In FLB Construction Corporation v. Trinidad, the Supreme Court reiterated that employers bear the burden of proving wage and benefit payments to employees. This means if an employee claims unpaid wages or benefits, the employer must present evidence like payrolls or remittances to demonstrate compliance. The ruling underscores the importance of meticulous record-keeping by employers and protects employees’ rights to receive due compensation, clarifying the evidentiary standards in labor disputes involving monetary claims.

Unpaid Dues or Abandoned Duties: Who Bears the Burden of Proof?

FLB Construction Corporation, facing a complaint from employees Susana Trinidad, Alicia Perdido, and Daniel Sebastian for unpaid wages and benefits, argued financial losses and employee abandonment. The employees countered, claiming illegal dismissal and unpaid dues. The Labor Arbiter (LA) initially ruled in favor of the employees, awarding them unpaid salaries and 13th-month pay. The National Labor Relations Commission (NLRC) upheld this decision, emphasizing the employer’s burden to prove payment of benefits. The Court of Appeals (CA) affirmed the monetary claims but modified the ruling, declaring the employees illegally dismissed and entitling them to backwages and separation pay. This prompted FLB Construction to elevate the case to the Supreme Court.

The Supreme Court, in its analysis, focused on the burden of proof in labor disputes, particularly regarding wage payments and illegal dismissal. The Court emphasized that in labor disputes, once an employee specifically claims unpaid labor standard benefits, the employer must prove payment. As the Court stated,

“One who pleads payment has the burden of proving it, and even where the employees must allege nonpayment, the general rule is that the burden rests on the defendant to prove payment, rather than on the plaintiff to prove non-payment.”

This reinforces the principle that employers are responsible for maintaining records and providing evidence of wage and benefit payments.

Building on this principle, the Court highlighted the practical realities of employment relationships. The Court further elucidated this point by stating,

“Indeed, the pertinent personnel files, payrolls, remittances and other similar documents showing that rightful benefits have been paid to the employee are not in the possession of the worker but in the custody and absolute control of the employer.”

This acknowledgment underscores the employer’s advantage in possessing relevant documentation, thus justifying the imposition of the burden of proof on them. Consequently, the failure of FLB Construction to present any evidence of payment led the Court to uphold the monetary awards in favor of the employees.

However, the Court diverged from the CA’s ruling on illegal dismissal. To prove illegal dismissal, the employee must first establish the fact of dismissal with substantial evidence. As the Court stated,

“To emphasize, before the employer must bear the burden of proving that the dismissal was legal, the employee must first establish by substantial evidence the fact of his dismissal from service. If there is no dismissal, then there can be no question as to the legality or illegality thereof.”

The respondents’ claim of being told to stop reporting for work was deemed insufficient to prove actual dismissal on the claimed date, especially since they did not pursue illegal dismissal in their initial complaint before the DOLE.

This approach contrasts with the CA’s finding of illegal dismissal based on the company’s closure. While the Court acknowledged the closure, it also considered the lack of concrete evidence of dismissal presented by the employees. In labor cases, the burden of proving dismissal rests on the employee. Therefore, the Court deleted the award of backwages but maintained the award of separation pay due to the company’s closure. Because the closure was not proven to be in full compliance with statutory requirements, the separation pay was computed until the finality of the Supreme Court’s resolution.

The Court then addressed the issue of abandonment, which FLB Construction raised as a defense. Abandonment requires both an unjustified failure to report for work and a clear intention to sever the employment relationship. The court cited the elements of abandonment, stating that there must be,

“(1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which ft may be deduced that the employee has no more intention to work. The intent to discontinue the employment must be shown by clear proof that it was deliberate and unjustified.”

The court ruled that FLB Construction failed to prove a clear intention on the part of the employees to abandon their jobs, particularly since no return-to-work orders were issued.

Building on these principles, the Court addressed the practical implications of the company’s closure. Reinstatement, the usual remedy in cases of neither illegal dismissal nor abandonment, was deemed impossible due to the cessation of operations. In such cases, separation pay is an appropriate substitute. This approach balances the employer’s right to close a failing business with the employees’ right to compensation for their years of service.

The Court then reiterated the criteria for determining the period for computing separation pay, citing Consolidated Distiller of the Far East, Inc. v. Zaragoza. According to the ruling, the employer must prove compliance with all statutory requirements for business closure to limit the computation of separation pay to the date of closure. Failure to do so extends the computation until the finality of the Court’s decision. In this case, FLB Construction’s failure to provide adequate proof of a bona fide closure extended the period for computing separation pay.

Finally, the Court upheld the solidary liability of Fidel and Marlyn Bermudez, as officers of FLB Construction, for the monetary awards. The officers willfully refused to pay the employees their wages and 13th-month pay and did not attempt to pay separation pay upon the closure of the business. The Court recognized the employees’ long years of service, underscoring the officers’ responsibility to ensure fair compensation. The Court cited the legal basis for holding corporate officers liable, stating,

“In labor cases, the Court has held corporate directors and officers solidarily liable with the corporation’s debt if he or she willfully and knowingly assents to patently unlawful acts of the corporation. Personal liability also attaches if the director or officer is guilty of gross negligence or bad faith in directing the affairs of the corporation.”

This ruling reinforces the accountability of corporate officers for labor violations.

FAQs

What was the key issue in this case?	The primary issue was determining who bears the burden of proof in labor disputes regarding unpaid wages and benefits. The case also examined the issue of illegal dismissal and whether employees had been abandoned their employment.
Who has the burden of proving payment of wages and benefits?	The employer bears the burden of proving that wages and benefits have been paid to the employees. They must provide evidence like payrolls and remittances to substantiate their claim of payment.
What must an employee prove to claim illegal dismissal?	An employee must first present substantial evidence demonstrating that they were actually dismissed from their employment. This evidence could include termination notices or proof of being barred from work.
What constitutes abandonment of employment?	Abandonment requires both an unjustified failure to report for work and a clear intention to sever the employment relationship. The employer must demonstrate that the employee deliberately and unjustifiably refused to continue working.
What happens when reinstatement is impossible due to company closure?	When reinstatement is not feasible due to the closure of the company, the employee is typically entitled to separation pay. The computation of separation pay depends on whether the company closure complied with all statutory requirements.
How is separation pay calculated in cases of company closure?	If the company proves full compliance with closure requirements, separation pay is computed until the date of closure. Otherwise, it is computed until the finality of the court’s decision.
When are corporate officers held liable for labor violations?	Corporate officers can be held solidarily liable with the corporation if they willfully assent to unlawful acts or are guilty of gross negligence or bad faith in directing the corporation’s affairs.
What interest rate applies to monetary awards in labor cases?	Monetary awards in labor cases earn legal interest at a rate of 6% per annum from the finality of the decision until fully paid.

The Supreme Court’s decision in FLB Construction Corporation v. Trinidad underscores the importance of proper documentation and adherence to labor laws. It serves as a reminder to employers to maintain accurate records of wage and benefit payments and to ensure compliance with statutory requirements in cases of business closure.

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: FLB Construction Corporation v. Trinidad, G.R. No. 194931, October 06, 2021