services of some employees is authorized to be undertaken by the
employer sometime before the losses anticipated are actually sustained or realized. It
is not, in other words, the intention of the lawmaker to compel the employer to stay his
hand and keep all his employees until sometime after losses shall have in fact
materialized; 7 if such an intent were expressly written into the law, that law may well be
vulnerable to constitutional attack as taking property from one man to give to another.
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 This is simple enough.
At the other end of the spectrum, it seems equally clear that not every assorted
possibility of loss is su cient legal warrant for reduction of personnel. In the nature of
things, the possibility of incurring losses is constantly present, in greater or lesser
degree, in the carrying on of business operations, since some, indeed many, of the
factors which impact upon the pro tability or viability of such operations may be
substantially outside the control of the employer. Thus, the di cult question is
determination of when, or under what circumstances, the employer becomes legally
privileged to retrench and reduce the number of his employees.
We consider it may be useful to sketch the general standards in terms of which
the acts of petitioner employer must be appraised. Firstly, the losses expected should
be substantial and not merely de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in
character, the bonafide nature of the retrenchment would appear to be seriously in
question. Secondly, the substantial loss apprehended must be reasonably imminent, as
such imminence can be perceived objectively and in good faith by the employer. There
should, in other words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the livelihood of the
employees retired or otherwise laid-off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent
the expected losses. The employer should have taken other measures prior or parallel
to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer
who, for instance, lays off substantial numbers of workers while continuing to dispense
fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely
claim to be retrenching in good faith to avoid losses. To impart operational meaning to
the constitutional policy of providing "full protection" to labor, the employer's
prerogative to bring down labor costs by retrenching must be exercised essentially as a
measure of last resort, after less drastic means — e.g., reduction of both management
and rank-and- le bonuses and salaries, going on reduced time, improving
manufacturing e ciencies, trimming of marketing and advertising costs, etc. — have
been tried and found wanting. LLjur

Lastly, but certainly not the least important, alleged losses if already realized, and
the expected imminent losses sought to be forestalled, must be proved by su cient
and convincing evidence. The reason for requiring this quantum of proof is readily
apparent: any less exacting standard of proof would render too easy the abuse of this
ground for termination of services of employees. In Garcia v. National Labor Relations
Commission, 8 the Court said:
". . . But it is essentially required that the alleged losses in business
operations must be prove[n]. (National Federation of Labor Unions [NAFLU] vs.
Ople, 143 SCRA 124 [1986]). Otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures in order to ease out
employees." 9 (Emphasis supplied).
Whether or not an employer would imminently suffer serious or substantial
losses for economic reasons is essentially a question of fact for the Labor Arbiter and
the NLRC to determine. In the instant case, the Labor Arbiter found no su cient and
convincing evidence to sustain petitioner's essential contention that it was acting in
order to prevent substantial and serious losses. The Labor Arbiter said:
"There is no question that an employer may reduce its work force to
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 prevent losses, however, these losses must be serious, actual and real. In the
instant case, even assuming arguendo that applicant company was, in fact,
surrounded by the major economic problems stated earlier, the question may be
asked - will it suffer serious losses as a result of the said economic problems?
We nd the answer to be negative . We have scanned the records but failed to
nd evidence submitted to show that applicant company would suffer serious
business losses or reverses as a consequence of the alleged major economic
problems. In fact, applicant company asseverated that these problems only
threatens its survival, hence, it had to reduce its work force. Another thing, while
applicant company was retrenching its regular employees, it also hired the
services of casuals. This militated its claim to reduce its work force to set up
cost reduction. It must be stated that settled is the rule that serious business
losses or reverses must be actual, real and amply supported by su cient and
convincing evidence." 1 0 (Emphasis supplied).
We are in principle bound by such ndings in accordance with well-established
jurisprudence that the factual ndings of labor administrative o cials, if supported by
substantial evidence, are entitled not only to great respect but even to nality, 1 1 unless,
indeed, petitioner is able to show that the Labor Arbiter and the NLRC simply and
arbitrarily disregarded evidence before them or had misapprehended evidence of such
a nature as to compel a contrary conclusion if properly appreciated. prLL

The submissions made by petitioner in this respect are basically that from the
crop year 1975-1976 to the crop year 1980-1981, the amount of cane deliveries made
to petitioner Central was declining and that the degree of utilization of the mill's
capacity and the sugar recovery from the cane actually processed, were similarly
declining. 1 2 Petitioner also argued that the competition among the existing sugar mills
for the limited supply of sugar cane was lively and that such competition resulted in
petitioner having to close approximately thirty-eight (38) of its railroad lines by the end
of 1979. 1 3 According to the petitioner, the cost of producing one (1) picul of sugar
during the same period (i.e., from crop year 1976-1977 to crop year 1979-1980)
increased from P69.97 to P93.11.
The principal di culty with petitioner's case as above presented was that no
proof of actual declining gross and net revenues was submitted. No audited nancial
statements showing the nancial condition of petitioner corporation during the above
mentioned crop years were submitted. Since nancial statements audited by
independent external auditors constitute the normal method of proof of the pro t and
loss performance of a company, it is not easy to understand why petitioner should have
failed to submit such financial statements.
Moreover, while petitioner made passing reference to cost reduction measures it
had allegedly undertaken, it was, once more, a fairly conspicuous failure to specify the
cost-reduction measures actually undertaken in good faith before resorting to
retrenchment. Upon the other hand, it appears from the record that petitioner, after
reducing its work force, advised 110 casual workers to register with the company
personnel o cer as extra workers. Petitioner, as earlier noted, argued that it did not
actually hire casual workers but that it merely organize[d] a pool of 'extra workers' from
which workers could be drawn whenever vacancies occurred by reason of regular
workers going on leave of absence. Both the Labor Arbiter and the NLRC did not accord
much credit to petitioner's explanation but petitioner has not shown that the Labor
Arbiter and the NLRC were merely being arbitrary and capricious in their evaluation. We
note also that petitioner did not claim that the retrenched and retired employees were
brought into the "pool of extra workers" rather than new casual workers.
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 Petitioner next contends that the NLRC committed grave abuse of discretion in
a rming the ruling of the Labor Arbiter that the retirements effected by petitioner were
not valid since the basis therefor, i.e., Article XI, Section 2 of the 1975-1977 CBA, had by
then already expired and was thus no longer enforceable or operative. 1 4 Article XI,
Section 2 of the CBA provides:
"Section 2. — Any employee may apply for retirement after having
rendered the equivalent of at least eighteen (18) years of service to the
COMPANY. The COMPANY, as a right, may retire any employee who has
rendered twenty (20) years of service, or has reached the age of sixty (60) years.
Employees who are physically incapacitated to continue to work in the
COMPANY upon certi cation of the COMPANY Physician, shall be entitled to a
separation pay equivalent to the retirement bene ts herein provided for that
may have accrued. The heirs or surviving legally married spouse of the
deceased employee shall be granted by the COMPANY the amount equivalent to
accrued retirement bene t of the deceased employee at the time of his death."
1 5 (Emphasis supplied).

Petitioner argues that the CBA was "extended" not merely by implication, but by
reciprocal acts — in the sense that even after the CBA had expired, petitioner continued
to give, and the workers continued to receive, the bene ts and exercise the
prerogatives provided therein. Under these circumstances, petitioner urges, the
employees are estopped from denying the extended effectivity of the CBA. LibLex

The Solicitor General, as well as private respondents, argue basically that

petitioner's right to retire its employees was coterminous with the life of the CBA.
On this point, we must nd for petitioner. Although the CBA expired on 31
December 1977, it continued to have legal effects as between the parties until a new
CBA had been negotiated and entered into. This proposition nds legal support in
Article 253 of the Labor Code, which provides:
"Article 253 — Duty to bargain collectively when there exists a collective
bargaining agreement. — When there is a collective bargaining agreement, the
duty to bargain collectively shall also mean that neither party shall terminate
nor modify such agreement during its lifetime. However, either party can serve a
written notice to terminate or modify the agreement at least sixty (60) days prior
to its expiration date. It shall be the duty of both parties to keep the status quo
and to continue in full force and effect the terms and conditions of the existing
agreement during the 60-day period and/or until a new agreement is reached by
the parties." (Emphasis supplied).
Accordingly, in the instant case, despite the lapse of the formal effectivity of the
CBA by virtue of its own provisions, the law considered the same as continuing in force
and effect until a new CBA shall have been validly executed. Hence, petitioner acted
within legal bounds when it decided to retire several employees in accordance with the
CBA. That the employees themselves similarly acted in accordance with the CBA is
plain from the record. Even after the expiration of the CBA, petitioner's employees
continued to receive the bene ts and enjoy the privileges granted therein. They
continued to avail of vacation and sick leaves as computed in accordance with Articles
VII and VIII of the CBA. They also continued to avail of medical and dental aid under
Article IX, death aid and bereavement leave under Articles X and XIV, insurance
coverage under Article XVI and housing allowance under Article XVIII. Seventeen (17)
employees even availed of Section XI (dealing with retirement) when they voluntarily
retired between 1 January 1978 and 31 December 1980 and received retirement pay
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 computed on the basis of Section 3 of the same article. If the workers chose to avail of
the CBA despite its expiration, equity — if not the law — dictates that the employer
should likewise be able to invoke the CBA.
The fact that several workers signed quitclaims will not by itself bar them from
joining in the complaint. Quitclaims executed by laborers are commonly frowned upon
as contrary to public policy and ineffective to bar claims for the full measure of the
worker's legal rights. In AFP Mutual Bene t Association, Inc. v. AFP-MBAI-EU, 1 6 the
Court held: LLpr

"In labor jurisprudence, it is well established that quitclaims and/or

complete releases executed by the employees do not estop them from pursuing
their claims arising from the unfair labor practice of the employer. The basic
reason for this is that such quitclaims and/or complete releases are against
public policy and, therefore, null and void. The acceptance of termination pay
does not divest a laborer of the right to prosecute his employer for unfair labor
practice acts. (Cariño vs. ACCFA, L-19808, September 29, 1966, 18 SCRA 183;
Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960, 109 Phil. 452;
Mercury Drug Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA 694, 704).
In the Cariño case, supra, the Supreme Court, speaking thru Justice
Sanchez, said:
'Acceptance of those bene ts would not amount to estoppel. The
reason is plain. Employer and employee, obviously, do not stand on the
same footing. The employer drove the employee to the wall. The latter
must have to get hold of money. Because, out of job, he had to face the
harsh necessities of life. He thus found himself in no position to resist
money proffered. His, then, is a case of adherence, not of choice. One thing
sure, however, is that petitioners did not relent their claim. They pressed it.
They are deemed not to have waived any of their rights. Renuntiatio non
praesumitur.'" (Emphasis supplied).
We conclude that because the attempted retrenchment on the part of the
petitioner was legally ineffective, all retrenched employees should be reinstated and
backwages paid them corresponding to a period of three (3) years without qualification
or deduction, in accordance with the three-year rule laid down in a long line of cases. 1 7
In the case of employees who had received payments for which they had executed
quitclaims, the amount of such payments shall be deducted from the backwages due
to them. Where reinstatement is no longer possible because the positions they had
previously lled are no longer in existence, petitioner shall pay backwages plus, in lieu
of reinstatement, separation pay in the amount of one-month's pay for every year of
service including the three (3) year-period of putative service for which backwages will
be paid. Upon the other hand, we find valid the retirement of those employees who were
retired by petitioner pursuant to the applicable provisions of the CBA.
WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the
Decision dated 2 July 1986 of the public respondent NLRC is hereby MODIFIED to the
extent that it had a rmed that portion of the Decision of the Labor Arbiter dated 30
September 1983 ordering the reinstatement of employees who had been retired by
petitioner under the applicable provisions of the CBA. Except as so modi ed, the
Decision of the NLRC is hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.
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 Footnotes
1. Rollo, pp. 38-39; Annexes "A" and "A-1" of Petition.

2. Id., pp. 40-41; Annexes "B" and "B-1" of the Petition.

3. Id., pp. 46-48; Annex "E" of Petition.
4. Id., pp. 86-100; Annex "J" of Petition.
5. Id., pp. 114-119; Annex "L" of Petition.
6. Id., p. 20.
7. Indino v. National Labor Relations Commission, et al. G.R. No. 80352, September 29,
1989.

8. 153 SCRA 639 (1987); See also Camara Shoes v. Kapisanan ng Manggagawa sa
Camara Shoes, 173 SCRA 127 (1989); and Indino v. National Labor Relations
Commission, supra.
9. 153 SCRA at 651.

10. Rollo, p. 98.

11. Mamerto v. Inciong, 118 SCRA 265 (1982); Atlas Consolidated Mining and
Development Corp. v. National Labor Relations Commission, 167 SCRA 758 (1988);
Reyes v. Minister of Labor, 170 SCRA 134 (1989); Bristol Laboratories Employees
Association-DFA, et al. v. National Labor Relations Commission, et al., G.R. No. 87974, 2
July 1990.
12. In its Petition, petitioner alleged that:.
"1. Based on its sugar mills' rated capacity of 7,500 to 8,000 tons of cane per day,
petitioner's production figures were as follows:
Crop Year Cane Deliveries Rate of Degree Sugar Rate
(CY) in Tons Increase Mill Recoveries Increase
(Decrease) Utili- in Piculs (Decrease)
zation.
1975-76 1,307,121.901 71.96% 2,047,29
1976-77 1,282,189.530 (1%) 70.80% 1,934,830 (5%)
1977-78 1,004,490.358 (21%) 55.56% 1,709,504 (11%)
1978-79 1,161,604.791 15% 64.25% 1,884,611 10%
1979-80 1,163,662.687 .0177% 64.26% 1,854,115 (1%)
1980-81 1,008,643.990 (13%) 55.64% 1,594,310 (14%).
These figures show that there was a continued decrease in production, both in cane
deliveries and in sugar recoveries from CY 1975-76 to CY 1977-78. While there were
increases in cane deliveries in CY 1978-79 and CY 1979-80, this was more because of
Petitioner's increased trucking allowance which proved to be too expensive. But
petitioner's studies projected that such increase were temporary and would not hold, as
tonnage of deliveries did fall in CY 1980-81 to a level only slightly higher than those in
CY 1977-78." (Rollo, p. 32).

13. Rollo, p. 33.

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 14. This CBA lapsed on 31 December 1977. The retirements, on the other hand, were made
on 1 January 1980 and 1 February 1980.
15. Rollo, p. 143; Comment of the Solicitor General, p. 5.
16. 97 SCRA 715 (1980).
17. Insular Life Assurance Co., Ltd. v. National Labor Relations Commission, 135 SCRA 697
(1985); Lepanto Consolidated Mining Company v. Encarnacion, 136 SCRA 256 (1985);
Panay Railways, Inc. v. NLRC, 137 SCRA 480 (1985); Atlas Consolidated Mining and
Development Corp. v. National Labor Relations Commission, et al., 167 SCRA 758
(1988).

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