Case Digest: National Federation of Labor vs.
NLRC, 107
SCAD 713, 327 SCRA 158 (2000)
Action - Special civil action for certiorari to set aside and annul two (2) resolutions of the National Labor
Relations Commission promulgated on April 24, 1996 [2] and August 29, 1996 denying the award of
separation pay to petitioners.
Facts - Petitioners are bona fide members of the National Federation of Labor (NFL) duly registered with
the Department of Labor and Employment. They were employed by private respondents Charlie Reith
and Susie Galle Reith, general manager and owner, respectively, of the 354-hectare Patalon Coconut
Estate located at Patalon, Zamboanga City. Pursuant to R.A. No. 6657 Comprehensive Agrarian Reform
Law (CARP), the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian Reform
Association (PEARA), a cooperative accredited by the Department of Agrarian Reform (DAR), of which
petitioners are members and co-owners. As a result of this acquisition, private respondents shut down the
operation of the Patalon Coconut Estate and the employment of the petitioners was severed on July 31,
1994. Petitioners did not receive any separation pay.
Petition – petitioners filed before the Regional Arbitration Branch (RAB) of the NLRC for their illegal
dismissal praying for: 1) reinstatement; 2) full backwages; 3) Muslim Holiday, overtime pay and rest day
pay.
Decision of RAB – Dismissed the charge of illegal dismissal and claims for Muslim Holiday, overtime pay
and rest day pay for lack of merit but ordering respondents to provide for separation pay and 13th month
differential pay.
Appeal – The respondent filed for an appeal (case provided no further information on this)
Decision of NLRC – Decision modified in favour of the respondent stressing the following:
1) Respondents not guilty of illegal dismissal. Respondents cessation of operation was not due to a
unilateral action. The severance of employer-employee relationship between the parties came about
INVOLUNTARILY, as a result of an act of the State. Consequently, complainants are not entitled to any
separation pay.
2) The award of 13th month pay differential is, however, Set Aside
Motion for Reconsideration – Petitioner filed for a motion for reconsideration consequently denied by
NRLC hence this resort to the Supreme Court.
Issue: Whether or not an employer that was compelled to cease its operation because of the compulsory
acquisition by the government of its land for purposes of agrarian reform, is liable to pay separation pay to
its affected employees.
Petitioners contend that they are entitled to separation pay citing Article 283 of the Labor Code which
reads:
"ART. 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 () month pay for every year of service, whichever is higher. A fraction of at least six (6)
months shall be considered as one (1) whole year."
Ruling – Petition was dismissed. The Court underscored that “The closure contemplated under Article
283 of the Labor Code is a unilateral and voluntary act on the part of the employer to close the business
establishment as may be gleaned from the wording of the said legal provision that "The employer may
also terminate the employment of any employee due to...". The use of the word "may," in a statute,
denotes that it is directory in nature and generally permissive only.
StatCon - The "plain meaning rule" or verba legis in statutory construction is thus applicable in this case.
Where the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning
and applied without attempted interpretation.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the
business establishment is forced upon the employer and ultimately for the benefit of the employees.
Additional Point - While the Constitution provides that "the State x x x shall protect the rights of workers
and promote their welfare", that constitutional policy of providing full protection to labor is not intended to
oppress or destroy capital and management. Thus, the capital and management sectors must also be
protected under a regime of justice and the rule of law.
