Separation pay, Government intervention

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Is separation pay due if the business is closed due to Government intervention?

  • No, separation pay is not due.

National Federation of Labor v. NLRC, Patalon Coconut Estate (G.R. No. 127718, 02 March 2000)

BACKGROUND:

  • In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL), which mandated the compulsory acquisition of all covered agricultural lands for distribution to qualified farmer beneficiaries under the so-called Comprehensive Agrarian Reform Programme (CARP).
  • The employer Patalon Coconut Estate was engaged in growing agricultural products and in raising livestock in Zamboanga City
  • The employees were bona fide members of the National Federation of Labor (NFL). In line with the CARP Law, they formed  and became co-owners of the Patalon Estate Agrarian Reform Association (PEARA), a cooperative accredited by the Department of Agrarian Reform (DAR). Subsequently, DAR awarded the Patalon Coconut Estate to PEARA.
  • This prompted the employer to shut down the business and severe employment relations with the employees without giving them separation pay. The employees argue that they are entitled to separation pay under Article 283 of the Labor Code or on the provision on closure or cessation of business operations.

HELD:

  • No separation pay is due.
  • There was no closure or reduction of personnel as contemplated in Article 283 of the Labor Code.
  • It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction of personnel. The peculiar circumstances in the case at bar, however, involves neither the closure of an establishment nor a reduction of personnel as contemplated under the aforesaid article. When the Patalon Coconut Estate was closed because a large portion of the estate was acquired by DAR pursuant to CARP, the ownership of that large portion of the estate was precisely transferred to PEARA and ultimately to the (petitioners/employees) as members thereof and as agrarian lot beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the case at bench.
  • Article 283 closure contemplates unilateral and voluntary act on the employer to close the business establishment.
  • Even assuming, arguendo, that the situation in this case were a closure of the business establishment called Patalon Coconut Estate of (respondent/employer), still the petitioners/employees are not entitled to separation pay. 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. 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.
  • As earlier stated, the Patalon Coconut Estate was closed down because a large portion of the said estate was acquired by the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut Estate was not effected voluntarily by (respondents/employer) who even filed a petition to have said estate exempted from the coverage of RA 6657. Unfortunately, their petition was denied by the Department of Agrarian Reform. Since the closure was due to the act of the government to benefit the (petitioners/employees), as members of the Patalon Estate Agrarian Reform Association, by making them agrarian lot beneficiaries of said estate, the (petitioners/employees) are not entitled to separation pay. The termination of their employment was not caused by the (respondents/employer). The blame, if any, for the termination of petitioners’ employment can even be laid upon the (petitioners/employees) themselves inasmuch as they formed themselves into a cooperative, PEARA, ultimately to take over, as agrarian lot beneficiaries, of (respondents/employer) landed estate pursuant to RA 6657. The resulting closure of the business establishment, Patalon Coconut Estate, when it was placed under CARP, occurred through no fault of the (respondents/employer).
  • Constitutional policy on full protection to labor does is not intended to oppress or destroy the employer.
  • While the Constitution provides that the State… 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.