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G.R. No. 117040.

January 27, 2000

Ruben Serrano was hired by private respondent, Isetann Department Store, as a security
checker to apprehend shoplifters and prevent pilferage of merchandise. He became a
regular employee on April 4, 1995 then head of Secuity Checkers Section in 1988.
In 1991, as a cost cutting measure, Isetann decided to phase out the entire security section
and engage the services of an independent security agency.
On October 11, 1991, Serrano received a memorandum informing him of his termination
which took immediate effect. On December 3, 1991 Serrano filed a complaint for illegal
dismissal, illegal layoff, unfair labor practice, underpayment, and non-payment of salary and
On April 30, 1993, the Labor Arbiter ruled in favor of Serrano and ordered Isetann to pay
backwages, reinstatement, unpaid wages, 13th month pay, attorneys fees under the
following findings:
failure of Isettan to establish that the retrenchment was to prevent or minimize losses
to its business
to accord due process
establish reasonable standards in the termination selection
no showing of inefficiency of employees to justify replacement of security agency

On March 30, 1994, NLRC reversed the decision of the Labor Arbiter and found the
termination legal but failed to address the issue of compliance with the notice requirement.
It ordered petitioner to be given separation pay equivalent to one month pay for every
year of service, unpaid salary, and proportionate 13th month pay ruling that:

the phase-out of private respondents security section and the hiring of an

independent security agency constituted an exercise by private respondent of "[a]
legitimate business decision

the distinction made by the Labor Arbiter between "retrenchment" and the
employment of "cost-saving devices" under Art. 283 of the Labor Code was

that the rule of "reasonable criteria" in the selection of the employees to be

retrenched did not apply because all positions in the security section had been
abolished; and

that the appointment of a safety and security supervisor referred to by petitioner to

prove bad faith on private respondents part was of no moment because the position
had long been in existence and was separate from petitioners position as head of the
Security Checkers Section.

Petitioner filed a motion for reconsideration, but his motion was denied, hence this petition.

Whether or not the dismissal was legal.
Yes, the termination of petitioners services was for an authorized cause, i.e., redundancy.
Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at
the rate of one month pay for every year of service.
Art. 283 also provides that to terminate the employment of an employee for any of the
authorized causes the employer must serve "a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date
thereof." In the case at bar, petitioner was given a notice of termination on October 11, 1991
terminating his services on the same day. He was thus denied his right to be given written
notice .
The Wenphil rule imposes a fine on an employer who is found to have dismissed an
employee for cause without prior notice. This has been found to be ineffective in deterring
employer violations of the notice requirement. Thus the present ruling of the Court is that
the dismissal of the employee is merely ineffectual, not void.
The decision in this case, providing for the payment of full backwages for failure of an
employer to give notice, seeks to vindicate the employee's right to notice before he is
dismissed or laid off, while recognizing the right of the employer to dismiss for any of the
just causes. The remedy is to order the payment to the employee of full backwages from
the time of his dismissal until the court finds that the dismissal was for a just cause. But,
otherwise, his dismissal must be upheld and he should not be reinstated. This is because his
dismissal is ineffectual.
The court responds to the arguments of Justice Puno - that the denial of due process makes
the decision a nullity; and Justice Panganiban - quoting from a statement in People vs Bocar
that "[w]here the denial of the fundamental right of due process is apparent, a decision
rendered in disregard of that right is void for lack of jurisdiction." The denial of due process
by the State does not apply to this case as founded on the following reasons.
Violation by the employer of the notice requirement cannot be considered a denial of
due process resulting in the nullity of the employees dismissal or layoff. The Due
Process Clause of the Constitution is a limitation on governmental powers. It does not
apply to the exercise of private power.
Notice and hearing are required under the Due Process Clause before the power of
organized society are brought to bear upon the individual. The purpose of the 30 day
notice is to give him time to prepare for the eventual loss of his job and the DOLE an
opportunity to determine whether economic causes do exist justifying the
termination of his employment.
The employer cannot really be expected to be entirely an impartial judge of his own
Thus the Court held, with respect to Art. 283 of the Labor Code, the employers failure to
comply with the notice requirement does not constitute a denial of due process but a mere

failure to observe a procedure for the termination of employment which makes the
termination of employment merely ineffectual.
The resolution of the National Labor Relations Commission is MODIFIED by ordering private
respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to
one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th
month pay and, in addition, full backwages from the time his employment was terminated
on October 11, 1991 up to the time the decision herein becomes final. For this purpose, this
case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages,
and other monetary awards to petitioner.