SHOEMART, INC. vs. NLRC

Posted: May 1, 2015 in case digests, labor relations
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G.R. Nos. 90795-96 August 13, 1993

SHOEMART, INC. vs. NLRC  & MORIS INDUSTRIES WORKERS UNION MORIS INDUSTRIES WORKERS UNION, vs. NLRC, SM SHOEMART, INC., represented by its Pres. & GM, HENRY SY, SR.

FACTS:

Moris Industries, Inc. is engaged in the manufacture of leather products, such as bags, belts, etc. It had in its employ seventy-three (73) workers, fifty-six (56) of whom are members of a labor organization known as Moris Industries Workers Union.

It affiliated itself with the Philippine Association of Free Labor Unions (PAFLU). The UNION, through PAFLU, invited Moris to enter into negotiations for a CBA but within two days, the company suddenly closed shop and ceased operations, claiming that such a closure had become inevitable because of business reverses.

The UNION filed a complaint for unfair labor practice against MORIS. A week later, it commenced another case against MORIS, this time for recovery of wage differentials and other monetary benefits (emergency cost of living allowance [ECOLA], sick leave, vacation leave benefits, etc.).

Shoemart, Inc., the other corporation involved in these cases, was impleaded by the UNION in both cases, together with the former’s president, Mr. Henry Sy, on the theory that SM and MORIS were one and the same juridical entity.

During the pendency of the two cases, the UNION disaffiliated itself from PAFLU and registered itself as an independent labor organization. The two cases were consolidated on motion of the UNION.

SHOEMART’s set up the claim inter alia that its corporate personality was separate and distinct from that of MORIS, and there was no employer-employee relationship between it and the UNION’s members.

The first LA who handled the cases allowed cross-examination of a witness. However, this was not completed by counsel for MORIS. The cases were postponed a number of times and transferred from one labor arbiter to the other on account of the reorganization of the Department of Labor and Employment in the aftermath of the 1986 Revolution.

SHOEMART and Henry Sy, Sr. moved to dismiss the complaint against them on the ground of lack of jurisdiction, there being no employment relationship between SHOEMART and the UNION members, MORIS’ employees.

MORIS moved that trial continue for cross-examination and further presentation of evidence but the LA denied the same and instead ordered the parties to file their last pleadings after which the case shall be considered submitted already for resolution.

SHOEMART (and Henry Sy, Sr.) filed in with the SC a special action of certiorari to annul the Order of Labor Arbiter. At this time however, the LA had already rendered a decision in favor of the UNION, holding both MORIS and SHOEMART “equally liable” to the complaining UNION for being guilty of unfair labor practice as charged. It declared “that indeed Moris Industries was but a conduit of SM it appearing that the “payrolls used by the former bear the letterhead of the latter,” and that “Moris Industries is a family corporation of the Sy’s, the same family that owns and controls SM Shoe Mart, Inc.

Both SHOEMART (and Henry Sy, Sr.) and MORIS appealed to the NLRC.  Subsequently, SHOEMART’s (and Henry Sy’s) certiorari action was dismissed by this Court.

The respondent NLRC rendered its decision on the consolidated cases, affirming the decision of the Labor Arbiter.

SHOEMART and the UNION respectively moved for reconsideration and clarification but was dismissed for lack of merit.

Two petitions seeking, on different bases, modification of the NLRC decision were filed by SHOEMART and MORIS UNION were filed before the SC. The cases were consolidated.

ISSUE:

Whether a corporation may be held liable for acts of unfair labor practice and illegal dismissal of employees of a “sister corporation,” engaged in a different line of business, on the theory that the latter is the former’s alter ego or business conduit.

HELD:

Yes. An examination of the Incorporation papers of SM Shoe Mart and Moris Manufacturing show (sic) that except for Elizabeth Sy — all other five (5) incorporators and directors of Morris Industries are major stockholders of SM Shoe Mart as of July 20, 1985.

That SM Shoe Mart is the exclusive buyer of all of Moris’ products;

Both companies are housed in one building and Moris for many years has been using the payrolls of SM Shoe Mart.

NLRC did not whimsically or capriciously rendered a decision. In truth, it was shown to have considered and analyzed the pertinent proofs of the complainant UNION in relation to the defenses set up by the private respondents.

The employees of MORIS however, cannot be reinstated or absorbed into the pool of employees of SHOEMART.

No claim is made that SHOEMART is other than a marketing company, or has ever engaged in manufacturing leather goods or products, or any other commodities. It seems undisputed, too, that MORIS has not been in operation for several years, its business is non-existent; it is dead company, to all intents and purposes. It is a defunct company at this time, whether might have been the operations. Its stockholders and officers have caused its extinguishment: a reality that cannot but be acknowledged. Under the circumstances, reinstatement of the employees to MORIS is no longer possible. Compulsion of the stockholders and officers to reopen for business is not a rational option. Some other sanction must be found.

Neither may SHOEMART be compelled to open a manufacturing company to engage in the same line of business as MORIS in order to accommodate the latter’s former employees, numbering some seventy or so, or to absorb these seventy workers latter into its own business, considering the obvious difference and diversity in skills, experience and orientation, etc. between its employees and those of MORIS.

No reasonable alternative thus present itself except to required the payment of separation pay in lieu of the reinstatement decreed by the judgment of the respondent Commission. That liability may in the premises properly and justly be imposed on SHOEMART, as well as on MORIS and on the latter’s president or executive head, jointly and severally.

LABREL CASE DIGEST POOL / ATTORNEY JHONELLE ESTRADA / MONDAYS / 5:30 PM TO 8:30 PM / NEW ERA UNIVERSITY COLLEGE OF LAW

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