SKM Art Corp. vs. Bauca, November 27, 2013

Facts:
The 23 respondents were employed by petitioner SKM Art Craft Corporation which is engaged in the handicraft business. On April 18, 2000, around 1:12 a.m., a fire occurred at the inspection and receiving/repair/packing area of petitioner’s premises in Intramuros, Manila. The fire investigation report stated that the structure and the beach rubber building were totally damaged. Also burned were four container vans and a trailer truck. The estimated damage was P22 million.
 
On May 8, 2000, petitioner informed respondents that it will suspend its operations for six months, effective May 9, 2000. On May 16, 2000, only eight days after receiving notice of the suspension of petitioner’s operations, the 23 respondents (and other coworkers) filed a complaint for illegal dismissal. They alleged that there was discrimination in choosing the workers to be laid off and that petitioner had discovered that most of them were members of a newly organized union. Petitioner denied the claim of illegal dismissal and said that Article 286ofthe Labor Code allows the bona fide suspension of a business or undertaking for a period not exceeding six months. Petitioner claimed that the fire cost it millions in losses and that it is impossible to resume its normal operations for a significant period of time.
 
LA: respondents were illegally dismissed and ordered petitioner to reinstate them and pay them back wages. The Labor Arbiter ruled that the fire that burned a part of petitioner’s premises may validate the suspension of respondents’ employment, but the suspension must not exceed six months. Since petitioner failed to recall respondents after the lapse of six months, the Labor Arbiter held that respondents were illegally dismissed. NLRC: set aside the Labor Arbiter’s Decision and ruled that there was no illegal dismissal. CA: set aside the NLRC Decision and Resolution and reinstated the Labor Arbiter’s Decision. The CA ruled that petitioner failed to prove that its suspension of operations is bona fide . The CA noted that the proof of alleged losses – the list of items and materials allegedly burned – was not even certified or signed by petitioner’s accountant or comptroller. And even if the suspension of operations is considered bona fide, the CA said that respondents were not reinstated after six months.
 
Issue:
Whether respondents were illegally dismissed.

​Held:
While we agree with the NLRC that the suspension of petitioner’s operation is valid, the Labor Arbiter and the CA are correct that respondents were illegally dismissed since they were not recalled after six months, after the bona fide suspension of petitioner’s operations. We agree with the Labor Arbiter and the CA that respondents were already considered illegally dismissed since petitioner failed to recall them after six months, when its bona fide suspension of operations lapsed. We stress that under Article 286 of the Labor Code, the employment will not be deemed terminated if the bona fide suspension of operations does not exceed six months. But if the suspension of operations exceeds six months, the employment will be considered terminated.
 
Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or undertaking for a period not exceeding six months shall not terminate employment. Consequently, when the bona fide suspension of the operation of a business or undertaking exceeds six months, then the employment of the employee shall be deemed terminated. By the same token and applying said rule by analogy, if the employee was forced to remain without work or assignment for a period exceeding six months, then he is in effect constructively dismissed. Indeed, petitioner’s manifestation dated October 2, 2001 that it is willing to admit respondents if they return to work was belatedly made, almost one year after petitioner’s suspension of operations expired in November 2000. We find that petitioner no longer recalled, nor wanted to recall, respondents after six months.
 
HENCE, THE RESPONDENTS WERE ILLEGALLY DISMISSED.