ABS-CBN vs. Hilario

July 10, 2019

Facts

Mr. Edmund Ty incorporated CCI to engage in the business of making props for TV programs et al. Honorato and Banting were hired as employees. In June 2003, Ty decided to retire to create his own company – Dream Weaver. In August 2003, Ty dismissed Banting and Honorato and were given separation pays. Both signed quitclaims against CCI.

In Sept 2003, the dismissed employees filed for illegal dismissal against CCI on the ground that they were dismissed in bad faith. Further reason: CCI violated the Labor Code because it’s still operating under the guise of Dreamweaver.

CCI’s defense: It paid separation pay and Banting et al signed quitclaims.

Labor Arbiter favored Banting and Honorato. NLRC affirmed but held that ABS-CBN is jointly liable to Banting et al. 

NLRC affirmed LA and held ABS CBN and CCI jointly and severally liable to pay respondents their backwages and other allowances.

CA argued that ABS CBN and CCI should not be treated as a single entity because there is clear and convincing evidence on record that each has separate corporate personality.

Issue

Should ABS-CBN be held liable for CCI’s dismissal of its employees? Did ABS CBN pierce the corporate veil and did it have control over the terminations of Banting and Honorato?

Ruling

Yes. Because ABS-CBN and CCI are substantially one entity.

How to determine if an entity (corporation or person) has control over another entity (subsidiary corporation)?

1. The existence of the subsidiary corporation (CCI)  is dependent upon the parent entity (ABS-CBN).
2. Most personnel of the parent were transferred to the subsidiary.
3. The subsidiary company was incorporated through the collaboration of its incorporators and that of the parent company.
4. Parent company exercised influence over the management and closure of the subsidiary.
5. The incorporator of the subsidiary was employed before as a high-ranking official of the parent company.
6. Subsidiary was then a mere division of the parent company.