Company “A” was engaged in the manufacture of goods using the byproducts of coconut trees and employed some fifty workers who lived in the coconut plantation in Quezon Province. The land upon which A conducted its operation was subjected to land reform under R.A. 6657 for distribution to the tenants and residents of the land. Consequently, A had to close its operations and dismiss its workers. The union representing the employees demanded that A pay the dismissed workers separation pay under Art. 283 of the Labor Code that requires, among others, the payment of separation pay to employees in cases of “closing or cessation of operations of the establishment or undertaking”. Is the union’s claim correct or not? Why?

(Bar Examination in Labor Law, 2001)

Suggested Answer:

The union’s claim is not correct. There is no obligation to pay separation pay if the closure is not a unilateral and voluntary act of the employer. (National Federation of Labor vs. NLRC, G.R. No. 127718, March 2, 2000.)

In this case, the closure was not unilateral and voluntary on the part of the employer, but due to the implementation of the Comprehensive Agrarian Reform Law.


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