This case clarifies the rights of employees who are illegally dismissed and the corresponding obligations of employers under Philippine labor law. The Supreme Court affirmed that an employee was illegally dismissed when the employer failed to prove just cause and did not follow due process. Even if a company closes down, it doesn’t erase the illegal dismissal, but it does change the remedy. Instead of getting their old jobs back (reinstatement), employees get separation pay. The decision underscores the importance of due process and the employer’s burden of proof in termination cases.

From Room Attendant to Legal Battle: Determining Employer Responsibility in Termination Cases

The case of Olympia Housing, Inc. v. Allan Lapastora and Irene Ubalubao, G.R. No. 187691, decided on January 13, 2016, revolves around a complaint filed by Allan Lapastora and Irene Ubalubao against Olympia Housing, Inc. (OHI) for illegal dismissal, backwages, and regularization of employment. Lapastora and Ubalubao, who worked as room attendants, claimed they were directly hired and controlled by OHI, while OHI argued they were employees of Fast Manpower, an independent contractor. This conflict highlights a common issue in labor law: determining the true employer-employee relationship and the responsibilities that come with it. The central question is whether OHI illegally dismissed Lapastora and whether the subsequent closure of OHI’s business affects the remedies available to him.

The Labor Arbiter (LA) initially ruled in favor of Lapastora and Ubalubao, finding that OHI exercised control over them and that the contract with Fast Manpower was a mere ploy to circumvent labor laws. The LA ordered OHI to reinstate them and pay backwages and other benefits. OHI appealed to the National Labor Relations Commission (NLRC), which affirmed the LA’s decision. The NLRC emphasized that Fast Manpower failed to prove its status as an independent contractor. OHI then elevated the case to the Court of Appeals (CA), arguing that a related case, Ocampo v. OHI, which upheld the validity of OHI’s closure of business, should apply under the principle of stare decisis. However, the CA dismissed OHI’s petition, stating that the two cases had different factual circumstances and issues.

The Supreme Court (SC) had to determine the true nature of the employment relationship, the validity of the dismissal, and the effect of OHI’s subsequent closure of business. The Court underscored the significance of Article 280 of the Labor Code, which defines regular employment. This article states that an employee is deemed regular if they perform activities that are usually necessary or desirable in the employer’s business, regardless of any written or oral agreement to the contrary.

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking, the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season.

Building on this principle, the Court found that Lapastora was a regular employee of OHI, given the continuous nature of his work and its necessity to OHI’s business. As such, he was entitled to security of tenure and could not be terminated without just cause and due process. The Court emphasized that employers bear the burden of proving that a dismissal was for a just cause and that due process was observed. OHI failed to meet this burden. The Court highlighted that OHI did not provide evidence of Lapastora being notified of the company’s dissatisfaction with his performance or given an opportunity to explain. Furthermore, OHI failed to observe the twin notice rule, which requires employers to provide two written notices to the employee: one specifying the grounds for termination and giving the employee an opportunity to explain, and another informing the employee of the decision to terminate.

The Court also addressed OHI’s argument that the principle of stare decisis should apply based on the Ocampo v. OHI case. The principle of stare decisis, as the Court defined it, requires lower courts to adhere to doctrinal rules established by the Supreme Court in its final decisions. The Court cited Ting v. Velez-Ting, 601 Phil. 676(2009), in explaining this doctrine:

The principle of stare decisis enjoins adherence by lower courts to doctrinal rules established by this Court in its final decisions. It is based on the principle that once a question of law has been examined and decided, it should be deemed settled and closed to further argument. Basically, it is a bar to any attempt to relitigate the same issues, necessary for two simple reasons: economy and stability. In our jurisdiction, the principle is entrenched in Article 8 of the Civil Code.

However, the Court held that stare decisis did not apply because the two cases involved different sets of facts and issues. In Lapastora, the issue was illegal dismissal based on a lack of due process and just cause. Meanwhile, in Ocampo, the petitioners questioned the validity of OHI’s closure of business. Despite not applying stare decisis, the Supreme Court acknowledged that OHI’s closure of business was a supervening event that affected the remedies available to Lapastora. The Court noted that OHI had complied with the requirements for closure, including filing a notice with the Department of Labor and Employment (DOLE) and providing termination notices to employees. Therefore, reinstatement was no longer feasible.

In light of the impossibility of reinstatement, the Court modified the award to include separation pay, calculated from the start of Lapastora’s employment until the closure of the business. Additionally, the Court upheld the award of backwages from the time of illegal dismissal until the date of closure. The Court also sustained the awards for service incentive leave pay, 13th-month pay, and attorney’s fees, as OHI failed to prove that these benefits had been paid. The decision clarifies the employer’s responsibility to comply with labor laws and the remedies available to illegally dismissed employees. While the closure of a business may affect the remedy of reinstatement, it does not negate the employer’s liability for illegal dismissal.

FAQs

What was the key issue in this case?	The central issue was whether Olympia Housing, Inc. (OHI) illegally dismissed Allan Lapastora and, if so, what remedies were available to him, especially considering OHI’s subsequent closure of business.
What did the Supreme Court rule?	The Supreme Court ruled that Lapastora was illegally dismissed because OHI failed to prove just cause and did not follow due process. However, due to OHI’s closure, reinstatement was no longer possible, and Lapastora was awarded separation pay and backwages until the date of closure.
What is the "twin notice rule"?	The twin notice rule requires employers to provide two written notices to an employee before termination: one stating the grounds for termination and giving the employee an opportunity to explain, and another informing the employee of the decision to terminate.
What is the principle of stare decisis?	Stare decisis is a legal principle that requires lower courts to follow established precedents set by higher courts in previous decisions. It promotes consistency and stability in the application of the law.
How did the Court define regular employment?	The Court referred to Article 280 of the Labor Code, which defines regular employment as when an employee performs activities that are usually necessary or desirable in the employer’s business, regardless of any written or oral agreement to the contrary.
What is separation pay?	Separation pay is a monetary benefit awarded to an employee who is terminated for authorized causes or, as in this case, when reinstatement is no longer possible due to the employer’s closure of business.
What is the significance of OHI’s closure of business?	OHI’s closure of business, while not excusing the illegal dismissal, made reinstatement impossible. As a result, the remedy was modified to include separation pay in lieu of reinstatement, along with backwages until the date of closure.
What benefits was Lapastora entitled to?	Lapastora was entitled to separation pay, backwages (until the company’s closure), service incentive leave pay, 13th-month pay, and attorney’s fees.

In conclusion, the Olympia Housing, Inc. v. Lapastora case serves as a reminder of the importance of adhering to labor laws and respecting employee rights. Employers must ensure that terminations are based on just cause and that due process is followed. Even in cases of business closure, employers may still be liable for illegal dismissals and must provide appropriate remedies to affected employees.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Olympia Housing, Inc. v. Lapastora, G.R. No. 187691, January 13, 2016