CASE DIGEST: ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA vs. NLRC. G.R. No. 71813. July 20, 1987

FACTS:

Petitioner Abella leased a farm land in Monteverde Negros Occidental known as Hacienda Danao-Ramona for a period of 10 years which is renewable for another 10 years at her option. During the existence of the said lease, she employed private respondents as regular farm workers and later on promoted as Cabo. Upon expiration of her leasehold rights, petitioner also dismissed respondents. The latter filed a complaint against petitioner for overtime pay, illegal dismissal and reinstatement with back wages in the Ministry of Labor and Employment in Bacolod City. The Ministry dismissed the case but granted separation pay to respondents. Petitioner appealed to NLRC but the latter affirmed the Ministry’s ruling.

ISSUES:

1. Whether Art. 284 of the Labor Code violates constitutional guarantee against impairment of obligations and contracts.

2. Whether private respondents are entitled to Separation pay.

RULING:

1. No, the prohibition to impair the obligations of contracts is not absolute and unqualified. The prohibition is general and requires construction to fill in the details. It allows reasonable impairment since the State continues to possess authority to safeguard the vital interest of its people. Legislation appropriate to safeguard said interest may modify or abrogate contracts already in effect. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. Legislation impairing obligations and contracts can be sustained when it is enacted for the promotion of the general good of the people and when the means adopted must be legitimate.

2. Yes, under Art. 284 of the Labor Code (amended)

...in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the worker affected shall be entitled to a separation pay of one month pay or at least one half month pay for every year of service whichever is higher.

The purpose of Art. 284 as amended is obvious - the protection of the workers whose employment is terminated because of the closure of establishment and reduction of personnel.

Since those affected workers were not actually parties to the leasehold contract with the owner of Hacienda, the said contract cannot have the effect of annulling subsequent legislation designed to protect the interest of the working class.

In any event, it is well-settled that in the implementation and interpretation of the provisions of the Labor Code and its implementing regulations, the workingman's welfare should be the primordial and paramount consideration.

It is the kind of interpretation which gives meaning and substance to the liberal and compassionate spirit of the law as provided for in Article 4 of the New Labor Code which states that "all doubts in the implementation and interpretation of the provisions of this Code including its implementing rules and regulations shall be resolved in favor of labor."