Termination due to closure requires proof as basis thereof. The Supreme Court held in the following case that non-compliance of the termination procedure may indicate bad faith.

Learn the procedure on valid dismissal of employees.

Essencia Q. Manarpiis Vs. Texan Philippine, Inc. Richard Tan and Catherine P. Rialubin-Tan
G.R. No. 197011, January 28, 2015


Texan Philippines, Inc. (TPI) which is owned and managed by Catherine Rialubin-Tan and her Singaporean husband Richard Tan (TPI, et al.), is a domestic corporation engaged in the importation, distribution and marketing of imported fragrances and aroma and other specialized products and services.

TPI, et al. hired Essencia Q. Manarpiis (Manarpiis) as Sales and Marketing Manager of the company’s Aroma Division. Claiming insurmountable losses, TPI, et al. served a written notice addressed to all their employees that TPI will cease operations.

Manarpiis filed a complaint for illegal dismissal, non-payment of overtime pay, holiday pay, service incentive leave pay, unexpired vacation leave and 13th month pay and with prayer for moral and actual damages. Subsequently, Manarpiis amended her complaint to state the true date of her dismissal. She averred that on the same day she was served with notice of company closure, TPI, et al. barred her from reporting for work and paid her last salary.

Manarpiis protested the company closure asserting that the alleged business losses were belied by TPI’s financial documents. But despite her pleas, she was asked to pack up her things and by the end of the month her salary was discontinued. She then received the memorandum regarding the company closure and was required to turn over the company car, pager and cellphone. She was told not to report for work anymore.

Subsequently, however Manarpiis received a Notice of Investigation and Grounding. After receiving said memorandum, Manarpiis’s counsel sent a reply stating that there was no point in the investigation because TPI, et al. already dismissed Manarpiis purportedly on the ground of cessation of business due to insurmountable losses, and also it was impossible for Manarpiis to respond to the charges which are devoid of particulars as to the alleged irregularities she committed.

It was pointed out that TPI, et al. should have investigated the supposed violations of company rules and fraudulent acts earlier and not when Manarpiis had filed an illegal dismissal complaint. Manarpiis was served with letter of termination.

TPI, et al. denied the charge of illegal dismissal and explained that TPI’s closure was averted by a new financing package obtained by respondent Richard Tan. They asserted that the requisite notices of business closure to government authorities and to their employees were complied with, and notwithstanding that TPI has in fact continued its operations, Manarpiis was found to have committed infractions resulting in loss of confidence which was the ground for the termination of her employment.

They likewise averred that respondent Rialubin-Tan gave specific instructions to Manarpiis for her to continue reporting for work but she instead went AWOL and subsequently abandoned her job, to the utmost prejudice of the company.

LA Ruling:

The LA rendered a Decision declaring dismissal illegal.

NLRC Ruling:

TPI, et al. appealed to the NLRC which affirmed the LA’s decision. Their motion for reconsideration was also denied.

CA Ruling:

The CA reversed the NLRC and ruled that Manarpiis was validly dismissed. Manarpiis filed a motion for reconsideration but it was denied by the CA.

Hence, the petition


Whether or not the termination due to closure was valid

If termination for closure was averted, whether or not the dismissal for abandonment and loss of trust and confidence was valid

SC Ruling:

Closure or cessation of business is the complete or partial cessation of the operations and/or shut-down of the establishment of the employer. It is carried out to either stave off the financial ruin or promote the business interest of the employer. Closure of business as an authorized cause for termination of employment is governed by Article 283 of the Labor Code, as amended.

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If the business closure is due to serious losses or financial reverses, the employer must present sufficient proof of its actual or imminent losses; it must show proof that the cessation of or withdrawal from business operations was bona fide in character.

A written notice to the DOLE thirty days before the intended date of closure is also required, the purpose of which is to inform the employees of the specific date of termination or closure of business operations, and which must be served upon each and every employee of the company one month before the date of effectivity to give them sufficient time to make the necessary arrangement.

The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in character. And the burden of proving such falls upon the employer.

The SC upheld the factual findings and conclusions of the labor tribunals that Manarpiis was dismissed without just or authorized cause, and that the announced cessation of business operations was a subterfuge for getting rid of Manarpiis.

The financial statements supposedly bearing the stamp mark of BIR were not signed by an independent auditor. Besides, the non-compliance with the requirements under Article 283 of the Labor Code, as amended, gains relevance in this case not for the purpose of proving the illegality of the company closure or cessation of business, which did not materialize, but as an indication of bad faith on the part of TPI, et al. in hastily terminating Manarpiis’s employment.

Under the circumstances, the subsequent investigation and termination of Manarpiis on grounds of dishonesty, loss of confidence and abandonment of work, clearly appears as an afterthought as it was done only after Manarpiis had filed an illegal dismissal case and TPI, et al. have been summoned for hearing before the LA.

The two elements which must concur for a valid abandonment are: (1) the failure to report to work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor being manifested by some overt acts.

Abandonment as a just ground for dismissal requires the deliberate, unjustified refusal of the employee to perform his employment responsibilities. Mere absence or failure to work, even after notice to return, is not tantamount to abandonment.

Furthermore, it is well-settled that the filing by an employee of a complaint for illegal dismissal with a prayer for reinstatement is proof enough of his desire to return to work, thus, negating the employer’s charge of abandonment.

An employee who takes steps to protest his dismissal cannot logically be said to have abandoned his work. Abandonment in this case was a trumped up charge, apparently to make it appear that Manarpiis was not yet terminated when she filed the illegal dismissal complaint and to give a semblance of truth to the belated investigation against the Manarpiis.

Manarpiis did not abandon her work but was told not to report for work anymore after being served a written notice of termination of company closure and turning over company properties to respondent Rialubin-Tan.

On the issue of loss of confidence, proof beyond reasonable doubt is not needed to justify the loss as long as the employer has reasonable ground to believe that the employee is responsible for the misconduct and his participation therein renders him unworthy of the trust and confidence demanded of his position.

Nonetheless, the right of an employer to dismiss employees on the ground of loss of trust and confidence, however, must not be exercised arbitrarily and without just cause. Unsupported by sufficient proof, loss of confidence is without basis and may not be successfully invoked as a ground for dismissal.

Loss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature, as in the case at bar, and the loss must be founded on clearly established facts sufficient to warrant the employee’s separation from work.

Here, loss of confidence was belatedly raised by the TPI, et al. who initiated an investigation on the alleged irregularities committed by Manarpiis only after the latter had questioned the legality of her earlier dismissal due to the purported company closure. Moreover, the turn over of company properties as demanded by respondent Rialubin-Tan belies the latter’s claim that she verbally instructed the former to continue reporting for work in view of the audit of the company’s finances.

Indeed, considering the gravity of the accusations of fraud against the Manarpiis, it is strange that TPI, et al. have not at least issued her a separate memorandum on her accountability for the alleged business losses.

To prove the dishonesty imputed to Manarpiis, TPI, et al. submitted before the NLRC a letter from one of TPI’s suppliers advising the company of a supposed double payment. However, there is no showing that such payment was made or ordered by Manarpiis, and neither was it shown that this overpayment was reflected in the account books of TPI.

TPI, et al. likewise failed to prove their accusation that Manarpiis put up a competing business while she was still employed with TPI, and their bare allegation that Manarpiis divulged confidential company matters to customers. As to the supposed failure of Manarpiis to account for funds intended for “under the table” transactions at the Bureau of Customs, the same was never raised before the labor tribunals and not a shred of evidence was presented by respondent to pro


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