Emergency Industrial Plywood owns a plywood plant. It leased the plant to Industrial Timber.

Due to lack of raw materials, it notified DOLE and its worker to suspend operations until the logs come in. Meanwhile, Industrial Plywood nitofied Industrial Timber of the expiration of the lease and its intention not to renew it. Industrial Timber notified DOLE and workers of closure due to lack of anti-pollution permit and raw materials. It closed immediately upon notification. Suspiciously, on the same day as the closure, Industrial Plywood took over the operations with all the permits, inlcluding the anti-pollution permit. That's why Ababon filed a case of illegal dismissal saying that Industrial Timber and Industrial Plywood are one and the same company, and the closure of Industrial Timber was just intended to bust their union. Issue: was there illegal dismissal? None. Ratio. The closure is a management prerogative. To be valid, such closure must be: 1) accompanied by a notice to DOLE and the employees 1 month before the actual closure 2) done in good faith 3) accompanied by separation pay. (Art. 283 Labor code, authorized dismissal) On the second requirement: Lack of raw materials and absence of permit is a valid cause for closure. Therefore, it is in good faith. On the first requirement: The notice must be made 1 month in advance. But such failure of notice does not invalidate the dismissal, however the employer must still be sanctioned.

(Sanctions for non-compliance with the notification requiremtent in Art. 283, authorized dismissals, must be stiffer bec. such dismissals were initiated by the employer, than in Art. 282, just-cause dismissals, since such dismissals were initiated in effect by the employee) Hence, P50K nominal damages to each emaployee is in order.

Facts Industrial Plywood Group Corporation (IPGC) is the owner of a plywood plant, leased to Industrial Timber Corporation (ITC) for a period of five years. Thereafter, ITC commenced operation of the plywood plant and hired 387 workers. ITC notified the Department of Labor and Employment (DOLE) and its workers that it will undergo a no plant operation due to lack of raw materials and will resume only after it can secure logs for milling. IPGC notified ITC of the expiration of the lease contract and its intention not to renew the same. ITC notified the DOLE and its workers of the plants shutdown due to the non-renewal of anti-pollution permit. This fact and the alleged lack of logs for milling constrained ITC to lay off all its workers until further notice. This was followed by a final notice of closure or cessation of business operations.
[6]

IPGC took over the plywood plant after it was issued a Wood Processing Plant Permit, which included the anti-pollution permit, by the Department of Environment and Natural Resources (DENR) coincidentally on the same day the ITC ceased operation of the plant.
[8]

This prompted Virgilio Ababon, et al. to file a complaint against ITC and IPGC for illegal dismissal, unfair labor practice and damages. They alleged, among others, that the cessation of ITCs operation was intended to bust the union and that both corporations are one and the same entity being controlled by one owner.

Issue whether Ababon, et al. were illegally dismissed due to the closure of ITCs business; and whether they are entitled to separation pay, backwages, and other monetary awards. NO BUT ENTITLED TO NOMINAL PAY FOR FAILURE TO TIMELY NOTIFY EMPLOYEES AND DOLE OF THE CLOSURE. RATIO Work is a necessity that has economic significance deserving legal protection. The social justice and protection to labor provisions in the Constitution dictate so. On the other hand, employers are also accorded rights and privileges to assure their self-determination and independence, and reasonable return of capital. This mass of privileges comprises the so-called management prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine whether an employer's privilege is exercised in a manner that complies with the legal requirements and does not offend the protected rights of labor. One of the rights accorded an employer is the right to close an establishment or undertaking.
[28]

The right to close the operation of an establishment or undertaking is one of the authorized causes in terminating employment of workers, the only limitation being that the closure must not be for the purpose of circumventing the provisions on termination of employment embodied in the Labor Code.

A reading of Art. 283 of the labor code shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses, while under the second kind, the employer can lawfully close shop anytime as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees, and as long as he pays his employees their termination pay in the amount corresponding to their length of service. Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.
[29] [30] [31] [32] [33]

In sum, under Article 283 of the Labor Code, three requirements are necessary for a valid cessation of business operations: (a) service of a written notice to the employees and to the DOLE at least one month before the intended date thereof; (b) the cessation of business must be bona fide in character; and (c) payment to the employees of termination pay amounting to one month pay or at least one-half month pay for every year of service, whichever is higher. We find that ITCs closure or cessation of business was done in good faith and for valid reasons. The records reveal that the decision to permanently close business operations was arrived at after a suspension of operation for several months precipitated by lack of raw materials used for milling operations, the expiration of the anti-pollution permit, and the termination of the lease contract with IPGC over the plywood plant. Moreover, the lack of raw materials used for milling operations was affirmed in Industrial Timber Corporation v. National Labor

Relations Commission as one of the reasons for the valid closure of ITCs Butuan Logs Plant in 1989. In said case, we upheld the management prerogative to close the plant as the only remedy available in order to prevent imminent heavy losses on account of high production costs, erratic supply of raw materials, depressed prices and poor market conditions for its wood products.
[35]

In Shoppers Gain Supermarket v. National Labor Relations Commission, we held that the non-renewal of petitioner corporations lease contract and its consequent closure and cessation of operations may be considered an event beyond petitioners control, in the nature of a force majeure situation. As such, it amounts to an authorized cause for termination of the private respondents.
[36]

Having established that ITCs closure of the plywood plant was done in good faith and that it was due to causes beyond its control, the conclusion is inevitable that said closure is valid. Consequently, Ababon, et al. could not have been illegally dismissed to be entitled to full backwages. Thus, we find it no longer necessary to discuss the issue regarding the computation of their backwages. However, they are entitled to separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher. Although the closure was done in good faith and for valid reasons, we find that ITC did not comply with the notice requirement. While an employer is under no obligation to conduct hearings before effecting termination of employment due to authorized cause, however, the law requires that it must notify the DOLE and its employees at least one month before the intended date of closure.
[37]

In the case at bar, ITC notified its employees and the DOLE of the no plant operation to lack of raw materials. This was followed by a shut down notice due to the expiration of the anti-pollution permit. However, this shutdown was only temporary as ITC assured its employees that they could return to work once the renewal is acted upon by the DENR. Then, the ITC sent its employees a final notice of closure or cessation of business operations to take effect on the same day it was released. We find that this falls short of the notice requirement for

termination of employment due to authorized cause considering that the DOLE was not furnished and the notice should have been furnished both the employees and the DOLE at least one month before the intended date of closure. In Ariola v. Philex Mining Corporation, we held:
[38]

In Agabon v. National Labor Relations Commission and Jaka Food Processing Corporation v. Pacot, the Court sustained the dismissals for just cause under Article 282 and for authorized cause under Article 283 of the Labor Code, respectively, despite non-compliance with the statutory requirement of notice and hearing. The grounds for the dismissals in those cases, namely, neglect of duty and retrenchment, remained valid because the non-compliance with the notice and hearing requirement in the Labor Code did not undermine the validity of the grounds for the dismissals. Indeed, to invalidate a dismissal merely because of a procedural defect creates absurdity and runs counter to public interest. We explained in Agabon: The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy.

Where the dismissal is based on an authorized cause under Article 283 of the Labor Code but the employer failed to comply with the notice requirement, the sanction should be stiff as the dismissal process was initiated by the employers exercise of his management prerogative, as opposed to a dismissal based on a just cause under Article 282 with the same procedural infirmity where the sanction to be imposed upon the employer should be tempered as the dismissal process was, in effect, initiated by an act imputable to the employee.
[39]

In light of the factual circumstances of the cases at bar, we deem it wise and reasonable to award P50,000.00 to each employee as nominal damages.