SC clarifies illegal dismissal rules

THE Supreme Court (SC) has ruled that a successor business entity may be held solidarily liable for the illegal dismissal of a worker from a defunct sole proprietorship if the new firm is merely an “alter ego” created to evade labor obligations.

In a Nov. 18 decision penned by Associate Justice Jhosep Lopez, the Second Division reversed rulings of the National Labor Relations Commission and the Court of Appeals that dismissed the claims of printing press operator Nilo S. Galit.

“For as long as the separate and distinct personality of such juridical entity is used to perpetuate fraud, commit illegal acts, and evade one’s obligations, the equitable doctrine of piercing the veil of corporate fiction will apply, as these are the acts which the doctrine seeks to prevent and remedy,” the High Court said.

Mr. Galit was hired in 1998 by MWC Enterprises, a sole proprietorship owned by Willy Tantongco. After suffering neck and back injuries in 2016, he went on approved leave. Mr. Tantongco later died in January 2018.

Months later, his daughter, Cristine N. Tantongco, established Treebox Enterprises, a printing business operating at the same address and engaged in the same line of work. The tribunal found that Treebox was effectively a continuation of MWC.

“A careful scrutiny of the circumstances obtaining in this case indubitably shows that Treebox is nothing more than a mere alter ego of MWC,” the high tribunal said.

The court declared Mr. Galit illegally dismissed and ordered Treebox Enterprises and Ms. Tantongco to jointly pay full backwages, separation pay, service incentive leave pay, P50,000 each in moral and exemplary damages, plus attorney’s fees. — Erika Mae P. Sinaking