G.R. No. 206789. July 15, 2020.

 
TEAM PACIFIC CORPORATION, FEDERICO M. FERNANDEZ, and AURORA Q.
GARCIA, petitioners, vs. LAYLA M. PARENTE, respondent.
Remedial Law; Courts; Court of Appeals; Jurisdiction; Power to Receive Evidence; In Spouses
Marcelo v. LBC Bank, 647 SCRA 516 (2011), the Supreme Court (SC) held that the Court of Appeals
(CA) has the authority to consider new evidence and perform what is necessary to resolve factual issues.
—The Court of Appeals is not precluded from considering the new evidence presented by petitioner
Team Pacific. Section 9 of Batas Pambansa Blg. 129, as amended by Republic Act No. 7902, states:
SECTION 9. Jurisdiction.—The Court of Appeals shall exercise: . . . . The Court of Appeals shall have
the power to try cases and conduct hearings, receive evidence and perform any and all acts necessary to
resolve factual issues raised in cases falling within its original and appellate jurisdiction, including the
power to grant and conduct new trials or further proceedings.

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*
 THIRD DIVISION.
 
 
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Trials or hearings in the Court of Appeals must be continuous and must be completed within three
(3) months, unless extended by the Chief Justice. x x x In Spouses Marcelo v. LBC Bank, 647 SCRA 516
(2011), this Court held that the Court of Appeals has the authority to consider new evidence and perform
what is necessary to resolve factual issues.
Labor Law; Termination of Employment; Retrenchment; Retrenchment involves a reduction in the
workforce, resorted to when the employer encounters business reverses, losses, or economic difficulties,
such as “recessions, industrial depressions, or seasonal fluctuations.”—Under Article 298 of the Labor
Code, retrenchment is one of the authorized causes to dismiss an employee. It involves a reduction in the
workforce, resorted to when the employer encounters business reverses, losses, or economic difficulties,
such as “recessions, industrial depressions, or seasonal fluctuations.” This is usually done as a last
recourse when other methods are found inadequate. A valid retrenchment may only be exercised after the
employer has proved compliance with the procedural and substantive requisites of valid retrenchment.
Absent any of these, then the dismissal is illegal.
Same; Same; Same; Separation Pay; The employer must serve a written notice on the employee and
the Department of Labor and Employment (DOLE) one (1) month before the date of the dismissal, and
pay the required amount of separation pay.—The employer must serve a written notice on the
employee and the Department of Labor and Employment one month before the date of the dismissal, and
pay the required amount of separation pay. Meanwhile, in La Consolacion College of Manila v.
Pascua, 859 SCRA 111 (2018), this Court enumerated three substantive requisites for a valid
retrenchment: While a legitimate business option, retrenchment may only be exercised in compliance
with substantive and procedural requisites. As to the substantive requisites, an employer must first show
“that the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer.” Second, an employer
must also show “that [it] exercises its prerogative to retrench employees in good faith for the
advancement of its interest and not to defeat or circumvent the employees’ right to
 
  
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security of tenure.” Third, an employer must demonstrate “that [it] used fair and reasonable criteria
in ascertaining who would be dismissed and who would be retained among the employees, such as status
(i.e., whether they are temporary, casual, regular or managerial employees), efficiency, seniority,
physical fitness, age, and financial hardship for certain workers.” x x x Thus, for a valid retrenchment,
the employer must show that: (a) retrenchment was a necessary measure to prevent substantial and serious
business losses; (b) it was done in good faith and not to defeat employees’ rights; and (c) the employer
was fair and reasonable in selecting the employees who will be retrenched.
Same; Same; Same; Independently audited financial statements are of high evidentiary value in
terms of proving the employer’s serious business losses.—Independently audited financial statements are
of high evidentiary value in terms of proving the employer’s serious business losses. In  Manatad v.
Philippine Telegraph and Telephone Corporation, 548 SCRA 64 (2008): The financial statements audited
by independent external auditors constitute the normal method of proving the profit and loss performance
of a company as enunciated in San Miguel Corporation v. Abella: Normally, the condition of business
losses is shown by audited financial documents like yearly balance sheets, profit and loss statements and
annual income tax returns. The financial statements must be prepared and signed by independent auditors
failing which they can be assailed as self-serving documents. No evidence can best attest to a company’s
economic status other than its financial statement. We defined the evidentiary weight accorded to audited
financial statements in Asian Alcohol Corporation v. National Labor Relations Commission: The
condition of business losses is normally shown by audited financial documents like yearly balance sheets
and profit and loss statements as well as annual income tax returns. It is our ruling that financial
statements must be prepared and signed by independent auditors. Unless duly audited, they can be
assailed as self-serving documents. But it is not enough that only the financial statements for the year
during which retrenchment was undertaken, are presented in evidence. For it may happen that while the
company has indeed been losing, its losses may be on a downward trend, indicating that business is
picking up and retrenchment, being a drastic move, should no longer be resorted to. Thus, the failure of
the employer to show its income or loss for the immediately preceding year or to prove that it expected no
abatement of such losses in the coming
 
 
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years, may bespeak the weakness of its cause. It is necessary that the employer also show that its
losses increased through a period of time and that the condition of the company is not likely to improve in
the near future.
Same; Same; Same; The employer must prove that the losses increased or have been increasing for
a period of time and the company’s condition will not improve in the near future. —This Court has
likewise ruled that presenting the audited financial statement for the year of retrenchment may not be
sufficient. The employer must prove that the losses increased or have been increasing for a period of time
and the company’s condition will not improve in the near future: Jurisprudence requires that the necessity
of retrenchment to stave off genuine and significant business losses or reverses be demonstrated by an
employer’s independently audited financial statements. Documents that have not been the subject of an
independent audit may very well be self-serving. Moreover, it is not enough that it presents its audited
financial statement for the year that retrenchment was undertaken for even as it may be incurring losses
for that year, its overall financial status may already be improving. Thus, it must “also show that its losses
increased through a period of time and that the condition of the company is not likely to improve in the
near future.” There may be instances when presenting audited financial statements is not necessary, but
this does not dispense with the employer’s burden of providing a basis for alleging that it has incurred
serious business losses.
Same; Same; Nonacceptance of Separation Pay; Quitclaims; Neither accepting separation pay nor
signing a waiver and quitclaim bars the employee from contesting the legality of the dismissal.—This
Court likewise holds that respondent was not barred by estoppel. Neither accepting separation pay nor
signing a waiver and quitclaim bars the employee from contesting the legality of the dismissal. Such acts
are generally taken with a grain of salt, considering that employees are usually at an economic
disadvantage and are often left with no choice, since they are suddenly faced with the pressure to meet
financial burdens. In American Home Assurance Company v. National Labor Relations Commission, 259
SCRA 280 (1996): The fact that private respondent signed a document of waiver and quitclaim does not
bar him from pursuing the P50,000.00 bonus under the SERP. His receipt of the separation pay and the
execution of the
 
 
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release documents cannot militate against him. That acceptance of separation pay does not amount
to estoppel, and the satisfaction receipt does not result in a waiver. The law does not consider as valid any
agreement to receive less compensation than what a worker is entitled to recover nor prevent him from
demanding benefits to which he is entitled. Quitclaims executed by employees are thus commonly
frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the
workers’ legal rights, considering the economic disadvantage of the employee and the inevitable pressure
upon him by financial necessity.
Same; Same; Filing Complaint for Illegal Dismissal; Voluntary Resignation; Filing a complaint for
illegal dismissal negates any claim that the dismissal was voluntarily accepted.—Filing a complaint for
illegal dismissal likewise negates any claim that the dismissal was voluntarily accepted. In Molave Tours
Corporation v. National Labor Relations Commission, 250 SCRA 325 (1995): The fact that private
respondent immediately filed a complaint for illegal dismissal against petitioner and repudiated his
alleged resignation completely negated petitioner’s claim that respondent Bolocon voluntarily
resigned. By vigorously pursuing the litigation of his action against petitioner, private respondent clearly
manifested that he has no intention of relinquishing his employment, which act is wholly incompatible to
petitioner’s assertion that he voluntarily resigned. x x x In this case, the Department of Labor and
Employment had advised respondent to first accept her separation pay before filing her complaint. To
accept her separation pay, she had to process her clearance and sign the waivers and quitclaims. Not long
after, she filed the case. Notably, respondent was dismissed when she had just given birth. Her dismissal’s
effectivity was set on the date she was supposed to return from her maternity leave. She was at a clear
disadvantage, having found herself without a job and a source of income right at a time when finances
were crucial. Thus, her acceptance of her separation pay and the execution of her waiver and quitclaim
cannot be deemed as her waiving her right to file a complaint. She was not estopped from contesting the
legality of her dismissal.
 Same; Same; Illegal Dismissals; Liability of Corporate Officers; In case of dismissals, directors
and officers of corporations may only be held solidarily liable with the corporation if they acted in bad
faith or with malice.—In case of dismissals, directors and officers of corpo-
 
 
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rations may only be held solidarily liable with the corporation if they acted in bad faith or with
malice. In Mandaue Dinghow Dimsum House, Co., Inc. v. National Labor Relations Commission, 547
SCRA 402 (2008): It must be emphasized that a corporation is invested by law with a personality separate
and distinct from those of the persons composing it as well as from that of any other legal entity to which
it may be related. Because of this, the doctrine of piercing the veil of corporate fiction must be exercised
with caution. In Malayang Samahan ng mga Manggagawa sa M. Greenfield v. Ramos, this Court
reiterated the rule that corporate directors and officers are solidarily liable with the corporation for the
termination of employees done with malice or bad faith. It has been held that bad faith does not connote
bad judgment or negligence; it imports a dishonest purpose or some moral obliquity and conscious doing
of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the
nature of fraud.