Is the mere closure of current factory and termination of current employees, and relocation to a bigger location with new employees violative of the security of tenure of its current employees?
The answer is yes.
Article 294 of the Labor Code provides that “[i]n cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.”
Closure of an establishment is considered as a valid authorized cause for termination of an employee under Article 298 of the Labor Code. In Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc., Labor-Union-Super (G.R. No. 166760, August 22, 2008), the Supreme Court held that unlike retrenchment, closure or cessation of business, as an authorized cause of termination of employment, need not depend for validity on evidence of actual or imminent reversal of the employer’s fortune. Article 283 authorizes termination of employment due to business closure, regardless of the underlying reasons and motivations therefor, be it financial losses or not.
In Industrial Timber Corporation v. Ababon (G.R. No. 164518, January 25, 2006), the Court explained:
“A reading of the foregoing law shows that a partial or total closure or cessation of operations of establishment or undertaking may either be due to serious business losses or financial reverses or otherwise. Under the first kind, the employer must sufficiently and convincingly prove its allegation of substantial losses, while under the second kind, the employer can lawfully close shop anytime as long as cessation of or withdrawal from business operations was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees, and as long as he pays his employees their termination pay in the amount corresponding to their length of service. Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management’s prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.”
In these cases, the Supreme Court illustrated that the closure of the business and withdrawal of business operations is considered a valid authorized cause as long as the employer complies with the requisites stated above.
Based on the foregoing, the mere closure of current factory and termination of current employees, and relocation to a bigger location with new employees violative of the security of tenure of its current employees, unless they can prove that the closure of the factory was bona fide in character and not impelled by a motive to defeat or circumvent the tenurial rights of employees. Thus, the employees in the current factory should be transferred to the new factory.
