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Ople | Emerson
July 22, 1986
Gutierrez, Jr., J.:
SUMMARY: Lawman and its employees, represented by NAFLU, were locked in a collective bargaining dispute. A
CBA was agreed upon, but 1 month before it could take effect, Lawman ceased operations and moved its machines
to another location so it can operate under another name, with new [more docile] workers. Conciliation failed and the
NAFLU workers declared a strike. NAFLU then filed a complaint for unfair labor practice with the NLRC. The Labor
Minister assumed jurisdiction over the dispute, and issued an order directing Lawman to reinstate the workers, pay
them back wages or separation pay, and refrain from transferring or encumbering its assets. Upon reconsideration,
the Labor Minister modified his order and ordered Lawman to pay the workers back wages/separation pay, and
penalty for failure to give notice of closure. However, the modified order did not order the reinstatement of the
workers; hence they appealed to the SC. SC upheld their contention, saying that the fact that Lawman had already
ceased operations does not mean that the workers could no longer be reinstated, since the Labor Minister himself
found that Lawman had continued operating under a different name, and it this new corporation (Libra/Dolphin) which
should absorb the workers. The veil of corporate fiction shielding Lawman and Libra must be pierced and the latter
considered an alter ego of the former.
DOCTRINE: When the veil of corporate fiction is made as a shield to perpetrate a fraud or to confuse legitimate
issues (here, the relation of employer-employee), the same should be pierced. A corporation which is a mere alterego of another corporation bears the consequences of the latter's unfair acts [in this case reinstatement of unfairly
terminated workers].
NATURE: Petition for review of an order of the Minister of Labor.

NAFLU was the designated exclusive bargaining agent for the employees of LAWMAN Industrial [which is a
garment factory I think].

Collective bargaining negotiations between NAFLU and Lawman happened between October 1981 and
January 1982.

July 1982 - NAFLU declared a strike, after Lawman refused to grant substantial economic demands to its
workers. The strike was ended in the same month through efforts of the Bureau of Labor Relations.

Lawman agreed to increase wages by one peso for 3 consecutive years; grant vacation leave, sick leave,
and other fringe benefits. This CBA was supposed to take effect in September 1982.

August 1982 Lawman commenced a partial shutdown of its operations.

o It hauled its machines out from its factory to a different location in Malabon, where it
operated under the name LIBRA Garments. It also hired new workers.
o When the Lawman employees discovered this, Libra changed its name to DOLPHIN

Sep. 8, 1982 NAFLU filed a request for conciliation before the Bureau of Labor Relations, requesting the
Bureau to intervene in their dispute with Lawman over certain money claims, the non-implementation of the
CBA, and the establishment of a runaway shop to bust the union.

Sep. 15, 1982 Lawman unilaterally declared a temporary shutdown

Sep. 23, 1982 Lawman promised its employees that normal operations will resume in Jan. 1983

Oct. 11, 1982- NAFLU filed a notice of strike, after all efforts to mediate the charge of unfair labor practice
and money claims have failed.

Nov. 9, 1982 Lawman offered to pay P200,000 as complete settlement of all claims plus separation pay.
NAFLU rejected the offer as it would be tantamount to accepting the separation of it members from the
company. Conciliation efforts proved futile.

December 1982 NAFLU filed before the NLRC an unfair labor practice complaint against Lawman.

January 1983 Lawman manifested its intention to cease operations

March 15, 1983 The period for provisional shutdown expired but Lawman extended it without notifying the
Minister of Labor (MoL).

Mar. 17, 1983 ORDER OF THE MoL

o Assumed jurisdiction over the dispute
o Ordered all affected employees to return to work and Lawman to accept them under the terms and
conditions prevailing prior to the strike.

Ordered Lawman to pay severance compensation and unpaid wages previous to the shutdown and
after Mar. 15, 1983 in case it cannot resume operations
o Lawman enjoined from transferring ownership or encumbering any of its assets in favor of a 3rd
party without prior clearance from the Labor Minister and timely notice to NAFLU
o Lawman prohibited from terminating employment of any of its workers pending resolution of the
May 20, 1983 Lawman filed a motion for reconsideration of the Mar. 17 order, alleging that:
o it informed the Ministry of Labor of its decision to effect a shutdown effective Sept. 8, 1982
o it announced cessation of operations on Nov. 2, 1982 through a circular
o its building and machinery were repossessed by Pioneer Texturizing Corp. for failure to pay rentals
June 6, 1983 NAFLU submitted a position paper setting forth allegations of unfair labor practice against
Lawman [see 1st 5 bullets supra]
o Directed Lawman to pay all accrued wages/benefits including 1 months pay for failure to comply
with the notice requirement under BP 130, and separation pay for all dismissed employees
equivalent to 1 months pay or half of 1 months pay for every year of service, whichever is higher,
computed up to Jan. 1983
o Order did not direct reinstatement of the employees as Lawman had declared that it had
ceased its operations completely.
NAFLU assails this non-reinstatement aspect of the order.

ISSUE (HELD): W/N the employees of Lawman should be reinstated to their former positions (YES)

Factual findings of the MoL can no longer be disturbed, being supported by substantial evidence. Findings of
administrative agencies with acquired expertise in specific matters are accorded respect, if not finality,

Judicial review of labor cases by the SC is limited to issues of jurisdiction and grave abuse of discretion and
do not include evaluation of the sufficiency of evidence upon which the decisions of the Deputy Minister and
Regional Director are based (Special Events & Central Shipping Office Workers Union v. SMC)

CASE AT BAR: MoL findings are categorical:

o Lawman was bargaining in bad faith when it declared a temporary cessation of operations while
negotiations were ongoing. This amounts to an illegal lockout.
o Lawman maintained a runaway shop when it transferred machines to Libra and later to Dolphin.
o Lawman failed to comply with requirements of due process and notice to its employees and the
MoL one month before the intended closure, in violation of the law.
o By admitting that its plant and machines have been repossessed by Pioneer Texturizing, Lawman
violated the Mar. 1983 order enjoining it from transferring or encumbering any of its properties.
o [The] evident bad faith, fraud and deceit committed by [Lawman] to the prejudice of both
[NAFLU] and the employees who have existing wage claims, some of which are due for
execution, leads us to affirm [NAFLUs] position that the veil of corporate fiction should be
pierced in order to safeguard the right to self-organization and certain vested rights which
had accrued in favor of [NAFLU].

It is obvious from the above findings that Libra seeks the protective shield of corporate fiction to achieve an
illegal purpose.

This veil should be pierced as it was deliberately and maliciously designed to evade Lawmans financial
obligations to its employees.

When the veil of corporate fiction is made as a shield to perpetrate a fraud or to confuse legitimate issues
(here, the relation of employer-employee), the same should be pierced (A.D. Santos, Inc. v. Vasquez).

As Lawman is guilty of unfair labor practice, the order of reinstatement should follow as a matter of right. An
employer who commits an unfair labor practice may be required to reinstate with full backwages the workers
affected by such act (National Mines and Allied Workers Union v. NLRC)

CASE AT BAR: After finding that Lawman transferred its operations to Libra and later to Dolphin, the MoL
cannot deny reinstatement to the workers simply because Lawman has ceased operations.
o Libra/Dolphin is thus a mere alter ego of Lawman. As such, it should bear the consequences of
Lawmans unfair acts. It must reinstate Lawmans workers without loss of seniority rights (PLASLU
v. Sy Indong Co. Rice and Corn Mill)

Lawman: Financial statements for 1980, 1981, and 1st half of 1986 show that it suffered serious losses
which necessitated closure.

SC: Alleged losses are more apparent than real.

o Lawmans Cost of Goods Manufactured and Sold as of December 1981 was 2.065 million pesos.
By June 1982, it had ballooned to 3.768 million.
o This was allegedly because of the entry of Direct Labor under said item, amounting to 1.703 million
for 1982.
o Direct Labor for 1981 = P398,863.40
Direct Labor as of June 1982 = P1,703,768.27
o Administrative Salaries for 1981 = P47,889.20
Administrative Salaries as of June 1982 = P213,752.85
o Sales for 1981 = P2,117,203.95
Sales from January to June 1982 = P2,359,479.25
o Lawman has failed to explain how its Direct Labor and Administrative Salaries costs for JanuaryJune 1982 exceeded that of the whole year 1981. Its sales for the 1st half of 1982 indicate that was
experiencing a sales upswing at the time of its shutdown (LOLOLOL binutas tuloy ang veil).
The workers must thus be reinstated, but with back wages not exceeding 3 years (Lepanto Con. Mining v.

DISPOSITION: Petition granted