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DE LEON VS NLRC

This case stemmed from a complaint for illegaldismissal, unfair labor practice and refund of cashbond filed by petitioners against respondents beforethe Arbitration Branch of the National Labor RelationsCommission (NLRC). The petition at bar seeks theannulment of the resolution of the NLRC dated July 5,1993 reversing the decision of the Labor Arbiter

finding respondents liable for the charges, and itsresolution dated August 10, 1993 denying petitioners'motion for reconsideration.

The undisputed facts are as follows:

On August 23, 1980, Fortune Tobacco Corporation(FTC) and Fortune Integrated Services, Inc. (FISI)entered into a contract for security services where thelatter undertook to provide security guards for theprotection and security of the former. The petitionerswere among those engaged as security guardspursuant to the contract.

On February 1, 1991, the incorporators and

stockholders of FISI sold out lock, stock and barrel toa group of new stockholders by executing for thepurpose a "Deed of Sale of Shares of Stock". On thesame date, the Articles of Incorporation of FISI wasamended changing its corporate name to MagnumIntegrated Services, Inc. (MISI). A new by-laws waslikewise adopted and approved by the Securities andExchange Commission on June 4, 1993.

On October 15, 1991, FTC terminated the contract forsecurity services which resulted in the displacementof some five hundred eighty two (582) security guardsassigned by FISI/MISI to FTC, including thepetitioners in this case. FTC engaged the services oftwo (2) other security agencies, Asian Security

Agency and Ligalig Security Services, whose securityguards were posted on October 15, 1991 to replaceFISI's security guards.

Sometime in October 1991, the Fortune TobaccoLabor Union, an affiliate of the National Federation ofLabor Unions (NAFLU), and claiming to be thebargaining agent of the security guards, sent a Noticeof Strike to FISI/MISI. On November 14, 1991, themembers of the union which include petitionerspicketed the premises of FTC. The Regional TrialCourt of Pasig, however, issued a writ of injunction to

enjoin the picket.

On November 29, 1991, Simeon de Leon, togetherwith sixteen (16) other complainants instituted theinstant case before the Arbitration Branch of theNLRC. The complaint was later amended to allow theinclusion of other complainants.

The parties submitted the following issues forresolution:

(1) Whether petitioners wereillegally dismissed;

(2) Whether respondents areguilty of unfair labor practice;and

(3) Whether petitioners areentitled to the refund of theircash bond deposited withrespondent FISI.

Petitioners alleged that they were regular employeesof FTC which was also using the corporate names

Fortune Integrated Services, Inc. and MagnumIntegrated Services, Inc. They were assigned to workas security guards at the company's main factoryplant, its tobacco redrying plant and warehouse. Theyaverred that they performed their duties under thecontrol and supervision of FTC's securitysupervisors. Their services, however, were severedin October 1991 without valid cause and without dueprocess. Petitioners claimed that their dismissal waspart of respondents' design to bust their newly-organized union which sought to enforce their rightsunder the Labor Standards law.

[1]

Respondent FTC, on the other hand, maintained thatthere was no employer-employee relationship

between FTC and petitioners. It said that at the timeof the termination of their services, petitioners werethe employees of MISI which was a separate anddistinct corporation from FTC. Hence, petitioners hadno cause of action against FTC.

[2]

Respondent FISI, meanwhile, denied the charge ofillegal dismissal and unfair labor practice. It arguedthat petitioners were not dismissed from service butwere merely placed on floating status pending re-assignment to other posts. It alleged that thetemporary displacement of petitioners was not due to

its fault but was the result of the pretermination byFTC of the contract for security services.

[3]

The Labor Arbiter found respondents liable for thecharges. Rejecting FTC's argument that there was noemployer-employee relationship between FTC andpetitioners, he ruled that FISI and FTC should beconsidered as a single employer. He observed thatthe two corporations have common stockholders andthey share the same business address. In addition,

FISI had no client other than FTC and othercorporations belonging to the group of companiesowned by Lucio Tan. The Labor Arbiter thus foundrespondents guilty of union busting and illegaldismissal. He observed that not long after thestockholders of FISI sold all their stocks to a new setof stockholders, FTC terminated the contract ofsecurity services and engaged the services of twoother security agencies. FTC did not give any reasonfor the termination of the contract. The Labor Arbitergave credence to petitioners' theory that respondents'precipitate termination of their employment wasintended to bust their union. Consequently, the Labor

Arbiter ordered respondents to pay petitioners theirbackwages and separation pay, to refund their cash

bond deposit, and to pay attorney's fees.[4]

On appeal, the NLRC reversed and set aside thedecision of the Labor Arbiter. First, it held that theLabor Arbiter erred in applying the "single employer"principle and concluding that there was an employer-employee relationship between FTC and FISI on onehand, and petitioners on the other hand. It found thatat the time of the termination of the contract ofsecurity services on October 15, 1991, FISI which, atthat time, had been renamed Magnum IntegratedServices, Inc. had a different set of stockholders andofficers from that of FTC. They also had separateoffices. The NLRC held that the principle of "singleemployer" and the doctrine of piercing the corporate

veil could not apply under the circumstances. Itfurther ruled that the proximate cause for thedisplacement of petitioners was the termination of thecontract for security services by FTC on October 15,1991. FISI could not be faulted for the severance ofpetitioners' assignment at the premises ofFTC. Consequently, the NLRC held that the chargeof illegal dismissal had no basis. As regards thecharge of unfair labor practice, the NLRC found thatpetitioners who had the burden of proof failed toadduce any evidence to support their charge of unfairlabor practice against respondents. Hence, it ordered

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the dismissal of petitioners' complaint.[5]

The petitioners filed a motion for reconsideration ofthe resolution of the NLRC but the same wasdenied.

[6]Hence, this petition.

We gave due course to the petition on May 15,1995. Thus, the ruling in St.Martin Funeral Home vs.NLRC

[7]remanding all petitions for certiorari from the

decision of the NLRC to the Court of Appeals does

not apply to the case at bar.

The petition is impressed with merit.

An examination of the facts of this case reveals thatthere is sufficient ground to conclude that respondentswere guilty of interfering with the right of petitioners toself-organization which constitutes unfair laborpractice under Article 248 of the LaborCode.

[8]Petitioners have been employed with FISI

since the 1980s and have since been posted at thepremises of FTC -- its main factory plant, its tobaccoredrying plant and warehouse. It appears from therecords that FISI, while having its own corporateidentity, was a mere instrumentality of FTC, tasked to

provide protection and security in the companypremises. The records show that the twocorporations had identical stockholders and the samebusiness address. FISI also had no other clientsexcept FTC and other companies belonging to theLucio Tan group of companies. Moreover, the earlypayslips of petitioners show that their salaries wereinitially paid by FTC.

[9]To enforce their rightful benefits

under the laws on Labor Standards, petitionersformed a union which was later certified as bargainingagent of all the security guards. On February 1, 1991,the stockholders of FISI sold all their participations inthe corporation to a new set of stockholders whichrenamed the corporation Magnum IntegratedServices, Inc. On October 15, 1991, FTC, without any

reason, preterminatedits contract of securityservices with MISI and contracted two other agenciesto provide security services for its premises. Thisresulted in the displacement of petitioners. As MISIhad no other clients, it failed to give new assignmentsto petitioners. Petitioners have remained unemployedsince then. All these facts indicate a concerted efforton the part of respondents to remove petitioners fromthe company and thus abate the growth of the unionand block its actions to enforce their demands inaccordance with the Labor Standards laws. TheCourt held inInsular Life Assurance Co., Ltd.,

Employees Association-NATU vs. Insular LifeAssurance Co., Ltd.:

[10]

The test of whether an employer has interfered withand coerced employees within the meaning of section(a) (1) is whether the employer has engaged inconduct which it may reasonably be said tends tointerfere with the free exercise of employees' rightsunder section 3 of the Act, and it is not necessary thatthere be direct evidence that any employee was in

fact intimidated or coerced by statements of threats ofthe employer if there is a reasonable inference thatanti-union conduct of the employer does have anadverse effect on self-organization and collectivebargaining.

[11]

We are not persuaded by the argument of respondentFTC denying the presence of an employer-employeerelationship. We find that the Labor Arbiter correctlyapplied the doctrine of piercing the corporate veil tohold all respondents liable for unfair labor practice andillegal termination of petitioners' employment. It is afundamental principle in corporation law that acorporation is an entity separate and distinct from itsstockholders and from other corporations to which it isconnected. However, when the concept of separate

legal entity is used to defeat public convenience,justify wrong, protect fraud or defend crime, the lawwill regard the corporation as an association ofpersons, or in case of two corporations, merge theminto one. The separate juridical personality of acorporation may also be disregarded when suchcorporation is a mere alter ego or business conduit ofanother person.

[12]In the case at bar, it was shown

that FISI was a mere adjunct of FTC. FISI, by virtueof a contract for security services, provided FTC withsecurity guards to safeguard its premises. However,records show that FISI and FTC have the sameowners and business address, and FISI providedsecurity services only to FTC and other companiesbelonging to the Lucio Tan group of companies. The

purported sale of the shares of the formerstockholders to a new set of stockholders whochanged the name of the corporation to MagnumIntegrated Services, Inc. appears to be part of ascheme to terminate the services of FISI's securityguards posted at the premises of FTC and bust theirnewly-organized union which was then beginning tobecome active in demanding the company'scompliance with Labor Standards laws. Under thesecircumstances, the Court cannot allow FTC to use itsseparate corporate personality to shield itself fromliability for illegal acts committed against its

employees.

Thus, we find that the termination of petitioners'services was without basis and thereforeillegal. Under Article 279 of the Labor Code, anemployee who is unjustly dismissed from work isentitled to reinstatement without loss of seniority rightsand other privileges, and to his full backwages,inclusive of allowances, and to his other benefits ortheir monetary equivalent computed from the time his

compensation was witheld from him up to the time ofhis actual reinstatement. However, if reinstatement isno longer possible, the employer has the alternative ofpaying the employee his separation pay in lieu ofreinstatement.

[13]

IN VIEW WHEREOF, the petition is GRANTED. Theassailed resolutions of the NLRC are SET

ASIDE. Respondents are hereby ordered to paypetitioners their full backwages, and to reinstate themto their former position without loss of seniority rightsand privileges, or to award them separation pay incase reinstatement is no longer feasible.

SO ORDERED.

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