G.R. No.
163033 October 2, 2009 In an undated letter,8 respondent informed SMC that he was
SAN MIGUEL CORPORATION, Petitioner,
vs.
EDUARDO L. TEODOSIO, Respondent.
DECISION
PERALTA, J.:
This is a petition for review on certiorari, under Rule 45 of the
Rules of Court, seeking to annul and set aside the
Decision1 dated October 30, 2003, rendered by the Court of
Appeals (CA) in CA-G.R. SP No. 60334 and its Resolution2 dated
February 24, 2004 denying petitioner’s motion for reconsideration.
The factual and procedural antecedents are as follows:
On September 5, 1991, respondent Eduardo Teodosio was hired
by San Miguel Corporation (SMC) as a casual forklift operator in
its Bacolod City Brewery.3 As a forklift operator, respondent was
tasked with loading and unloading pallet4 of beer cases within the
brewery premises. Respondent continuously worked from
September 5, 1991 until March 1992, after which he was "asked
to rest" for a while. A month after, or sometime in April 1992,
respondent was rehired for the same position, and after serving
for about five to six months, he was again "asked to rest." After
three weeks, he was again rehired as a forklift operator. He
continued to work as such until August 1993.5
Sometime in August 1993, respondent was made to sign an
"Employment with a Fixed Period"6 contract by SMC, wherein it
was stipulated, among other things, that respondent’s
employment would be "from August 7, 1993 to August 30, 1995,
or upon cessation of the instability/fluctuation of the market
demand, whichever comes first." Thereafter, respondent worked
at the plant without interruption as a forklift operator.
On March 20, 1995, respondent was transferred to the plant’s
bottling section as a case piler. In a letter7 dated April 10, 1995,
respondent formally informed SMC of his opposition to his transfer
to the bottling section. He asserted that he would be more
effective as a forklift operator because he had been employed as
such for more than three years already. Respondent also
requested that he be transferred to his former position as a forklift
operator. However, SMC did not answer his letter.
separation pay from SMC. It upheld the validity of the said Receipt
applying for the vacant position of bottling crew as he was
interested in becoming a regular employee of SMC.
On June 1, 1995, SMC notified the respondent that his
employment shall be terminated on July 1, 1995 in compliance
with the Employment with a Fixed Period contract.9 SMC
explained that this was due to the reorganization and streamlining
of its operations.
In a letter10 dated July 3, 1995, respondent expressed his dismay
for his dismissal. He informed SMC that despite the fact that he
would be compelled to receive his separation pay and would be
forced to sign a waiver to that effect, this does not mean that he
would be waiving his right to question his dismissal and to claim
employment benefits as provided in the Collective Bargaining
Agreement (CBA) and company policies.
Thereafter, respondent signed a Receipt and Release 11 document
in favor of SMC and accepted his separation pay, thereby
releasing all his claims against SMC.
On July 4, 1995, respondent filed a Complaint12 against SMC
before the National Labor Relations Commission (NLRC),
Regional Arbitration Branch No. VI, Bacolod City, for illegal
dismissal and underpayment of wages and other benefits.
After the filing of the parties’ respective pleadings, the Labor
Arbiter rendered a Decision13 dismissing the complaint for lack of
merit. The Labor Arbiter concluded that the contract of
employment with a fix period signed by respondent was a
legitimate exercise of management prerogative. There was thus
nothing illegal about respondent’s transfer to the bottling section
and the assignment of a regular employee to his former position.
Considering that respondent failed to qualify in the bottling section
and there was no longer any available position for him, his
termination in accordance with the employment contract was
valid. Moreover, the Labor Arbiter opined that since the
respondent was not a union member and not a regular employee
of SMC, he was not entitled to the benefits granted by the existing
CBA.14
Aggrieved, respondent sought recourse before the NLRC, Fourth
Division, Cebu City. On November 26, 1999, the NLRC rendered
a Decision15 dismissing the appeal and affirming the decision of
the Labor Arbiter. The NLRC anchored its decision on the fact that
respondent signed a "Receipt and Release" upon receiving his
and Release document, finding the same to have been voluntarily
executed by the respondent and the consideration therefor
appears to be reasonable under the circumstances.16 The
respondent filed a motion for reconsideration, but it was denied in
a Resolution17 dated May 26, 2000.
Respondent then filed before the CA a petition for certiorari,
docketed as CA-G.R. SP No. 60334, seeking to annul and set
aside the said Decision and Resolution of the NLRC.18
On October 30, 2003, the CA rendered a Decision19 granting the
petition, the decretal portion of which reads:
WHEREFORE, the instant petition is GRANTED. The Decision
dated November 29, 1999 and Resolution dated May 26, 2000 of
the National Labor Relations Commission, Fourth Division, Cebu
City and Decision dated April 24, 1998 of the Labor Arbiter are
REVERSED and SET ASIDE. Judgment is rendered ordering:
1. The reinstatement of petitioner Eduardo Teodosio to
his position as forklift operator without loss of seniority
rights.
2. The private respondent San Miguel Corporation to pay
the full backwages of the petitioner from the day of his
illegal dismissal until actual reinstatement. Said
backwages shall be computed on the basis of the basic
salary, allowances and other benefits granted to regular
employees under the Collective Bargaining Agreement
existing at the time. Public respondent NLRC is hereby
directed to make the computation of said full backwages
and inform soonest all parties as well as this Court,
accordingly, within thirty days after receipt of this
decision.
3. The private respondent San Miguel Corporation to pay
the deficiency amount of salary, allowances and benefits
that petitioner should have received as a regular
employee from the time he attained the status of regular
employee by operation of law on September, 1996 to the
time he was illegally dismissed. Public respondent NLRC
is likewise directed to make the necessary computation
and inform all parties and this Court within thirty (30)
days after receipt of this decision.
1
 4. The private respondent San Miguel Corporation to pay
petitioner the amount of FIFTY THOUSAND PESOS
(₱50,000.00) as moral damages, TEN THOUSAND
PESOS (₱10,000.00) as exemplary damages and ten
percent (10%) of the total amount awarded to petitioner
by this Court as attorney’s fees. Costs against private
respondent San Miguel Corporation.
SO ORDERED.20
In granting the petition, the CA ratiocinated that the Employment
with a Fixed Period contract was just a scheme of SMC to
circumvent respondent’s security of tenure. The CA concluded
that even before the respondent signed the employment contract,
he already attained the status of a regular employee.
Consequently, respondent’s transfer to the bottling section and his
subsequent dismissal were evidently tainted with bad faith.
Moreover, the appellate court declared invalid the Receipt and
Release document signed by the respondent, since the law
proscribes any agreement whereby a worker agrees to receive
less compensation than what he is entitled to recover. It added
that a deed of release or quitclaim cannot bar an employee from
demanding benefits to which he is legally entitled.
SMC filed a motion for reconsideration, but it was denied in the
Resolution21 dated February 24, 2004.
Hence, this petition assigning the following errors:
First ground
The hon. Court of appeals committed serious errors when it did
not uphold the validity of the contract of employment with a fixed
period (hereinafter referred to as "EWFP", for brevity) between
smc and respondent teodosio.
Second ground
The hon. Court of Appeals seriously erred in declaring that
respondent had already attained status of a regular employee
even before [THE] parties entered into the ewfp contract.
Third ground
The hon. Court of Appeals seriously erred in its conclusion that
respondent’s transfer to the bottling section and subsequent
dismissal was tainted with bad faith since having acquired the
status of a regular employee as early as 1992, respondent had a
vested right to his position as foklift (sic) operator which could not
be arbitrarily taken from him and given to accommodate another
regular employee, mr. vaflor.
Fourth ground
The hon. Court of Appeals seriously erred when it declared that
from September 1992 or one (1) year after respondent was hired
and attained regular status by operation of law, he was entitled to
receive the same basic salary and benefits granted by the
collective bargaining agre[E]ment to respondent’s co-
workers/forklift operators who were regular employees.
Fifth ground
The hon. Court of Appeals seriously erred when it did not uphold
the validity of the "receipt and release" signed by respondent.
Sixth ground
The hon. Court of Appeals seriously erred when it concluded that
smc intentionally evaded its legal obligation of granting the
benefits and privileges to which its loyal employee of five years is
clearly entitled to and such act being oppressive to labor and
contrary to the avowed public policy of protecting labor rights
entitled the grant to respondent of moral damages in the amount
of fifty thousand pesos (₱50,000.00) and exemplary damages of
ten thousand pesos (₱10,000.00) as well as attorney’s fees in the
amount of ten percent (10%) of the total award for expenses
incurred by respondent to protect his rights and interests.
Seventh ground
The hon. Court of Appeals seriously erred when it granted the
petition on certiorari filed by respondent and reversed and set
aside the decision dated November 26, 1999 (not November 29,
1999 as erroneously stated) and resolution dated May 26, 2000 of
the nlrc, fourth division, cebu city, and decision dated April 24,
1998 of the labor arbiter, and consequently ordered the following:
1) the reinstatement of petitioner Eduardo teodosio to his
position as forklift operator without losss [sic] of seniority
rights;
2) the private respondent san Miguel corporation to pay
the full backwages of the petitioners from the day of his
illegal dismissal until actual reinstatement. Said
backwages shall be computed on the basis of the basic
salary, allowances and other benefits granted to regular
employees under the collective bargaining agreement
existing at the time;
3) The private respondent san Miguel corporation to pay
the deficiency amount of salary, allowances and benefits
that petitioner should have received as a regular
employee from the time he attained the status of regular
employee by operation of law on September, 1996 to the
time he was illegally dismissed. x x x.;
4) the private respondent san Miguel corporation to pay
petitioner the amount of fifty thousand PESOS
(₱50,000.00) as moral damages, ten thousand pesos
(₱10,000.00) as exemplary damages and ten percent
(10%) of the total amount awarded to petitioner by this
court as attorney’s fees. Costs against private
respondent san Miguel corporation.22
Simply stated, the issues before us are the following: 1) whether
the respondent was a regular employee of SMC; 2) whether the
respondent was illegally dismissed; and 3) whether the
respondent is entitled to his monetary claims and damages.
SMC argues that it did not have the slightest intention to
circumvent respondent’s right to security of tenure. When SMC
employed respondent, it was in response to the business
environment and operating needs prevailing at that time. It was
made in good faith and in the exercise of business judgment. The
option of SMC to fully mechanize its operations and to regularize
the second shift of employees in the bottling section if favorable
conditions prevail were known to the respondent when he
voluntarily entered into the employment with a fixed period
contract.
SMC adds that before the employment contract expired,
respondent was given the opportunity to continue working and
was transferred to the second shift operations of the bottling
section. When it decided to regularize the second shift operations
and accept 23 workers for regular positions, respondent was
given the equal opportunity to apply. However, despite being
already in the bottling section, respondent failed to perform. After
an objective evaluation of the total performance of all the workers
2
with employment contract, respondent failed to qualify for a
regular position. Respondent should not, therefore, blame SMC
for his failure to qualify for a regular position.
SMC also contends that respondent’s employment contract was in
accordance with Article 280 of the Labor Code. Respondent’s
employment has been pre-determined, in that the duration of the
work was contingent upon the cessation of fluctuating or unstable
market demand for beer products, coupled with the automation of
brewery operations.
As regards respondent’s claim for underpayment of salary and
other benefits in accordance with the provisions of the existing
CBA, SMC submits that respondent was not entitled to them.
SMC maintains that being a contractual employee, by express
provision of the CBA, he was excluded therefrom as he was not
included in the appropriate bargaining unit defined in the CBA.
Respondent was neither a union member nor one who paid any
membership or agency fee to the union. Thus, he was not entitled
to any benefits provided in the CBA to its union members.
Moreover, SMC insists that respondent was bound by the Receipt
and Release contract that he executed. The terms and conditions
of the document were clear and respondent understood and knew
fully well the consequences thereof when he signed it. SMC adds
that respondent wanted to squeeze more money from it despite
the fact that it had already doubled respondent’s separation pay.
SMC avers that although a waiver or quitclaim executed by a
terminated employee upon receipt of his separation pay is not
necessarily a bar to question the legality of his termination, still
such conclusion does not apply to the instant case. SMC posits
that respondent was not taken advantage of, since he did not
receive a ludicrously low and unconscionable amount as
separation pay. In fact, respondent was given separation pay in
excess of what was stipulated in the employment contract.
Finally, SMC argues that respondent’s dismissal from the
company was based on legal and valid grounds, i.e., the
termination of his employment contract.
For his part, respondent posits that he is already a regular
employee of SMC considering that he has been working as a
forklift operator for several years before he signed the
employment contract. Respondent insists that his position as a
forklift operator has never been redundant. In fact, he was
replaced by another employee of SMC, who transferred from
another plant. Also, the automation of some of SMC’s operation
does not affect his work as a forklift operator, because forklifts
would still be utilized in lifting the pile of cases whether they were
arranged manually or by palletizer machine. Respondent
contends that his transfer to the bottling section was merely a ploy
of SMC to legitimize the designation of another SMC employee to
his former position as forklift operator.
Respondent maintains that the execution of the Receipt and
Release agreement did not bar him from questioning the legality
of his dismissal. He submits that the said agreement was
unilaterally prepared by SMC and that prior to its execution, he
was already dismissed by SMC. He adds that after receiving his
separation pay, he immediately filed the complaint against SMC,
thus, affirming his desire to assail the legality of his dismissal.
Respondent maintains that his dismissal was illegal. Hence, he is
entitled to reinstatement to his former position as forklift operator,
moral and exemplary damages, and payment of attorney’s fees.
The petition is bereft of merit.
This Court finds the respondent to be a regular employee. Article
280 of the Labor Code, as amended, provides:
ART. 280. REGULAR AND CASUAL EMPLOYMENT. - The
provisions of written agreement to the contrary notwithstanding
and regardless of the oral agreement of the parties, an
employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a
specific project or undertaking, the completion or termination of
which has been determined at the time of the engagement of the
employee or where the work or services to be performed is
seasonal in nature and the employment is for the duration of the
season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph: Provided, That, any employee who
has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee
with respect to the activity in which he is employed and his
employment shall continue while such activity exists.
Thus, there are two kinds of regular employees, namely: (1) those
who are engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer; and (2) those who have rendered at least one year of
service, whether continuous or broken, with respect to the activity
in which they are employed.23Simply stated, regular employees
are classified into (1) regular employees - by nature of work and
(2) regular employees - by years of service. The former refers to
those employees who perform a particular activity which is
necessary or desirable in the usual business or trade of the
employer, regardless of their length of service; while the latter
refers to those employees who have been performing the job,
regardless of the nature thereof, for at least a year.24 If the
employee has been performing the job for at least one year, even
if the performance is not continuous or merely intermittent, the law
deems the repeated and continuing need for its performance as
sufficient evidence of the necessity, if not indispensability, of that
activity to the business.25
Based on the circumstances surrounding respondent’s
employment by SMC, this Court is convinced that he has attained
the status of a regular employee long before he executed the
employment contract with a fixed period. Although respondent
was initially hired by SMC as a casual employee, respondent has
attained the status of a regular employee. Respondent was
initially hired by SMC on September 5, 1991 until March 1992. He
was rehired for the same position in April 1992 which lasted for
five to six months. After three weeks, he was again rehired as a
forklift operator and he continued to work as such until August
1993. Thus, at the time he signed the Employment with a Fixed
Period contract, respondent had already been in the employ of
SMC for at least twenty-three (23) months.
The Labor Code provides that a casual employee can be
considered as a regular employee if said casual employee has
rendered at least one year of service regardless of the fact that
such service may be continuous or broken. Section 3, Rule V,
Book II of the Implementing Rules and Regulations of the Labor
Code clearly defines the term "at least one year of service" to
mean service within 12 months, whether continuous or broken,
reckoned from the date the employee started working, including
authorized absences and paid regular holidays, unless the
working days in the establishment, as a matter of practice or
policy, or as provided in the employment contract, is less than 12
months, in which case said period shall be considered one year. If
the employee has been performing the job for at least one year,
even if the performance is not continuous or merely intermittent,
the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity, if not
indispensability, of that activity to the business of the employer.26
3
Moreover, the nature of respondent’s work is necessary in the
business in which SMC is engaged. SMC is primarily engaged in
the manufacture and marketing of beer products, for which
purpose, it specifically maintains a brewery in Bacolod
City.27 Respondent, on the other hand, was engaged as a forklift
operator tasked to lift and transfer pallets and pile them from the
bottling section to the piling area. SMC admitted that it hired
respondent as a forklift operator since the third quarter of 1991
when, in the absence of fully automated palletizers, manual
transfers of beer cases and empties would be extensive within the
brewery and its premises.
SMC would have wanted this Court to believe that circumstances
have transpired to force it to implement full automation of its
brewery and new marketing and distribution systems in its sales
offices resulting in the reduction of personnel and termination of
employees with a fixed period contract. However, even after the
installation of the automated palletizers, SMC did not leave the
position of forklift operator vacant. SMC even transferred one of
its regular employees to the Bacolod City Brewery to replace
respondent who was in turn transferred to the bottling section of
the plant. This demonstrates the continuing necessity and
indispensability of hiring a forklift operator to the business of SMC.
Undoubtedly, respondent is a regular employee of SMC.
Consequently, the employment contract with a fixed period which
SMC had respondent execute was meant only to circumvent
respondent’s right to security of tenure and is, therefore, invalid.
While this Court recognizes the validity of fixed-term employment
contracts, it has consistently held that this is the exception rather
than the general rule. Verily, a fixed-term contract is valid only
under certain circumstances.28 In the oft-cited case of Brent
School, Inc. v. Zamora,29 this Court made it clear that a contract of
employment stipulating a fixed term, even if clear as regards the
existence of a period, is invalid if it can be shown that the same
was executed with the intention of circumventing an employee’s
right to security of tenure, and should thus be ignored. Moreover,
in that same case, this Court issued a stern admonition that where
from the circumstances, it is apparent that the period was
imposed to preclude the acquisition of tenurial security by the
employee, then it should be struck down as being contrary to law,
morals, good customs, public order and public policy.30
Since respondent was already a regular employee months before
the execution of the Employment with a Fixed Period contract, its
execution was merely a ploy on SMC’s part to deprive respondent
of his tenurial security. Hence, no valid fixed-term contract was
executed. The employment status of a person is defined and
prescribed by law and not by what the parties say it should be.
Equally important to consider is that a contract of employment is
impressed with public interest such that labor contracts must yield
to the common good. Provisions of applicable statutes are
deemed written into the contract, and the parties are not at liberty
to insulate themselves and their relationships from the impact of
labor laws and regulations by simply contracting with each other.31
Having gained the status of a regular employee, respondent is
entitled to security of tenure and could only be dismissed on just
or authorized causes and after he has been accorded due
process.32
SMC insists that the termination of respondent’s employment was
in accordance with the Employment with a Fixed Period contract;
and that respondent was given opportunities to become a regular
employee when he was transferred to the bottling section of the
plant. However, considering that respondent was already a
regular employee of SMC at that time, the reason advanced by
SMC for his termination would not constitute a just or authorized
cause.331avvphi1
Also, SMC cannot take refuge in the Receipt and Release
document signed by the respondent. Generally, deeds of release,
waivers, or quitclaims cannot bar employees from demanding
benefits to which they are legally entitled or from contesting the
legality of their dismissal, since quitclaims are looked upon with
disfavor and are frowned upon as contrary to public policy.
Where, however, the person making the waiver has done so
voluntarily, with a full understanding thereof, and the
consideration for the quitclaim is credible and reasonable, the
transaction must be recognized as a valid and binding
undertaking.34 The burden of proving that the quitclaim or waiver
was voluntarily entered into rests on the employer.35
SMC failed to discharge this burden. This is buttressed by the fact
that before the respondent signed the document, he already
informed SMC in the letter dated July 3, 1995, that even if he
would be compelled to receive his separation pay and be forced
to sign a waiver to that effect, he was not waiving his right to
question his dismissal and to claim employment benefits. This
clearly proves that respondent did not freely and voluntarily
consent to the execution of the document.
As aptly concluded by the CA, herein respondent, having been
unjustly dismissed from work, is entitled to reinstatement without
loss of seniority rights and other privileges and to full back wages,
inclusive of allowances, and to other benefits or their monetary
equivalents computed from the time compensation was withheld
up to the time of actual reinstatement.36
Anent the awards for damages awarded by the CA, this Court
finds that respondent is not entitled to moral and exemplary
damages. Moral damages are recoverable where the dismissal of
the employee was attended by bad faith or fraud or constituted an
act oppressive to labor, or was done in a manner contrary to
morals, good customs or public policy.37 On the other hand,
exemplary damages are proper when the dismissal was effected
in a wanton, oppressive or malevolent manner, and public policy
requires that these acts must be suppressed and
discouraged.38 In the present case, respondent failed to
sufficiently establish that his dismissal was done in bad faith; was
contrary to morals, good customs or public policy; and was
arbitrary and oppressive to labor, thus entitling him to the award of
moral and exemplary damages.
As to the award of attorney’s fees, by reason of his illegal
dismissal, respondent was forced to litigate and incur expenses to
protect his rights and interest.39 Moreover, in labor cases,
although an express finding of fact and law is still necessary to
prove the merit of the award of attorney’s fees, there need not be
any showing that the employer acted maliciously or in bad faith
when it withheld the wages. There need only be a showing that
the lawful wages were not paid accordingly.40 Thus, it is but just
and proper that the same should be awarded to respondent.
At this juncture, this Court notes that there is an apparent
discrepancy between the ratio decidendi and the fallo of the CA’s
decision. In its ratio the CA concluded that respondent became a
regular employee of SMC in September 1992.41 However, in the
dispositive portion thereof the CA may have overlooked the date
as it stated therein that respondent "attained the status of a
regular employee by operation of law on September, 1996." 42 This
part of the fallo should be rectified to reflect the true intent and
meaning of the decision.
Findings of the court are to be considered in the interpretation of
the dispositive portion of the judgment.43 Verily, to grasp and
delve into the true intent and meaning of a decision, no specific
portion thereof should be resorted to – the decision must be
considered in its entirety. The Court may resort to the pleadings of
the parties, its findings of fact and conclusions of law as
expressed in the body of the decision to clarify any ambiguities
caused by any inadvertent omission or mistake in the dispositive
4
portion thereof.44 This assures swift delivery of justice and avoids
any protracted litigation anchored only on trivial matters as a
result of any inadvertent omissions or mistakes in the fallo. Thus,
to conform to the ratio, the date in the fallo when respondent
became a regular employee should be modified from September
1996 to September 1992.
Furthermore, although the instant case calls for the reinstatement
of the respondent to his former position as forklift operator or any
equivalent position, the fact that his former position was already
given to another regular employee; the length of time that this
case has been pending; and the likely possibility that the
protracted litigation may have seriously marred the relationship of
the parties beyond reconciliation, may well have rendered
reinstatement impossible. Accordingly, petitioner shall be awarded
separation pay in lieu of reinstatement, if the latter is no longer
possible.45
WHEREFORE, premises considered, the petition is DENIED. The
Decision and Resolution of the Court of Appeals, dated October
30, 2003 and February 24, 2004, respectively, in CA-G.R. SP No.
60334 are AFFIRMED with the following MODIFICATIONS:
1. Respondent Eduardo L. Teodosio became a regular
employee in September 1992.
2. Respondent is awarded separation pay in lieu of
reinstatement.
3. The awards of moral and exemplary damages are
DELETED.
In all other aspects, the Decision stands.
SO ORDERED.
G.R. No. 82249 February 7, 1991
WILTSHIRE FILE CO., INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and
VICENTE T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.
FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of
petitioner Wiltshire File Co., Inc. ("Wiltshire") from 16 March 1981
up to 18 June 1985. As such, he received a monthly salary of
P14,375.00 excluding commissions from sales which averaged
P5,000.00 a month. He also enjoyed vacation leave with pay
equivalent to P7,187,50 per year, as well as hospitalization
privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a
business and pleasure trip abroad, he was informed by the
President of petitioner Wiltshire that his services were being
terminated. Private respondent maintains that he tried to get an
explanation from management of his dismissal but to no avail. On
18 June 1985, when private respondent again tried to speak with
the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were
being terminated upon the ground of redundancy.
Private respondent filed, on 21 October 1985, a complaint before
the Labor Arbiter for illegal dismissal alleging that his position
could not possibly be redundant because nobody (save himself) in
the company was then performing the same duties. Private
respondent further contended that retrenching him could not
prevent further losses because it was in fact through his
remarkable performance as Sales Manager that the Company
had an unprecedented increase in domestic market share the
preceding year. For that accomplishment, he continued, he was
promoted to Marketing Manager and was authorized by the
President to hire four (4) Sales Executives five (5) months prior to
his termination.
In its answer, petitioner company alleged that the termination of
respondent's services was a cost-cutting measure: that in
December 1984, the company had experienced an unusually low
volume of orders: and that it was in fact forced to rotate its
employees in order to save the company. Despite the rotation of
employees, petitioner alleged; it continued to experience financial
losses and private respondent's position, Sales Manager of the
company, became redundant.
On 2 December 1986, during the proceedings before the Labor
Arbiter, petitioner, in a letter1 addressed to the Regional Director
of the then Ministry of Labor and Employment, notified that official
that effective 2 January 1987, petitioner would close its doors
permanently due to substantial business losses.
In a decision dated 11 March 1987, the Labor Arbiter declared the
termination of private respondent's services illegal and ordered
petitioner to pay private respondent backwages in the amount of
P299,000.00, unpaid salaries in the amount of P22,352.11,
accumulated sick and vacation leaves in the amount of
P12,543.91, hospitalization benefit package in the amount of
P10,000.00, unpaid commission in the amount of P57,500,00,
moral damages in the amount of P100,000.00 and attorney's fees
in the amount of P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations
Commission ("NLRC") affirmed in toto on 9 February 1988 the
decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main
reason in terminating the services of complainant
is REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant
and Mr. Deliva, the Vice-President is absent that would
justify redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the
effective date of private respondent's termination was 18 July
1985, although it was only 18 June 1985 that he received the
letter of termination, and concluded that he was not given any
opportunity to explain his position on the matter. The NLRC held
that the termination was attended by malice and bad faith on the
part of petitioner, considering the manner of private respondent
was ordered by the President to pack up and remove his personal
belongings from the office. Private respondent was said to have
been embarrassed before his immediate family and other
acquaintance due to his inability to explain the reasons behind the
termination of his services.
In this Petition for Certiorari, it is submitted that private
respondent's dismissal was justified and not illegal. Petitioner
maintains that it had been incurring business losses beginning
1984 and that it was compelled to reduce the size of its personnel
force. Petitioner also contends that redundancy as a cause for
termination does not necessarily mean duplication of work but a
"situation where the services of an employee are in excess of
what is demanded by the needs of an undertaking . . ."
5
Having reviewed the record of this case, the Court has satisfied
itself that indeed petitioner had serious financial difficulties before,
during and after the termination of the services of private
respondent. For one thing, the audited financial statements of the
petitioner for its fiscal year ending on 31 July 1985 prepared by a
firm of independent auditors, showed a net loss in the amount of
P4,431,321.00 and a total deficit or capital impairment at the end
of year of P6,776,493.00.2
In the preceding fiscal year (1983-1984), while the company
showed a net after tax income of P843,506.00, it actually suffered
a deficit or capital impairment of P2,345,172.00. Most importantly,
petitioner Wiltshire finally closed its doors and terminated all
operations in the Philippines on January 1987, barely two (2)
years after the termination of private respondent's employment.
We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous
financial distress. The Court finds it very difficult to suppose that
petitioner Wiltshire would take the final and irrevocable step of
closing down its operations in the Philippines simply for the sole
purpose of easing out a particular officer or employee, such as the
private respondent.
Turning to the legality of the termination of private respondent's
employment, we find merit in petitioner's basic argument. We are
unable to sustain public respondent NLRC's holding that private
respondent's dismissal was not justified by redundancy and hence
illegal. In the first place, we note that while the letter informing
private respondent of the termination of his services used the
word "redundant", that letter also referred to the company having
"incur[red] financial losses which [in] fact has compelled [it] to
resort to retrenchment to prevent further losses".3
Thus, what the letter was in effect saying was that because of
financial losses, retrenchment was necessary, which
retrenchment in turn resulted in the redundancy of private
respondent's position.
In the second place, we do not believe that redundancy in an
employer's personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same
position that private respondent held prior to the termination of his
services, does not show that his position had not become
redundant. Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that
redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the
enterprise.4
The employer has no legal obligation to keep in its payroll more
employees than are necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of
the contraction of its volume of sales and in order to cut down its
operating expenses, effected some changes in its organization by
abolishing some positions and thereby effecting a reduction of its
personnel. Thus, the position of Sales Manager was abolished
and the duties previously discharged by the Sales Manager
simply added to the duties of the General Manager, to whom the
Sales Manager used to report.
It is of no legal moment that the financial troubles of the company
were not of private respondent's making. Private respondent
cannot insist on the retention of his position upon the ground that
he had not contributed to the financial problems of Wiltshire. The
characterization of private respondent's services as no longer
necessary or sustainable, and therefore properly terminable, was
an exercise of business judgment on the part of petitioner
company. The wisdom or soundness of such characterization or
decision was not subject to discretionary review on the part of the
Labor Arbiter nor of the NLRC so long, of course, as violation of
law or merely arbitrary and malicious action is not shown. It
should also be noted that the position held by private respondent,
Sales Manager, was clearly managerial in character. In D.M.
Consunji, Inc. v. National Labor Relations Commission,5 the Court
held:
An employer has a much wider discretion in terminating
the employment relationship of managerial personnel as
compared to rank and file employees. However, such
prerogative of management to dismiss or lay off an
employee must be made without abuse of discretion, for
what is at stake is not only the private respondent's
position but also his means of livelihood . . . .6
The determination of the continuing necessity of a particular
officer or position in a business corporation is management's
prerogative, and the courts will not interfere with the exercise of
such so long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is shown.7
On the issue of moral damages, petitioner assails the finding of
the NLRC that the dismissal was done in bad faith. Petitioner
argues that it had complied with the one-month notice required by
law; that there was no need for private respondent to be heard in
his own defense considering that the termination of his services
was for a statutory or authorized cause; and that whatever
humiliation might have been suffered by private respondent arose
from a lawful cause and hence could not be the basis of an award
of moral damages.
Termination of an employee's services because of retrenchment
to prevent further losses or redundancy, is governed by Article
283 of the Labor Code which provides as follows:
Art. 283. Closure of establishment and reduction of
personnel. –– The employer may also terminate the
employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination
due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to
serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every of service,
whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
Termination of services for any of the above described causes
should be distinguished from termination of employment by
reason of some blameworthy act or omission on the part of the
employee, in which case the applicable provision is Article 282 of
the Labor Code which provides as follows:
6
 Art. 282. Termination by employer. –– An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his
employer or representative in connection with
his work;
(b) Gross and habitual neglect by the employee
of his duties;
(c) Fraud or willful breach by the employee of
the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
Sections 2 and 5 of Rule XIV entitled "Termination of
Employment:" of the "Rules to Implement the Labor Code" read
as follows:
Sec. 2. Notice of dismissal. –– Any employer who seeks
to dismiss a worker shall furnish him a written notice
stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the worker's last
known address.
xxx xxx xxx
Sec. 5. Answer and hearing. –– The worker may
answer the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the
assistance of his representative if he so desires.
(emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the
notice to specify "the particular acts or omissions constituting the
ground for his dismissal", a requirement which is obviously
applicable where the ground for dismissal is the commission of
some act or omission falling within Article 282 of the Labor Code.
Again, Section 5 gives the employee the right to answer and to
defend himself against "the allegations stated against him in the
notice of dismissal". It is such allegations by the employer and any
counter-allegations that the employee may wish to make that
need to be heard before dismissal is effected. Thus, Section 5
may be seen to envisage charges against an employee
constituting one or more of the just causes for dismissal listed in
Article 282 of the Labor Code. Where, as in the instant case, the
ground for dismissal or termination of services does not relate to a
blameworthy act or omission on the part of the employee, there
appears to us no need for an investigation and hearing to be
conducted by the employer who does not, to begin with, allege
any malfeasance or non-feasance on the part of the employee. In
such case, there are no allegations which the employee should
refute and defend himself from. Thus, to require petitioner
Wiltshire to hold a hearing, at which private respondent would
have had the right to be present, on the business and financial
circumstances compelling retrenchment and resulting in
redundancy, would be to impose upon the employer an
unnecessary and inutile hearing as a condition for legality of
termination.
This is not to say that the employee may not contest the reality or
good faith character of the retrenchment or redundancy asserted
as grounds for termination of services. The appropriate forum for
such controversion would, however, be the Department of Labor
and Employment and not an investigation or hearing to be held by
the employer itself. It is precisely for this reason that an employer
seeking to terminate services of an employee or employees
because of "closure of establishment and reduction of personnel",
is legally required to give a written notice not only to the employee
but also to the Department of Labor and Employment at least one
month before effectivity date of the termination. In the instant
case, private respondent did controvert before the appropriate
labor authorities the grounds for termination of services set out in
petitioner's letter to him dated 17 June 1985.
We hold, therefore, that the NLRC's finding that private
respondent had not been accorded due process, is bereft of
factual and legal bases. The award of moral damages that rests
on such ground must accordingly fall.
While private respondent may well have suffered personal
embarrassment by reason of termination of his services, such fact
alone cannot justify the award of moral damages. Moral damages
are simply a species of damages awarded to compensate one for
injuries brought about by a wrongful act.8 As discussed above, the
termination of private respondent's services was not a wrongful
act. There is in this case no clear and convincing evidence of
record showing that the termination of private respondent's
services, while due to an authorized or statutory cause, had been
carried out in an arbitrary, capricious and malicious manner, with
evident personal ill-will. Embarrassment, even humiliation, that is
not proximately caused by a wrongful act does not constitute a
basis for an award of moral damages.
Private respondent is, of course, entitled to separation pay and
other benefits under Act 283 of the Labor Code and petitioner's
letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to
the Petition for Certiorari. The Resolutions of the National Labor
Relations Commission dated 9 February 1988 and 7 March 1988
are hereby SET ASIDE and NULLIFIED. The Temporary
Restraining Order issued by this Court on 21 March 1988 is
hereby made PERMANENT. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
G.R. No. 166703 April 14, 2008
AMA COMPUTER COLLEGE, INC., petitioner,
vs.
ELY GARCIA and MA. TERESA BALLA, respondents.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules
of Court seeks to reverse the Decision1 dated 30 August 2004 of
the Court of Appeals in CA-G.R. SP No. 81808 affirming the
Decision dated 29 May 2003 of the National Labor Relations
Commission (NLRC) in NLRC NCR 00-03-01898-00. The NLRC,
in its Decision, affirmed the Labor Arbiter's Decision dated 25
March 2002, finding that the dismissal by petitioner AMA
Computer College, Inc. (ACC) of respondents Ely Garcia (Garcia)
and Ma. Teresa Balla (Balla) was illegal and granting of
backwages and separation pay; but modified the same by deleting
the grant of 13th month pay, service incentive leave pay and cost
7
of living allowance. The Court of Appeals, in its Resolution dated
1 December 2004, denied ACC's motion for reconsideration of its
earlier Decision.
The factual antecedents of the case are as follows:
Garcia was hired as a janitress by ACC on 6 January 1988. On 15
May 1989, her employment status was changed to probationary
Library Aide. She became a regular employee on 15 February
1990.
Balla was hired as a Social Worker by ACC on 1 August 1996.
She later became a Guidance Assistant in the Guidance
Department of ACC, and on 2 June 1997, became a regular
employee.
On 21 March 2000, Anthony R. Vince Cruz, ACC Human
Resource Director, informed Garcia and Balla and 52 other
employees of the termination of their employment, thus:
This is to formally inform you that due to the prevailing
economic condition of our economy and as part of the
austerity program of the company, the top management
has decided to come up with a manpower review of the
AMA Group of Companies in order to streamline its
operation and the growth of the Organization.
In view of this, your position as Library Aide [for Ely;
Guidance Assistant, for Teresa] has (sic) been found no
longer necessary for the reason that your function can be
handled by the other existing staff.
Thus, we regret to inform you effective April 21, 2000,
your employment with AMA Group of Companies is
hereby terminated. x x x.2
Thereafter, Garcia and Balla filed a complaint with the Labor
Arbiter for illegal dismissal and prayed for the payment of
separation pay, 13th month pay, and attorney's fees, alleging that
ACC's streamlining program was tainted with bad faith as there
was no fair and reasonable criteria used therein, such as the less
preferred status, efficiency rating and authority. They asserted
that certain acts of ACC belied its claim of being adversely
affected by the prevailing economic conditions, and that the
statistics and pattern of dismissal by the college indicate a
nefarious intent to circumvent the law on the security of tenure.
ACC, in its position paper, countered that Garcia and Balla's
dismissal was due to the legitimate streamlining by the company.
On 25 March 2002, the Labor Arbiter ruled that Garcia and Balla
were illegally dismissed and ordered the payment of their
backwages and additional separation pay. The dispositive portion
of the Labor Arbiter's Decision3 reads:
Wherefore, premises all considered, judgment is hereby
rendered finding the dismissal illegal and ordering
respondent [petitioner ACC] to pay complainants [Garcia
and Balla] backwages and additional separation pay.
The Research and Computation Unit, (sic) this
Commission is hereby directed to effect the necessary
computation which shall form part of this decision.
Aggrieved by the Labor Arbiter's afore-quoted Decision, ACC
appealed to the NLRC.
On 20 May 2003, the NLRC4 affirmed the assailed Decision of the
Labor Arbiter with the modification of deleting the award of
13th month pay, service incentive leave pay and cost of living
allowance. The NLRC thus ordered:
While We are in accord with the finding that
complainants were illegally dismissed from employment,
We find the inclusion of the relief of 13th month pay,
Service Incentive Leave Pay and Cost of Living
Allowance as inappropriate.
Quite notable from the pro-forma complaint that no
prayer for payment of cost of living allowance or service
incentive leave pay was indicated therein by the
complainants (Records, p. 2). And, while they may have
indicated non-payment of the 13th month benefit as a
cause of action, nowhere in the Labor Arbiter's decision
can it be gleaned that the said relief was adjudged in
favor of the complainants. Deletion of the aforesaid
monetary award is, therefore, decreed.
WHEREFORE, premises considered, the decision under
review is hereby MODIFIED by DELETING the relief of
13th month pay, service incentive leave pay and cost of
living allowance therefrom.
In other respects, the decision, insofar as it orders the
payment to the complainants [Garcia and Balla] their
backwages and additional separation pay, shall stand
AFFIRMED.
ACC filed a Motion for Reconsideration of the foregoing but the
same was denied5 by the NLRC in a Resolution dated 30 October
2003.
ACC then appealed6 by way of Petition for Certiorari under Rule
65 of the Rules of Court to the Court of Appeals alleging that the
NLRC gravely abused its discretion amounting to lack or in
excess of jurisdiction in only partially modifying the Decision of the
Labor Arbiter and affirming the rest thereof.
On 30 August 2004, the Court of Appeals rendered a
Decision7 affirming the Decision of the NLRC. In its Decision, the
Court of Appeals ruled that inquiry in a Petition for Certiorari under
Rule 65 of the Rules of Court is limited exclusively to the issue of
whether or not respondent acted with grave abuse of discretion,
amounting to lack or in excess of jurisdiction, and does not go as
far as to evaluate the sufficiency of evidence upon which the
NLRC and the Labor Arbiter based their determination.
ACC filed a motion for reconsideration but was denied by the
Court of Appeals in a Resolution8 dated 1 December 2004.
Hence, the present Petition for Review under Rule 45 of the Rules
of Court filed by ACC raising the following errors9of the Court of
Appeals:
THE COURT OF APPEALS GRAVELY ERRED IN
DEPARTING FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL REVIEW[.]
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT SUSTAINED THE FINDING OF ILLEGAL DISMISSAL
NOTWITHSTANDING THE SUBSTANTIAL EVIDENCE
ADDUCED BY PETITIONER TO THE CONTRARY[.]
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT REFUSED TO RECOGNIZE REDUNDANCY AS A
BASIS IN TERMINATING THE SERVICES OF
RESPONDENT[S].
8
On 18 April 2005, We required10 Garcia and Balla to file their
Comment within ten days from notice, but they failed to comply
therewith despite notice.
As a consequence, we required11 Garcia and Balla to show cause
why they should not be held in contempt of court for failure to file
their desired comment. Again, they failed to comply with our show
cause order, thus, we imposed12upon them a fine of P500.00
each payable within ten days from receipt of notice.
Still failing to receive any response from Garcia and Balla, we
required13 ACC, on 2 October 2006, to inform the Court of their
current addresses.
In a Manifestation14 dated 18 January 2007, ACC stated that, as
for Garcia, it has the same address as the one being considered
by the Court; and as to Balla, all pleadings and orders in the
course of the proceedings before the NLRC and the Court of
Appeals were served to her through Garcia's address.
In a Resolution dated 28 February 2007, we noted ACC's
Manifestation but considered its compliance unsatisfactory. We
required ACC to exert more effort in locating Garcia's present
address and to inform the Court thereof within ten days from
notice.15
ACC through counsel failed to comply with our 28 February 2007
Resolution, thus, we required16 its counsel to show cause why it
should not be held in contempt for failure to submit the addresses
of Garcia and Balla despite notice.
In a Compliance17 dated 5 December 2007, ACC through counsel
apologized for its inadvertence and asked for an extension within
which to comply with the 28 February 2007 Resolution, which was
granted.18
ACC's counsel would later inform us that various ways were
employed to search for Garcia's address, such as searches
through the telephone directories, internet and personal inquiries,
but to no avail. Hence, ACC requested for another
extension,19 which was again granted.
In a Manifestation, dated 5 January 2007, ACC through counsel
stated that it already made a personal inquiry at Garcia's previous
address, but still without success.
Thus, we resolved to dispense with Garcia and Balla's comment
and submitted the case for decision based on the pleadings filed.
Even without Garcia and Balla's comment, this Court denies
ACC's Petition.
The issues for resolution are factual and Rule 45 of the Rules of
Court provides that only questions of law may be raised in a
petition for review on certiorari. The raison d'etre is that the Court
is not a trier of facts. It is not to reexamine and reevaluate the
evidence on record. Moreover, the factual findings of the NLRC,
as affirmed by the Court of Appeals, are accorded high respect
and finality unless the factual findings and conclusions of the
Labor Arbiter clash with those of the NLRC and the Court of
Appeals in which case, the Court will have to review the records
and the arguments of the parties to resolve the factual issues and
render substantial justice to the parties.20
In termination cases, the burden of proving just and valid cause
for dismissing an employee from his employment rests upon the
employer, and the latter's failure to discharge that burden would
result in a finding that the dismissal is unjustified.21
It must be stressed at the outset that ACC raised different
grounds to justify its dismissal of Garcia and Balla: before the
Labor Arbiter, it cited retrenchment; before the NLRC, it claimed
redundancy; and before the Court of Appeals, it averred both
retrenchment and redundancy.
It is apparent that ACC itself is confused as to the real reason why
it terminated Garcia and Balla's employment.
Both retrenchment and redundancy are authorized causes for the
termination of employment. According to Article 283 of the Labor
Code:
ART. 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the
employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the worker and the
Department of Labor and Employment at least one (1)
month before the intended date thereof. In case of
termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1)
whole year.
Although governed by the same provision of the Labor Code,
retrenchment and redundancy are two distinct grounds for
termination arising from different circumstances, thus, they are in
no way interchangeable.
Redundancy exists when the service capability of the workforce is
in excess of what is reasonably needed to meet the demands of
the business enterprise. A reasonably redundant position is one
rendered superfluous by any number of factors, such as
overhiring of workers, decreased volume of business, dropping of
a particular product line previously manufactured by the company
or phasing out of service activity priorly undertaken by the
business. Among the requisites of a valid redundancy program
are: (1) the good faith of the employer in abolishing the redundant
position; and (2) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and accordingly
abolished.22
The determination that the employee's services are no longer
necessary or sustainable and, therefore, properly terminable for
being redundant is an exercise of business judgment of the
employer. The wisdom or soundness of this judgment is not
subject to discretionary review of the Labor Arbiter and the NLRC,
provided there is no violation of law and no showing that it was
prompted by an arbitrary or malicious act. In other words, it is not
enough for a company to merely declare that it has become
overmanned. It must produce adequate proof of such redundancy
to justify the dismissal of the affected employees.23
In Panlilio v. National Labor Relations Commission,24 it was held
that the following evidence may be proffered to substantiate
redundancy: the new staffing pattern, feasibility studies/proposal
on the viability of the newly created positions, job description and
the approval by the management of the restructuring.
9
In the case at bar, ACC attempted to establish its streamlining
program by presenting its new table of organization. ACC also
submitted a certification25 by its Human Resources Supervisor,
Ma. Jazmin Reginaldo, that the functions and duties of many rank
and file employees, including the positions of Garcia and Balla as
Library Aide and Guidance Assistant, respectively, are now being
performed by the supervisory employees. These, however, do not
satisfy the requirement of substantial evidence that a reasonable
mind might accept as adequate to support a conclusion. 26 As they
are, they are grossly inadequate and mainly self-serving. More
compelling evidence would have been a comparison of the old
and new staffing patterns, a description of the abolished and
newly created positions, and proof of the set business targets and
failure to attain the same which necessitated the reorganization or
streamlining.
To further justify its dismissal of Garcia and Balla, ACC presented
several memoranda to prove that Garcia and Balla had been
remiss in the performance of their duties, as well as perennially
tardy and absent. Other than being self-serving, said memoranda
are irrelevant to prove redundancy of the positions held by Garcia
and Balla. Redundancy arises because there is no more need for
the employee's position in relation to the whole business
organization, and not because the employee unsatisfactorily
performed the duties and responsibilities required by his position.
Redundancy is an authorized cause for termination of
employment under Article 282 of the Labor Code; while serious
misconduct or willful disobedience or gross and habitual neglect
of duties by the employee is a just cause for dismissal under
Article 283 of the Code.
The lingering doubt as to the existence of redundancy or of ACC's
so called "streamlining program" is highlighted even more by its
non-presentation of the required notice27 to the Department of
Labor and Employment (DOLE) at least one month before the
intended dismissal.28 The notice to the DOLE would have afforded
the labor department the opportunity to look into and verify
whether there is truth as to ACC's claim that a decline in its
student population resulted in excess manpower in the college.
Compliance with the required notices would have also established
that ACC pursued its streamlining program in good faith.
In balancing the interest between labor and capital, the prudent
recourse in termination cases is to safeguard the prized security
of tenure of employees and to require employers to present the
best evidence obtainable, especially so because in most cases,
the documents or proof needed to resolve the validity of the
termination, are in the possession of employers. A contrary ruling
would encourage employers to utilize redundancy as a means of
dismissing employees when no valid grounds for termination are
shown by simply invoking a feigned or unsubstantiated
redundancy program.
Granting that ACC was able to substantiate the need for
streamlining its organization, it still failed to implement the same
using fair and reasonable criteria for choosing which employees to
dismiss. Among the accepted criteria in implementing a
redundancy are: (a) less preferred status, e.g., temporary
employee; (b) efficiency; and (c) seniority.29 There is no showing
that ACC applied any of these criteria in determining that, among
its employees, Garcia and Balla should be dismissed, thus,
making their dismissal arbitrary and illegal.
Retrenchment, on the other hand, is the termination of
employment effected by management during periods of business
recession, industrial depression, seasonal fluctuations, lack of
work or considerable reduction in the volume of the employer's
business.30 Resorted to by an employer to avoid or minimize
business losses,31 it is a management prerogative consistently
recognized by this Court.32
There are three basic requisites for a valid retrenchment to exist,
to wit: (a) the retrenchment is necessary to prevent losses and
such losses are proven; (b) written notice to the employees and to
the DOLE at least one (1) month prior to the intended date of
retrenchment; and (c) payment of separation pay equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.33
To justify retrenchment, the employer must prove serious
business losses.34 Indeed, not all business losses suffered by the
employer would justify retrenchment under Article 283 of the
Labor Code.35 The "loss" referred to in Article 283 cannot be just
any kind or amount of loss; otherwise, a company could easily
feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees.36
In a number of cases, the Court has identified the necessary
conditions for the company losses to justify retrenchment: (1) the
losses incurred are substantial and not de minimis; (2) the losses
are actual or reasonably imminent; (3) the retrenchment is
reasonably necessary and is likely to be effective in preventing
the expected losses; and (d) the alleged losses, if already
incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing
evidence.37 ACC miserably failed to prove any of the foregoing.
In the case at bar, ACC claimed that the retrenchment of Garcia
and Balla was justified due to the financial difficulties experienced
by the college that it was made effective in all of its campuses and
for all departments; and appropriate notices were given to Garcia
and Balla. But other than its bare allegations, ACC failed to
present any supporting evidence.
Not only was ACC unable to prove its losses, it also failed to
present proof that it served the necessary notice to the DOLE one
month before the purported retrenchment of Garcia and
Balla.38 As also found by the Labor Arbiter, and affirmed by the
NLRC and the Court of Appeals, ACC did not give Garcia and
Balla sufficient separation pay. Falling short of all the
requirements, ACC cannot claim that it had effected a valid
retrenchment of Garcia and Balla.
In sum, the Court finds no basis for disturbing the consistent
findings of the Labor Arbiter, the NLRC and the Court of Appeals
that ACC was not able to discharge the burden of proving that its
dismissal of Garcia and Balla was valid.
Finally, ACC argues that the Court of Appeals should not have
limited its power of review to the finding of grave abuse of
discretion allegedly committed by the NLRC, but should have
considered the substantial evidence adduced by ACC.
The contention is without merit.
The extent of judicial review by certiorari of decisions or
resolutions of the NLRC, as exercised previously by the Supreme
Court and now by the Court of Appeals, is described in Zarate, Jr.
v. Olegario,39 thus –
The rule is settled that the original and exclusive
jurisdiction of this Court to review a decision of
respondent NLRC (or Executive Labor Arbiter as in this
case) in a petition for certiorari under Rule 65 does not
normally include an inquiry into the correctness of
its evaluation of the evidence. Errors of judgment, as
distinguished from errors of jurisdiction, are not
within the province of a special civil action
for certiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion. It is thus
incumbent upon petitioner to satisfactorily establish that
10
 respondent Commission or executive labor arbiter acted
capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy,
in order that the extraordinary writ of certiorari will lie. By
grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically. For certiorari to lie,
there must be capricious, arbitrary and whimsical
exercise of power, the very antithesis of the judicial
prerogative in accordance with centuries of both civil law
and common law traditions. (Underscoring supplied.)
The Court of Appeals, therefore, can grant the petition
for certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence which is material
or decisive of the controversy.
In Garcia v. National Labor Relations Commission,40 we further
defined the scope of the Court of Appeals' power to review the
evidence when the decision of the NLRC is brought before it via a
petition for certiorari –
[I]n Ong v. People, we ruled that certiorari can be
properly resorted to where the factual findings
complained of are not supported by the evidence on
record. Earlier, in Gutib v. Court of Appeals, we
emphasized thus:
[I]t has been said that a wide breadth of
discretion is granted a court of justice in
certiorari proceedings. The cases in which
certiorari will issue cannot be defined, because
to do so would be to destroy its
comprehensiveness and usefulness. So wide is
the discretion of the court that authority is not
wanting to show that certiorari is more
discretionary than either prohibition or
mandamus. In the exercise of our
superintending control over inferior courts, we
are to be guided by all the circumstances of
each particular case "as the ends of justice may
require." So it is that the writ will be granted
where necessary to prevent a substantial
wrong or to do substantial justice.
And in another case of recent vintage, we further held:
In the review of an NLRC decision through a
special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave
abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from
reviewing factual assessments of lower courts
and agencies exercising adjudicative functions,
such as the NLRC. Occasionally, however, the
Court is constrained to delve into factual
matters where, as in the instant case,
the findings of the NLRC contradict those of
the Labor Arbiter.
In this instance, the Court in the exercise of its
equity jurisdiction may look into the records of
the case and re-examine the questioned
findings. As a corollary, this Court is clothed
with ample authority to review matters, even if
they are not assigned as errors in their appeal,
if it finds that their consideration is
necessary to arrive at a just decision of the
case. The same principles are now necessarily
adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor
cases elevated through a petition for certiorari;
thus, we see no error on its part when it made
anew a factual determination of the matters and
on that basis reversed the ruling of the NLRC.
(Underscoring supplied.)
None of the foregoing circumstances exists in this case that would
justify the Court of Appeals, in a petition for certiorari, to look into
and re-weigh the evidence on record to determine whether the
NLRC committed errors of judgment as regards thereto. Absent
exceptional circumstances, the general rule applies and the Court
of Appeals is limited only to ascertaining whether the NLRC acted
capriciously and whimsically in total disregard of evidence
material to or decisive of the controversy so as to oust the latter of
jurisdiction.
WHEREFORE, the instant Petition is hereby DENIED. The
Decision dated 30 August 2004 of the Court of Appeals in CA-
G.R. SP No. 81808 is hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes,
JJ., concur.
G.R. No. 166703 April 14, 2008
AMA COMPUTER COLLEGE, INC., petitioner,
vs.
ELY GARCIA and MA. TERESA BALLA, respondents.
DECISION
CHICO-NAZARIO, J.:
This Petition for Review on Certiorari under Rule 45 of the Rules
of Court seeks to reverse the Decision1 dated 30 August 2004 of
the Court of Appeals in CA-G.R. SP No. 81808 affirming the
Decision dated 29 May 2003 of the National Labor Relations
Commission (NLRC) in NLRC NCR 00-03-01898-00. The NLRC,
in its Decision, affirmed the Labor Arbiter's Decision dated 25
March 2002, finding that the dismissal by petitioner AMA
Computer College, Inc. (ACC) of respondents Ely Garcia (Garcia)
and Ma. Teresa Balla (Balla) was illegal and granting of
backwages and separation pay; but modified the same by deleting
the grant of 13th month pay, service incentive leave pay and cost
of living allowance. The Court of Appeals, in its Resolution dated
1 December 2004, denied ACC's motion for reconsideration of its
earlier Decision.
The factual antecedents of the case are as follows:
Garcia was hired as a janitress by ACC on 6 January 1988. On 15
May 1989, her employment status was changed to probationary
Library Aide. She became a regular employee on 15 February
1990.
Balla was hired as a Social Worker by ACC on 1 August 1996.
She later became a Guidance Assistant in the Guidance
Department of ACC, and on 2 June 1997, became a regular
employee.
On 21 March 2000, Anthony R. Vince Cruz, ACC Human
Resource Director, informed Garcia and Balla and 52 other
employees of the termination of their employment, thus:
11
 This is to formally inform you that due to the prevailing
economic condition of our economy and as part of the
austerity program of the company, the top management
has decided to come up with a manpower review of the
AMA Group of Companies in order to streamline its
operation and the growth of the Organization.
In view of this, your position as Library Aide [for Ely;
Guidance Assistant, for Teresa] has (sic) been found no
longer necessary for the reason that your function can be
handled by the other existing staff.
Thus, we regret to inform you effective April 21, 2000,
your employment with AMA Group of Companies is
hereby terminated. x x x.2
Thereafter, Garcia and Balla filed a complaint with the Labor
Arbiter for illegal dismissal and prayed for the payment of
separation pay, 13th month pay, and attorney's fees, alleging that
ACC's streamlining program was tainted with bad faith as there
was no fair and reasonable criteria used therein, such as the less
preferred status, efficiency rating and authority. They asserted
that certain acts of ACC belied its claim of being adversely
affected by the prevailing economic conditions, and that the
statistics and pattern of dismissal by the college indicate a
nefarious intent to circumvent the law on the security of tenure.
ACC, in its position paper, countered that Garcia and Balla's
dismissal was due to the legitimate streamlining by the company.
On 25 March 2002, the Labor Arbiter ruled that Garcia and Balla
were illegally dismissed and ordered the payment of their
backwages and additional separation pay. The dispositive portion
of the Labor Arbiter's Decision3 reads:
Wherefore, premises all considered, judgment is hereby
rendered finding the dismissal illegal and ordering
respondent [petitioner ACC] to pay complainants [Garcia
and Balla] backwages and additional separation pay.
The Research and Computation Unit, (sic) this
Commission is hereby directed to effect the necessary
computation which shall form part of this decision.
Aggrieved by the Labor Arbiter's afore-quoted Decision, ACC
appealed to the NLRC.
On 20 May 2003, the NLRC4 affirmed the assailed Decision of the
Labor Arbiter with the modification of deleting the award of
13th month pay, service incentive leave pay and cost of living
allowance. The NLRC thus ordered:
While We are in accord with the finding that
complainants were illegally dismissed from employment,
We find the inclusion of the relief of 13th month pay,
Service Incentive Leave Pay and Cost of Living
Allowance as inappropriate.
Quite notable from the pro-forma complaint that no
prayer for payment of cost of living allowance or service
incentive leave pay was indicated therein by the
complainants (Records, p. 2). And, while they may have
indicated non-payment of the 13th month benefit as a
cause of action, nowhere in the Labor Arbiter's decision
can it be gleaned that the said relief was adjudged in
favor of the complainants. Deletion of the aforesaid
monetary award is, therefore, decreed.
WHEREFORE, premises considered, the decision under
review is hereby MODIFIED by DELETING the relief of
13th month pay, service incentive leave pay and cost of
living allowance therefrom.
In other respects, the decision, insofar as it orders the
payment to the complainants [Garcia and Balla] their
backwages and additional separation pay, shall stand
AFFIRMED.
ACC filed a Motion for Reconsideration of the foregoing but the
same was denied5 by the NLRC in a Resolution dated 30 October
2003.
ACC then appealed6 by way of Petition for Certiorari under Rule
65 of the Rules of Court to the Court of Appeals alleging that the
NLRC gravely abused its discretion amounting to lack or in
excess of jurisdiction in only partially modifying the Decision of the
Labor Arbiter and affirming the rest thereof.
On 30 August 2004, the Court of Appeals rendered a
Decision7 affirming the Decision of the NLRC. In its Decision, the
Court of Appeals ruled that inquiry in a Petition for Certiorari under
Rule 65 of the Rules of Court is limited exclusively to the issue of
whether or not respondent acted with grave abuse of discretion,
amounting to lack or in excess of jurisdiction, and does not go as
far as to evaluate the sufficiency of evidence upon which the
NLRC and the Labor Arbiter based their determination.
ACC filed a motion for reconsideration but was denied by the
Court of Appeals in a Resolution8 dated 1 December 2004.
Hence, the present Petition for Review under Rule 45 of the Rules
of Court filed by ACC raising the following errors9of the Court of
Appeals:
THE COURT OF APPEALS GRAVELY ERRED IN
DEPARTING FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL REVIEW[.]
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT SUSTAINED THE FINDING OF ILLEGAL DISMISSAL
NOTWITHSTANDING THE SUBSTANTIAL EVIDENCE
ADDUCED BY PETITIONER TO THE CONTRARY[.]
THE COURT OF APPEALS GRAVELY ERRED WHEN
IT REFUSED TO RECOGNIZE REDUNDANCY AS A
BASIS IN TERMINATING THE SERVICES OF
RESPONDENT[S].
On 18 April 2005, We required10 Garcia and Balla to file their
Comment within ten days from notice, but they failed to comply
therewith despite notice.
As a consequence, we required11 Garcia and Balla to show cause
why they should not be held in contempt of court for failure to file
their desired comment. Again, they failed to comply with our show
cause order, thus, we imposed12upon them a fine of P500.00
each payable within ten days from receipt of notice.
Still failing to receive any response from Garcia and Balla, we
required13 ACC, on 2 October 2006, to inform the Court of their
current addresses.
In a Manifestation14 dated 18 January 2007, ACC stated that, as
for Garcia, it has the same address as the one being considered
by the Court; and as to Balla, all pleadings and orders in the
course of the proceedings before the NLRC and the Court of
Appeals were served to her through Garcia's address.
In a Resolution dated 28 February 2007, we noted ACC's
Manifestation but considered its compliance unsatisfactory. We
12
required ACC to exert more effort in locating Garcia's present
address and to inform the Court thereof within ten days from
notice.15
ACC through counsel failed to comply with our 28 February 2007
Resolution, thus, we required16 its counsel to show cause why it
should not be held in contempt for failure to submit the addresses
of Garcia and Balla despite notice.
In aCompliance17 dated 5 December 2007, ACC through counsel
apologized for its inadvertence and asked for an extension within
which to comply with the 28 February 2007 Resolution, which was
granted.18
ACC's counsel would later inform us that various ways were
employed to search for Garcia's address, such as searches
through the telephone directories, internet and personal inquiries,
but to no avail. Hence, ACC requested for another
extension,19 which was again granted.
In a Manifestation, dated 5 January 2007, ACC through counsel
stated that it already made a personal inquiry at Garcia's previous
address, but still without success.
Thus, we resolved to dispense with Garcia and Balla's comment
and submitted the case for decision based on the pleadings filed.
Even without Garcia and Balla's comment, this Court denies
ACC's Petition.
The issues for resolution are factual and Rule 45 of the Rules of
Court provides that only questions of law may be raised in a
petition for review on certiorari. The raison d'etre is that the Court
is not a trier of facts. It is not to reexamine and reevaluate the
evidence on record. Moreover, the factual findings of the NLRC,
as affirmed by the Court of Appeals, are accorded high respect
and finality unless the factual findings and conclusions of the
Labor Arbiter clash with those of the NLRC and the Court of
Appeals in which case, the Court will have to review the records
and the arguments of the parties to resolve the factual issues and
render substantial justice to the parties.20
In termination cases, the burden of proving just and valid cause
for dismissing an employee from his employment rests upon the
employer, and the latter's failure to discharge that burden would
result in a finding that the dismissal is unjustified.21
It must be stressed at the outset that ACC raised different
grounds to justify its dismissal of Garcia and Balla: before the
Labor Arbiter, it cited retrenchment; before the NLRC, it claimed
redundancy; and before the Court of Appeals, it averred both
retrenchment and redundancy.
It is apparent that ACC itself is confused as to the real reason why
it terminated Garcia and Balla's employment.
Both retrenchment and redundancy are authorized causes for the
termination of employment. According to Article 283 of the Labor
Code:
ART. 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the
employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the worker and the
Department of Labor and Employment at least one (1)
month before the intended date thereof. In case of
termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1)
whole year.
Although governed by the same provision of the Labor Code,
retrenchment and redundancy are two distinct grounds for
termination arising from different circumstances, thus, they are in
no way interchangeable.
Redundancy exists when the service capability of the workforce is
in excess of what is reasonably needed to meet the demands of
the business enterprise. A reasonably redundant position is one
rendered superfluous by any number of factors, such as
overhiring of workers, decreased volume of business, dropping of
a particular product line previously manufactured by the company
or phasing out of service activity priorly undertaken by the
business. Among the requisites of a valid redundancy program
are: (1) the good faith of the employer in abolishing the redundant
position; and (2) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and accordingly
abolished.22
The determination that the employee's services are no longer
necessary or sustainable and, therefore, properly terminable for
being redundant is an exercise of business judgment of the
employer. The wisdom or soundness of this judgment is not
subject to discretionary review of the Labor Arbiter and the NLRC,
provided there is no violation of law and no showing that it was
prompted by an arbitrary or malicious act. In other words, it is not
enough for a company to merely declare that it has become
overmanned. It must produce adequate proof of such redundancy
to justify the dismissal of the affected employees.23
In Panlilio v. National Labor Relations Commission,24 it was held
that the following evidence may be proffered to substantiate
redundancy: the new staffing pattern, feasibility studies/proposal
on the viability of the newly created positions, job description and
the approval by the management of the restructuring.
In the case at bar, ACC attempted to establish its streamlining
program by presenting its new table of organization. ACC also
submitted a certification25 by its Human Resources Supervisor,
Ma. Jazmin Reginaldo, that the functions and duties of many rank
and file employees, including the positions of Garcia and Balla as
Library Aide and Guidance Assistant, respectively, are now being
performed by the supervisory employees. These, however, do not
satisfy the requirement of substantial evidence that a reasonable
mind might accept as adequate to support a conclusion. 26 As they
are, they are grossly inadequate and mainly self-serving. More
compelling evidence would have been a comparison of the old
and new staffing patterns, a description of the abolished and
newly created positions, and proof of the set business targets and
failure to attain the same which necessitated the reorganization or
streamlining.
To further justify its dismissal of Garcia and Balla, ACC presented
several memoranda to prove that Garcia and Balla had been
remiss in the performance of their duties, as well as perennially
tardy and absent. Other than being self-serving, said memoranda
are irrelevant to prove redundancy of the positions held by Garcia
and Balla. Redundancy arises because there is no more need for
the employee's position in relation to the whole business
13
organization, and not because the employee unsatisfactorily
performed the duties and responsibilities required by his position.
Redundancy is an authorized cause for termination of
employment under Article 282 of the Labor Code; while serious
misconduct or willful disobedience or gross and habitual neglect
of duties by the employee is a just cause for dismissal under
Article 283 of the Code.
The lingering doubt as to the existence of redundancy or of ACC's
so called "streamlining program" is highlighted even more by its
non-presentation of the required notice27 to the Department of
Labor and Employment (DOLE) at least one month before the
intended dismissal.28 The notice to the DOLE would have afforded
the labor department the opportunity to look into and verify
whether there is truth as to ACC's claim that a decline in its
student population resulted in excess manpower in the college.
Compliance with the required notices would have also established
that ACC pursued its streamlining program in good faith.
In balancing the interest between labor and capital, the prudent
recourse in termination cases is to safeguard the prized security
of tenure of employees and to require employers to present the
best evidence obtainable, especially so because in most cases,
the documents or proof needed to resolve the validity of the
termination, are in the possession of employers. A contrary ruling
would encourage employers to utilize redundancy as a means of
dismissing employees when no valid grounds for termination are
shown by simply invoking a feigned or unsubstantiated
redundancy program.
Granting that ACC was able to substantiate the need for
streamlining its organization, it still failed to implement the same
using fair and reasonable criteria for choosing which employees to
dismiss. Among the accepted criteria in implementing a
redundancy are: (a) less preferred status, e.g., temporary
employee; (b) efficiency; and (c) seniority.29 There is no showing
that ACC applied any of these criteria in determining that, among
its employees, Garcia and Balla should be dismissed, thus,
making their dismissal arbitrary and illegal.
Retrenchment, on the other hand, is the termination of
employment effected by management during periods of business
recession, industrial depression, seasonal fluctuations, lack of
work or considerable reduction in the volume of the employer's
business.30 Resorted to by an employer to avoid or minimize
business losses,31 it is a management prerogative consistently
recognized by this Court.32
There are three basic requisites for a valid retrenchment to exist,
to wit: (a) the retrenchment is necessary to prevent losses and
such losses are proven; (b) written notice to the employees and to
the DOLE at least one (1) month prior to the intended date of
retrenchment; and (c) payment of separation pay equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.33
To justify retrenchment, the employer must prove serious
business losses.34 Indeed, not all business losses suffered by the
employer would justify retrenchment under Article 283 of the
Labor Code.35 The "loss" referred to in Article 283 cannot be just
any kind or amount of loss; otherwise, a company could easily
feign excuses to suit its whims and prejudices or to rid itself of
unwanted employees.36
In a number of cases, the Court has identified the necessary
conditions for the company losses to justify retrenchment: (1) the
losses incurred are substantial and not de minimis; (2) the losses
are actual or reasonably imminent; (3) the retrenchment is
reasonably necessary and is likely to be effective in preventing
the expected losses; and (d) the alleged losses, if already
incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing
evidence.37 ACC miserably failed to prove any of the foregoing.
In the case at bar, ACC claimed that the retrenchment of Garcia
and Balla was justified due to the financial difficulties experienced
by the college that it was made effective in all of its campuses and
for all departments; and appropriate notices were given to Garcia
and Balla. But other than its bare allegations, ACC failed to
present any supporting evidence.
Not only was ACC unable to prove its losses, it also failed to
present proof that it served the necessary notice to the DOLE one
month before the purported retrenchment of Garcia and
Balla.38 As also found by the Labor Arbiter, and affirmed by the
NLRC and the Court of Appeals, ACC did not give Garcia and
Balla sufficient separation pay. Falling short of all the
requirements, ACC cannot claim that it had effected a valid
retrenchment of Garcia and Balla.
In sum, the Court finds no basis for disturbing the consistent
findings of the Labor Arbiter, the NLRC and the Court of Appeals
that ACC was not able to discharge the burden of proving that its
dismissal of Garcia and Balla was valid.
Finally, ACC argues that the Court of Appeals should not have
limited its power of review to the finding of grave abuse of
discretion allegedly committed by the NLRC, but should have
considered the substantial evidence adduced by ACC.
The contention is without merit.
The extent of judicial review by certiorari of decisions or
resolutions of the NLRC, as exercised previously by the Supreme
Court and now by the Court of Appeals, is described in Zarate, Jr.
v. Olegario,39 thus –
The rule is settled that the original and exclusive
jurisdiction of this Court to review a decision of
respondent NLRC (or Executive Labor Arbiter as in this
case) in a petition for certiorari under Rule 65 does not
normally include an inquiry into the correctness of
its evaluation of the evidence. Errors of judgment, as
distinguished from errors of jurisdiction, are not
within the province of a special civil action
for certiorari, which is merely confined to issues of
jurisdiction or grave abuse of discretion. It is thus
incumbent upon petitioner to satisfactorily establish that
respondent Commission or executive labor arbiter acted
capriciously and whimsically in total disregard of
evidence material to or even decisive of the controversy,
in order that the extraordinary writ of certiorari will lie. By
grave abuse of discretion is meant such capricious and
whimsical exercise of judgment as is equivalent to lack of
jurisdiction, and it must be shown that the discretion was
exercised arbitrarily or despotically. For certiorari to lie,
there must be capricious, arbitrary and whimsical
exercise of power, the very antithesis of the judicial
prerogative in accordance with centuries of both civil law
and common law traditions. (Underscoring supplied.)
The Court of Appeals, therefore, can grant the petition
for certiorari if it finds that the NLRC, in its assailed decision or
resolution, committed grave abuse of discretion by capriciously,
whimsically, or arbitrarily disregarding evidence which is material
or decisive of the controversy.
In Garcia v. National Labor Relations Commission,40 we further
defined the scope of the Court of Appeals' power to review the
evidence when the decision of the NLRC is brought before it via a
petition for certiorari –
14
[I]n Ong v. People, we ruled that certiorari can be
properly resorted to where the factual findings
complained of are not supported by the evidence on
record. Earlier, in Gutib v. Court of Appeals, we
emphasized thus:
[I]t has been said that a wide breadth of
discretion is granted a court of justice in
certiorari proceedings. The cases in which
certiorari will issue cannot be defined, because
to do so would be to destroy its
comprehensiveness and usefulness. So wide is
the discretion of the court that authority is not
wanting to show that certiorari is more
discretionary than either prohibition or
mandamus. In the exercise of our
superintending control over inferior courts, we
are to be guided by all the circumstances of
each particular case "as the ends of justice may
require." So it is that the writ will be granted
where necessary to prevent a substantial
wrong or to do substantial justice.
And in another case of recent vintage, we further held:
In the review of an NLRC decision through a
special civil action for certiorari, resolution is
confined only to issues of jurisdiction and grave
abuse of discretion on the part of the labor
tribunal. Hence, the Court refrains from
reviewing factual assessments of lower courts
and agencies exercising adjudicative functions,
such as the NLRC. Occasionally, however, the
Court is constrained to delve into factual
matters where, as in the instant case,
the findings of the NLRC contradict those of
the Labor Arbiter.
In this instance, the Court in the exercise of its
equity jurisdiction may look into the records of
the case and re-examine the questioned
findings. As a corollary, this Court is clothed
with ample authority to review matters, even if
they are not assigned as errors in their appeal,
if it finds that their consideration is
necessary to arrive at a just decision of the
case. The same principles are now necessarily
adhered to and are applied by the Court of
Appeals in its expanded jurisdiction over labor
cases elevated through a petition for certiorari;
thus, we see no error on its part when it made
anew a factual determination of the matters and
on that basis reversed the ruling of the NLRC.
(Underscoring supplied.)
None of the foregoing circumstances exists in this case that would
justify the Court of Appeals, in a petition for certiorari, to look into
and re-weigh the evidence on record to determine whether the
NLRC committed errors of judgment as regards thereto. Absent
exceptional circumstances, the general rule applies and the Court
of Appeals is limited only to ascertaining whether the NLRC acted
capriciously and whimsically in total disregard of evidence
material to or decisive of the controversy so as to oust the latter of
jurisdiction.
WHEREFORE, the instant Petition is hereby DENIED. The
Decision dated 30 August 2004 of the Court of Appeals in CA-
G.R. SP No. 81808 is hereby AFFIRMED. Costs against
petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes,
JJ., concur.
G.R. No. 159641 October 15, 2007
CALTEX (PHILS.), INC. (now CHEVRON PHILIPPINES,
INC.),* Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND ROMEO
T. STO. TOMAS, Respondents.**
DECISION
AUSTRIA-MARTINEZ, J.:
Before us is a Petition for Review on Certiorari under Rule 45 filed
by Caltex (Philippines) Inc., now Chevron Philippines, Inc.
(petitioner) seeking to annul and set aside the Decision 1 dated
May 15, 2003, and the Resolution2dated August 21, 2003 of the
Court of Appeals (CA) in CA-G.R. SP No. 65405.
Romeo T. Sto Tomas (private respondent) was a regular
employee of petitioner since February 2, 1984. He was a Senior
Accounting Analyst receiving a monthly salary of ₱29,860.00 at
the time of his termination on July 31, 1997.
In a letter3 dated October 21, 1996, petitioner informed the
Department of Labor and Employment (DOLE) of its plan to
implement a redundancy program in its Marketing Division and
some departments in its Batangas Refinery for the period starting
October 1996 to December 1998. The letter alleged that the
redundancy program is a response to the market situation which
constrained petitioner to rationalize and simplify its business
processes; that petitioner undertook a review, restructuring and
streamlining of its organization which resulted in consolidation,
abolition and outsourcing of certain functions and in the
identification of certain redundant positions. The letter also states
that petitioner will provide the DOLE a list of affected employees
as it implements each phase of the redundancy program.
Petitioner, through a letter4 dated June 30, 1997, notified private
respondent of his termination effective July 31, 1997 due to the
redundancy of his position and awarded him a separation
package in the amount of ₱559,458.90 consisting of the following:
Regular separation/retirement benefits ₱352,721.25
under the New Retirement Plan; and
Ex-gratia payment computed at ½
month’s
basic pay for every year of service 206,737.65
TOTAL ₱559,458.905
On June 8, 1998, respondent filed with the Labor Arbiter a
complaint6 for illegal dismissal against petitioner and its President
and Chief Executive Officer, Mr. Clifton Hon. Private respondent
alleged that: being petitioner’s regular employee, he is entitled to
security of tenure; he did not commit any serious misconduct,
willful disobedience, gross and habitual neglect of duty or fraud
and willful breach of trust to warrant the penalty of dismissal from
employment; there was no independent proof or evidence
presented by petitioner to substantiate its claim of redundancy nor
was he afforded due process as he was not given any opportunity
to present his side; he was dismissed due to his active
participation in union activities; petitioner opened positions for
hiring some of which offered jobs that are the same as what
15
private respondent was performing; petitioner failed to give written
notice to him and DOLE at least one month before the intended
date of termination as required by the Labor Code.
In its position paper, petitioner and Mr. Hon averred that private
respondent’s dismissal from the service was due to redundancy of
his position which was determined after petitioner’s business
process re-engineering study and organization review, conducted
with private respondent’s knowledge; that redundancy is an
authorized cause to terminate an employee which is a
management prerogative and cannot be interfered with absent
any abuse of discretion; and that there is nothing in the law that
requires petitioner to conduct impartial investigation or hearing to
terminate an employee due to redundancy.
On March 31, 1999, the Labor Arbiter (LA) rendered a
decision7 dismissing the complaint without prejudice to the
payment of private respondent’s separation pay as required by
law or as granted by petitioner pursuant to company practice
whichever is higher.
The LA found that private respondent's dismissal from the service
on the ground of redundancy was done in good faith and a valid
exercise of management prerogative; that redundancy did not
deter the employer to hire additional workers when it is deemed
best for proper management; and that there is no need for
petitioner to conduct an impartial investigation or hearing since
private respondent’s dismissal was not related to his blameworthy
act or omission. While the LA found that petitioner failed to give
notice to DOLE one month before the intended date of private
respondent’s termination, the LA ruled that non-compliance with
the procedural requirement will not per se make the termination
illegal and held that requirement of procedural process was not
totally disregarded.
Respondent filed his appeal with the National Labor Relations
Commission (NLRC) which in a Decision8 dated January 30,
2001, reversed the decision of the LA, the dispositive portion of
which reads:
WHEREFORE, the decision of the Labor Arbiter is hereby
VACATED and SET ASIDE and judgment is hereby rendered:
1. Declaring the dismissal of complainant to be without a
just or authorized cause and, therefore, illegal.
2. Ordering respondent Caltex (Phils.) Inc. to reinstate the
complainant to his former or substantially equivalent
position, without loss of seniority rights and other
privileges and to pay complainant his full backwages
inclusive of allowance and other benefits computed from
August 1, 1997 up to his actual reinstatement. However,
should complainant’s reinstatement be no longer feasible
due to some valid reasons, respondent Caltex (Phils.)
Inc., is hereby ordered to pay complainant his separation
pay computed at one (1) month pay for every year of
service, a fraction of at least six (6) months to be
considered as one (1) whole year. The separation pay
shall be in addition to complainant’s full backwages.
All other claims of complainant are hereby DISMISSED for lack of
merit.9
In so ruling, the NLRC expounded that although Article 283 of the
Labor Code authorizes termination due to redundancy, there must
be factual basis; that the records did not disclose any evidence to
show basis for respondent’s termination; that neither did petitioner
send notice to DOLE one month prior to respondent’s dismissal.
Petitioner’s Motion for Reconsideration was denied in a
Resolution10 dated March 27, 2001.
Petitioner filed with the CA a Petition for Certiorari alleging grave
abuse of discretion committed by the NLRC in finding
respondent’s termination illegal.
In a Decision dated May 15, 2003, the CA denied the petition. The
CA ruled that there was no reason to deviate from the findings of
the NLRC since the pieces of evidence presented by petitioner
are not only insufficient but also baseless and self-serving; that
petitioner’s main argument that private respondent’s dismissal on
the ground of redundancy was only resorted to after a conduct of
thorough business process reengineering study and research is
nothing but a bare assertion; that nowhere in the records can it be
found that there was indeed a study conducted by petitioner which
culminated in the abolition and consolidation of certain positions in
the office; that neither was there any proof that petitioner truly had
a concrete redundancy program that is reflective of any financial
loss or possible and obtainable substantial profits in case the
program is implemented nor were there any named factors
considered by the petitioner in undertaking the reduction program;
that what petitioner presented was merely a copy of its letter to
the DOLE informing the latter of its intention to implement a
redundancy program and nothing more; and that petitioner failed
to apply the criteria in effecting private respondent’s dismissal due
to redundancy as there was no showing that it underwent
painstaking selection from among its employees to be dismissed.
The CA further found that petitioner failed to send DOLE a written
notice of its implementation of the redundancy program one
month prior to the intended date thereof since petitioner had
admitted such failure in its Answer to respondent’s appeal to the
NLRC.
The CA likewise found that petitioner’s belated submission to the
CA of the letter dated June 30, 1997 purportedly notifying DOLE
of the plan to implement a redundancy program is dubious
because of petitioner’s earlier admission that it did not send DOLE
a written notice of termination; that petitioner should have
submitted the evidence at the earliest opportunity; and that the
letter was self-serving since it did not bear any proof of receipt by
the DOLE.
The CA denied petitioner’s Motion for Reconsideration in a
Resolution dated August 21, 2003.
Hence, herein petition filed by petitioner on the following grounds:
THE PUBLIC RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OF OR IN EXCESS OF ITS
JURISDICTION WHEN IT ISSUED THE DECISION
DATED MAY 15, 2003 AND THE RESOLUTION DATED
AUGUST 21, 2003 AFFIRMING THE ORDERS DATED
JANUARY 30, 2001 AND MARCH 27, 2001 OF THE
RESPONDENT NLRC CONSIDERING THAT THEY
ARE NOT SUPPORTED BY SUBSTANTIAL
EVIDENCE.
THE PUBLIC RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF
JURISDICTION WHEN IT AFFIRMED THE FINDING OF
THE RESPONDENT NLRC THAT THE DISMISSAL OF
THE PRIVATE RESPONDENT WAS WITHOUT JUST
AND AUTHORIZED CAUSE.
THE PUBLIC RESPONDENT COURT OF APPEALS
COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF ITS
JURISDICTION WHEN IT AFFIRMED THE FINDING OF
THE RESPONDENT NLRC DIRECTING THE
16
 REINSTATEMENT OF THE PRIVATE RESPONDENT
AND THE PAYMENT OF HIS BACKWAGES
COMPUTED FROM AUGUST 1, 1997.11
Petitioner insists that it had already informed the DOLE Secretary
through a letter-notice dated October 21, 1996 of its plan to
implement a redundancy program which was received on October
24, 1996; that the CA ignored such earlier notice and
concentrated on its alleged failure to send notice one month prior
to private respondent’s termination; that the June 30, 1997 notice
to DOLE was belatedly submitted since it was not easily located;
that the belated submission should not be taken against
petitioner; that the subsequent notice to the DOLE was only a
follow up to the earlier notice dated October 21, 1996; and that
there was substantial compliance with the notice requirement of
the Labor Code for a valid redundancy program.
Petitioner further argues that private respondent’s termination due
to redundancy is valid considering that he consented to his
termination by accepting and benefiting from the package given
by petitioner in the total amount of ₱559,458.90; that his
separation package is equivalent to 1.39 month’s basic pay for
every year of service, way above the minimum separation pay
required by law; that if private respondent’s termination is indeed
illegal and that he should be reinstated with full backwages, he
should be ordered to pay back petitioner the benefits he received
on account of its redundancy program as he unjustly enriched
himself in the amount of ₱206,737.65 representing ex-gratia
benefit paid only to terminated employees on account of the
redundancy program.
Petitioner further claims that private respondent was not
retrenched but dismissed on account of petitioner’s redundancy
program, thus, the finding that "petitioner was not able to provide
proof that it truly had an extensive engineering study on account
of business losses arising out of massive oil deregulation" is
misplaced; that retrenchment and redundancy are two different
authorized causes terminating employment relationship and the
elements of one do not apply to the other; that its right to
terminate respondent’s employment is embodied under Article
283 of the Labor Code which required employers to give notice of
redundancy to the worker and the DOLE one month before the
intended date of actual termination; that the twin notice
requirement is the only condition precedent mandated by law
before any valid redundancy may be effected which petitioner had
duly complied with; that termination due to redundancy is a valid
exercise of management prerogative which courts ordinarily
hesitate to interfere with unless the act is marked with bad faith.
The issues for resolution are (1) whether private respondent’s
termination on the ground of redundancy was valid, and (2)
whether petitioner gave a written notice to DOLE as required
under Article 283 of the Labor Code.
Under Rule 45 of the Rules of Court, only questions of law may be
raised in this Court. However, factual issues may be considered
and resolved when the findings of facts and the conclusions of the
Labor Arbiter are inconsistent with those of the NLRC and the
CA,12 as obtaining in the present case.
The CA correctly dismissed herein petitioner’s petition
for certiorari. The NLRC did not commit grave abuse of discretion
in finding that respondent was illegally dismissed.
Private respondent was dismissed by petitioner on the ground of
redundancy, one of the authorized causes for dismissal under
Article 283 of the Labor Code, to wit:
Article 283. Closure of establishment and reduction of personnel.-
The employer may also terminate the employment of any
employee due to the installment of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or reverses, the separation pay shall be
equivalent to one (1) month pay or at least one half (1/2) month
pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year
(emphasis supplied).
In Becton Dickinson Phils., Inc. v. National Labor Relations
Commission,13 citing the leading case, Wiltshire File Co., Inc. v.
National Labor Relations Commission,14 we explained the nature
of redundancy as an authorized cause for dismissal in the
following manner:
x x x redundancy in an employer’s personnel force necessarily or
even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior
to the termination of his services, does not show that his position
had not become redundant. Indeed, in any well organized
business enterprise, it would be surprising to find duplication of
work and two (2) or more people doing the work of one person.
We believe that redundancy, for purposes of the Labor Code,
exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers,
decrease in volume of business, or dropping of a particular
product line or service activity previously manufactured or
undertaken by the enterprise.15
We are mindful of the rule that the characterization of an
employee’s services as no longer necessary or sustainable, and
therefore, properly terminable, is an exercise of business
judgment on the part of the employer, and that the wisdom or
soundness of such characterization or decision is not subject to
discretionary review. However, such characterization may be
rejected if the same is found to be in violation of law or is arbitrary
or malicious.16
We have held that the employer must comply with the following
requisites to ensure the validity of the implementation of a
redundancy program: 1) a written notice served on both the
employees and the Department of Labor and Employment
(DOLE) at least one month prior to the intended date of
retrenchment; 2) payment of separation pay equivalent to at least
one month pay or at least one month pay for every year of
service, whichever is higher; 3) good faith in abolishing the
redundant positions; and 4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and
accordingly abolished.17
In Asufrin, Jr. v. San Miguel Corporation,18 we ruled that it is not
enough for a company to merely declare that it has become
overmanned. It must produce adequate proof of such redundancy
to justify the dismissal of the affected employees.
In Panlilio v. National Labor Relations Commission,19 we held that
evidence must be presented to substantiate redundancy such as
but not limited to the new staffing pattern, feasibility
studies/proposal, on the viability of the newly created positions,
17
job description and the approval by the management of the
restructuring.
In the instant case, we find no reversible error committed by the
CA in upholding the findings of the NLRC that there was no
substantial evidence presented by petitioner to justify private
respondent's dismissal due to redundancy. As correctly found by
the CA, petitioner’s evidence to show redundancy merely
consisted of a copy of petitioner’s letter to the DOLE informing the
latter of its intention to implement a redundancy program and
nothing more. The letter which merely stated that petitioner
undertook a review, restructuring and streamlining of its
organization which resulted in consolidation, abolition and
outsourcing of certain functions; and which resulted in identified
and redundant positions instead of simplifying its business
process restructuring, does not satisfy the requirement of
substantial evidence, that is, the amount of evidence which a
reasonable mind might accept as adequate to justify a
conclusion.20
Petitioner failed to demonstrate the superfluity of private
respondent’s position as there was nothing in the records that
would establish any concrete and real factors recognized by law
and relevant jurisprudence,21 such as overhiring of workers,
decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by
the enterprise, which were adopted by petitioner in implementing
the redundancy program.
Petitioner also failed to show any fair and reasonable criteria in
ascertaining what positions are redundant and how the selection
of employees to be dismissed was made.
In Capitol Wireless, Inc. v. Confesor,22 we have held that in
selecting the employee to be dismissed, fair and reasonable
criteria must be used such as but not limited to (a) less preferred
status, e.g. temporary employee; (b) efficiency; and (c) seniority.
No such appraisal was done in the present case. The absence of
criteria in the selection of an employee to be dismissed renders
the dismissal arbitrary.
Moreover, petitioner failed to refute private respondent’s assertion
that it opened positions of accountants for hiring to which he could
have qualified rather than be dismissed. In petitioner’s
Memorandum dated May 28, 199723 and July 4, 1997,24 it
declared vacant the positions of Terminal Accountant and Internal
Auditor, respectively, the minimum requirements of which are
being accountants and having 4-5 years experience in handling
accounting and supervisory functions, among others. There is no
showing that private respondent could not perform the functions
demanded of the vacant positions considering his experience as
petitioner’s Senior Accounting Analyst for 13 years and to which
he could be transferred instead of being dismissed. We find such
hiring of accountants inconsistent with respondent’s termination
due to redundancy.
In fact, petitioner expressly stated in its Answer to private
respondent’s Appeal Memorandum filed with the NLRC that "it
may still hire additional employees so long as it is not for the
position previously declared and determined to be redundant."25
As we ruled, redundancy exists where the services of an
employee are in excess of what is reasonably demanded by the
actual requirement of the enterprise.26 It is the burden of
petitioner, as employer, to prove the factual and legal basis for the
dismissal of its employees on the ground of redundancy.27
The CA committed no reversible error when it found that petitioner
failed to discharge the burden of proving respondent’s dismissal
as valid.
There is merit in petitioner’s claim that the CA’s finding "that it
(petitioner) failed to provide proof that it truly had an extensive
reengineering study on account of business losses arising out of
massive oil deregulation" is misplaced considering that Article 283
of the Labor Code does not require that the employer should be
suffering financial losses before he can terminate the services of
the employee on the ground of redundancy.28 Nevertheless, the
CA finding on this matter does not detract from the fact that
petitioner failed to show proof of fair and reasonable criteria for
the implementation of a valid redundancy program. Thus, whether
it is retrenchment or redundancy, or any of the other authorized
causes, no employee may be dismissed without observance of
the fundamentals of fair play.29
Petitioner committed a fatal error when it failed to give a written
notice to DOLE as required under Article 283 of the Labor Code.
All three, the LA, NLRC and the CA, found the absence of notice
sent by petitioner to DOLE one month before the intended date of
private respondent’s termination. While petitioner claims that it
sent a notice to the DOLE through a letter dated June 30, 1997,
petitioner failed to show that the same was actually received by
DOLE. The purpose of the written notice to the DOLE is to give it
the opportunity to ascertain the verity of the alleged authorized
cause of termination.30
Petitioner’s insistence that its written notice of redundancy
program per its October 1996 letter addressed to DOLE is a
substantial compliance with the notice requirement, is not
persuasive since the said letter merely stated its planof
implementing a redundancy program but did not contain the
details necessary to effect the program such as the reason for
finding certain portions as redundant, the name of the employees
to be terminated and the actual date of termination. In fact,
petitioner in its October letter wrote that it would provide DOLE
with a list of affected employees as it implements each phase of
the redundancy program which it failed to do.
Petitioner’s failure to show an authorized cause for private
respondent’s termination is sufficient to declare the dismissal
illegal.
Petitioner’s claim that private respondent consented to his
termination by accepting his separation pay deserves scant
consideration. Private respondent had no other recourse but to
accept his separation pay since petitioner’s letter made it clear
that his position had been determined to be redundant and his
services shall be terminated effective July 31, 1997. As private
respondent was dismissed allegedly due to redundancy, he is
entitled to separation pay under Article 283 of the Labor Code.
And since there was no extra consideration for the private
respondent to give up his employment, such undertaking cannot
be allowed to bar the action for illegal dismissal.31
Petitioner asserts that private respondent’s reinstatement is no
longer possible since his former position was already abolished
when it was declared redundant. Notably, this matter was only
raised for the first time in petitioner’s motion for
reconsideration32 of the assailed CA decision dated May 15, 2003.
Private respondent, in his comment33to the motion, contends that
petitioner’s claim is doubtful considering that the establishment
where he is to be reinstated has not ceased operation or closed.
The CA disregarded the claim of petitioner that private
respondent’s reinstatement is no longer possible and denied the
motion for reconsideration finding no cogent reason to reconsider
its earlier decision.
The issue of whether private respondent’s reinstatement to his
former or substantially equivalent position is no longer possible, is
a factual matter which is not a proper subject of the present
18
petition for review on certiorari since we are not a trier of facts.
The parties’ conflicting claims on this matter can be best
determined by the Labor Arbiter upon the execution of the
judgment after our Decision shall have become final and
executory.
Finally, we find merit in petitioner’s claim that private respondent
should return the amount of ₱206,737.65 representing ex-gratia
benefit paid only to terminated employees on account of the
redundancy program. While we note that this matter is raised only
for the first time, we have ample authority to review and resolve it
if we find the consideration and determination of the same
essential and indispensable in order34 to arrive at a just decision
in the case. The ex-gratia benefit should be returned following the
principle against unjust enrichment which is held applicable in
labor cases.35
WHEREFORE, the petition is DENIED. The Decision dated May
15, 2003 and the Resolution dated August 21, 2003 of the Court
of Appeals in CA-G.R. SP No. 65405 are AFFIRMED. However,
in the higher interest of justice, private respondent is ordered to
return the amount of ₱206,737.65, representing the ex-gratia
benefit paid to him by petitioner.
No costs.
SO ORDERED.
G.R. No. 182475 November 21, 2012
LENN MORALES, Petitioner,
vs.
METROPOLITAN BANK AND TRUST COMPANY, Respondent.
DECISION
PEREZ, J.:
Filed pursuant to Rule 45 of the 1997 Rules on Civil Procedure,
the Petition for Review on Certiorari at bench primarily assails the
Decision1 dated 20 September 2007 rendered by the then
Nineteenth Division of the Court of Appeals (CA) in CA-G.R. SP
No. 02405,2 the dispositive portion of which states:
WHEREFORE, the petition for certiorari filed by Morales is hereby
xxx DENIED for lack of merit. Accordingly, the assailed decision
and resolution of the NLRC dated June 28, 2006 and September
15, 2006, are hereby UPHELD respectively.
SO ORDERED.3
The facts are not in dispute.
Sometime in August 1992, petitioner Lenn Morales was hired by
Solidbank as Teller for its Rizal Avenue Branch in Tacloban City.
With said bank’s merger with respondent Metropolitan Bank &
Trust Company (Metrobank ) in September 2000, the latter, as
surviving entity, absorbed Morales and assigned him to its
Customer Service Relations-Reserve Pool (CSR-RP) which was
composed of employees who, with no permanent places of
assignment, acted as relievers whenever temporary vacancies
arise in other branches. Designated as reliever for Metrobank’s
Main Branch in Tacloban City, Morales was likewise assigned to
work in the same capacity for the bank’s other Visayas Region III
branches. From a job with a grade four rank, Morales was
subsequently promoted in April 20034 to the position of Customer
Service Representative (CSR), with a job grade 6 rank and a
gross monthly salary of P16,250.00. It was while occupying the
latter position that Morales was informed by Federico Mariano ,
the Senior Manager of Metrobank’s Tacloban City Main Branch,
that he was covered by the bank’s Special Separation Program
(SSP) and that, in accordance therewith, his employment was
going to be terminated on the ground of redundancy. 5
On 27 August 2003, Morales was furnished a copy of a
memorandum of the same date informing him that, after a review
of its organizational structure, Metrobank had found his services
redundant and will consider him separated effective 1 October
2003. Assured that his termination was through no fault of his own
but mainly due to business exigencies and developments in the
banking industry, Morales was notified that he shall be paid the
following: (a) a redundancy premium/separation pay, on top of his
entitlements under the bank’s retirement plan; (b) proportionate
13th month pay; (c) cash conversion of his outstanding vacation
and sick leave credits; and, if applicable, (d) the return of his
Provident Fund contributions; and, (e) cash surrender value of his
Insurance.6 Having signed a form on the same day signifying his
unqualified and unconditional acceptance of Metrobank’s decision
to terminate his employment,7 Morales executed on 10 November
2003 a Release, Waiver and Quitclaim acknowledging receipt of
the sum of P158,496.95 as full payment of his monetary
entitlements.8
On 20 February 2004, Morales filed against Metrobank a
complaint for illegal dismissal, separation pay, backwages, moral
and exemplary damages as well as attorney’s fees.9 Together with
a similar complaint filed by one Raymundo Piczon , Morales’
complaint was docketed as NLRC RAB Case No. 2-0046-04
before the Regional Arbitration Branch No. VIII of the National
Labor Relations Commission (NLRC). In support of his complaint,
Morales alleged that, despite being an organic member of the
Rizal Avenue Branch, he was assigned to Metrobank’s Zamora
St. Branch in view of his having signed a petition against the
driver of the armored car who was eventually dismissed. With his
actions suddenly closely watched and blown out of proportion,
Morales claimed that he started receiving directives for him to
explain his unauthorized absences and out of town allowances
which, far from being infractions, were simply the results of
miscommunication. Arbitrarily singled out for termination, he was
supposedly forced to sign the Release, Waiver and Quitclaim by
Mariano who embarrassed him by announcing that his services
had already been terminated and that he was no longer required
to report for work.10
In its position paper, Metrobank averred that it had adopted the
SSP since 1995 as a way of addressing worsening economic
conditions and stiff competition with strategies designed to make
its operations efficient but cost-effective. Towards said end, it
claimed to have embarked on a major component of SSP called
the Headcount Rationalization Program (HRP) which, taking into
consideration the volume of its transactions vis-à-vis the massive
computerization and automation of its operating systems, targeted
the reduction of its existing workforce by 10% by the end of 2003.
Having created and/or consolidated branches, centralized loan
processing and adopted a branch headcount reduction scheme,
Metrobank asserted that it identified 291 positions as superfluous,
utilizing as criteria such factors as performance, work attitude and
cost. Among the areas where the HRP was conducted was
Visayas Region III which was directed to reduce the manpower of
its 13 branches spread out in three provinces by 15 employees.
Affected was its eight-man reserve pool which was composed of
former Solidbank employees who acted as relievers whenever
temporary vacancies occurred in the Region’s branches.11
Metrobank further asserted that the volume of the Region’s
transactions required only six employees in the reserve pool,
thereby rendering two positions superfluous. As a member of the
reserve pool, Morales allegedly had a record of unauthorized
absences as well as complaints for undesirable and
unprofessional conduct from various Branch Heads. In view of the
absence of redeployment opportunities for him, Metrobank
19
claimed Morales was included in the SSP and was eventually
considered for termination on the ground of redundancy. Aside
from the fact that Morales was duly informed of the management’s
decision more than one month ahead of his actual severance from
service, Metrobank claimed to have served the Department of
Labor and Employment (DOLE) the required Establishment
Termination Report on 29 August 2003. Likewise accorded the
separation benefits included in the SSP, Morales supposedly
expressed his unqualified and unconditional acceptance of his
termination and, upon receipt of his monetary entitlements,
voluntarily executed the aforesaid Release, Waiver and Quitclaim.
Claiming good faith in the implementation of its redundancy
program, Metrobank prayed for the dismissal of Morales’
complaint for lack of merit.12
On 11 November 2005, Executive Labor Arbiter Jesselito Latoja
rendered a decision finding Morales’ termination from service
illegal on the ground that his promotion in April 2003 contradicted
Metrobank’s claim that his poor work performance contributed to
his inclusion in the SSP. Brushing aside the Release, Waiver and
Quitclaim for having been prepared by Metrobank, the Labor
Arbiter ruled that Morales was entitled to reinstatement without
loss of seniority rights, backwages assessed at P390,005.00 at
the time of the rendition of the decision, 13th month pay in the
sum of P32,500.50, quarterly bonus in the sum of P130,002.00
and CBA signing bonus in the sum of P120,000.00. On the
ground that Morales’ dismissal from service was tainted with bad
faith and malice, the Labor Arbiter likewise held Metrobank liable
to pay said employee P100,000.00 in moral damages,
P100,000.00 in exemplary damages and attorney’s fees which, at
10% of the total award, was computed at P87,250.65. From the
grand total of P959,757.15 in monetary awards, the Labor Arbiter
decreed the deduction of the sum of P158,496.95 which Morales
had acknowledged to have received by way of separation
benefits.13
On appeal, the foregoing decision was reversed and set aside in
the 20 July 2006 Decision rendered by the Fourth Division of the
NLRC in NLRC Case No. V-000200-2006. Finding that Metrobank
validly implemented the HRP on a nationwide scale in connection
with the SSP, the NLRC ruled that Morales termination in
accordance therewith belied the latter’s claim that he was
arbitrarily singled out for dismissal from service. Given that the
reserve pool in Visayas Region III was overstaffed, Morales was
legitimately terminated in view of his poor work performance and
negative attitude which, at one point, gravely jeopardized the
operations of the branch to which he was temporarily assigned.
Applying the general rule that the characterization of an
employee’s services as redundant is a management prerogative
which should not be interfered with absent showing of abuse, the
NLRC also upheld the validity of the Release, Waiver and
Quitclaim on the ground that the P158,496.95 Morales received
represented a reasonable settlement of his claims. 14 Morales’
motion for reconsideration of the decision was denied for lack of
merit in the NLRC’s Resolution dated 15 September 2006.15
Aggrieved, Morales filed the Rule 65 Petition for Certiorari
docketed before the CA Cebu City Station as CA-G.R. SP No.
02405, on the ground that the NLRC gravely abused its discretion
in reversing the Labor Arbiter’s decision. Maintaining that
Metrobank’s claim of redundancy was belied by its hiring of one
Abigail Perez as replacement for his position, Morales also
argued that Metrobank did not comply with the notice requirement
for a termination of employment on the ground of
redundancy.16 On 20 September 2007, however, the CA’s
Nineteenth Division rendered the herein assailed decision,
denying the foregoing petition for lack of merit. Upholding the
validity of Morales’ termination from employment, the CA
discounted the grave abuse of discretion imputed against the
NLRC for ruling that Metrobank’s redundancy program
legitimately entailed reduction of its workforce to make it more
responsive to the actual demands and necessities of its business.
Considering that Abigail Perez was hired as a clerk on a
permanent status for the bank’s Ormoc Branch, the CA also ruled
that said employee could not be considered as Morales’
replacement. Finding that Metrobank complied with the
noticerequirement under Article 283 of the Labor Code, the CA
ultimately sustained the validity of the Release, Waiver and
Quitclaim executed by Morales.17
Dissatisfied, Morales filed the Rule 45 petition for review at
bench,18 seeking the reversal of the CA’s 20 September 2007
Decision on the following grounds:
(a)
THE COURT OF APPEALS ERRONEOUSLY UPHELD THE
DISMISSAL OF HEREIN PETITIONER ON AUTHORIZED
CAUSE OF REDUNDANCY WHICH WAS MADE KNOWN TO
PETITIONER ON THE SAME DATE HE WAS INFORMED HE
[WAS] NO LONGER REQUIRED TO REPORT FOR OFFICE
AND WITHOUT SUBJECTING OTHER SIMILARLY SITUATED
EMPLOYEES OF THE SAME POSITION AND
RESPONSIBILITIES TO THE STANDARD OF TERMINATION
ON REDUNDANCY
(b)
THE COURT OF APPEALS ERRONEOUSLY UPHELD THE
DISMISSAL OF HEREIN PETITIONER THOUGH THE
DISMISSAL IS TAINTED WITH ARBITRARINESS AND BAD
FAITH AS FOUND BY THE LABOR ARBITER AS THE HEREIN
PETITIONER WAS EVEN PROMOTED FIVE MONTHS BEFORE
HIS TERMINATION CONTRARY TO THE CRITERIA IN THE
SSP OR HRP ON NON-PROMOTION WITHIN THE PERIOD OF
FIVE YEARS
(c)
THE COURT OF APPEALS ERRONEOUSLY UPHELD THE
DISMISSAL ON AMBIVALENT AND EQUIVOCAL PROGRAMS
WHICH ON ANALYSIS ARE ACTUALLY RETRENCHMENT
PROGRAM[S] AND THE REQUISITES FOR VALID
TERMINATION BY RETRENCHMENT NOT HAVING BEEN
COMPLIED WITH
(d)
THE COURT OF APPEALS ERRONEOUSLY UPHELD THE
VALIDITY OF THE QUITCLAIM ALTHOUH IT IS APPARENT
THAT THE PETITIONER WAS COMPELLED TO ACCEDE TO IT
BY ECONOMIC REASONS.19
We find the petition bereft of merit.
One of the authorized causes for the dismissal of an
employee,20 redundancy exists when the service capability of the
workforce is in excess of what is reasonably needed to meet the
demands of the business enterprise.21 A position is redundant
when it is superfluous, and superfluity of a position or positions
could be the result of a number of factors, such as the overhiring
of workers, a decrease in the volume of business or the dropping
of a particular line or service previously manufactured or
undertaken by the enterprise.22 Time and again, it has been ruled
that an employer has no legal obligation to keep more employees
than are necessary for the operation of its business.23 For the
implementation of a redundancy program to be valid, however,
the employer must comply with the following requisites: (1) written
notice served on both the employees and the DOLE at least one
month prior to the intended date of termination of employment; (2)
payment of separation pay equivalent to at least one month pay
for every year of service; (3) good faith in abolishing the
redundant positions; and (4) fair and reasonable criteria in
20
ascertaining what positions are to be declared redundant and
accordingly abolished.24
Contrary to the first and second errors Morales imputes against
the CA, our perusal of the record shows that Metrobank has more
than amply proven compliance with the third and fourth of the
above-enumerated requisites for the validity of his termination
from service on the ground of redundancy. Under the SSP which
Metrobank adopted in 1995, employees who voluntarily gave up
their employment were paid the amount of separation pay they
were entitled under the law and a premium equivalent to 50%-
75% of their salaries. It appears that employees "whose work
evaluation showed consistent poor performance and/or those who
had not been promoted for five years" were also considered
primary candidates for optional separation from service.25 In order
to meet the challenges of the business and to make its operations
efficient and cost effective, however, it was shown that Metrobank
further conducted a bank-wide operational review and study which
resulted in the adoption in March 2003 of the HRP, a major
component of the SSP which was designed to reduce its
workforce by 10%. Entailing various initiatives like conversion of
regular branches into mini-branches, consolidation of branches,
centralization of loans processing and branch headcount
reduction, the HRP yielded 291 employees who could no longer
be redeployed, fifteen (15) of whom belonged to Visayas Region
III.26
In implementing a redundancy program, it has been ruled that the
employer is required to adopt a fair and reasonable criteria, taking
into consideration such factors as (a) preferred status; (b)
efficiency; and (c) seniority,27among others. Consistent with this
principle, Metrobank established that, as a direct result of the
adoption of the HRP, it was determined that the volume of
transactions in Visayas Region III required the further reduction of
its eight-man reserve pool by two employees.28 As these
employees had no permanent place of assignment and merely
acted as relievers whenever temporary vacancies arise in other
branches, they were the most logical candidates for inclusion in
the SSP. Already lacking preferred status in Metrobank’s
hierarchy of positions, Morales was included in the SSP because
of his poor work performance which reportedly caused complaints
from the branches where he was temporarily assigned as
reliever.29 To our mind, the foregoing circumstances contradict
Morales’ claim that he was arbitrarily singled out for termination by
Metrobank which, having validly determined the surplus in its
manpower complement, appears to have appropriately identified
him as a candidate for the SSP on account of his work attitude.
As evidence of the bad faith which supposedly attended his
termination from service, Morales argues that his promotion in
April 2003 should have excluded him from the coverage of the
SSP. Aside from the fact that his promotion rendered his position
less cost-effective, however, Morales loses sight of the fact that it
was precisely his work performance subsequent to his promotion
which was cited by Metrobank as reason for his inclusion in the
SSP. In his 19 May 2003 Memorandum, R.D. Barrientos , the
Branch Manager of Metrobank’s Baybay Branch, reported that
Morales caused delay in the processing of over-the-counter
transactions on a busy Monday when he was absent himself
without an approved leave. Since it was Morales’ third absence
while he was assigned at said branch as reliever of an employee
who was on maternity leave, Barrientos even requested for
another reliever on the ground that the risk of losing clients as a
consequence of Morales’ unpredictability which was inimical to
the bank’s interest.30 Despite being advised against being absent
from work on Mondays and Fridays in view of the expected
volume of transactions on said days,31 it appears, however, that
Morales obstinately went ahead with his planned absence and
simply apprised a colleague and the branch security guard of his
decision not to report for work on 19 May 2003.32
Given Morales’ previous record of not reporting for work for one
whole week without prior leave of absence while assigned as
reliever in its Borongan, Samar Branch,33 we find that Metrobank
cannot be faulted for including him in the list of employees
covered by the SSP. The rule is settled that "the determination
that the employee’s services are no longer necessary or
sustainable and, therefore, properly terminable for being
redundant is an exercise of business judgment of the
employer."34 "While it is true that management may not, under the
guise of invoking its prerogative, ease out employees and defeat
their constitutional right to security of tenure,"35 the wisdom and
soundness of such characterization or decision is not subject to
discretionary review unless a violation of law or arbitrary or
malicious action is shown.36 Against Morales’ bare assertion that
he was arbitrarily and maliciously terminated from service,
Metrobank was able to establish that its action was based on the
fair application of a criterion established in connection with the
implementation of a well-thought redundancy program. For these
reasons, we find that the CA cannot be faulted for upholding the
NLRC’s finding that Morales’ termination pursuant to the SSP was
valid.
Morales next insists that Metrobank failed to comply in good faith
with the notice requirement under Article 283 of the Labor Code
which allows the employer to terminate the employment of any
employee due to redundancy by serving a written notice on the
worker and the DOLE at least one (1) month before the intended
date thereof. Intended to enable the employee to prepare himself
for the legal battle to protect his tenure of employment and to find
other means of employment and ease the impact of the loss of his
job and his income,37 said notice requirement is also designed to
allow the DOLE to ascertain the verity of the cause for the
termination.38
As correctly determined by the CA, Metrobank’s compliance with
this requirement is evident from its service of the 27 August 2003
notice of termination upon Morales on the same date, effective 1
October 2003 or 30 days after the date of said notice.39 On 29
August 2003, Metrobank similarly served the DOLE with an
Establishment Termination Report, together with a list of the 43
employees about to be terminated on the ground of redundancy,
effective 1 October 2003.40
By and of themselves, the notices of termination Metrobank
served to the DOLE and Morales one month before their intended
effectivity date significantly belie the latter’s claim that he was told
not to report for work anymore immediately upon receipt thereof.
As proof of the bad faith and malice which supposedly attended
his separation from service, Morales asserted that Mariano
caused him great embarrassment by announcing that he was no
longer required to report for work, within hearing distance of his
colleagues. For one who claims to have been immediately
terminated from employment, however, Morales quite distinctly
indicated in his 18 February 2004 complaint that he was
dismissed on 30 September 2003.41 Reckoned from the service of
notice of termination upon Morales on 27 August 2003, said
admitted date of dismissal clearly confirms Metrobank’s
compliance with the above-discussed one-month prior notice that
the law requires for severance from service on the ground of
redundancy.1âwphi1
Neither are we inclined to entertain Morales’ belated argument
that the real cause for his termination was retrenchment to
prevent losses and that Metrobank failed to establish the
requirements therefor. For one, said theory contradicts Morales’
claim that he was dismissed from employment for personal
reasons, in a manner amounting to constructive dismissal. For
another, not having been raised before the Labor Arbiter, the
NLRC and the CA, it stands to reason that Morales’ theory of
termination to preserve the viability of Metrobank’s business
cannot be entertained for the first time in connection with the
petition at bench. Consistent with the principle that issues not
raised a quo cannot be raised for the first time on appeal, 42 points
21
of law, theories and arguments not brought to the attention of the
CA need not – and ordinarily will not – be considered by this
Court.43 For a reviewing court to allow otherwise would be
offensive to the basic rules of fair play, justice and due process. 44
Morales, finally, argues that the CA erred in upholding the validity
of the 10 November 2003 Release, Waiver and Quitclaim which
he supposedly signed out dire economic necessity. While "it may
be accepted as ground to annul a quitclaim if the consideration is
unconscionably low and the employee was tricked into accepting
it, dire necessity is not, however, an acceptable ground for
annulling the release when it is not shown that the employee has
been forced to execute it."45 Not having sufficiently proved that he
was forced to sign said Release, Waiver and Quitclaim, Morales
cannot expediently argue that quitclaims are looked upon with
disfavor and considered ineffective to bar claims for the full
measure of a worker’s legal rights. This Court has held that not all
quitclaims are per se invalid or against public policy, except (1)
where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or (2) where the terms of
settlement are unconscionable on their face.46 These two
instances are not present in this case.
WHEREFORE, premises considered, the petition is DENIED for
lack of merit.
SO ORDERED.
G.R. No. 117040 January 27, 2000
RUBEN SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN
DEPARTMENT STORE, respondents.
MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March
30, 1994 and August 26, 1994, of the National Labor Relations
Commission (NLRC) which reversed the decision of the Labor
Arbiter and dismissed petitioner Ruben Serrano's complaint for
illegal dismissal and denied his motion for reconsideration. The
facts are as follows:
Petitioner was hired by private respondent Isetann Department
Store as a security checker to apprehend shoplifters and prevent
pilferage of merchandise.1 Initially hired on October 4, 1984 on
contractual basis, petitioner eventually became a regular
employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private respondent.2
Sometime in 1991, as a cost-cutting measure, private respondent
decided to phase out its entire security section and engage the
services of an independent security agency. For this reason, it
wrote petitioner the following memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
In view of the retrenchment program of the
company, we hereby reiterate our verbal notice
to you of your termination as Security Section
Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a
complaint on December 3, 1991 for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of
wages, and nonpayment of salary and overtime pay.4
The parties were required to submit their position papers,
on the basis of which the Labor Arbiter defined the
issues as follows:5
Whether or not there is a valid ground for the dismissal
of the complainant.
Whether or not complainant is entitled to his monetary
claims for underpayment of wages, nonpayment of
salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor
practice.
Thereafter, the case was heard. On April 30, 1993, the Labor
Arbiter rendered a decision finding petitioner to have been illegally
dismissed. He ruled that private respondent failed to establish that
it had retrenched its security section to prevent or minimize losses
to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use
reasonable standards in selecting employees whose employment
would be terminated; that private respondent had not shown that
petitioner and other employees in the security section were so
inefficient so as to justify their replacement by a security agency,
or that "cost-saving devices [such as] secret video cameras (to
monitor and prevent shoplifting) and secret code tags on the
merchandise" could not have been employed; instead, the day
after petitioner's dismissal, private respondent employed a safety
and security supervisor with duties and functions similar to those
of petitioner.1âwphi1.nêt
Accordingly, the Labor Arbiter ordered:6
WHEREFORE, above premises considered, judgment is hereby
decreed:
(a) Finding the dismissal of the complainant to be illegal
and concomitantly, Respondent is ordered to pay
complainant full backwages without qualification or
deduction in the amount of P74,740.00 from the time of
his dismissal until reinstatement. (computed till
promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited
to (3) three years;
(b) Ordering the Respondent to immediately reinstate the
complainant to his former position as security section
head or to a reasonably equivalent supervisorial position
in charges of security without loss of seniority rights,
privileges and benefits. This order is immediately
executory even pending appeal;
22
 (c) Ordering the Respondent to pay complainant unpaid
wages in the amount of P2,020.73 and proportionate
13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the
amount of P7,995.91, representing 10% attorney's fees
based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary or
otherwise is hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution
of March 30, 1994; reversed the decision of the Labor Arbiter and
ordered petitioner to be given separation pay equivalent to one
month pay for every year of service, unpaid salary, and
proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security
section and the hiring of an independent security agency
constituted an exercise by private respondent of "[a] legitimate
business decision whose wisdom we do not intend to inquire into
and for which we cannot substitute our judgment"; that the
distinction made by the Labor Arbiter between "retrenchment" and
the employment of cost-saving devices" under Art. 283 of the
Labor Code was insignificant because the company official who
wrote the dismissal letter apparently used the term "retrenchment"
in its "plain and ordinary sense: to layoff or remove from one's job,
regardless of the reason therefor"; 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
respondent's part was of no moment because the position had
long been in existence and was separate from petitioner's position
as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY
AGENCY BY THE PRIVATE RESPONDENT TO
REPLACE ITS CURRENT SECURITY SECTION A
VALID GROUND FOR THE DISMISSAL OF THE
EMPLOYEES CLASSED UNDER THE LATTER?7
Petitioner contends that abolition of private respondent's Security
Checkers Section and the employment of an independent security
agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee
due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operations of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the, workers and the Department of
Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least one (1)
month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to at
least one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this
Court upheld the termination of employment of three mechanics in
a transportation company and their replacement by a company
rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as
part of the company's cost-saving program, the services
rendered by the mechanics became redundant and
superfluous, and therefore properly terminable. The
company merely exercised its business judgment or
management prerogative. And in the absence of any
proof that the management abused its discretion or acted
in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.9
In Asian Alcohol Corporation v. National Labor Relations
Commission,10 the Court likewise upheld the termination of
employment of water pump tenders and their replacement by
independent contractors. It ruled that an employer's good faith in
implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to
promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a
company] cannot be denied the faculty of promoting efficiency
and attaining economy by a study of what units are essential for
its operation. To it belongs the ultimate determination of whether
services should be performed by its personnel or contracted to
outside agencies . . . [While there] should be mutual consultation,
eventually deference is to be paid to what management
decides."11Consequently, absent proof that management acted in
a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer.12
In the case at bar, we have only the bare assertion of petitioner
that, in abolishing the security section, private respondent's real
purpose was to avoid payment to the security checkers of the
wage increases provided in the collective bargaining agreement
approved in 1990.13 Such an assertion is not sufficient basis for
concluding that the termination of petitioner's employment was not
a bona fide decision of management to obtain reasonable return
from its investment, which is a right guaranteed to employers
under the Constitution.14 Indeed, that the phase-out of the security
section constituted a "legitimate business decision" is a factual
finding of an administrative agency which must be accorded
respect and even finality by this Court since nothing can be found
in the record which fairly detracts from such finding.15
Accordingly, we hold that the termination of petitioner's 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.
Sanctions for Violations of the Notice Requirement
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. On the same day, his services
were terminated. He was thus denied his right to be given written
notice before the termination of his employment, and the question
is the appropriate sanction for the violation of petitioner's right.
23
To be sure, this is not the first time this question has arisen.
In Subuguero v. NLRC,16 workers in a garment factory were
temporarily laid off due to the cancellation of orders and a
garment embargo. The Labor Arbiter found that the workers had
been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand,
found that this was a case of retrenchment due to business losses
and ordered the payment of separation pay without backwages.
This Court sustained the NLRC's finding. However, as the
company did not comply with the 30-day written notice in Art. 283
of the Labor Code, the Court ordered the employer to pay the
workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving
dismissals which, although based on any of the just causes under
Art. 282,17 were effected without notice and hearing to the
employee as required by the implementing rules.18 As this Court
said: "It is now settled that where the dismissal of one employee is
in fact for a just and valid cause and is so proven to be but he is
not accorded his right to due process, i.e., he was not furnished
the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of, or for failure to observe,
due process."19
The rule reversed a long standing policy theretofore followed that
even though the dismissal is based on a just cause or the
termination of employment is for an authorized cause, the
dismissal or termination is illegal if effected without notice to the
employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.20 In announcing the change, this Court said:21
The Court holds that the policy of ordering the
reinstatement to the service of an employee without loss
of seniority and the payment of his wages during the
period of his separation until his actual reinstatement but
not exceeding three (3) years without qualification or
deduction, when it appears he was not afforded due
process, although his dismissal was found to be for just
and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment, should be re-
examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an
employee who has been shown to be guilty of the
charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the
undeserving, if not undesirable, remains in the service.
xxx xxx xxx
However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his
right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of
an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of
the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct
an investigation as required by law before dismissing
petitioner from employment. Considering the
circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The
measure of this award depends on the facts of each
case and the gravity of the omission committed by the
employer.
The fines imposed for violations of the notice requirement have
varied from P1,000.0022 to P2,000.0023 to P5,000.0024 to
P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate
sanctions for violations of the notice experience during the last
decade or so with the Wenphil doctrine. The number of cases
involving dismissals without the requisite notice to the employee,
although effected for just or authorized causes, suggest that the
imposition of fine for violation of the notice requirement has not
been effective in deterring violations of the notice requirement.
Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the
other hand, Justice Puno says there has in effect been fostered a
policy of "dismiss now; pay later" which moneyed employers find
more convenient to comply with than the requirement to serve a
30-day written notice (in the case of termination of employment for
an authorized cause under Arts. 283-284) or to give notice and
hearing (in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the
requisite notice to be null and void even though there are just or
authorized cause for such dismissal or layoff. Consequently, in
their view, the employee concerned should be reinstated and paid
backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and
Panganiban, that we should rethink the sanction of fine for an
employer's disregard of the notice requirement. We do not agree,
however, that disregard of this requirement by an employer
renders the dismissal or termination of employment null and void.
Such a stance is actually a reversion to the discredited pre-
Wenphil rule of ordering an employee to be reinstated and paid
backwages when it is shown that he has not been given notice
and hearing although his dismissal or layoff is later found to be for
a just or authorized cause. Such rule was abandoned in Wenphil
because it is really unjust to require an employer to keep in his
service one who is guilty, for example, of an attempt on the life of
the employer or the latter's family, or when the employer is
precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's
right to notice before he is dismissed or laid off, at the same time
acknowledges the right of the employer to dismiss for any of the
just causes enumerated in Art. 282 or to terminate employment
for any of the authorized causes mentioned in Arts. 283-284. If the
Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void if
there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to uphold
the right of the employee but deny the right of the employer to
dismiss for cause. Rather, 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.
For the same reason, if an employee is laid off for any of the
causes in Arts. 283-284, i.e., installation of a labor-saving device,
but the employer did not give him and the DOLE a 30-day written
notice of termination in advance, then the termination of his
employment should be considered ineffectual and he should be
paid backwages. However, the termination of his employment
should not be considered void but he should simply be paid
separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the
notice requirement constitutes a denial of the employee's right to
due process. Prescinding from this premise, he quotes the
statement of Chief Justice Concepcion Vda. de Cuaycong v. Vda.
de Sengbengco26 that "acts of Congress, as well as of the
Executive, can deny due process only under the pain of nullity,
24
and judicial proceedings suffering from the same flaw are subject
to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an
employee without notice and hearing, even if for a just cause, as
provided in Art. 282, or for an authorized cause, as provided in
Arts. 283-284, is a nullity. Hence, even if just or authorized cause
exist, the employee should be reinstated with full back pay. On
the other hand, Justice Panganiban quotes from the statement
in People v. Bocar27 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."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer,
however, to the denial of due process by the State, which is not
the case here. There are three reasons why, on the other hand,
violation by the employer of the notice requirement cannot be
considered a denial of due process resulting in the nullity of the
employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of employment
under the Labor Code. This is plain from the text of Art. III, §1 of
the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . ." The reason is simple:
Only the State has authority to take the life, liberty, or property of
the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are
considered civilized methods.
The second reason is that notice and hearing are required under
the Due Process Clause before the power of organized society
are brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the
employee is not faced with an aspect of the adversary system.
The purpose for requiring a 30-day written notice before an
employee is laid off is not to afford him an opportunity to be heard
on any charge against him, for there is none. The purpose rather
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.
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due
Process Clause of the Constitution. The time for notice and
hearing is at the trial stage. Then that is the time we speak of
notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of
the latter to question the legality of his dismissal. As Art. 277(b)
provides, "Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code
is an aspect of due process is to overlook the fact that Art. 283
had its origin in Art. 302 of the Spanish Code of Commerce of
1882 which gave either party to the employer-employee
relationship the right to terminate their relationship by giving
notice to the other one month in advance. In lieu of notice, an
employee could be laid off by paying him a mesada equivalent to
his salary for one month.28 This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But
on June 12, 1954, R.A. No. 1052, otherwise known as the
Termination Pay Law, was enacted reviving the mesada. On June
21, 1957, the law was amended by R.A. No. 1787 providing for
the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.29
The Termination Pay Law was held not to be a substantive law
but a regulatory measure, the purpose of which was to give the
employer the opportunity to find a replacement or substitute, and
the employee the equal opportunity to look for another job or
source of employment. Where the termination of employment was
for a just cause, no notice was required to be given to the,
employee.30 It was only on September 4, 1981 that notice was
required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by
the then Minister of Labor and Employment to implement B.P. Blg.
130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the
amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It
cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in
case an employee leaves his job without cause and without prior
notice to his employer, his act should be void instead of simply
making him liable for damages.
The third reason why the notice requirement under Art. 283 can
not be considered a requirement of the Due Process Clause is
that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the
lawful orders of the employer, gross and habitual neglect of
duties, fraud or willful breach of trust of the employer, commission
of crime against the employer or the latter's immediate family or
duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE
will prove that many cases have been won by employees before
the grievance committees manned by impartial judges of the
company." The grievance machinery is, however, different
because it is established by agreement of the employer and the
employees and composed of representatives from both sides.
That is why, in Batangas Laguna Tayabas Bus Co. ·v. Court of
Appeals,31 which Justice Puno cites, it was held that "Since the
right of [an employee] to his labor is in itself a property and that
the labor agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal
amounted to deprivation of his property without due process of
law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance
machinery. Accordingly in Montemayor v. Araneta University
Foundation,32 although a professor was dismissed without a
hearing by his university, his dismissal for having made
homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process.
Some are simply part of a procedure to be followed before a right
granted to a party can be exercised. Others are simply an
application of the Justinian precept, embodied in the Civil
Code,33 to act with justice, give everyone his due, and observe
honesty and good faith toward one's fellowmen. Such is the notice
requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is
to make him liable in damages, not to render his act (dismissal or
resignation, as the case may be) void. The measure of damages
is the amount of wages the employee should have received were
it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor
Code, the employer's 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. It is
25
similar to the failure to observe the provisions of Art. 1592, in
relation to Art. 1191, of the Civil Code34 in rescinding a contract for
the sale of immovable property. Under these provisions, while the
power of a party to rescind a contract is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an
action in court or giving notice of rescission by means of a notarial
demand.35 Consequently, a notice of rescission given in the letter
of an attorney has no legal effect, and the vendee can make
payment even after the due date since no valid notice of
rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause
for the termination of employment can make the dismissal of an
employee illegal. This is clear from Art. 279 which provides:
Security of Tenure. — In cases of regular employment,
the employer shall not terminate the services of an
employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissedfrom
work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement.37
Thus, only if the termination of employment is not for any of the
causes provided by law is it illegal and, therefore, the employee
should be reinstated and paid backwages. To contend, as
Justices Puno and Panganiban do, that even if the termination is
for a just or authorized cause the employee concerned should be
reinstated and paid backwages would be to amend Art. 279 by
adding another ground for considering a dismissal illegal. What is
more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for
damages.38 This disparity in legal treatment, which would result
from the adoption of the theory of the minority cannot simply be
explained by invoking resident Ramon Magsaysay's motto that
"he who has less in life should have more in law." That would be a
misapplication of this noble phrase originally from Professor
Thomas Reed Powell of the Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in
support of his view that an illegal dismissal results not only from
want of legal cause but also from the failure to observe "due
process." The Pepsi-Cola case actually involved a dismissal for
an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not
because there was a denial of due process, but because the
dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the
dismissal with illegality" was merely a dictum thrown in as
additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate
sanction for the failure to give notice is the payment of backwages
for the period when the employee is considered not to have been
effectively dismissed or his employment terminated. The sanction
is not the payment alone of nominal damages as Justice Vitug
contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior
Notice As Illegal
The refusal to look beyond the validity of the initial action taken by
the employer to terminate employment either for an authorized or
just cause can result in an injustice to the employer. For not giving
notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the
life of the employer, an employer will be forced to keep in his
employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social
economic force."40 But so does it declare that it "recognizes the
indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment." 41 The
Constitution bids the State to "afford full protection to labor."42 But
it is equally true that "the law, in protecting the right's of the
laborer, authorizes neither oppression nor self-destruction of the
employer."43And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his interest to
do so.
In sum, we hold that if in proceedings for reinstatement under Art.
283, it is shown that the termination of employment was due to an
authorized cause, then the employee concerned should not be
ordered reinstated even though there is failure to comply with the
30-day notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one month
for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six months shall be considered one (1) whole
year.
If the employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either case,
whether he is reinstated or only granted separation pay, he should
be paid full backwages if he has been laid off without written
notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art.
282, if it is shown that the employee was dismissed for any of the
just causes mentioned in said Art. 282, then, in accordance with
that article, he should not be reinstated. However, he must be
paid backwages from the time his employment was terminated
until it is determined that the termination of employment is for a
just cause because the failure to hear him before he is dismissed
renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and 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.
SO ORDERED.
26
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo,
Buena, Gonzaga-Reyes and De Leon, Jr., JJ.,concur.
Bellosillo J., Please see Separate Opinion.
Puno, J., Please see Dissenting Opinion.
Vitug, J., Please see Separate opinion.
Panganiban J., Please see Separate Opinion.
Ynares-Santiago, J., I join the dissenting opinion of J. Puno.
Separate Opinions
BELLOSILLO, J., separate opinion;
We point out at the outset that this Petition for Review which was
filed before the promulgation of St. Martin Funeral Home v.
National Labor Relations Commission,1 is not the proper means
by which NLRC decisions are appealed to this Court. Before St.
Martin Funeral Home, it was only through a Petition
for Certiorari under Rule 65 that NLRC decisions could be
reviewed and nullified by us on the ground of lack of jurisdiction or
grave abuse of discretion amounting to lack or excess of
jurisdiction. After St. Martin Funeral Home, petitions like the one
at bar are initially filed in the Court of Appeals for proper
adjudication.
In the interest of justice, however, and in order to write finis to the
instant case which has already dragged on for so long, we shall
treat the petition pro hac vice as one for certiorari under Rule 65
although it is captioned Petition for Review on Certiorari; after all,
it was filed within the reglementary period for the filing of a petition
for certiorari under Rule 65.
Briefly, on 4 April 1985 private respondent Isetann Department
Store, Inc. (ISETANN), employed petitioner Ruben Serrano as
Security Checker until his appointment as Security Section Head.
On October 1991 ISETANN through its Human Resource Division
Manager Teresita A. Villanueva sent Serrano a memorandum
terminating his employment effective immediately "in view of the
retrenchment program of the company," and directing him to
secure clearance from their office.2
Petitioner Serrano filed with the NLRC Adjudication Office a
complaint for illegal dismissal and underpayment of wages
against ISETANN. Efforts at amicable settlement proved futile.
Ms. Cristina Ramos, Personnel Administration Manager of
ISETANN, testified that the security checkers and their section
head were retrenched due to the installation of a labor saving
device, i.e., the hiring of an independent security agency.
Finding the dismissal to be illegal, the Labor Arbiter ordered the
immediate reinstatement of Serrano to his former or to an
equivalent position plus payment of back wages, unpaid wages,
13th month pay and attorney's fees.
On appeal the NLRC reversed the Labor Arbiter and ruled that
ISETANN acted within its prerogative when it phased out its
Security Section and retained the services of an independent
security agency in order to cut costs and economize. Upon denial
of his motion for reconsideration3 Serrano filed the instant petition
imputing grave abuse of discretion on the part of the NLRC.
Art. 282 of the Labor Code enumerates the just causes for the
termination of employment by the employer: (a) serious
misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection
with the employee's work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the employee
of the trust reposed in him by his employer or his duly authorized
representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and,
(e) other causes analogous to the foregoing.
On the other hand, Arts. 283 and 284 of the same Code
enumerate the so-called authorized causes: (a) installation of
labor saving devices; (b) redundancy: (b) retrenchment to prevent
losses; (d) closure or cessation of the establishment or
undertaking unless the closure or cessation is for the purpose of
circumventing the provisions of the law; and, (e) disease.
The Just causes enumerated under Art. 282 of the Labor Code
are provided by the employee who causes the infraction.
The authorized causes are provided by the employer either
because of outside factors such as the general decline in the
economy or merely part of its long range plan for business
profitability. Corollarily, in termination for a just cause, the
employee is not entitled to separation pay unlike in termination for
an authorized cause. In addition, the basis in computing the
amount of separation pay varies depending on whether the
termination is due to the installation of a labor saving device, or
redundancy, in which case, the employee is entitled to receive
separation pay equivalent to at least one (1) month pay or to at
least one (1) month pay for every year of service. In case the
termination is due to retrenchment in order to prevent losses or in
case of closure or cessation of operation of the establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay is lower, i.e., equivalent to one (1)
month pay or at least one-half month pay for every year of
service, whichever is higher. As may be gleaned from the
foregoing, where the cause of termination is for the financial
advantage or benefit of the employer, the basis in computing for
separation pay is higher compared to termination dictated by
necessity with no appreciable financial advantage to the
employer.
In the instant case, we agree with the NLRC that the dismissal of
petitioner Serrano was for an authorized cause, i.e., redundancy,
which exists where the services of an employee are in excess of
what are reasonably demanded by the actual requirements of the
enterprise. A position is redundant where it is superfluous, and the
superfluity may be the outcome of other factors such as overhiring
of workers, decreased volume of other business, or dropping of a
particular product line or service activity previously manufactured
or undertaken by the enterprise.4
The hiring of an independent security agency is a business
decision properly within the exercise of management prerogative.
As such, this Court is denied the authority to delve into its wisdom
although it is equipped with the power to determine whether the
exercise of such prerogative is in accordance with law.
Consequently, the wisdom or soundness of the management
decision is not subject to the discretionary review of the Labor
Arbiter nor of the NLRC unless there is a violation of law or
arbitrariness in the exercise thereof, in which case, this Court will
step in.5Specifically, we held in International Harvester Macleod,
Inc. v. Intermediate Appellate Court6 that the determination of
whether to maintain or phase out an entire department or section
or to reduce personnel lies with management. The determination
of the need for the phasing out of a department as a labor and
cost saving device because it is no longer economical to retain its
services is a management prerogative.
After having established that the termination of petitioner Ruben
Serrano was for an authorized cause, we now address the issue
of whether proper procedures were observed in his dismissal.
27
Since the State affords protection to labor under the
Constitution,7 workers enjoy security of tenure and may only be
removed or terminated upon valid reason and through strict
observance of proper procedure.8 Article 279 of the Labor Code
specifically provides —
Art. 279. Security of Tenure. — In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed
from the time his compensation was withheld from him
up to the time of his actual reinstatement.
Security of tenure however does not guarantee perpetual
employment. If there exists a just or an authorized cause, the
employer may terminate the services of an employee but subject
always to procedural requirements. The employer cannot be
legally compelled to have in its employ a person whose continued
employment is patently inimical to its interest. The law, while
affording protection to the employee, does not authorize the
oppression or destruction of his employer.9
Subject then to the constitutional right of workers to security of
tenure and to be protected against dismissal except for a just or
authorized cause, and without prejudice to the requirement of
notice under Art. 283 of the Labor Code, the employer shall
furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the cause of termination
and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so
desires, in accordance with company rules and regulations
promulgated pursuant to guidelines set by the DOLE.10
As specifically provided in Art. 283 of the Labor Code, the
employer may terminate the employment of any employee due to
redundancy by serving a written notice on the worker and the
DOLE at least one (1) month before the intended date thereof. In
the instant case, ISETANN clearly violated the provisions of Art.
283 on notice.11 It did not send a written notice to DOLE which is
essential because the right to terminate an employee is not an
absolute prerogative. The lack of written notice denied DOLE the
opportunity to determine the validity of the termination.
The written notice ISETANN sent to Serrano was dated 11
October 1991 or on the same day the intended termination was to
take effect. This obviously did not comply with the 30-day
mandatory requirement. Although the cause for discharge may be
just or authorized, it is still necessary and obligatory to afford the
employee concerned his basic and more important right to notice.
Serrano was not given the chance to make the needed
adjustments brought about by his termination. Significantly, the
notice is intended to enable the employee not only to prepare
himself for the legal battle to protect his tenure of employment,
which can be long, arduous, expensive and complicated by his
own standards, but also to find other means of employment and
ease the impact of the loss of his job and, necessarily, has
income.
We are of the view that failure to send notice of termination to
Serrano is not tantamount to violation of his constitutional right to
due process but merely constitutes non-compliance with the
provision on notice under Art. 283 of the Labor Code.
The legitimacy of a government is established and its functions
delineated in the Constitution. From the Constitution flows all the
powers of government in the same manner that it sets the limits
for their proper exercise. In particular, the Bill of Rights functions
primarily as a deterrent to any display of arbitrariness on the part
of the government or any of its instrumentalities. It serves as the
general safeguard, as is apparent in its first section which states,
"No person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal
protection of the laws."12 Specifically, due process is a
requirement for the validity of any governmental action amounting
to deprivation of liberty.13 It is a restraint on state action not only in
terms of what it amounts to but how it is accomplished. Its range
thus covers both the ends sough to be achieved by officialdom as
well as the means for their realization.14
Substantive due process is a weapon that may be utilized to
challenge acts of the legislative body, whether national or local,
and presumably executive orders of the President and
administrative orders and regulations of a rule-making character.
Procedural due process, on the other hand, is available for the
purpose of assailing arbitrariness or unreasonableness in the
administration of the law by executive department or the judicial
branch. Procedural due process likewise may aid those appearing
before Congressional committees if the proceedings are arbitrary
or otherwise unfair.13
Procedural due process demands that governmental acts, more
specifically so in the case of the judiciary, not be affected with
arbitrariness.16 The same disinterestedness required of men on
the bench must characterize the actuations of public officials, not
excluding the President, to satisfy the requirements of procedural
due process.17
In his dissent Mr. Justice Puno states that "the new majority
opinion limiting violations of due process to government action
alone is a throwback to a regime of law long discarded by more
progressive countries." He opines that "today, private due process
is a settled norm in administrative law," citing Schwartz, an
authority in administrative law.
We beg to disagree. A careful reading of Schwartz would reveal
that requirements of procedural due process extended from
governmental to private action only in instances where there is
"sufficient governmental involvement" or "the private action was
so saturated with governmental incidents."
The cardinal primary requirements of due process in
administrative proceedings were highlighted in Ang Tibay v. Court
of Industrial Relations:18 (a) the right to a hearing, which includes
the right to present one's case and submit evidence in support
thereof; (b) the tribunal must consider the evidence presented; (c)
the decision must have something to support itself; (d) the
evidence must be substantial; (e) the decision must be based on
the evidence presented at the hearing, or at least contained in the
record and disclosed to the parties affected; (f) the tribunal or
body or any of its judges must act on its own independent
consideration of the law and facts of the controversy, and not
simply accept the views of a subordinate; (g) the board or body
should, in all controversial questions, render its decision in such
manner that the parties to the proceeding may know the various
issues involved, and the reason for the decision rendered.
Also in Lumiqued v. Exevea19 it was held —
In administrative proceedings, the essence of due
process is simply the opportunity to explain one's side.
One may be heard, not solely by verbal presentation but
also, and perhaps even more creditably as it is more
practicable than oral arguments, through pleadings. An
actual hearing is not always an indispensable aspect of
due process. As long as a party was given the
opportunity to defend his interests in due course, he
cannot be said to have been denied due process of law,
28
 for this opportunity to be heard is the very essence of
due process.
From the foregoing, it is clear that the observance of due process
is demanded in governmental acts. Particularly in administrative
proceedings, due process starts with the tribunal or hearing officer
and not with the employer. In the instant case, what is mandated
of the employer to observe is the 30-day notice requirement.
Hence, non-observance of the notice requirement is not denial of
due process but merely a failure to comply with a legal obligation
for which we strongly recommend, we impose a disturbance
compensation as discussed hereunder.
In the instant case, we categorically declare that Serrano was not
denied his right to due process. Instead, his employer did not
comply with the 30-day notice requirement. However, while
Serrano was not given the required 30-day notice, he was
nevertheless given and, in fact, took advantage of every
opportunity to be heard, first, by the Labor Arbiter, second, by the
NLRC, and third, by no less than this Court. Before the Labor
Arbiter and the NLRC, petitioner had the opportunity to present
his side not only orally but likewise through proper pleadings and
position papers.
It is not correct therefore to say that petitioner was deprived of his
right to due process.
We have consistently upheld in the past as valid although
irregular the dismissal of an employee for a just or authorized
cause but without notice and have imposed a sanction on the
erring employers in the form of damages for their failure to comply
with the notice requirement. We discussed the rationale behind
this ruling in Wenphil Corporation v. NLRC20 thus —
The Court holds that the policy of ordering reinstatement
to the service of an employee without loss of seniority
and the payment of his wages during the period of his
separation until his actual reinstatement but not
exceeding three years without qualification or deduction,
when it appears he was not afforded due process,
although his dismissal was found to be for just and
authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment should be re-
examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an
employee who has been shown to be guilty of the
charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the
undeserving, if not undesirable, remains in the service . .
. . However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his
right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of
an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of
the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct
an investigation as required by law before dismissing
petitioner from employment. Considering the
circumstances of this case petitioner must indemnify
private respondent the amount of P1,000.00. The
measure of this award depends on the facts of each
case and the gravity of the omission committed by the
employer (emphasis supplied).
In Sebuguero v. National Labor Relations Commission21 Mr.
Justice Davide Jr., now Chief Justice, made this clear
pronouncement —
It is now settled that where the dismissal of an employee
is in fact for a just and valid cause and is so proven to be
but he is not accorded his right to due process, i.e. he
was not furnished the twin requirements of notice and
the opportunity to be heard, the dismissal shall be upheld
but the employer must be sanctioned for non-compliance
with the requirements of or for failure to observe due
process. The sanction, in the nature of indemnification or
penalty, depends on the facts of each case and the
gravity of the omission committed by the employer.
This ruling was later ably amplified by Mr. Justice Puno in Nath v.
National Labor Relations Commission22 where he wrote —
The rules require the employer to furnish the worker
sought to be dismissed with two written notices before
termination of employment can be legally effected: (1)
notice which apprises the employee of the particular acts
or omissions for which his dismissal is sought; and (2)
the subsequent notice which informs the employee of the
employer's decision to dismiss him. In the instant case,
private respondents have failed to furnish petitioner with
the first of the required two (2) notices and to state
plainly the reasons for the dismissal in the termination
letter. Failure to comply with the requirements taints the
dismissal with illegality.
Be that as it may, private respondent can dismiss
petitioner for just cause . . . . We affirm the finding of the
public respondent that there was just cause to dismiss
petitioner, a probationary employee (emphasis supplied).
Also, in Camua v. National Labor Relations Commission23 this
Court through Mr. Justice Mendoza decreed —
In the case at bar, both the Labor Arbiter and the NLRC
found that no written notice of the charges had been
given to petitioner by the respondent company. . . .
Accordingly, in accordance with the well-settled rule,
private respondents should pay petitioner P1,000.00 as
indemnity for violation of his right to due process . . . .
Although an employee validy dismissed for cause he
may nevertheless be given separation pay as a measure
of social justice provided the cause is not serious
misconduct reflecting on his moral character (emphasis
supplied).
Non-observance of this procedural requirement before would
cause the employer to be penalized by way of paying damages to
the employee the amounts of which fluctuated through the years.
Thus, for just cause the indemnity ranged from P1,000.00 to
P10,000.00.24 For authorized cause, as distinguished from just
cause, the award ranged from P2,000.00 to P5,000.00.25
This Court has also sanctioned the ruling that a dismissal for a
just or authorized cause but without observance of the mandatory
30-day notice requirement was valid although considered
irregular. The Court ratiocinated that employers should not be
compelled to keep in their employ undesirable and undeserving
laborers. For the irregularity, i.e., the failure to observe the 30-day
notice of termination, the employer was made to pay a measly
sum ranging from P1,000.00 to P10,000.00.
With regard to the indemnity or penalty, which we prefer seriously
to be referred to as "disturbance compensation," the Court has
awarded varying amounts depending on the circumstances of
each case and the gravity of the commission. We now propose
that the amount of the award be uniform and rational and not
arbitrary. The reason for the proposal or modification is that in
their non-compliance with the 30-day notice requirement the
erring employers, regardless of the peculiar circumstances of
each case, commit the infraction only by the single act of not
giving any notice to their workers. It cannot be gainfully said that
the infraction in one case is heavier than in the other as the non-
29
observance constitutes one single act. Thus, if the dismissal is
illegal, i.e. there is no just or authorized cause, a disturbance
compensation in the amount of P10,000.00 may be considered
reasonable. If the dismissal is for a just cause but without notice,
a disturbance compensation in the amount P5,000.00 may be
given. In termination for an authorized cause and the notice
requirement was not complied with, we distinguish further: If it is
to save the employer from imminent bankruptcy or business
losses, the disturbance compensation to be given is P5,000.00. If
the authorized cause was intended for the employer to earn more
profits, the amount of disturbance compensation is P10,000.00.
This disturbance compensation, again we strongly recommend,
should be given to the dismissed employee at the first instance,
the moment it is shown that his employer has committed the
infraction — of not complying with the 30-day written notice
requirement — to tide him over during his economic dislocation.
The right of the laborers to be informed of their impending
termination cannot be taken lightly, and the award of any amount
below P5,000.00 may be too anemic to satisfy the fundamental
protection especially accorded to labor and the workingman. In
fact, it is hardly enough to sustain a family of three; more so if the
employee has five or more children, which seems to be the
average size of a Filipino family.
Henceforth, if the dismissal is for a just cause but without
observance of the 30-day notice requirement, the dismissal is
deemed improper and irregular. If later the dismissal is
ascertained to be without just cause, the dismissed employee is
entitled to reinstatement, if this be feasible, otherwise to
separation pay and back wages plus disturbance compensation of
P10,000.00 and moral damages, if warranted. On the other hand,
if the dismissal is ascertained to be with just cause, the dismissed
employee is entitled nevertheless to a disturbance compensation
of P5,000.00 if the legal requirement of the 30-day notice to both
employee and DOLE has not been complied with.
In instances where there is obviously a ground for dismissal, as
when the employee has become violent and his presence would
cause more harm to his co-workers and the security and serenity
of the workplace, the employee may be suspended in the
meantime until he is heard with proper observance of the 30-day
notice requirement. Likewise, if the dismissal is for an authorized
cause but without the required notice, the dismissal is improper
and irregular and the employee should be paid separation pay,
back wages and disturbance compensation of P5,000.00 or
P10,000.00.00 depending on the cause. As already intimated, if
the authorized cause is for the purpose of saving the employer
from imminent bankruptcy or business losses, the disturbance
compensation should be P5,000.00; otherwise, if the authorized
cause is for the employer, in the exercise of management
prerogative, to save and earn more profits, the disturbance
compensation should be P10,000.00.
In the instant case, Serrano was given his walking papers only on
the very same day his termination was to take effect. DOLE was
not served any written notice. In other words, there was non-
observance of the 30-day notice requirement to both Serrano and
the DOLE. Serrano was thus terminated for an authorized cause
but was not accorded his right to 30-day notice. Thus, his
dismissal being improper and irregular, he is entitled to separation
pay and back wages the amounts of which to be determined by
the Labor Arbiter, plus P10,000.00 as disturbance compensation
which, from its very nature, must be paid immediately to cushion
the impact of his economic dislocation.
One last note. This Separate Opinion is definitely not advocating a
new concept in imposing the so-called "disturbance
compensation." Since Wenphil Corporation v. NLRC 26 this Court
has already recognized the necessity of imposing a sanction in
the form of indemnity or even damages, when proper, not
specifically provided by any law, upon employers who failed to
comply with the twin-notice requirement. At the very least, what is
being proposed to be adopted here is merely a change in the
terminology used, i.e., from "sanction," "indemnity," "damages" or
"penalty," to "disturbance compensation" as it is believed to be the
more appropriate term to accurately describe the lamentable
situation of our displaced employees.
Indeed, from the time the employee is dismissed from the service
without notice — in this case since 11 October 1991 — to the
termination of his case, assuming it results in his reinstatement, or
his being paid his back wages and separation pay, as the case
may be, how long must he be made to suffer emotionally and bear
his financial burden? Will reinstating him and/or paying his back
wages adequately make up for the entire period that he was
indistress for want of any means of livelihood? Petitioner Serrano
has been deprived of his only source of income — his
employment — for the past eight (8) years or so. Will his
reinstatement and/or the payment of his back wages and
separation pay enable him to pay off his debts incurred in abject
usury — to which he must have succumbed — during his long
period of financial distress? Will it be adequate? Will it be just?
Will it be fair? Thus, do we really and truly render justice to the
workingman by simply awarding him full back wages and
separation pay without regard for the long period during which he
was wallowing in financial difficulty?
FOR ALL THE FOREGOING, the Decision of respondent National
Labor Relations Commission should be MODIFIED. The
termination of petitioner RUBEN SERRANO being based on an
authorized cause should be SUSTAINED AS VALID although
DECLARED IRREGULAR for having been effected without the
mandatory 30-day notice.
ISETANN DEPARTMENT STORE INC. should PAY petitioner
SERRANO back wages and separation pay the amounts of which
to be determined by the Labor Arbiter, plus P10,000.00 as
disturbance compensation which must be paid immediately.
Consequently, except as regards the disturbance compensation,
the case should be REMANDED to the Labor Arbiter for the
immediate computation and payment of the back wages and
separation pay due petitioner.
EXCEPT as herein stated, I concur with the majority.
PUNO, J., dissenting opinion;
The rule of audi alteram partem — hear the other side, is the
essence of procedural due process. That a "party is not to suffer
in person or in purse without an opportunity of being heard" is the
oldest established principle in administrative law.1 Today, the
majority is relies that the all important right of an employee to be
notified before he is dismissed for a just or authorized cause is not
a requirement of due process. This is a blow on the breadbasket
of our lowly employees, a considerable erosion of their
constitutional right to security of tenure, hence this humble
dissenting opinion.
A review of our law on dismissal is in order.
I. DISMISSAL DUE TO JUST CAUSE
The law allowing dismissal of an employee due to a just cause is
provided in Article 282 of the Labor Code:
Art. 282. Termination by employer. — An employer may
terminate an employment for any of the following causes:
30
 (a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his
employer or representative in connection with
his work;
(b) Gross and habitual neglect by the employee
of his duties;
(c) Fraud or willful breach by the employee of
the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of the crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
The long established jurisprudence2 is that to justify dismissal of
an employee for a just cause, he must be given two kinds of
notice by his employer, viz: (1) notice to apprise the employee of
the particular acts or omissions for which the dismissal is sought,
and (2) subsequent notice to inform him of the employer's
decision to dismiss him. Similarly, deeply ingrained is our ruling
that these pre and post notice requirements are not mere
technicalities but are requirements of due process.3
Then came the case of Wenphil Corporation vs. NLRC and
Mallare in 1989.4 It is the majority view that Wenphil reversed the
long standing policy of this Court on dismissal. This is too broad a
reading of Wenphil. A careful statement of the facts of Wenphil
and the ruling of this Court is thus proper.
First, the facts. The private respondent Roberto Mallare is the
assistant head of the backroom department of petitioner Wenphil
Corporation. At about 2:30 pm on May 20, 1985, Mallare had an
altercation with his co-employee, Job Barrameda, about tending
the Salad Bar. He slapped Barrameda's cap, stepped on his foot,
picked up an ice scooper and brandished it against the latter. He
refused to be pacified by another employee who reported the
incident to Delilah Hermosura, assistant manager. Hermosura
summoned Mallare but the latter refused to see the former. It took
a security guard to bring Mallare to Hermosura. Instead of making
an explanation, Mallare shouted profane words against
Hermosura. He declared that their altercation should only be
settled by him and Barrameda.
The following morning, Mallare was suspended. In the afternoon,
he was dismissed from the service. He received an official notice
of his dismissal four (4) days later.
Mallare filed with the Labor Arbiter a complaint for illegal
suspension, illegal dismissal and unfair labor practice. No hearing
was conducted in view of the repeated absence of the counsel of
Mallare. The parties submitted their respective position papers.
On December 3, 1986, the Arbiter denied the complaint as he
found Mallare guilty of grave misconduct and insubordination,
which are just causes for dismissal. The Arbiter also ruled that
Mallare was not denied due process. On appeal, the NLRC
reversed. It held that Mallare was denied due process before he
was dismissed. It ordered Mallare's reinstatement and the
payment of his one (1) year backwages.
On certiorari to this Court, we reversed the NLRC and reinstated
the decision of the Arbiter with the modification that petitioner
should pay to Mallare an indemnity of P1,000.00 for dismissing
Mallare without any notice and hearing. We held:
Petitioner insists that private respondent was afforded
due process but he refused to avail of his right to the
same; that when the matter was brought to the labor
arbiter he was able to submit his position paper although
the hearing cannot proceed due to the non-appearance
of his counsel; and that the private respondent is guilty of
serious misconduct in threatening or coercing a co-
employee which is a ground for dismissal under Article
283 of the Labor Code.
The failure of petitioner to give private respondent the
benefit of a hearing before he was dismissed constitutes
an infringement of his constitutional right to due process
of law and equal protection of the laws. The standards of
due process in judicial as well as administrative
proceedings have long been established. In its bare
minimum due process of law simply means giving notice
and opportunity to be heard before judgment is rendered.
The claim of petitioner that a formal investigation was not
necessary because the incident, which gave rise to the
termination of private respondent, was witnessed by his
co-employees and supervisors, is without merit. The
basic requirement of due process is that which hears
before it condemns, which proceeds upon inquiry and
renders judgment only after trial.
However, it is a matter of fact that when the private
respondent filed a complaint against petitioner, he was
afforded the right to an investigation by the labor arbiter.
He presented his position paper as did the petitioner. If
no hearing was had, it was the fault of private
respondent as his counsel failed to appear at the
scheduled hearings. The labor arbiter concluded that the
dismissal of private respondent was for just cause. He
was found guilty of grave misconduct and
insubordination. This is borne by the sworn statements of
witnesses. The Court is bound by this finding of the labor
arbiter.
By the same token, the conclusion of the public
respondent NLRC on appeal that private respondent was
not afforded due process before he was dismissed is
binding on this Court. Indeed, it is well taken and
supported by the records. However, it can not justify a
ruling that private respondent should be reinstated with
back wages as the public respondent NLRC so decreed.
Although belatedly, private respondent was afforded due
process before the labor arbiter wherein the just cause of
his dismissal had been established. With such finding, it
would be arbitrary and unfair to order his reinstatement
with back wages.
Three member of the Court filed concurring and dissenting
opinions. Madam Justice Herrera opined that: (a) Mallare was
dismissed for cause, hence, he is not entitled to reinstatement
and backwages; (b) he was not denied due process; and (c) he
has no right to any indemnity but to separation pay to cushion the
impact of his loss of employment Mr. Justice Padilla took the view
that: (1) Mallare was not entitled to reinstatement and backwages
as he was guilty of grave misconduct and insubordination; (2) he
was denied administrative due process; and (3) for making such
denial, Wenphil should pay "separation pay (instead of indemnity)
in the sum of P1,000.00." Madam Justice Cortes held that: (1)
Mallare was not illegally dismissed; (2) he was not denied due
process; (3) he was not entitled to indemnity; and (4) if P1,000.00
was to be imposed on Wenphil as an administrative sanction, it
should form part of the public fund of the government.
I shall discuss later that Wenphil did not change our ruling that
violation of the pre-dismissal notice requirement is an
infringement of due process.
II. DISMISSAL DUE TO AUTHORIZED CAUSE
31
The applicable law on dismissal due to authorized cause is Article
283 of the Labor Code which provides:
Art. 283. Closure of establishment and reduction of
personnel. — The employer may also terminate the
employment of any employee due to the installation of
labor serving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the
[Department] of Labor and Employment at least one (1)
month before the intended date thereof. In case of
termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1)
whole year.
In Sebuguero v. NLRC,5 we held thru our esteemed Chief Justice
Davide that "the requirement of notice to both the employees
concerned and the Department of Labor and Employment (DOLE)
is mandatory and must be written and given at least one month
before the intended date of retrenchment." We explained that the
"notice to the DOLE is essential because the right to retrench is
not an absolute prerogative of an employer but is subject to the
requirement of law that retrenchment be proved to prevent losses.
The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by
fact."6 Nonetheless, we ruled:
The lack of written notice to the petitioners and to the
DOLE does not, however, make the petitioners'
retrenchment illegal such that they are entitled to the
payment of back wages and separation pay in lieu of
reinstatement as they contend. Their retrenchment, for
not having been effected with the required notices, is
merely defective. In those cases where we found the
retrenchment to be illegal and ordered the employees'
reinstatement and the payment of backwages, the
validity of the cruse for retrenchment, that is the
existence of imminent or actual serious or substantial
losses, was not proven. But here, such a cause is
present as found by both the Labor Arbiter and the
NLRC. There is only a violation by GTI of the procedure
prescribed in Article 283 of the Labor Code in effecting
the retrenchment of the petitioners.1âwphi1.nêt
It is now settled that where the dismissal of an employee is in fact
for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of or for failure to observe
due process. The sanction, in the nature of indemnification or
penalty, depends on the facts of each case and the gravity of the
omission committed by the employer and has ranged from
P1,000.00 as in the cases of Wenphil vs. National Labor Relations
Commission, Seahorse Maritime Corp. v.National Labor Relations
Commission, Shoemart, Inc. vs. National Labor Relations
Commission, Rubberworld (Phils.) Inc. vs. National Labor
Relations Commission, Pacific Mills, Inc. vs. Alonzo, and Aurelio
vs. National Labor Relations Commission to P10,000.00 in Reta
vs. National Labor Relations Commission and Alhambra
Industries, Inc. vs. National Labor Relations Commission. More
recently, in Worldwide Papermills, Inc. vs. National Labor
Relations Commission, the sum of P5,000.00 was awarded to the
employee as indemnification for the employer's failure to comply
with the requirements of procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award of
back wages, But because the required notices of the petitioners'
retrenchment were not served upon the petitioners and the DOLE,
GTI must be sanctioned for such failure and thereby required to
indemnify each of the petitioners the sum of P20,000.00 which we
find to be just and reasonable under the circumstances of this
case.
III. RE-EXAMINATION OF THE WENPHIL DOCTRINE:
FROM BAD TO WORSE
The minority of the Court has asked for a re-examination of
Wenphil because as the majority correctly observed, "the number
of cases involving dismissals without the requisite notice to the
employee although effected for just or authorized causes
suggests that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the
notice requirement."
We must immediately set Wenphil in its proper perspective as it is
a very exceptional case. Its doctrine must be limited to its distinct
facts. Its facts therefore ought to be carefully examined again. In
Wenphil, it was clearly established that the employee had a
violent temper, caused trouble during office hours and even defied
his superiors as they tried to pacify him. The employee was
working for a fast food chain that served the public and where
violence has no place. These facts were established only in the
proceedings before the Labor Arbiter after the employee filed a
complaint for illegal dismissal. There were no formal investigation
proceedings before the employer as the employment was
dismissed without any notice by the employer. Given these facts,
we ruled that the pre-dismissal notice requirement was part of due
process; nonetheless, we held that the employee was given due
process as he was heard by the Labor Arbiter; we found that the
proceedings before the Labor Arbiter proved that the employer
was guilty of grave misconduct and insubordination; we concluded
with the rule that it would be highly prejudicial to the interest of the
employer to reinstate the employee, but the employer must
indemnify the employee the amount of P1,000.00 for dismissing
him without notice. We further held that "the measure of this
award depends on the facts or each case and the gravity of the
omission committed by the employer." 7
At the outset, I wish to emphasize that Wenphil itself held, and
repeatedly held that "the failure of petitioner to give private
respondent the benefit of a hearing before he was dismissed,
constitutes an infringement of his constitutional right to due
process of law and equal protection of the laws. The standards of
due process of law in judicial as well as administrative
proceedings have long been established. In its bare minimum due
process of law simply means giving notice and opportunity to be
heard before judgment is rendered."8 The Court then satisfied
itself with this bare minimum when it held that the post dismissal
hearing before the Labor Arbiter was enough compliance with
demands of due process and refused to reinstate an eminently
undesirable employee. Heretofore, the Court was far from
satisfied with this bare minimum as it strictly imposed on an
employer compliance with the requirement of pre-dismissal notice,
violation of which resulted in orders of reinstatement of the
dismissed employee. This is the only wrinkle wrought by Wenphil
in our jurisprudence on dismissal. Nonetheless, it should be
stressed that the Court still punished Wenphil's violation of the
pre-dismissal notice requirement as it was ordered to pay an
indemnity of P1,000.00 to the employee. The indemnity was
32
based on the iterated and reiterated rule that "the dismissal of an
employee must be for just or authorized cause and after due
process."9
Our ten (10) years experience with Wenphil is not a happy one.
Unscrupulous employers have abused the Wenphil ruling. They
have dismissed without notice employees including those who are
not as eminently undesirable as the Wenphil employee. They
dismissed employees without notice as a general rule when it
should be the exception. The purpose of the pre-dismissal notice
requirement was entirely defeated by employers who were just
too willing to pay an indemnity for its violation. The result, as the
majority concedes, is that the indemnity we imposed has not been
effective to prevent unjust dismissals employees. To be sure, this
is even a supreme understatement. The ugly truth is that Wenphil
is the mother of many unjust and unauthorized dismissals of
employees who are too weak to challenge their powerful
employees.
As the Wenphil indemnity doctrine has proved to be highly
inimical to the interest of our employees, I humbly submit a return
to the pre-Wenphil rule where a reasonless violation of the pre-
dismissal notice requirement makes the dismissal of an employee
illegal and results in his reinstatement. In fine, we should strike
down as illegal the dismissal of an employee even if it is for a
justified end if it is done thru unjustified means for we cannot be
disciples of the Machiavellian doctrine of the end justifies the
means. With due respect, the majority decision comes too near
this mischievous doctrine by giving emphasis on the end and not
the means of dismissal of employees. What grates is that the
majority today espouses a doctrine more pernicious than Wenphil
for now it announces that a violation of the pre-dismissal notice
requirement does not even concern due process. The reasons
relied upon by the majority for this new ruling against the job
security of employees cannot inspire assent.
FIRST. I would like to emphasize that one undesirable effect of
Wenphil is to compel employees to seek relief against illegal
dismissals with the DOLE whereas before, a remedy can be
sought before the employer. In shifting this burden, an employee's
uneven fight against his employer has become more uneven.
Now, an illegally dismissed employee often goes to the DOLE
without an exact knowledge of the cause of his dismissal. As a
matter of strategy, some employers today dismiss employees
without notice. They know that it is more advantageous for them
to litigate with an employee who has no knowledge of the cause
of dismissal. The probability is that said employee will fail to prove
the illegality of his dismissal. All that he can prove is that he was
dismissed without notice and the penalty for the omission is a Ms. Ramos:
mere fine, a pittance.
Yes Sir.
The case at bar demonstrates how disastrous Wenphil has been
to our helpless employees. In holding that the petitioner failed to Q: And instead hired the services of a security agency?
prove his cause of action, the majority held ". . . we have only the
bare assertion of petitioner that, in abolishing the security section,
private respondent's real purpose was to avoid payment to the A: Yes, sir.
security checkers of the wage increases provided in the collective
bargaining agreement approved in 1990." The bare assertion of xxx xxx xxx
the petitioner is understandable. The notice given to him spoke of
a general ground — retrenchment. No details were given about Q: Did you not retrench the position of security
the employer's sudden retrenchment program. Indeed, the checkers?
employee was dismissed on the day he received the notice in
violation of the 30-day requirement. He was given no time, no
opportunity to ascertain and verify the real cause of his dismissal. A: We installed a labor saving device.
Thus, he filed with the DOLE a complaint for illegal dismissal with
a hazy knowledge of its real cause. Heretofore, it is the employer Q: So you did not retrench?
whom we blame and penalize if he does not notify his employee
of the cause of his dismissal. Today, the majority puts the blame
A: No. sir.
on the employee for not knowing why he was dismissed when he
was not given any notice of dismissal. In truth, the suspicion of the
petitioner in the case at bar that he was dismissed to avoid Q: How about the position of Section Head of Security
payment of their wage increases is not without basis. The DOLE Department?
itself found that petitioner has unpaid wages which were ordered
to be paid by the employer. The majority itself affirmed this A: It was abolished in 1991.
finding.
xxx xxx xxx
What hurts is that while the majority was strict with the petitioner-
employee, it was not so with the employer ISETANN.
Q: Are you aware of the retrenchment program of the
Immediately, it validated the finding of the NLRC that petitioner
company as stated in this letter?
was dismissed due to the redundancy of his position. This is
inconsistent with the finding of the Labor Arbiter that the employer
failed to prove retrenchment, the ground it used to dismiss the A: Actually it's not a retrenchment program. It's an
petitioner. A perusal of the records will show that Ms. Cristina installation of a labor saving device.
Ramos, Personnel Administration Manager of the employer
ISETANN testified on the cause of dismissal of the petitioner. She Q: So you are telling this Court now that there was no
declared that petitioner was retrenched due to the installation of a retrenchment program?
labor saving device. Allegedly, the labor saving device was the
hiring of an independent security agency, thus:10
A: It was actually an installation of a labor saving
device (emphasis supplied).
xxx xxx xxx
xxx xxx xxx
Atty. Perdigon:
Q: . . . What (is) this labor saving device that you are
You said that your company decided to phase out the referring to?
position of security checkers . . .
33
 A: The labor saving device is that the services of a
security agency were contracted to handle the services
of the security checkers of our company.
Q: Are you sure of what labor saving means, Madam
witness?
A: Yes, sir.
Q: You said you installed a labor saving device, and you
installed a security agency as a labor saving device?
A: We hired the services of a security agency.
Q: So according to you . . . a security agency is a labor
saving device?
Atty. Salonga:
Already answered, your Honor.
Obviously, Ms. Ramos could not even distinguish between
retrenchment and redundancy. The Labor Arbiter thus ruled that
petitioner's dismissal was illegal. The NLRC, however, reversed.
The majority affirmed the NLRC ruling that ISETANN's phase out
of its security employees is a legitimate business decision, one
that is necessary to obtain reasonable return from its investment.
To use the phrase of the majority, this is a "bare assertion."
Nothing in the majority decision shows how the return of
ISETANN's investment has been threatened to justify its so-called
business decision as legitimate.
SECOND. The majority holds that "the need is for a rule which,
while recognizing the employee's right to notice before he is
dismissed or laid off, at the same time acknowledges the right of
the employer to dismiss for any of the just causes enumerated in
Art. 282 or to terminate employment for any of the authorized
causes mentioned in Arts. 283-284. If the Wenphil rule imposing a
fine on an employer who is found to have dismissed an employee
for cause without prior notice is deemed ineffective in deterring
employer violations of the notice requirement, the remedy is not to
declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause.
That would be to uphold the right of the employee but deny the
right of the employer to dismiss for cause. Rather, the remedy is
to consider the dismissal or termination to be simply ineffectual for
failure of the employer to comply with the procedure for dismissal
or termination.
With due respect, I find it most difficult to follow the logic of the
majority. Before Wenphil, we protected employees with the ruling
that dismissals without prior notice are illegal and the illegally
dismissed employee must be reinstated with backwages. Wenphil
diluted that rule when it held that due process is satisfied if the
employee is given the opportunity to be heard by the Labor
Arbiter. It further held that an employee cannot be reinstated if it is
established in the hearing that his dismissal is for a just cause.
The failure of the employer to give a pre-dismissal notice is only to
be penalized by payment of an indemnity. The dilution of the rule
has been abused by unscrupulous employers who then followed
the "dismiss now, pay later" strategy. This evil practice of
employers was what I expected the majority to address in re-
examining the Wenphil doctrine. At the very least, I thought that
the majority would restore the balance of rights between an
employee and an employer by giving back the employee's
mandatory right to notice before dismissal. It is disquieting,
however, that the majority re-arranged this balance of right by
tilting it more in favor of the employer's right to dismiss. Thus,
instead of weakening a bit the right to dismiss of employers, the
majority further strengthens it by insisting that a dismissal without
prior notice is merely "ineffectual" and not illegal.
The stubborn refusal of the majority to appreciate the importance
of pre-dismissal notice is difficult to understand. It is the linchpin of
an employee's right against an illegal dismissal. The notice tells
him the cause of his dismissal. It gives him a better chance to
contest his dismissal in an appropriate proceeding as laid down in
the parties' collective bargaining agreement or the rules of
employment established by the employer, as the case may be. In
addition, it gives to both the employee and employer more cooling
time to settle their differences amicably. In fine, the prior notice
requirement and the hearing before the employer give an
employee a distinct, different and effective first level of remedy to
protect his job. In the event the employee is dismissed, he can still
file a complaint with the DOLE with better knowledge of the cause
of his dismissal, with longer time to prepare his case, and with
greater opportunity to take care of the financial needs of his
family pendente lite. The majority has taken away from employees
this effective remedy. This is not to say that the pre-dismissal
notice requirement equalizes the fight between an employee and
an employer for the fight will remain unequal. This notice
requirement merely gives an employee a fighting chance but that
fighting chance is now gone.
It is equally puzzling why the majority believes that restoring the
employee's right to pre-dismissal notice will negate the right of an
employer to dismiss for cause. The pre-Wenphil rule simply
requires that before the right of the employer to dismiss can be
exercised, he must give prior notice to the employee of its cause.
There is nothing strange nor difficult about this requirement. It is
no burden to an employer. He is bereft of reason not to give the
simple notice. If he fails to give notice, he can only curse himself.
He forfeits his right to dismiss by failing to follow the procedure for
the exercise of his right. Employees in the public sector cannot be
dismissed without prior notice. Equal protection of law demands
similar treatment of employees in the private sector.
THIRD. The case at bar specifically involves Article 283 of the
Labor Code which lays down four (4) authorized causes for
termination of employment.11 These authorized causes are: (1)
installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the law. It also provides that prior
to the dismissal of an employee for an authorized cause, the
employer must send two written notices at least one month before
the intended dismissal — one notice to the employee and another
notice to the Department of Labor and Employment (DOLE). We
have ruled that the right to dismiss on authorized causes is not an
absolute prerogative of an employer.12 We explained that the
notice to the DOLE is necessary to enable it to ascertain the truth
of the cause of termination.13 The DOLE is equipped with men and
machines to determine whether the planned closure or cessation
of business or retrenchment or redundancy or installation of labor
saving device is justified by economic facts.14 For this reason too,
we have held that notice to the employee is required to enable
him to contest the factual bases of the management decision or
good faith of the retrenchment or redundancy before the
DOLE.15 In addition, this notice requirement gives an employee a
little time to adjust to his joblessness.16
The majority insists that if an employee is laid off for an authorized
cause under Article 283 in violation of the prior notice
requirement, his dismissal should not be considered void but only
ineffectual. He shall not be reinstated but paid separation pay and
some backwages. I respectfully submit that an employee under
Article 283 has a stronger claim to the right to a pre-dismissal
notice and hearing. To begin with, he is an innocent party for he
has not violated any term or condition of his employment.
Moreover, an employee in an Article 283 situation may lose his
job simply because of his employer's desire for more profit. Thus,
the installation of a labor saving device is an authorized cause to
34
terminate employment even if its non-installation need not
necessarily result in an over-all loss to an employer possessed by
his possessions. In an Article 283 situation, it is easy to see that
there is a greater need to scrutinize the allegations of the
employer that he is dismissing an employee for an authorized
cause. The acts involved here are unilateral acts of the employer.
Their nature requires that they should be proved by the employer
himself. The need for a labor saving device, the reason for
redundancy, the cause for retrenchment, the necessity for closing
or cessation of business are all within the knowledge of the
employer and the employer alone. They involve a constellation of
economic facts and factors usually beyond the ken of knowledge
of an ordinary employee. Thus, the burden should be on the
employer to establish and justify these authorized causes. Due to
their complexity, the law correctly directs that notice should be
given to the DOLE for it is the DOLE more than the lowly
employee that has the expertise to validate the alleged cause in
an appropriate hearing. In fine, the DOLE provides the equalizer
to the powers of the employer in an Article 283 situation. Without
the equalizing influence of DOLE, the employee can be abused by
his employer.
Further, I venture the view that the employee's right to security of
tenure guaranteed in our Constitution calls for a pre-dismissal
notice and hearing rather than a post facto dismissal hearing. The
need for an employee to be heard before he can be dismissed
cannot be overemphasized. As aforestated, in the case at bar,
petitioner was a regular employee of ISETANN. He had the right
to continue with his employment. The burden to establish that this
right has ceased is with ISETANN, as petitioner's employer. In
fine, ISETANN must be the one to first show that the alleged
authorized cause for dismissing petitioner is real. And on this
factual issue, petitioner must be heard. Before the validity of the
alleged authorized cause is established by ISETANN, the
petitioner cannot be separated from employment. This is the
simple meaning of security of tenure. With due respect, the
majority opinion will reduce this right of our employees to a mere
illusion. It will allow the employer to dismiss an employee for a
cause that is yet to be established. It tells the employee that if he
wants to be heard, he can file a case with the labor arbiter, then
the NLRC, and then this Court. Thus, it unreasonably shifts the
burden to the employee to prove that his dismissal is for an
unauthorized cause.
The pernicious effects of the majority stance are self-evident in
the case at bar. For one, petitioner found himself immediately
jobless and without means to support his family. For another,
petitioner was denied the right to rely on the power of DOLE to
inquire whether his dismissal was for a genuine authorized cause.
This is a valuable right for all too often, a lowly employee can only
rely on DOLE's vast powers to check employer abuses on illegal
dismissals. Without DOLE, poor employees are preys to the claws
of powerful employers. Last but not the least, it was the petitioner
who was forced to file a complaint for illegal dismissal. To a
jobless employee, filing a complaint is an unbearable burden due
to its economic cost. He has to hire a lawyer and defray the other
expenses of litigation while already in a state of penury. At this
point, the hapless employee is in a no win position to fight for his
right. To use a local adage, "aanhin pa ang damo kung patay na
ang kabayo."
In the case at bar, the job of the petitioner could have been saved
if DOLE was given notice of his dismissal. The records show that
petitioner worked in ISETANN as security checker for six (6)
years. He served ISETANN faithfully and well. Nonetheless, in a
desire for more profits, and not because of losses, ISETANN
contracted out the security work of the company. There was no
effort whatsoever on the part of ISETANN to accommodate
petitioner in an equivalent position. Yet there was the position of
Safety and Security Supervisor where petitioner fitted like a
perfect T. Despite petitioner's long and loyal service, he was
treated like an outsider, made to apply for the job, and given a
stringent examination which he failed. Petitioner was booted out
and given no chance to contest his dismissal. Neither was the
DOLE given the chance to check whether the dismissal of
petitioner was really for an authorized cause. All these because
ISETANN did not follow the notice and hearing requirement of due
process.
FOURTH. The majority has inflicted a most serious cut on the job
security of employees. The majority did nothing to restore the pre-
Wenphil right of employees but even expanded the right to
dismiss of employer by holding that the pre-dismissal notice
requirement is not even a function of due process. This seismic
shift in our jurisprudence ought not to pass.
The key to the new majority ruling is that the "due process clause
of the Constitution is a limitation on governmental powers. It does
not apply to the exercise of private power such as the termination
of employment under the Labor Code." The main reason alleged
is that "only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause
is to ensure that the exercise of this power is consistent with
settled usage of civilized society."
There can be no room for disagreement on the proposition that
the due process clause found in the Bill of Rights of the
Constitution is a limitation on governmental powers. Nor can there
be any debate that acts of government violative of due process
are null and void. Thus, former Chief Justice Roberto Concepcion
emphasized in Cuaycong v. Senbengco 17 that ". . . acts of
Congress as well as those of the Executive, can deny due
process only under pain of nullity, and judicial proceedings
suffering from the same flaw are subject to the same sanction,
any statutory provision to the contrary notwithstanding." With due
respect to the majority, however, I part ways with the majority in
its new ruling that the due process requirement does not apply to
the exercise of private power. This overly restrictive majority
opinion will sap the due process right of employees of its
remaining utility. Indeed, the new majority opinion limiting
violations of due process to government action alone is a
throwback to a regime of law long discarded by more progressive
countries. Today, private due process is a settled norm in
administrative law. Per Schwartz, a known authority in the
field, viz:18
Private Due Process
As already stressed, procedural due process has proved
of an increasingly encroaching nature. Since Goldberg
v. Kelly, the right to be heard has been extended to an
ever-widening area, covering virtually all aspects of
agency action, including those previously excluded under
the privilege concept. The expansion of due process has
not been limited to the traditional areas of administrative
law. We saw how procedural rights have expanded into
the newer field of social welfare, as well as that of
education. But due process expansion has not been
limited to these fields. The courts have extended
procedural protections to cases involving prisoners and
parolees, as well as the use of established adjudicatory
procedures. Important Supreme Court decisions go
further and invalidate prejudgment wage garnishments
and seizures of property under replevin statutes where
no provision is made for notice and hearing. But the
Court has not gone so far as to lay down an inflexible
rule that due process requires an adversary hearing
when an individual may be deprived of any possessory
interest, however brief the dispossession and however
slight the monetary interest in the property. Due process
is not violated where state law requires, as a
precondition to invoking the state's aid to sequester
property of a defaulting debtor, that the creditor furnish
35
 adequate security and make a specific showing of
probable cause before a judge.
In addition, there has been an extension of procedural
due process requirements from governmental to private
action. In Section 5.16 we saw that Goldberg v. Kelly has
been extended to the eviction of a tenant from a public
housing project. The courts have not limited the right to
be heard to tenants who have governmental agencies as
landlords. Due process requirements also govern acts by
"private" landlords where there is sufficient governmental
involvement in the rented premises. Such an
involvement exists in the case of housing aided by
Federal Housing Administration financing and tax
advantages. A tenant may not be summarily evicted from
a building operated by a "private" corporation where the
corporation enjoyed substantial tax exemption and had
obtained an FHA-insured mortgage, with governmental
subsidies to reduce interest payments. The "private"
corporation was so saturated with governmental
incidents as to be limited in its practices by constitutional
process. Hence, it could not terminate tenancies without
notice and an opportunity to be heard.
But we need nor rely on foreign jurisprudence to repudiate the
new majority ruling that due process restricts government alone
and not private employers like ISETANN. This Court has always
protected employees whenever they are dismissed for an unjust
cause by private employers. We have consistently held that
before dismissing an employee for a just cause, he must be given
notice and hearing by his private employer. In Kingsize
Manufacturing Corporation vs. NLRC,19 this Court, thru Mr. Justice
Mendoza, categorically ruled:
. . . (P)etitioners failure to give notice with warning to the
private respondents before their services were
terminated puts in grave doubt petitioners' claim that
dismissal was for a just cause. Section 2 Rule XIV of the
Rules implementing the Labor Code provides:
An employer who seeks to dismiss a worker
shall furnish him a written notice stating the
particular acts or omission constituting the
ground for dismissal. In case of abandonment
of work, the notice shall be served on the
worker's last known address.
The notice required, . . ., actually consists of two parts to
be separately served on the employee, to wit: (1) notice
to apprise the employee of the particular acts or
omissions for which the dismissal is sought; and (2)
subsequent notice to inform him of the employer's
decision to dismiss him.
This requirement is not a mere technicality but a
requirement of due process to which every employee is
entitled to insure that the employer's prerogative to
dismiss or lay off is not abused or exercised in an
arbitrary manner. This rule is clear and unequivocal . . .
.20
In other words, we have long adopted in our decisions the
doctrine of private due process. This is as it ought to be. The 1987
Constitution guarantees the rights of workers, especially the right
to security of tenure in a separate article — section 3 of Article XIII
entitled Social Justice and Human Rights. Thus, a 20-20 vision of
the Constitution will show that the more specific rights of labor are
not in the Bill of Rights which is historically directed against
government acts alone. Needless to state, the constitutional rights
of labor should be safeguarded against assaults from both
government and private parties. The majority should not reverse
our settled rulings outlawing violations of due process by
employers in just causes cases.
To prop up its new ruling against our employees, the majority
relates the evolution of our law on dismissal starting from Article
302 of the Spanish Code of Commerce, to the New Civil Code of
1950, to R.A. No. 1052 (Termination Pay Law), then to R.A. No.
1787. To complete the picture, let me add that on May 1, 1974,
the Labor Code (PD 442) was signed into law by former President
Marcos. It took effect on May 1, 1974 or six months after its
promulgation. The right of the employer to terminate the
employment was embodied in Articles 283,21 284,22 and
285.23 Batas Pambansa Blg. 130 which was enacted on August
21, 1981 amended Articles 283 and 284, which today are cited as
Arts. 282 and 283 of the Labor Code.24
On March 2, 1989, Republic Act No. 6715 was approved which
amended, among others, Article 277 of the Labor Code.
Presently, Article 277 (b) reads:
Art. 277. Miscellaneous provisions. — (a) . . . .
(b) Subject to the constitutional right of workers
to security of tenure and their right to be
protected against dismissal except for a just or
authorized cause and without prejudice to the
requirement of notice under Article 283 of this
Code, the employer shall furnish the worker
whose employment is sought to be terminated a
written notice containing a statement of the
causes for termination and shall afford the latter
ample opportunity to be heard and to defend
himself with the assistance of his representative
if he so desires in accordance with company
rules and regulations promulgated pursuant to
the guidelines set by the Department of Labor
and Employment. Any decision taken by the
employer shall be without prejudice to the right
of the worker to contest the validity or legality of
his dismissal by filing a complaint with the
regional branch of the National Labor Relations
Commission. The burden of proving that the
termination was for a valid or authorized cause
shall rest on the employer. . . . .
Previous to the amendment, Article 277 (b) read:
Art. 277. Miscellaneous provisions. — (a) . . . .
(b) With or without a collective agreement, no
employer may shut down his establishment or
dismiss or terminate the employment of
employees with at least one year of service
during the last two years, whether such service
is continuous or broken, without prior written
authority issued in accordance with the rules
and regulations as the Secretary may
promulgate.
Rule XIV, Book V of the 1997 Omnibus Rules Implementing the
Labor Code provides:
Termination of Employment
Sec. 1. Security of tenure and due process. — No worker
shall be dismissed except for a just or authorized cause
provided by law and after due process.
36
 Sec. 2. Notice of dismissal. — Any employer who seeks
to dismiss a worker shall furnish him a written notice
stating the particular acts or omissions constituting the
grounds for his dismissal. . . .
xxx xxx xxx
Sec. 5. Answer and hearing. — The worker may answer
the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
These laws, rules and regulations should be related to our
decisions interpreting them. Let me therefore emphasize our
rulings holding that the pre-dismissal notice requirement is part of
due process. In Batangas Laguna Tayabas Bus Co. vs. Court of
Appeals,25 which was decided under the provisions of RA No.
1052 as amended by RA No. 1787, this Court ruled that "the
failure of the employer to give the [employee] the benefit of a
hearing before he was dismissed constitute an infringement on his
constitutional right to due process of law and not to be denied the
equal protection of the laws. . . . Since the right of [an employee]
to his labor is in itself a property and that the labor agreement
between him and [his employer] is the law between the parties,
his summary and arbitrary dismissal amounted to deprivation of
his property without due process." Since then, we have
consistently held that before dismissing an employee for a just
cause, he must be given notice and hearing by his private
employer as a matter of due process.
I respectfully submit that these rulings are more in accord with the
need to protect the right of employees against illegal dismissals.
Indeed, our laws and our present Constitution are more protective
of the rights and interests of employees than their American
counterpart. For one, to justify private due process, we need not
look for the factors of "sufficient governmental involvement" as
American courts do. Article 1700 of our Civil Code explicitly
provides:
Art. 1700. The relation between capital and labor are not
merely contractual. They are so impressed with public
interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining,
strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
Nor do we have to strain on the distinction made by American
courts between property and privilege and follow their ruling that
due process will not apply if what is affected is a mere privilege. It
is our hoary ruling that labor is property within the contemplation
of the due process clause of the Constitution. Thus, in Philippine
Movie Pictures Workers Association vs. Premiere Productions,
Inc.,26 private respondent-employer filed with the Court of
Industrial Relations (CIR) a petition seeking authority to lay off
forty-four of its employees. On the date of the hearing of the
petition, at the request of the counsel of the private respondent,
the judge of the CIR conducted an ocular inspection in the
premises of the employer. He interrogated fifteen laborers. On the
basis of the ocular inspection, the judge concluded that the
petition for lay off was justified. We did not agree and we ruled
that "the right of a person to his labor is deemed to he property
within the meaning of constitutional guarantees. That is his means
of livelihood. He can not be deprived of his labor or work without
due process of law. . . . (T)here are certain cardinal primary rights
which the Court of Industrial Relations must respect in the trial of
every labor case. One of them is the right to a hearing which
includes the right of the party interested to present his own case
and to submit evidence in support thereof."
I wish also to stress that the 1999 Rules and Regulations
implementing the Labor Code categorically characterize this pre-
dismissal notice requirement as a requirement of due process.
Rule XXIII provides:
Sec. 2. Standards of due process: requirements of
notice. — In all cases of termination of employment, the
following standards of due process shall be substantially
observed.
I. For termination of employment based on just causes
as defined in Article 282 of the Code:
(a) A written notice served on the employee
specifying the ground or grounds for
termination, and giving to said employee
reasonable opportunity within which to explain
his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of
counsel if the employee so desires, is given
opportunity to respond to the charge, present
his evidence or rebut the evidence presented
against him; and
(c) A written notice of termination served on the
employee indicating that upon due
consideration of all the circumstance, grounds
have been established to justify his termination.
In case of termination, the foregoing notices shall be
served on the employee's last known address.
II. For termination of employment as based on
authorized causes defined in Article 283 of the Code, the
requirements of due process shall be deemed complied
with upon service of a written notice to the employee and
the appropriate Regional Office of the Department at
least thirty (30) days before the effectivity of the
termination, specifying the ground or grounds for
termination.
The new ruling of the majority is not in consonance with this Rule
XXIII.
If we are really zealous of protecting the rights of labor as called
for by the Constitution, we should guard against every violation of
their rights regardless of whether the government or a private
party is the culprit. Section 3 of Article XIII of the Constitution
requires the State to give full protection to labor. We cannot be
faithful to this duty if we give no protection to labor when the
violator of its rights happens to be private parties like private
employers. A private person does not have a better right than the
government to violate an employee's right to due process. To be
sure, violation of the particular right of employees to security of
tenure comes almost always from their private employers. To
suggest that we take mere geriatric steps when it comes to
protecting the rights of labor from infringement by private parties
is farthest from the intent of the Constitution. We trivialize the right
of the employee if we adopt the rule allowing the employer to
dismiss an employee without any prior hearing and say let him be
heard later on. To a dismissed employee that remedy is too little
and too late. The new majority ruling is doubly to be regretted
because it comes at a time when deregulation and privatization
are buzzwords in the world being globalized. In such a setting, the
new gods will not be governments but non-governmental
corporations. The greater need of the day therefore is protection
37
from illegal dismissals sans due process by these non-
governmental corporations.
The majority also holds that the "third reason why the notice
requirement under Art. 283 is not a requirement of due process is
that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282." Again,
with due respect, I beg to disagree. In an Article 283 situation,
dismissal due to an authorized cause, the employer is not called
upon to act as an impartial judge. The employer is given the duty
to serve a written notice on the worker and the DOLE at least one
month before the intended date of lay-off. It is the DOLE, an
impartial agency that will judge whether or not the employee is
being laid off for an authorized caused.27 It is not the employer
who will adjudge whether the alleged authorized cause for
dismissing the employee is fact or fiction. On the other hand, in an
Article 282 situation, dismissal for a just cause, it is also incorrect
to hold that an employer cannot be an impartial judge. Today, the
procedure on discipline and dismissal of employees is usually
defined in the parties' collective bargaining agreement or in its
absence, on the rules and regulations made by the employer
himself. This procedure is carefully designed to be bias free for it
is to the interest of both the employee and the employer that only
a guilty employee is disciplined or dismissed. Hence, where the
charge against an employee is serious, it is standard practice to
include in the investigating committee an employee representative
to assure the integrity of the process. In addition, it is usual
practice to give the aggrieved employee an appellate body to
review an unfavorable decision. Stated otherwise, the
investigators are mandated to act impartially for to do otherwise
can bring havoc less to the employee but more to the employer.
For one, if the integrity of the grievance procedure becomes
suspect, the employees may shun it and instead resort to coercive
measures like picketing and strikes that can financially bleed
employers. For another, a wrong, especially a biased judgment
can always be challenged in the DOLE and the courts and can
result in awards of huge damages against the company. Indeed,
the majority ruling that an employer cannot act as an impartial
judge has no empirical evidence to support itself. Statistics in the
DOLE will prove the many cases won by employees before the
grievance committees manned by impartial judges of the
company.
Next, the majority holds that "the requirement to hear an
employee before he is dismissed should be considered simply as
an application of the Justinian precept, embodied in the Civil
Code, to act with justice, give everyone his due, and observe
honesty and good faith toward one's fellowmen." It then rules that
violation of this norm will render the employer liable for damages
but will not render his act of dismissal void. Again, I cannot join
the majority stance. The faultline of this ruling lies in the refusal to
recognize that employer-employee relationship is governed by
special labor laws and not by the Civil Code. The majority has
disregarded the precept that relations between capital and labor
are impressed with public interest. For this reason, we have the
Labor Code that specially regulates the relationship between
employer-employee including dismissals of employees. Thus,
Article 279 of the Labor Code specifically provides that "in cases
of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to instatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him
up to the time of his actual reinstatement." This provision of the
Labor Code clearly gives the remedies that an unjustly dismissed
employee deserves. It is not the Civil Code that is the source of
his remedies.
The majority also holds that lack of notice in an Article 283
situation merely makes an employee dismissal "ineffectual" but
not illegal. Again, the ruling is sought to be justified by analogy
and our attention is called to Article 1592, in relation to Article
1191 of the Civil Code. It is contended that "under these
provisions, while the power to rescind is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot rescind the contract even though the
vendee defaults in the payment of the price, except by bringing an
action in court or giving notice of rescission by means of a notarial
demand." The analogy of the majority cannot be allowed both in
law and in logic. The legal relationship of an employer to his
employee is not similar to that of a vendor and a vendee. An
employee suffers from a distinct disadvantage in his relationship
with an employer, hence, the Constitution and our laws give him
extra protection. In contrast, a vendor and a vendee in a sale of
immovable property are at economic par with each other. To
consider an employer-employee relationship as similar to a sale of
commodity is an archaic abomination. An employer-employee
relationship involves the common good and labor cannot be
treated as a mere commodity. As well-stated by former Governor
General Leonard Wood in his inaugural message before the 6th
Philippine Legislature on October 27, 1922, "it is opportune that
we strive to impress upon all the people that labor is neither a
chattel nor a commodity, but human and must be dealt with from
the standpoint of human interests."
Next, the majority holds that under the Labor Code, only the
absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. Quoting Article 279
which provides:
Security of Tenure. — In cases of regular employment,
the employer shall not terminate the services of an
employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement.
it is then rationalized that "to hold that the employer's failure to
give notice before dismissing an employee . . . results in the nullity
of the dismissal would, in effect, be to amend Article 279 by
adding another ground, for considering a dismissal illegal." With
due respect, the majority has misread Article 279. To start with,
the article is entitled "Security of Tenure" and therefore protects
an employee against dismissal not only for an unjust cause but
also for an unauthorized cause. Thus, the phrase "unjustly
dismissed" refers to employees who are dismissed without just
cause and to employees who are laid off without any authorized
cause. As heretofore shown, we have interpreted dismissals
without prior notice as illegal for violating the right to due process
of the employee. These rulings form part of the law of the land
and Congress was aware of them when it enacted the Labor
Code and when its implementing rules and regulations were
promulgated especially the rule ordering employers to follow due
process when dismissing employees. Needless to state, it is
incorrect for the majority to urge that we are in effect amending
Article 279.
In further explication of its ruling, the majority contends "what is
more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for
damages." Article 285(a) states: "An employee may terminate
without just cause the employee-employer relationship by serving
a written notice on the employer at least one (1) month in
advance. The employer upon whom no such notice was served
may hold the employee liable for damages."
38
In effect, the majority view is that its new ruling puts at par both
the employer and the employee — under Article 285, the failure of
an employee to pre-notify in writing his employer that he is
terminating their relationship does not make his walk-out void;
under its new ruling, the failure of an employer to pre-notify an
employee before his dismissal does not also render the dismissal
void. By this new ruling, the majority in a short stroke has
rewritten the law on dismissal and tampered its pro-employee
philosophy. Undoubtedly, Article 285 favors the employee as it
does not consider void his act of terminating his employment
relationship before giving the required notice. But this favor given
to an employee just like the other favors in the Labor Code and
the Constitution are precisely designed to level the playing field
between the employer and the employee. It cannot be gainsaid
that employees are the special subject of solicitous laws because
they have been and they continue to be exploited by
unscrupulous employers. Their exploitation has resulted in labor
warfare that has broken industrial peace and slowed down
economic progress. In the exercise of their wisdom, the founding
fathers of our 1935, 1973 and 1987 Constitutions as well as the
members our past and present Congresses, have decided to give
more legal protection and better legal treatment to our employees
in their relationship with their employer. Expressive of this policy is
President Magsaysay's call that "he who has less in life should
have more in law." I respectfully submit that the majority cannot
revise our laws nor shun the social justice thrust of our
Constitution in the guise of interpretation especially when its result
is to favor employers and disfavor employees. The majority talks
of high nobility but the highest nobility it to stoop down to reach
the poor.
IV. NO UNJUST RESULTS OF CONSIDERING
DISMISSALS WITHOUT PRIOR NOTICE AS ILLEGAL
The majority further justifies its new ruling by holding:
The refusal to look beyond the validity of the initial action
taken by the employer to terminate employment either
for an authorized or just cause can result in an injustice
to the employer. For not having been given notice and
hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt
against the life of the employer, an employer will be
forced to keep in his employ such guilty employee. This
is unjust.
It is true the Constitution regards labor as "a primary
social economic force." But so does it declare that it
"recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives
to needed investment." The Constitution bids the State to
"afford full protection to labor." But it is equally true that
"the law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer."
And it is oppression to compel the employer to continue
in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his
interest to do so.
With due respect, I cannot understand this total turn around of the
majority on the issue of the unjustness of lack of pre-dismissal
notice to an employee. Heretofore, we have always considered
this lack of notice as unjust to the employee. Even under Article
302 of the Spanish Code of Commerce of 1882 as related by the
majority, an employer who opts to dismiss an employee without
any notice has to pay a mesada equivalent to his salary for one
month because of its unjustness. This policy was modified by our
legislators in favor of a more liberal treatment of labor as our
country came under the influence of the United States whose
major labor laws became the matrix of our own laws like R.A. 875,
otherwise known as the Industrial Peace Act. In accord with these
laws, and as aforediscussed, we laid down the case law that
dismissals without prior notice offend due process. This is the
case law when the Labor Code was enacted on May 1, 1974 and
until now despite its amendments. The 1935 and the 1973
Constitutions did not change this case law. So with the 1987
Constitution which even strengthened the rights of employees,
especially their right to security of tenure. Mr. Justice Laurel in his
usual inimitable prose expressed this shift in social policy in favor
of employees as follows:
It should be observed at the outset that our Constitution
was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social
distress which was threatening the stability of
governments the world over. Alive to the social and
economic forces at work, the framers of our Constitution
boldly met the problems and difficulties which faced them
and endeavored to crystallize, with more or less fidelity,
the political, social and economic propositions of their
age, and this they did, with the consciousness that the
political and philosophical aphorism of their generation
will, in the language of a great jurist, "be doubted by the
next and perhaps entirely discarded by the third." (Chief
Justice Winslow in Gorgnis v. Falk Co., 147 Wis., 327;
133 N. W., 209). Embodying the spirit of the present
epoch, general provisions were inserted in the
Constitution which are intended to bring about the
needed social and economic equilibrium between
component elements of society through the application of
what may be termed as the justitia communisadvocated
by Grotius and Leibnitz many years ago to be secured
through the counter-balancing of economic and social
forces and employers or landlords, and employees or
tenants, respectively; and by prescribing penalties for the
violation of the orders" and later, Commonwealth Act No.
213, entitled "An Act to define and regulate legitimate
labor organizations."28
This ingrained social philosophy favoring employees has now
been weakened by the new ruling of the majority. For while this
Court has always considered lack of pre-dismissal notice as
unjust to employees, the new ruling of the majority now declares it
is unjust to employers as if employers are the ones exploited by
employees. In truth, there is nothing unjust to employers by
requiring them to give notice to their employees before denying
them their jobs. There is nothing unjust to the duty to give notice
for the duty is a reasonable duty. If the duty is reasonable, then it
is also reasonable to demand its compliance before the right to
dismiss on the part of an employer can be exercised. If it is
reasonable for an employer to comply with the duty, then it can
never be unjust if non-compliance therewith is penalized by
denying said employer his right to dismiss. In fine, if the
employer's right to dismiss an employee is forfeited for his failure
to comply with this simple, reasonable duty to pre-notify his
employee, he has nothing to blame but himself. If the employer is
estopped from litigating the issue of whether or not he is
dismissing his employee for a just or an authorized cause, he
brought the consequence on to himself. The new ruling of the
majority, however, inexplicably considers this consequence as
unjust to the employer and it merely winks at his failure to give
notice.
V. A LAST WORD
The new ruling of the majority erodes the sanctity of the most
important right of an employee, his constitutional right to security
of tenure. This right will never be respected by the employer if we
merely honor the right with a price tag. The policy of "dismiss now
and pay later" favors monied employers and is a mockery of the
right of employees to social justice. There is no way to justify this
pro-employer stance when the 1987 Constitution is undeniably
more pro-employee than our previous fundamental laws. Section
18 of Article II (State Policies) provides that "the State affirms
39
labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare." Section 1, Article XIII
(Social Justice and Human Rights) calls for the reduction of
economic inequalities. Section 3, Article XIII (Labor) directs the
State to accord full protection to labor and to guaranty security of
tenure. These are constitutional polestars and not mere works of
cosmetology. Our odes to the poor will be meaningless mouthfuls
if we cannot protect the employee's right to due process against
the power of the peso of employers.
To an employee, a job is everything. Its loss involves terrible
repercussions — stoppage of the schooling of children, ejectment
from leased premises, hunger to the family, a life without any
safety net. Indeed, to many employees, dismissal is their lethal
injection. Mere payment of money by way of separation pay and
backwages will not secure food on the mouths of employees who
do not even have the right to choose what they will chew.
I vote to grant the petition.
VITUG, J., separate (concurring and dissenting) opinion;
The lawful severance by an employer of an employer-employee
relationship would require a valid cause. There are, under the
Labor Code, two groups of valid causes, and these are the just
causes under Article 2821 and the authorized causes under Article
2832 and Article 284.3
An employee whose employment is terminated for a just cause is
not entitled to the payment of separation benefits.4Separation pay
would be due, however, when the lay-off is on account of an
authorized cause. The amount of separation pay would depend
on the ground for the termination of employment. A lay-off due to
the installation of a labor saving device, redundancy (Article 283)
or disease (Article 284), entitles the worker to a separation pay
equivalent to "one (1) month pay or at least one (1) month pay for
every year of service, whichever is higher." When the termination
of employment is due to retrenchment to prevent losses, or to
closure or cessation of operations of an establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay is only an equivalent of "one (1)
month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher." In the above instances, a fraction of
at least six (6) months is considered as one (1) whole year.
Due process of law, in its broad concept, is a principle in our legal
system that mandates due protection to the basic rights, inherent
or accorded, of every person against harm or transgression
without an intrinsically just and valid law, as well as an opportunity
to be heard before an impartial tribunal, that can warrant such an
impairment. Due process guarantees against arbitrariness and
bears on both substance and procedure. Substantive due process
concerns itself with the law, its essence, and its concomitant
efficacy; procedural due process focuses on the rules that are
established in order to ensure meaningful adjudications
appurtenant thereto.
In this jurisdiction, the right to due process is constitutional and
statutory.
Due process in the context of a termination of employment,
particularly, would be two-fold, i.e., substantive due process which
is complied with when the action of the employer is predicated on
a just cause or an authorized cause, and procedural due process
which is satisfied when the employee has the opportunity to
contest the existence of the ground invoked by the employer in
terminating the contract of employment and to be heard thereon. I
find it difficult to ascribe either a want of wisdom or a lack of legal
basis to the early pronouncements of this Court that sanction the
termination of employment when a just or an authorized cause to
warrant the termination is clearly extant. Regrettably, the Court in
some of those pronouncements has used, less than guarded in
my view, the term "due process" when referring to the notices
prescribed in the Labor Code5 and its implementing rules6 that
could, thereby, albeit unintendedly and without meaning to,
confuse the latter with the notice requirement in adjudicatory
proceedings. It is not seldom when the law puts up various
conditions in the juridical relations of parties; it would not be
accurate to consider, I believe, an infraction thereof to ipso-
facto raise a problem of due process. The mere failure of notice of
the dismissal or lay-off does not foreclose the right of an
employee from disputing the validity, in general, of the termination
of his employment, or the veracity, in particular, of the cause that
has been invoked in order to justify that termination. In assailing
the dismissal or lay-off, an employee is entitled to be heard and to
be given the corresponding due notice of the proceedings. It
would be when this right is withheld without cogent reasons that,
indeed, it can rightly be claimed that the fundamental demands of
procedural due process have been unduly discarded.
I do appreciate the fact that the prescribed notices can have
consequential benefits to an employee who is dismissed or laid
off, as the case may be; its non-observance by an employer,
therefore, can verily entitle the employee to an award of damage
but, to repeat, not to the extent of rendering outrightly illegal that
dismissal or lay-off predicated on valid grounds. I would consider
the indemnification to the employee not a penalty or a fine against
the employer, the levy of either of which would require an
appropriate legislative enactment; rather, I take the grant of
indemnity as justifiable as an award of nominal damages in
accordance with the provisions of Articles 2221-2223 of the Civil
Code, viz:
Art. 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in
every obligation arising from any source enumerated in
article 1157, or in every case where any property right
has been invaded.
Art. 2223. The adjudication of nominal damages shall
preclude further contest upon the right involved and all
accessory questions, as between the parties to the suit,
or their respective heirs and assigns.
There is no fixed formula for determining the precise amount of
nominal damages. In fixing the amount of nominal damages to be
awarded, the circumstances of each case should thus be taken
into account, such as, to exemplify, the —
(a) length of service or employment of the dismissed
employee;
(b) his salary or compensation at the time termination of
employment vis-a-vis the capability of the employer to
pay;
(c) question of whether the employer has deliberately
violated the requirements for termination of employment
or has attempted to comply, at least substantially,
therewith; and/or
(d) reasons for the termination of employment.
40
I might stress the rule that the award of nominal damages is not
for the purpose of indemnification for a loss but for the recognition
and vindication of a right. The degree of recovery therefor can
depend, on the one hand, on the constitution of the right, and,
upon the other hand, on the extent and manner by which that right
is ignored to the prejudice of the holder of that right.
In fine7 —
A. A just cause or an authorized cause and a written
notice of dismissal or lay-off, as the case may be, are
required concurrently but not really equipollent in their
consequence, in terminating an employer-employee
relationship.
B. Where there is neither just cause nor authorized
cause, the reinstatement of the employee and the
payment of back salaries would be proper and should be
decreed. If the dismissal or lay-off is attended by bad
faith or if the employer acted in wanton or oppressive
manner, moral and exemplary damages might also be a
warded. In this respect, the Civil Code provides:
Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the
court should find that, under the circumstances,
such damages are just due. The same rule
applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
Art. 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner
(Civil Code).
Separation pay can substitute for reinstatement if such
reinstatement is not feasible, such as in case of a clearly
strained employer-employee relationship (limited to
managerial positions and contracts of employment
predicated on trust and confidence) or when the work or
position formerly held by the dismissed employee plainly
has since ceased to be available.
C. Where there is just cause or an authorized cause for
the dismissal or lay-off but the required written notices
therefor have not been properly observed by an
employer, it would neither be light and justifiable nor
likely intended by law to order either the reinstatement of
the dismissed or laid-off employee or the payment of
back salaries to him simply for the lack of such notices if,
and so long as, the employee is not deprived of an
opportunity to contest that dismissal or lay-off and to
accordingly be heard thereon. In the termination of
employment for an authorized cause (this cause being
attributable to the employer), the laid-off employee is
statutorily entitled to separation pay, unlike a dismissal
for a just cause (a cause attributable to an employee)
where no separation pay is due. In either case, if an
employer fails to comply with the requirements of notice
in terminating the services of the employee, the
employer must be made to pay, as so hereinabove
expressed, corresponding damages to the employee.
WHEREFORE, I vote to hold (a) that the lay-off in the case at bar
is due to redundancy and that, accordingly, the separation pay to
petitioner should be increased to one month, instead of one-half
month, pay for every year of service, and (b) that petitioner is
entitled to his unpaid wages, proportionate 13th-month pay, and
an indemnity of P10,000.00 in keeping with the nature and
purpose of, as well as the rationale behind, the grant of nominal
damages.
PANGANIBAN, J., separate opinion;
In the case before us, the Court is unanimous in at least two
findings: (1) petitioner's dismissal was due to an authorized
cause, redundancy; and (2) petitioner was notified of his dismissal
only on the very day his employment was terminated. The
contentious issue arising out of these two findings is as follows:
What is the legal effect and the corresponding sanction for the
failure of the employer to give the employee and the Department
of Labor and Employment (DOLE) the 30-day notice of
termination required under Article 283 of the Labor Code?
During the last ten (10) years, the Court has answered the
foregoing question by ruling that the dismissal should be upheld
although the employee should be given "indemnity or damages"
ranging from P1,000 to P10,000 depending on the circumstances.
The present ponencia of Mr. Justice Mendoza holds that "the
termination of his employment should be considered ineffectual
and the [employee] should be paid back wages" from the time of
his dismissal until the Court finds that the dismissal was for a just
cause.
Reexamination of the "Indemnity Only" Rule
I am grateful that the Court has decided to reexamine our ten-year
doctrine on this question and has at least, in the process,
increased the monetary award that should go to the dismissed
employee — from a nominal sum in the concept "indemnity or
damages" to "full back wages." Shortly after my assumption of
office on October 10, 1995, I already questioned this practice of
granting "indemnity only" to employees who were dismissed for
cause but without due process.1 I formally registered reservations
on this rule in my ponencia in MGG Marine Services v.
NLRC2 and gave it full discussion in my Dissents in Better
Buildings v. NLRC3 and in Del Val v. NLRC.4
Without in any way diminishing my appreciation of this
reexamination and of the more financially-generous treatment the
Court has accorded labor, I write to take issue with the legal basis
of my esteemed colleague, Mr. Justice Mendoza, in arriving at his
legal conclusion that "the employer's 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." In short, he believes that (1) the 30-day notice
requirement finds basis only in the Labor Code, and (2) the
sanction for its violation is only "full back wages."
With due respect, I submit the following counter-arguments:
(1) The notice requirement finds basis not only in the
Labor Code but, more important, in the due process
clause of the Constitution.
(2) Consequently, when the employee is dismissed
without due process, the legal effect is an illegal
dismissal and the appropriate sanction is full back wages
plus reinstatement, not merely full back wages. It is
jurisprudentially settled, as I will show presently, that
when procedural due process is violated, the
proceedings — in this case, the dismissal — will be
voided, and the parties will have to be returned to
their status quo ante; that is, the employee will have to
be given back his old job and paid all benefits as if he
were never dismissed.
41
 (3) In any event, contrary to Mr. Justice Mendoza's
premise, even the Labor Code expressly grants the
dismissed employee not only the right to be notified but
also the right to be heard.
In short, when an employee is dismissed without notice and
hearing, the effect is an illegal dismissal and the appropriate
reliefs are reinstatement and full back wages. In ruling that the
dismissal should be upheld, the Court majority has virtually
rendered nugatory the employee's right to due process as
mandated by law and the Constitution. It implicitly allows the
employer to simply ignore such right and to just pay the
employee. While it increases the payment to "full back wages," it
doctrinally denigrates his right to due process to a mere statutory
right to notice.
Let me explain the foregoing by starting with a short background
of our jurisprudence on the right to due process.
Without Due Process, the Proceedings Are Illegal
In the past, this Court has untiringly reiterated that there are two
essential requisites for an employer's valid termination of an
employee's services: (1) a just5 or authorized6 cause and (2) due
process.7 During the last ten years, the Court has been quite firm
in this doctrinal concept, but it has been less than consistent in
declaring the illegality of a dismissal when due process has not
been observed. This is particularly noticeable in the relief granted.
Where there has been no just or authorized cause, the employee
is awarded reinstatement or separation pay, and back wages. 8 If
only the second requisite (due process) has not been fulfilled, the
employee, as earlier stated, is granted indemnity or damages
amounting to a measly P1,000 up to P10,000.9
I respectfully submit that illegal dismissal results not only from the
absence of a legal cause (enumerated in Arts. 282 to 284 of the
Labor Code), but likewise from the failure to observe due process.
Indeed, many are the cases, labor or otherwise, in which acts
violative of due process are unequivocally voided or declared
illegal by the Supreme Court. In Pepsi-Cola Bottling
Co. v. NLRC,10 the Court categorically ruled that the failure of
management to comply with the requirements of due process
made its judgment of dismissal "void and non-existent."
This Court in People v. Bocar 11 emphatically made the following
pronouncement, which has been reiterated in several cases:12
The cardinal precept is that where there is a violation of
basis constitutional rights, courts are ousted of their
jurisdiction. Thus the violation of the State's right to due
process raises a serious jurisdictional issue (Gumabon
vs. Director of the Bureau of Prisons, L-30026, 37 SCRA
420 [Jan. 30, 1971]) which cannot be glossed over or
disregarded at will. Where the denial of the fundamental
right of due process is apparent, a decision rendered in
disregarded of the right is void for lack of jurisdiction
(Aducayen vs. Flores, L-30370, [May 25, 1973] 51 SCRA
78; Shell Co. vs. Enage, L-30111-12, 49 SCRA 416
[Feb. 27, 1973]). Any judgment or decision rendered
notwithstanding such violation may be regarded as a
"lawless thing, which can be treated as an outlaw and
slain at sight, or ignored wherever it exhibits its head"
(Aducayen vs. Flores, supra).
In the earlier case Bacus v. Ople,13 this Court also nullified the
then labor minister's clearance to terminate the employment of
company workers who had supposedly staged an illegal strike.
The reason for this ruling was the denial of sufficient opportunity
for them to present their evidence and prove their case. The Court
explained:14
A mere finding of the illegality of a strike should not be
automatically followed by a wholesale dismissal of the
strikers from their employment. What is more, the finding
of the illegality of the strike by respondent Minister of
Labor and Employment is predicated on the evidence
ascertained through an irregular procedure conducted
under the semblance of summary methods and speedy
disposition of labor disputes involving striking
employees.
While it is true that administrative agencies exercising
quasi-judicial functions are free from the rigidities of
procedure, it is equally well-settled in this jurisdiction that
avoidance of such technicalities of law or procedure in
ascertaining objectively the facts in each case should
not, however, cause a denial of due process. The
relative freedom of the labor arbiter from the rigidities of
procedure cannot be invoked to evade what was clearly
emphasized in the landmark case of Ang Tibay v. Court
of Industrial Relations that all administrative bodies
cannot ignore or disregard the fundamental and essential
requirements of due process.
In the said case, the respondent company was ordered to
reinstate the dismissed workers, pending a hearing "giving them
the opportunity to be heard and present their evidence."
In Philippine National Bank v. Apalisok,15 Primitivo Virtudazo, an
employee of PNB, was served a Memorandum stating the finding
against him of a prima facie case for dishonesty and violation of
bank rules and regulations. He submitted his Answer denying the
charges and explaining his defenses.
Later, two personnel examiners of the bank conducted a fact-
finding investigation. They stressed to him that a formal
investigation would follow, in which he could confront and
examine the witnesses for the bank, as well as present his own.
What followed, however, was a Memorandum notifying him that
he had been found guilty of the charges and that he was being
dismissed. After several futile attempts to secure a copy of the
Decision rendered against him, he instituted against PNB a
Complaint for illegal dismissal and prayed for reinstatement and
damages.
The trial court held that Virtudazo had been deprived of his rights
to be formally investigated and to cross-examine the witnesses.
This Court sustained the trial court, stating resolutely: "The
proceedings having been conducted without according to
Virtudazo the "cardinal primary rights of due process" guaranteed
to every party in an administrative or quasi-judicial proceeding,
said proceedings must be pronounced null and void." 16
Also in Fabella v. Court of Appeals,17 this Court declared the
dismissal of the schoolteachers illegal, because the administrative
body that heard the charges against them had not afforded them
their right to procedural due process. The proceedings were
declared void, and the orders for their dismissal set aside. We
unqualifiedly reinstated the schoolteachers, to whom we awarded
all monetary benefits that had accrued to them during the period
of their unjustified suspension or dismissal.
In People v. San Diego,18 People v. Sola,19 People
v. Dactrdao,20 People v. Calo Jr.21 and People v. Burgos,22 this
Court similarly voided the trial court's grant of bail to the accused
upon a finding that the prosecution had been deprived of
procedural due process.
In People v. Sevilleno,23 the Court noted that the trial judge "hardly
satisfied the requisite searching inquiry" due the accused when he
pleaded guilty to the capital offense he had been charged with.
42
We thus concluded that "the accused was not properly accorded
his fundamental right to be informed of the precise nature of the
accusation leveled against him." Because of the nonobservance
of "the fundamental requirements of fairness and due process,"
the appealed Decision was annulled and set aside, and the case
was remanded for the proper arraignment and trial of the
accused.
Recently, the Court vacated its earlier Decision24 in People v.
Parazo25 upon realizing that the accused — "a deaf-mute, a
mental retardate, whose mental age [was] only seven (7) years
and nine (9) months, and with low IQ of 60 only" — had not been
ably assisted by a sign language expert during his arraignment
and trial. Citing People v. Crisologo,26 we ruled that the accused
had been deprived of "a full and fair trial and a reasonable
opportunity to defend himself." He had in effect been denied his
fundamental right to due process of law. Hence, we set aside the
trial proceedings and granted the accused a re-arraignment and a
retrial.
Of late, we also set aside a Comelec Resolution disallowing the
use by a candidate of a certain nickname for the purpose of her
election candidacy. The Resolution was issued pursuant to a
letter-petition which was passed upon by the Comelec without
affording the candidate the opportunity to explain her side and to
counter the allegations in said letter-petition. In invalidating the
said Resolution, we again underscored the necessity of the
observance of the twin requirements of notice and hearing before
any decision can be validly rendered in a case.27
Clearly deducible from our extant jurisprudence is that the denial
of a person's fundamental right to due process amounts to the
illegality of the proceedings against him. Consequently, he is
brought back to his status quo ante, not merely awarded nominal
damages or indemnity.
Our labor force deserves no less. Indeed, the State recognizes it
as its primary social economic force,28 to which it is constitutionally
mandated to afford full protection.29 Yet, refusing to declare the
illegality of dismissals without due process, we have continued to
impose upon the erring employer the simplistic penalty of paying
indemnity only. Hence, I submit that it is time for us to denounce
these dismissals as null and void and to grant our workers these
proper reliefs: (1) the declaration that the termination or dismissal
is illegal and unconstitutional and (2) the reinstatement of the
employee plus full back wages. The present ruling of the Court is
manifestly inconsistent with existing prudence which holds that
proceedings held without notice and hearing are null and void,
since they amount to a violation of due process, and therefore
bring back the parties to the status quo ante.
Exception: When Due Process Is Impractical and Futile
I am fully aware that in a long line of cases starting with Wenphil
v. NLRC,30 the Court has held: where there is just cause for the
dismissal of an employee but the employer fails to follow the
requirements of procedural due process, the former is not entitled
to back wages, reinstatement (or separation pay in case
reinstatement is no longer feasible) or other benefits. Instead, the
employee is granted an indemnity (or penalty or damages)
ranging from P1,00031 to as much as P10,000,32 depending on the
circumstances of the case and the gravity of the employer's
omission. Since then, Wenphil has perfunctorily been applied in
most subsequent cases33 involving a violation of due process
(although just cause has been duly proven), without regard for the
peculiar factual milieu of each case. Indemnity or damages has
become an easy substitute for due process.
Be it remembered, however, that the facts in Wenphil clearly
showed the impracticality and the futility of observing the
procedure laid down by law and by the Constitution for terminating
employment. The employee involved therein appeared to have
exhibited a violent temper and caused trouble during office hours.
In an altercation with a co-employee, he "slapped [the latter's]
cap, stepped on his foot and picked up the ice scooper and
brandished it against [him]." When summoned by the assistant
manager, the employee "shouted and uttered profane words"
instead of giving an explanation. He was caught virtually
in flagrante delicto in the presence of many people. Under the
circumstances action was necessary to preserve order and
discipline, as well as to safeguard the customers' confidence in
the employer's business — a fastfood chain catering to the
general public where courtesy is a prized virtue.
However, in most of the succeeding cases, including the present
one before us in which the petitioner was dismissed on the very
day he was served notice, there were ample opportunities for the
employers to observe the requisites of due process. There were
no exigencies that called for immediate response. And yet,
Wenphil was instantly invoked and due process brushed aside.
I believe that the price that the Court has set for the infringement
of the fundamental right to due process is too insignificant, too
niggardly, and sometimes even too late. I believe that imposing a
stiffer sanction is the only way to emphasize to employers the
extreme importance of the right to due process in our democratic
system. Such right is too sacred to be taken for granted or
glossed over in a cavalier fashion. To hold otherwise, as by simply
imposing an indemnity or even "full back wages," is to allow the
rich and powerful to virtually purchase and to thereby stifle a
constitutional right granted to the poor and marginalized.
It may be asked: If the employee is guilty anyway, what difference
would it make if he is fired without due process? By the same
token, it may be asked: If in the end, after due hearing, a criminal
offender is found guilty anyway, what difference would it make if
he is simply penalized immediately without the trouble and the
expense of trial? The absurdity of this argument is too apparent to
deserve further discourse.34
Worker's Right to Notice Is Constitutional, Not Merely Statutory
According to the ponencia of Mr. Justice Mendoza, the "violation
of the notice requirement cannot be considered a denial of due
process resulting in the nullity of the employee's dismissal or lay-
off." He argues that the due process clause of the Constitution
may be used against the government only. Since the Labor Code
does not accord employees the right to a hearing, ergo, he
concludes, they do not have the right to due process.
I disagree. True, as pointed out by Mr. Justice Mendoza,
traditional doctrine holds that constitutional rights may be invoked
only against the State. This is because in the past, only the State
was in a position to violate these rights, including the due process
clause. However, with the advent of liberalization, deregulation
and privatization, the State tended to cede some of its powers to
the "market forces." Hence, corporate behemoths and even
individuals may now be sources of abuses and threats to human
rights and liberties. I believe, therefore, that such traditional
doctrine should be modified to enable the judiciary to cope with
these new paradigms and to continue protecting the people from
new forms of abuses.34 -a
Indeed the employee is entitled to due process not because of the
Labor code, but because of the Constitution. Elementary is the
doctrine that constitutional provisions are deemed written into
every statute, contract or undertaking. Worth noting is that "[o]ne's
employment, profession, trade or calling is a property right within
the protection of the constitutional guaranty of due process of
law."35
43
In a long line of cases involving judicial, quasi-judicial and
administrative proceedings, some of which I summarized earlier,
the Court has held that the twin requirements of notice and
hearing (or, at the very least, an opportunity to be heard)
constitute the essential elements of due process. In labor
proceedings, both are the conditio sine qua non for a dismissal to
be validly effected.36 The perceptive Justice Irene Cortes has aptly
stated: "One cannot go without the other, for otherwise the
termination would, in the eyes of the law, be illegal."37
Even the Labor Code Grants the Right to a Hearing
Besides, it is really inaccurate to say that the Labor Code grants
"notice alone" to employees being dismissed due to an authorized
cause. Article 277 (b)38 of the said Code explicitly provides that
the termination of employment by the employer is "subject to the
constitutional right of workers to security of tenure[;] . . . without
prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of
the causes for termination and shall afford the latter ample
opportunity to be heard . . . ." Significantly, the provision requires
the employer "to afford [the employee] ample opportunity to be
heard" when the termination is due to a "just and authorized
cause." I submit that this provision on "ample opportunity to be
heard" applies to dismissals under Articles 282, 283 and 284 of
the Labor Code.
In addition, to say that the termination is "simply ineffectual" for
failure to comply with the 30-day written notice and, at the same
time, to conclude that it has "legal effect" appears to be
contradictory. Ineffectual means "having no legal force." 39 If a
dismissal has no legal force or effect, the consequence should be
the reinstatement of the dismissed employee and the grant of full
back wages thereto, as provided by law — not the latter only.
Limiting the consequence merely to the payment of full back
wages has no legal or statutory basis. No provision in the Labor
Code or any other law authorizes such limitation of sanction,
which Mr. Justice Mendoza advocates.
The majority contends that it is not fair to reinstate the employee,
because the employer should not be forces to accommodate an
unwanted worker. I believe however that it is not the Court that
forces the employer to rehire the worker. By violating the latter's
constitutional right to due process, the former brings this sanction
upon itself. Is it unfair to imprison a criminal? No! By violating the
law, one brings the penal sanction upon oneself. There is nothing
unfair or unusual about this inevitable chain of cause and effect,
of crime and punishment, of violation and sanction.
Due Process Begins With Each of Us
To repeat, due process begins with the employer, not with the
labor tribunals. An objective reading of the Bill of Rights clearly
shows that the due process protection is not limited to
government action alone. The Constitution does not say that the
right cannot be claimed against private individuals and entities.
Thus, in PNB v. Apalisok, which I cited earlier, this Court voided
the proceedings conducted by petitioner bank because of its
failure to observe Apalisok's right to due process.
Truly, justice is dispensed not just by the courts and quasi-judicial
bodies like public respondent here. The administration of justice
begins with each of us, in our everyday dealings with one another
and, as in this case, in the employers' affording their employees
the right to be heard. If we, as a people and as individuals, cannot
or will not deign to act with justice and render unto everyone his or
her due in little, everyday things, can we honestly hope and
seriously expect to do so when monumental, life-or-death issues
are at stake? Unless each one is committed to a faithful
observance of day-to-day fundamental rights, our ideal of a just
society can never be approximated, not to say attained.
In the final analysis, what is involved here is not simply the
amount of monetary award, whether insignificant or substantial;
whether termed indemnity, penalty or "full back wages." Neither is
it merely a matter of respect for workers' rights or adequate
protection of labor. The bottom line is really the constitutionally
granted right to due process. And due process is the very
essence of justice itself. Where the rule of law is the bedrock of
our free society, justice is its very lifeblood. Denial of due process
is thus no less than a denial of justice itself.
In Addition to Reinstatement and Back Wages, Damages May Be
Awarded
One last point. Justice Vitug argues in his Separate Opinion that
the nonobservance of the prescribed notices "can verily entitle the
employee to an award of damages but . . . not to the extent of
rendering outrightly illegal that dismissal or lay-off . . . ." I, of
course, disagree with him insofar as he denies the illegality of the
dismissal, because as I already explained, a termination without
due process is unconstitutional and illegal. But I do agree that,
where the employee proves the presence of facts showing liability
for damages (moral, exemplary, etc.) as provided under the Civil
Code, the employee could be entitled to such award in addition to
reinstatement and back wages. For instance, where the illegal
dismissal has caused the employee "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury" due to
the bad faith of the employer, an award for moral damages would
be proper, in addition to reinstatement and back wages.
Summary
To conclude, I believe that even if there may be a just or an
authorized cause for termination but due process is absent, the
dismissal proceedings must be declared null and void. The
dismissal should still be branded as illegal. Consequently, the
employee must be reinstated and given full back wages.
On the other hand, there is an exception. The employer can
adequately prove that under the peculiar circumstances of the
case, there was no opportunity to comply with due process
requirements; or doing so would have been impractical or gravely
adverse to the employer, as when the employee is caught in
flagrante delicto. Under any of these circumstances, the dismissal
will not be illegal and no award may properly be granted.
Nevertheless, as a measure of compassion, the employee may be
given a nominal sum depending on the circumstances, pursuant
to Article 2221 of the Civil Code.
Depending on the facts of each case, damages as provided under
applicable articles of the Civil Code may additionally be awarded.
WHEREFORE, I vote to GRANT the petition. Ruben Serrano
should be REINSTATED and PAID FULL BACK WAGES from
date of termination until actual reinstatement, plus all benefits he
would have received as if he were never dismissed.
G.R. No. 165594 April 23, 2007
FRANCISCO SORIANO, JR., Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
PHILIPPINE LONG DISTANCE TELEPHONE COMPANY,
INCORPORATED, Respondents.
DECISION
44
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court, petitioner Francisco Soriano Jr. seeks to set aside
the Decision dated 29 April 20042 and Resolution dated 4 October
20043 of the Court of Appeals in CA-G.R. SP No. 75152, affirming
the Decision and Resolution of the National Labor Relations
Commission (NLRC) dated 20 August 20024 and 28 October
2002,5 respectively, in NLRC-CA No. 024050-2000. In its Decision
and Resolution, the NLRC affirmed the Decision of Labor Arbiter
Joel S. Lustria (Labor Arbiter Lustria) dated 23 March 2000 in
NLRC-NCR Case No. 00-08-05259-966 dismissing the petitioner’s
complaint for illegal dismissal against respondent Philippine Long
Distance Telephone Company, Incorporated.
The factual antecedents of the petition at bar are as follows:
In 1980, petitioner and certain individuals namely Sergio Benjamin
(Benjamin), Maximino Gonzales (Gonzales), and Noel Apostol
(Apostol) were employed by the respondent as Switchman
Helpers in its Tondo Exchange Office (TEO). After participating in
several trainings and seminars, petitioner, Benjamin, and
Gonzales were promoted as Switchmen. Apostol, on the other
hand, was elevated to the position of Frameman. One of their
duties as Switchmen and Frameman was the manual operation
and maintenance of the Electronic Mechanical Device (EMD) of
the TEO.7
In November 1995, respondent PLDT implemented a company-
wide redundancy program.8 In its "Notice of Separation Due to
Redundancy" dated 27 November 1995 to the Director of the
Department of Labor and Employment, National Capital Region
(DOLE-NCR),9 respondent PLDT cited the following reasons for
the aforesaid redundancy program:
a) Technological changes where new technologies
necessitate reduction in workforce, e.g., conversion of
electro-mechanical switches; outmoded electronic
switches to modern digital switches.
b) Position declared redundant due to collapsing/merging
of functions where the required number of personnel
became less, i.e. rehoming of toll centers or
centralization of toll centers.
c) Non-replacement of function upon retirement of
executive where attached staffs with the executive are
no longer needed – Staff Assistant, Secretary, Clerk.
d) Process Improvements and Automation of functions
which render the positions as redundant since the new
process or Automation require less personnel.
e) Functions or positions which are affected adversely by
market forces, thereby necessitating reduction of current
workforce to match the reduction of workload, i.e., Traffic
– due to decreasing number of handled calls.
Subsequently, the respondent PLDT gave separate letters dated
15 July 1996 to petitioner, Benjamin, Gonzales, and Apostol
informing them that their respective positions were deemed
redundant due to the above-cited reasons and that their services
will be terminated on 16 August 1996.10 They requested the
respondent PLDT for transfer to some vacant positions but their
requests were denied since all positions were already filled up.
Hence, on 16 August 1996, respondent PLDT dismissed the four
from employment.11
On 20 August 1996, Benjamin received an amount of
₱315,435.04 from the respondent PLDT as separation pay,12while
Apostol and Gonzales received on 2 September 1996 their
separation pay from the respondent PLDT in the amounts of
₱486,484.95 and ₱472,897.08, respectively.13 Likewise, petitioner
received on 21 October 1996 an amount of ₱644,194.64 from the
respondent PLDT as his separation pay.14 All four of them
executed a document entitled, "Receipt, Release and Quitclaim"
in favor of the respondent PLDT;15 they, however, placed a note
of "Under Protest" beside their signatures in the said document. 16
Thereafter, petitioner, Benjamin, Gonzales, and Apostol filed a
joint complaint for illegal dismissal against respondent PLDT. 17 On
23 March 2000, Labor Arbiter Lustria rendered his Decision
dismissing the complaint for lack of merit. He stated that the
respondent PLDT legitimately exercised its management
prerogative in terminating the services of petitioner, Benjamin,
Gonzales, and Apostol, on the ground of a valid redundancy
program. He was also convinced that the respondent PLDT
complied with the requirements for dismissing an employee for
redundancy under Article 283 of the Labor Code.18
Further, Labor Arbiter Lustria opined that respondent PLDT’s
redundancy program was effected in good faith as the reduction
of the latter’s employees was brought about by its adoption of the
latest communication technology equipment which can be
operated by computers alone. This undertaking was also done
pursuant to the demand of the public for clearer signal, faster
service and digital features. He found no ill-motive or bad faith on
the part of the respondent PLDT in implementing the redundancy
program and noted that petitioner, Benjamin, Gonzales and
Apostol had already received their respective separation pay and
had executed release and quitclaim in favor of respondent PLDT.
In conclusion, Labor Arbiter Lustria held:
Finally, we have often stressed that it has always been an avowed
policy of this Arbitration Branch that in carrying out and
interpreting the provisions of the Labor Code and its Implementing
Rules and Regulations, the working man’s welfare should be the
paramount and primordial consideration. In protecting the working
class, however, we could not simply close our eyes to the rule that
justice is in every case for the deserving, to be dispensed in the
light of the established facts and the applicable law and doctrine.
This, is so, for while we favor the cause of the working class in his
conflict with management, we likewise have to consider the rights
and interest of the employers, which are equally entitled to legal
protection.
WHEREFORE, foregoing premises considered, judgment is
hereby rendered dismissing the instant complaint for lack of
merit.19
Petitioner, Benjamin, Gonzales, and Apostol appealed to the
NLRC. On 20 August 2002, the NLRC promulgated its Decision
dismissing the appeal and affirming in toto the decision of Labor
Arbiter Lustria. It ruled that the findings, conclusions and legal
bases of Labor Arbiter Lustria were supported by the evidence on
record. In parting, it ruled:
Needless to state, not having been illegally dismissed, as
comprehensively discussed above, Complainants-Appellants are
therefore not entitled to reinstatement to their former positions
without loss of seniority right and privileges and to payment of full
back wages.
WHEREFORE, premises considered, the Appeal is hereby
DISMISSED for lack of merit. Accordingly, the Decision appealed
from is sustained in toto.20
Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for
Reconsideration of the NLRC Decision but the same was denied
45
for lack of compelling reason in the Resolution dated 28 October
2002.
Thereafter, the four dismissed employees assailed the NLRC
Decision and Resolution, dated 20 August 2002 and 28 October
2002, respectively, via a Petition for Certiorari to the Court of
Appeals. On 29 April 2004, the Court of Appeals dismissed the
Petition and found no grave abuse of discretion on the part of the
NLRC in rendering its assailed Decision and Resolution. Pertinent
portions of the said decision read:
At any rate, grave abuse of discretion, the ground invoked to
support the petition at bench, has been defined as "such
capricious and whimsical exercise of judgment as is equivalent to
lack of jurisdiction, or, x x x where the power is exercised in an
arbitrary or despotic manner by reason of passion or personal
hostility, and it must be so patent and gross as to amount to an
evasion of positive duty or to a virtual refusal to perform the duty
enjoined or to act at all in contemplation of law. It is not in fact
sufficient that a tribunal, in the exercise of its power, abused its
discretion; (the) abuse must be grave.
Noting that no such abuse of discretion as defined attended the
assailed resolutions, We have no choice but to dismiss the
petition.
WHEREFORE, the petition for certiorari is DISMISSED.21
Petitioner, Benjamin, Gonzales, and Apostol filed a Motion for
Reconsideration but the same was denied by the Court of
Appeals in its Resolution dated 4 October 2004.
On 24 November 2004, petitioner, Benjamin, Gonzales, and
Apostol filed before this Court a Petition for Review on Certiorari
of the Court of Appeals Decision and Resolution, dated 29 April
2004 and 4 October 2004, respectively. In our Resolution dated
24 January 2005, we denied the Petition for failure of Benjamin,
Gonzales, and Apostol to sign the attached verification and
certificate of non-forum shopping, thus:
In accordance with Rule 45 and other related provisions of the
1997 Rules of Civil Procedure, as amended, governing appeals
by certiorari to the Supreme Court, only petitions which are
accompanied by or comply strictly with the requirements specified
therein shall be entertained. On the basis thereof, the Court
Resolves to DENY the petition for review on certiorari dated 24
November 2004 assailing the decision and resolution of the Court
of Appeals for petitioners’ failure to submit a valid certification of
non-forum shopping in accordance with Section 4 (e), Rule 45 in
relation to Section 5, Rule 7, Section 2, Rule 42, and Sections 4
and 5 (d), Rule 56, the attached verification and certification of
non-forum shopping having been signed by only one (1) of four
(4) petitioners.22
On 28 February 2004, petitioner filed a Motion for
Reconsideration alleging therein that:
Since the cause of action of each petitioner is independent of the
other three, petitioner SORIANO, JR. could validly proceed with
his own petition for review on certiorari without the intervention of
his co-petitioners. Consequently, he should not be prejudiced by
the failure of his co-petitioners to verify the petition and submit a
valid certification of non-forum shopping.
Petitioner SORIANO, JR. signed the verification and certificate of
non-forum shopping in the petition for review on certiorari. Hence,
as far as he is concerned, his petition has complied with Section 4
(e), Rule 45 in relation to Section 5, Rule 7, Section 2, Rule 42,
and Sections 4 and 5 (d), Rule 56 of the 1997 Rules of Civil
Procedure. The petition in regard to him should not have been
dismissed by this Honorable Court.23
Hence, we reinstated the Petition but excluded Benjamin,
Gonzales, and Apostol as petitioners.24
Petitioner raises the following issues for our consideration:
I.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS
RULED CONTRARY TO LAW AND EXISTING
JURISPRUDENCE IN REFUSING TO REVIEW THE FACTUAL
FINDINGS OF THE NLRC.
II.
WHETHER OR NOT THE FINDING OF THE NLRC THAT
PETITIONER WAS LAWFULLY TERMINATED FROM
EMPLOYMENT IS SUPPORTED BY SUBSTANTIAL EVIDENCE.
III.
WHETHER OR NOT PETITIONER’S ACCEPTANCE OF
SEPARATION BENEFITS AMOUNTS TO A WAIVER OF HIS
RIGHT TO QUESTION THE VALIDITY OF HIS DISMISSAL.25
Apropos the first issue, petitioner argues that the Court of Appeals
may review the findings of fact of the NLRC in a petition for
certiorari under Rule 65 even if the factual findings of the Labor
Arbiter and the NLRC do not conflict with each other; that the
reliance of the Court of Appeals on the case of Gonzales v.
National Labor Relations Commission26 was contrary to law and
jurisprudence; that our ruling in Gonzales v. National Labor
Relations Commission, to wit: "Only when the factual findings and
conclusion of the Labor Arbiter and NLRC are clearly in conflict
with each other is this Court behooved to give utmost attention to
and thoroughly scrutinize the records of the case, more
particularly the evidence presented, to arrive at a correct
decision," is not absolute; that the aforecited ruling is only a
general rule and is only binding if the factual findings of the Labor
Arbiter and the NLRC are supported by substantial evidence; and
that in the case of Maya Farms Employees Organization v.
National Labor Relations Commission,27 this Court held that
findings of fact of the NLRC, even though these do not conflict
with the findings of the Labor Arbiter, may be reviewed on
certiorari when these findings are made in disregard of the
evidence on record.28
We reject these contentions.
As a general rule, in certiorari proceedings under Rule 65 of the
Rules of Court, the appellate court does not assess and weigh the
sufficiency of evidence upon which the Labor Arbiter and the
NLRC based their conclusion. The query in this proceeding is
limited to the determination of whether or not the NLRC acted
without or in excess of its jurisdiction or with grave abuse of
discretion in rendering its decision. However, as an exception, the
appellate court may examine and measure the factual findings of
the NLRC if the same are not supported by substantial
evidence.29
In the case at bar, the Court of Appeals was correct in limiting its
determination to the issue of whether there was grave abuse of
discretion on the part of the NLRC, and in refusing to review the
factual findings of the said administrative body, since its factual
findings and conclusions are anchored on substantial evidence.
46
The Labor Arbiter, the NLRC, and the Court of Appeals all found
that substantial evidence supports the absence of illegal dismissal
in the present case.
Article 283 of the Labor Code provides that an employer may
dismiss from work an employee by reason of redundancy. The
same provision also states the procedural requirements for the
validity of the dismissal, viz:
ART. 283. CLOSURE OF ESTABLISHMENT AND REDUCTION
OF PERSONNEL. – The employer may also terminate the
employment of any employee due to the installation of labor
saving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the
worker and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the
worker affected thereof shall be entitled to a separation pay
equivalent to at least his one month pay or to at least one (1)
month pay for every year of service, whichever is higher.
(Emphases supplied.)
In upholding the legality of petitioner’s dismissal from work, the
NLRC relied on the documents submitted by the respondent
PLDT showing compliance with the requirements abovestated, to
wit: 1) a letter notifying the Director of the DOLE-NCR of the
impending termination from work of the petitioner by reason of
redundancy and stating the grounds/reasons for the
implementation of the redundancy program;30 2) a letter apprising
the petitioner of his dismissal from employment due to
redundancy;31 3) a receipt certifying that the petitioner had already
received his separation pay from the respondent PLDT; 32 4) a
release/waiver/quitclaim executed by the petitioner in favor of the
respondent PLDT;33 and 5) affidavits executed by the officers of
the respondent PLDT explaining the reasons and necessities for
the implementation of the redundancy program.34 Petitioner failed
to question, impeach or refute the existence, genuineness, and
validity of these documents.
It is clear that the foregoing documentary evidence constituted
substantial evidence to support the findings of Labor Arbiter
Lustria and the NLRC that petitioner’s employment was
terminated by respondent PLDT due to a valid or legal
redundancy program since substantial evidence merely refers to
that amount of evidence which a reasonable mind might accept as
adequate to support a conclusion.35
With regard to petitioner’s allegation that the NLRC committed
grave abuse of discretion in affirming the validity of his dismissal
from work, it should be borne in mind that an act of a court or
tribunal may constitute grave abuse of discretion when the same
is performed in a capricious or whimsical exercise of judgment
amounting to lack of jurisdiction. The abuse of discretion must be
so patent and gross as to amount to an evasion of positive duty,
or to a virtual refusal to perform a duty enjoined by law, as where
the power is exercised in an arbitrary and despotic manner
because of passion or personal hostility.36
As earlier discussed, the ruling of the NLRC was premised on
substantial evidence comprising of documentary proofs submitted
by the respondent PLDT showing compliance with the
requirements of law for terminating petitioner’s employment due to
redundancy. This obviously negates any capriciousness or
arbitrariness in the exercise of judgment of the NLRC. Thus, no
grave abuse of discretion can be ascribed to the NLRC for
promulgating its Decision dated 20 August 2002.
Petitioner’s reliance on the case of Maya Farms Employees
Organization v. National Labor Relations Commission 37is
misplaced. We did not make a categorical statement in the said
case that the Court of Appeals may review the findings of fact of
the NLRC in a petition for certiorari under Rule 65 of the Rules of
Court even if the factual findings of the Labor Arbiter and the
NLRC do not conflict with each other. What we stated therein was
that findings of fact of administrative agencies and quasi-judicial
bodies which have acquired expertise because their jurisdiction is
confined to specific matters are generally accorded not only
respect but even finality and are binding upon this Court unless
there is a showing of grave abuse of discretion, or where it is
clearly shown that they were arrived at arbitrarily or in disregard of
the evidence on record.38
In Maya Farms, this Court deemed it necessary to look into the
factual findings of the NLRC to determine whether there was
grave abuse of discretion on the part of the latter. Even then, we
found substantial evidence to support the NLRC decision and,
thus, we held that there was no grave abuse of discretion on the
part of the latter.
Moreover, the circumstances in Maya Farms are different from the
instant case. The facts and issues of Maya Farms were initially
referred to the Secretary of the DOLE which, subsequently,
endorsed these to the NLRC. Thereafter, the said case was
immediately elevated to this Court by a petition for certiorari under
Rule 65 of the Rules of Court. On the other hand, the present
case was initially referred to the Labor Arbiter, whose findings
were affirmed by the NLRC. From the NLRC, the instant case was
appealed to the Court of Appeals through a petition for certiorari
under Rule 65 of the Rules of Court. Finding that the NLRC did
not commit grave abuse of discretion, the Court of Appeals denied
the petition. Thereafter, this case was brought before this Court by
way of Petition for Review on Certiorari under Rule 45 of the
Rules of Court.
The jurisdiction of this Court in petitions for review on certiorari
under Rule 45 of the Rules of Court is limited to reviewing errors
of law, not of fact.39 Nevertheless, this Court may review the facts
where: (1) the findings and conclusions of the Labor Arbiter, on
one hand, and the NLRC and the Court of Appeals, on the other,
are inconsistent on material and substantial points; (2) the
findings of the NLRC and the Court of Appeals are capricious and
arbitrary; and (3) the Court of Appeals’ findings that are premised
on a supposed absence of evidence are in fact contradicted by
the evidence on record.40 None of the foregoing exceptions to our
limited power to review the facts is present in the case at bar.
Anent the second issue, petitioner contends that there was no
substantial evidence showing that the position of Switchman had
become redundant; that the affidavits of the respondent PLDT’s
officers have no probative value and should not have been
considered by the NLRC because the said officers are not
competent to testify on the technical aspects and effects of
respondent PLDT’s adoption of new technology; that the
existence of redundancy was belied by the respondent PLDT’s
acts of employing outside plant personnel as Switchmen and
Framemen, and of hiring contractual employees to perform the
functions of Switchmen; and that the respondent PLDT did not
present proof of the method and criteria it used in determining the
Switchman to be terminated from work.41
Petitioner further avers that he passed several qualifying exams
and received awards for outstanding work; that by reason of his
qualifications and exemplary work, he should have been among
the last Switchmen to be laid-off; that the respondent PLDT
violated its Collective Bargaining Agreement with the petitioner’s
union, Manggagawa ng Komunikasyon sa Pilipinas, when it
terminated his job; that the respondent PLDT did not undertake
sincere efforts and actual measures to avoid loss of employment
due to its adoption of new technology; that at the time he was
dismissed from work, there were 163 vacant positions for which
he was qualified; that he timely applied for transfer to these
positions; and that the respondent PLDT denied his applications
47
without showing any evidence that the said positions were already
filled up.42
Redundancy exists when the service capability of the workforce is
in excess of what is reasonably needed to meet the demands of
the business enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors such as over-hiring of workers,
decrease in volume of business, or dropping a particular product
line or service activity previously manufactured or undertaken by
the enterprise.43
d. Routine – it is a periodic check of the functioning of
telephone apparatus to detect faults.
The foregoing are some of the duties and work of a switchman.
Considering the number of strowger switches in a single
switchtrain and considering further the number of switchtrains in
an exchange (bearing in mind the ratio of 30 switchtrains is to 200
subsribers), certainly, the use of a step-by-step automatic
telephone system necessitates intensive maintenance costs and
procedures, not to mention the big number of people needed to
perform the maintenance work.
exchange, using the old system, would need 100
personnel working in 3 8-hour shifts to perform
preventive and corrective switch maintenance. On the
other hand, an exchange using the new system would
need only one man working from 8 a.m. to 5 p.m. to take
care of switch maintenance.
22. In addition to the simplicity of maintenance another
advantage of the digital technology is the added services
never before known by ordinary Filipinos. These are to
name a few:

The records show that respondent PLDT had sufficiently
established the existence of redundancy in the position of
Switchman. In his affidavit dated 27 September 1999, Roberto D.
Lazam (Lazam), Senior Manager of GMM Network Surveillance
Division of respondent PLDT, explained:
17. The work, on the other hand, of all the complainants as
switchmen is to MAINTAIN ALL the strowger switches in an
exchange. The exchange is the center of an area’s telephone
network. PLDT, thus, have a Sta. Mesa Exchange that houses the
switchtrains servicing the Sta. Mesa, Manila and its neighboring
areas while it has exchanges in other areas like the Quezon City
exchange, Parañaque, etc., that house the switchtrains of the
telephones in the said respective territories.
18. To maintain a single strowger switch, the following are
performed according to a regular schedule:
a. Spring Gauging – it is the adjusting of stationary
springs to ensure that they open enough to break circuits
when they should, and so "stationary" springs, "follow"
moving springs to exert pressure in break contracts
when the relay is unoperated, and makes contact when
operated.
b. Margining – it is the measuring of moving spring
tension by checking response of the armature and
specific electrical limits. It measures the total mechanical
resistance to the operation of the armature due to the
tension of the springs.
c. Stroke – is the normal armature air gap and is
adjusted by bending the armature backstop.
19. With the advent, however, of new technology that is, (a) The call waiting feature
feature for feature, more advanced than the step-by-step
automatic telephone system, the company decided to (b) Terminal Portability
upgrade its system and abandon the use of the old
system.
(c) Direct dialing long distance features
(International and Domestic)
20. One of the features of the digital technology is that it
does not make use of switches every step of connection.
Instead, a single card studded with microchips is issued (d) Do not disturb feature
for each telephone number so that if a caller wishes to
call another, the microchips in the assigned card do all (e) Automatic Recall
the work and in a speed of light gets in contact with the
microchips of the called party’s card. These "cards" are (f) Redial gadgets
stored in a "bookshelf like" structure and practically
requires zero maintenance because if a card or a chip in
the card is defective, a computer that monitors the entire (g) Call forwarding facilities
exchange will automatically inform the computer operator
of a defect, the card involved, its exact location and the (h) Conference call capacity
specific "bookshelf." All the computer operator has to do
then is to rise up from his chair, proceed to the computer
23. The new technology simply rendered the position of
identified bookshelf, locate the card, pull out the card
switchmen redundant. And since there is no other
from the "bookshelf", throw it in the waste-can, and put in
position available and suited for their qualifications, the
a new card programmed of course with the telephone
company had no other option but to terminate their
number. Programming a card, upon the other hand, is a
employment under a redundancy program.
fairly simple procedure that it is almost similar to the
programming of the PIN number of an ATM card.
24. With the features of the new system, it certainly
cannot be said that the company’s decision and
21. With the utter simplicity of the above system, albeit
implementation of the redundancy program was arbitrary
ultimately hi-tech, a lot of tedious tasks have been done
or whimsical.44
away with. Where before a big number of switchmen
were required to keep the system in shape and where
before every strowger switch was scrutinized and It is evident from the foregoing facts that respondent PLDT’s
measured, the new system requires only one human utilization of high technology equipment in its operation such as
being to ensure that an exchange servicing a million computers and digital switches necessarily resulted in the
subscribers is in tip top shape. To illustrate, consider an reduction of the demand for the services of a Switchman since
exchange serving 50,000 subscribers. Such an computers and digital switches can aptly perform the function of
48
several Switchmen. Indubitably, the position of Switchman has
become redundant.
As to whether Lazam was competent to testify on the effects of
respondent PLDT’s adoption of new technology vis-à-vis the
petitioner’s position of Switchman, the records show that Lazam
was highly qualified to do so. He is a licensed electrical engineer
and has been employed by the respondent PLDT since 1971. He
was a Senior Manager for Switching Division in several offices of
the respondent PLDT, and had attended multiple training
programs on Electronic Switching Systems in progressive
countries. He was also a training instructor of Switchmen in the
respondent’s office.45
The fact that respondent PLDT hired contractual employees after
implementing its redundancy program does not necessarily
negate the existence of redundancy. As amply stated by the
respondent PLDT, such hiring was intended solely for winding up
operations using the old system.
The respondent PLDT, as employer, has the recognized right and
prerogative to select the persons to be hired and to designate the
work as well as the employee or employees to perform it.46 This
includes the right of the respondent PLDT to determine the
employees to be retained or discharged and who among the
applicants are qualified and competent for a vacant position. The
rationale for this principle is that respondent PLDT is in the best
position to ascertain what is proper for the advancement of its
interest. Thus, this Court cannot interfere in the wisdom and
soundness of the respondent PLDT’s decision as to who among
the Switchmen should be retained or discharged or who should be
transferred to vacant positions, as long as such was made in good
faith and not for the purpose of curbing the rights of an
employee.47 Since the respondent PLDT determined that
petitioner’s services are no longer necessary either as a
Switchman or in any other position, and such determination was
made in good faith and in furtherance of its business interest, the
petitioner’s contention that he should be the last switchman to be
laid-off by reason of his qualifications and outstanding work must
fail.
Coming now to the third issue, petitioner asseverates that his
acceptance of separation pay from the respondent PLDT does not
bar the filing of his complaint for illegal dismissal against the latter,
nor does it imply that he had already waived his right to question
the validity of his dismissal; that he accepted the separation pay
only after the lapse of two months from the time he filed an illegal
dismissal case against respondent PLDT; that he had no intention
of accepting the separation pay; that he was only forced to accept
the separation pay when his parent fell ill and, thus, needed a
large amount of money to cover the expenses for treatment; and
that he was compelled to execute a quitclaim in favor of
respondent PLDT since this was the only way he could avail
himself of the necessary amount for the treatment of his parent.48
Generally, deeds of release, waiver or quitclaims cannot bar
employees from demanding benefits to which they are legally
entitled or from contesting the legality of their dismissal since
quitclaims are looked upon with disfavor and are frowned upon as
contrary to public policy.49 Where, however, the person making
the waiver has done so voluntarily, with a full understanding
thereof, and the consideration for the quitclaim is credible and
reasonable, the transaction must be recognized as being a valid
and binding undertaking.50
The requisites for a valid quitclaim are: 1) that there was no fraud
or deceit on the part of any of the parties; 2) that the consideration
for the quitclaim is credible and reasonable; and 3) that the
contract is not contrary to law, public order, public policy, morals
or good customs or prejudicial to a third person with a right
recognized by law.51
It cannot be gainfully said that the petitioner did not fully
understand the consequences of signing the "Receipt, Release,
and Quitclaim" dated 15 August 1996. Petitioner is not an illiterate
person who needs special protection. He held responsible
positions in the office of the respondent PLDT and had attended
and passed various training courses for his position. It is thus
assumed that he comprehended the contents of the "Receipt,
Release, and Quitclaim" which he signed on 15 August 1996.
There is also no showing that the execution thereof was tainted
with deceit or coercion. By his own admission, petitioner signed
the quitclaim voluntarily, compelled by personal circumstances,
rather than by respondent PLDT. He had received his separation
pay and benefited therefrom. Certainly, it would result in unjust
enrichment on the part of the petitioner if he is allowed to question
the legality of his dismissal from work.
Further, the petitioner received separation pay from the
respondent PLDT, the amount of which was more than the
amount required under Article 283 of the Labor Code.52 Indeed,
there was a credible and reasonable consideration for his
separation from work.
Given the foregoing circumstances, the "Receipt, Release, and
Quitclaim" dated 15 August 1996 should be considered as legal
and binding on petitioner. It is settled that a legitimate waiver
which represents a voluntary and reasonable settlement of a
worker’s claim should be respected as the law between the
parties.53 Thus, the petitioner is bound by the "Receipt, Release
and Quitclaim" dated 15 August 1996 and, as such, he is already
precluded from assailing the validity of his dismissal.
Finally, it should be noted that the ruling of Labor Arbiter Lustria
sustaining the validity of petitioner’s dismissal from work by
reason of a valid redundancy program was affirmed by the NLRC
and the Court of Appeals. As heretofore discussed, their findings
were predicated on the evidence on records and prevailing
jurisprudence. It is well-established that the findings of the Labor
Arbiter, the NLRC and the Court of Appeals, when in absolute
agreement, are accorded not only respect but even finality as long
as they are supported by substantial evidence.54 We find no
compelling reason to depart from this principle.
WHEREFORE, the petition is DENIED. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 75152
dated 29 April 2004 and 4 October 2004, respectively, are hereby
AFFIRMED. No costs.
SO ORDERED.
G.R. No. 106256 December 28, 1994
MAYA FARMS EMPLOYEES ORGANIZATION, MAYA REALTY
AND LIVESTOCK SUPERVISORY UNION, MAYA FARMS
EMPLOYEES ASSOCIATION, and MAYA FARMS, INC.
SUPERVISORY UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, MAYA
REALTY & LIVESTOCK, INC., MAYA FARMS, INC., and
LIBERTY FLOUR MILLS, INC., respondents.
Paterno D. Menzon Law Office for petitioners.
Angara, Abello, Concepcion, Regala & Cruz for private
respondents.
KAPUNAN, J.:
49
This petition for review on certiorari seeks to set aside the
decision of public respondent National Labor Relations
Commission (NLRC) which upheld the legality of the separation of
sixty-six (66) employees who are members of petitioner unions,
thereby dismissing petitioners' complaint against private
respondents for violation of collective bargaining agreement
(CBA) and unfair labor practice.
Private respondents Maya Farms, Inc. and Maya Realty and
Livestock Corporation belong to the Liberty Mills group of
companies whose undertakings include the operation of a meat
processing plant which produces ham, bacon, cold cuts,
sausages and other meat and poultry products.
Petitioners, on the other hand, are the exclusive bargaining
agents of the employees of Maya Farms, Inc. and the Maya
Realty and Livestock Corporation.
On April 12, 1991, private respondents announced the adoption of
an early retirement program as a cost-cutting measure
considering that their business operations suffered major
setbacks over the years. The program was voluntary and could be
availed of only by employees with at least eight (8) years of
service.1 Dialogues were thereafter conducted to give the parties
an opportunity to discuss the details of the program. Accordingly,
the program was amended to reduce the minimum requirement of
eight (8) years of service to only five (5) years.
However, the response to the program was nil. There were only a
few takers. To avert further losses, private respondents were
constrained to look into the companies' organizational set-up in
order to streamline operations. Consequently, the early retirement
program was converted into a special redundancy program
intended to reduce the work force to an optimum number so as to
make operations more viable.
In December 1991, a total of sixty-nine (69) employees from the
two companies availed of the special redundancy program.
On January 17, 1992, the two companies sent letters to sixty-six
(66) employees informing them that their respective positions had
been declared redundant. The notices likewise stated that their
services would be terminated effective thirty (30) days from
receipt thereof. Separation benefits, including the conversion of all
earned leave credits and other benefits due under existing CBAs
were thereafter paid to those affected.
On January 24, 1992, a notice of strike was filed by the petitioners
which accused private respondents, among others, of unfair labor
practice, violation of CBA and discrimination. Conciliation
proceedings were held by the National Conciliation and Mediation
Board (NCMB) but the parties failed to arrive at a settlement.
On February 6, 1992, the two companies filed a petition with the
Secretary of Labor and Employment asking the latter to assume
jurisdiction over the case and/or certify the same for compulsory
arbitration. Thus, on February 12, 1992, the then Acting Labor
Secretary (now Secretary) Nieves Confesor certified the case to
herein public respondent for compulsory arbitration.
On March 4, 1992, the parties were called to a hearing to identify
the issues involved in the case. Thereafter, they were ordered to
submit their respective position papers.
In their position paper, petitioners averred that in the dismissal of
sixty-six (66) union officers and members on the ground of
redundancy, private respondents circumvented the provisions in
their CBA, more particularly, Section 2, Article III thereof. Said
provision reads:
Sec. 2. LIFO RULE. — In all cases of lay-off or
retrenchment resulting in termination of
employment in the line of work, the
Last-In-First-Out (LIFO) Rule must always be
strictly observed.
Petitioners also alleged that the companies' claim that they were
in economic crisis was fabricated because in 1990, a net income
of over 83 million pesos was realized by Liberty Flour Mills Group
of Companies.2 Furthermore, with the termination of the sixty-six
(66) employees pursuant to the special redundancy program, the
remaining work force, especially the drivers, became overworked
and overburdened so much so that they found themselves doing
overtime work and reporting for duty even during rest days.
Invoking the workers' constitutional right to security of tenure,
petitioners prayed for the reinstatement of the sixty-six (66)
employees and the payment of attorney's fees as they were
constrained to hire the services of counsel in order to protect the
workers' rights.
On their part, private respondents contend that their decision to
implement a special redundancy program was an exercise of
management prerogative which could not be interfered with
unless it is shown to be tainted with bad faith and ill motive.
Private respondents explained that they had no choice but to
reduce their work force, otherwise, they would suffer more losses.
Furthermore, they denied that the program violated CBA
provisions.
On June 29, 1992, public respondent rendered a decision, 3 the
dispositive portion of which reads:
WHEREFORE, in view of the foregoing,
judgment is hereby rendered confirming the
legality of the separation of the 66 employees of
management thereby dismissing the charges of
violation of CBA and unfair labor practice on the
part of management. Accordingly, Maya Farms
Incorporated and Maya Realty and Livestocks
Inc. are hereby ordered to comply with its (sic)
undertaking per the notice of termination dated
January 17, 1992 issued to the remaining fifty
three (53) employees paying them their
respective separation benefits as listed in the
attached sheet considered part of this Decision.
Said awards (sic) is in addition to other benefits
as extended by the companies in the letter of
termination.
SO ORDERED.4
Not satisfied with the above-quoted decision, petitioners
interposed the instant petition.
Petitioners maintain that public respondent grossly erred and
gravely abused its discretion when it ruled that: (a) the termination
of the sixty-six (66) employees was in accordance with the LIFO
rule in the CBA; (b) the termination of the sixty-six (66) employees
was in accordance with Article 283 of the Labor Code; and (c) the
payment or offer of payment can substitute for the 30-day
required notice prior to termination.5
A close scrutiny of these assigned errors however, shows that the
same primarily deal with the factual findings of public respondent
which we are not at liberty to set aside in the absence of grave
abuse of discretion amounting to lack or in excess of jurisdiction.
This Court has consistently ruled that findings of fact of
administrative agencies and quasi-judicial bodies which have
acquired expertise because their jurisdiction is confined to specific
50
matters are generally accorded not only respect but even
finality6 and are binding upon this Court unless there is a showing
of grave abuse of discretion,7 or where it is clearly shown that they
were arrived at arbitrarily or in disregard of the evidence on
record.8
Nevertheless, we will look into the factual findings of public
respondent if only to determine whether there was grave abuse of
discretion amounting to lack or in excess of jurisdiction.
The termination of the sixty-six employees was done in
accordance with Article 283 of the Labor Code. The basis for this
was the companies' study to streamline operations so as to make
them more viable. Positions which overlapped each other, or
which are in excess of the requirements of the service, were
declared redundant.
Article 283 provides:
Art. 283. Closure of establishment and
reduction of personnel. — The employer may
also terminate the employment of any employee
due to the installation of labor-saving devises,
redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the
establishment or undertaking unless the closing
is for the purpose of circumventing in the
provisions of this title, by serving a written
notice on the workers and the Department of
Labor and Employment at least one (1) month
before the intended date thereof. In case of
retrenchment to prevent losses of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the one
(1) month pay or at least
one-half (1/2) pay for every year of service,
whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
We fully agree with the findings and conclusions of the public
respondent on the issue of termination, to wit:
We sustain the companies' prerogative to adopt
the alleged redundancy/retrenchment program
to minimize if not, to avert losses in the conduct
of its operations. This has been recognized in a
line of cases. (Wiltshire File Co. vs. NLRC, G.R.
No. L-82249, February 7, 1991). However, the
companies' decision on this matter is not
absolute. The basis for such an action must be
far from being whimsical and the same must be
proved by substantial evidence. In addition, the
implementation of such a decision or policy
must be in accordance with existing laws, rules
and procedure and provisions of the CBA
between the parties, if there be any. Short of
any of these conditions, management policy to
pursue and terminate its employees allegedly to
avert losses, must fail.
In subject case, the 66 complaining employees
were separated from service as a result of the
decision of management to limit its operations
and streamline positions and personnel
requirements.
In the case of Maya Farms, Inc. its meat
processing department, prior to the adoption of
special redundancy program had four (4)
sections each of which is headed by an
assistant superintendent. These 3 sections are:
(a) meat processing; (b) slaughterhouse; (c)
packing. With the implementation of the
decision of management to limit meat
processing with sausages as the only output,
only one position for assistant superintendent
was retained that of Asst. Superintendent for
meat processing held by Lydia Bandong.
(Plantilla attached to the letter of May 24, 1992;
also Exh. "E." Likewise, positions of
slicer/seater operator, debonner/skinner, ham
and bacon operative, were scrapped. Similarly,
positions for packers were decreased retaining
only five positions out of 21 packers. Also
affected were the positions of egg
sorters/stockers as only 4 positions were
retained out of ten (10) positions.
A close examination of the positions retained by
management show that said positions such as
egg sorter, debonner were but the minimal
positions required to sustain the limited
functions/operations of the meat processing
department. In the absence of any evidence to
prove bad faith on the part of management in
arriving at such decision, which records on
hand failed to show in instant case, the
rationality of the act of management in this
regard must be sustained. While it may be true
that the Liberty Flour Mills Group of Companies
as a whole posted a net income of P83.3
Million, it is admitted that with respect to
operations of the meat processing and livestock
which were undertaken by herein companies
sustained losses in the sum of P2,257,649.88
(Exh. "3"). This is the reason, as advanced by
management, for its decision to streamline
positions resulting in the reduction of manpower
compliment (sic).9
In Abbott Laboratories (Phils.) Inc. vs. NLRC, 10 we had occasion
to uphold the employer in its exercise of what are clearly
management prerogatives, thus:
The hiring, firing, transfer, demotion, and
promotion of employees has been traditionally,
identified as a management prerogative subject
to limitations found in law, a collective
bargaining agreement or general principles of
fair play and justice. This is a function
associated with the employer's inherent right to
control and manage effectively its enterprise.
Even as the law is solicitous of the welfare of
the employees, it must also protect the right of
an employer to exercise what are clearly
management prerogatives. The free will of
management to conduct its own business
affairs to achieve its purpose cannot be denied
(see Dangan vs. National Labor Relations
Commission, 127 SCRA 706).
The rule is well-settled that labor laws discourage interference
with an employer's judgment in the conduct of his business. Even
as the law is solicitous of the welfare of employees, it must also
protect the right of an employer to exercise what are clearly
management prerogatives. As long as the company's exercise of
the same is in good faith to advance its interest and not for the
purpose of defeating or circumventing the rights of employees
under the laws or valid agreements, such exercise will be
upheld. 11
51
The NLRC correctly held that private respondents did not violate
the LIFO rule under Section 2, Article III of the CBA which
provides:
Sec. 2. LIFO RULE. In all cases of lay-off or
retrenchment resulting in termination of
employment in the line of work, the
Last-in-First-Out (LIFO) Rule must always be
strictly observed.
It is not disputed that the LIFO rule applies to termination of
employment in the line of work. 12 Verily, what is contemplated in
the LIFO rule is that when there are two or more employees
occupying the same position in the company affected by the
retrenchment program, the last one employed will necessarily be
the first to go.
Moreover, the reason why there was no violation of the LIFO rule
was amply explained by public respondent in this wise:
. . . . The LIFO rule under the CBA is explicit. It
is ordained that in cases of retrenchment
resulting in termination of employment in line of
work, the employee who was employed on the
latest date must be the first one to go. The
provision speaks of termination in the line of
work. This contemplates a situation where
employees occupying the same position in the
company are to be affected by the retrenchment
program. Since there ought to be a reduction in
the number of personnel in such positions, the
length of service of each employees is the
determining factor, such that the employee who
has a longer period of employment will be
retained.
In the case under consideration, specifically
with respect to Maya Farms, several positions
were affected by the special involuntary
redundancy program. These are packers, egg
sorters/stockers, drivers. In the case of packers,
prior to the involuntary redundancy program,
twenty-one employees occupied the position of
packers. Out of this number, only 5 were
retained. In this group of employees, the
earliest date of employment was October 27,
1969, and the latest packer was employed in
1989. The most senior employees occupying
the position of packers who were retained are
as follows:
Santos, Laura C. Oct. 27,
1969
Estrada, Mercedes Aug. 20,
1970
Hortaleza, Lita June 11, 1971
Jimenez, Lolita April 25, 1972
Aquino, Teresita June 25,
1975
All the other packers employed after June 2,
1975 (sic) were separated from the service.
The same is true with respect to egg sorters.
The egg sorters employed on or before April 26,
1972 were retained. All those employed after
said date were separated.
With respect to the position of drivers, there
were eight drivers prior to the involuntary
redundancy program. Thereafter only 3
positions were retained. Accordingly, the three
drivers who were most senior in terms of period
of employment, were retained. They are:
Ceferino D. Narag, Efren Macaraig and Pablito
Macaraig.
The case of Roberta Cabrera and Lydia C.
Bandong, Asst. Superintendent for packing and
Asst. Superintendent for meat processing
respectively was presented by the union as an
instance where the LIFO rule was not observed
by management. The union pointed out that
Lydia Bandong who was retained by
management was employed on a much later
date than Roberta Cabrera, and both are
Assistant Superintendent. We cannot sustain
the union's argument. It is indeed true that
Roberta Cabrera was employed earlier
(January 28, 1961) and (sic) Lydia Bandong
(July 9, 1966). However, it is maintained that in
meat processing department there were 3 Asst.
Superintendents assigned as head of the 3
sections thereat. The reason advanced by the
company in retaining Bandong was that as
Asst. Superintendent for meat processing she
could "already take care of the operations of the
other sections." The nature of work of each
assistant superintendent as well as experience
were taken into account by management. Such
criteria was not shown to be whimsical nor
carpricious (sic). 13(Emphasis supplied).
Finally, contrary to petitioners' contention, there is nothing on
record to show that the 30-day notice of termination to the
workers was disregarded and that the same substituted with
separation pay by private respondents. As found by public
respondent, written notices of separation were sent to the
employees on January 17, 1992. The notices expressly stated
that the termination of employment was to take effect one month
from receipt thereof. Therefore, the allegation that separation pay
was given in lieu of the 30-day notice required by law is baseless.
WHEREFORE, finding no grave abuse of discretion amounting to
lack or in excess of jurisdiction on the part of public respondent,
the instant petition is hereby DISMISSED.
SO ORDERED.
Padilla, Davide, Jr., Bellosillo and Quiason, JJ., concur.
G.R. No. 109002 April 12, 2000
DELA SALLE UNIVERSITY, petitioner,
vs.
DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION
(DLSUEA) and BUENAVENTURA MAGSALIN,respondents.
x-----------------------x
G.R. No. 110072 April 12, 2000
DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION-
NATIONAL FEDERATION OF TEACHERS AND EMPLOYEES
UNION (DLSUEA-NAFTEU), petitioner,
vs.
DELA SALLE UNIVERSITY and BUENAVENTURA
MAGSALIN, respondents.
52

BUENA, J.:
Filed with this Court are two petitions for certiorari,1 the first
petition with preliminary injunction and/or temporary restraining
order,2 assailing the decision of voluntary arbitrator Buenaventura
Magsalin, dated January 19, 1993, as having been rendered with
grave abuse of discretion amounting to lack or excess of
jurisdiction. These two petitions have been consolidated inasmuch
as the factual antecedents, parties involved and issues raised
therein are interrelated.3
The facts are not disputed and, as summarized by the voluntary
arbitrator, are as follows. On December 1986, Dela Salle
University (hereinafter referred to as UNIVERSITY) and Dela
Salle University Employees Association — National Federation of
Teachers and Employees Union (DLSUEA-NAFTEU), which is
composed of regular non-academic rank and file
employees,4 (hereinafter referred to as UNION) entered into a
collective bargaining agreement with a life span of three (3) years,
that is, from December 23, 1986 to December 22, 1989.5 During
the freedom period, or 60 days before the expiration of the said
collective bargaining agreement, the Union initiated negotiations
with the University for a new collective bargaining
agreement6 which, however, turned out to be unsuccessful,
hence, the Union filed a Notice of Strike with the National
Conciliation and Mediation Board, National Capital Region. 7 After
several conciliation-mediation meetings, five (5) out of the eleven
(11) issues raised in the Notice of Strike were resolved by the
parties. A partial collective bargaining agreement was thereafter
executed by the parties.8 On March 18, 1991, the parties entered
into a Submission Agreement, identifying the remaining six (6)
unresolved issues for arbitration, namely: "(1) scope of the
bargaining unit, (2) union security clause, (3) security of tenure,
(4) salary increases for the third and fourth years [this should
properly read second and third years]9 of the collective bargaining
agreement, (5) indefinite union leave, reduction of the union
president's workload, special leave, and finally, (6) duration of the
agreement." 10 The parties appointed Buenaventura Magsalin as
voluntary arbitrator. 11 On January 19, 1993, the voluntary
arbitrator rendered the assailed decision. 12
In the said decision, the voluntary arbitrator, on the first issue
involving the scope of the bargaining unit, ruled that ". . . the
Computer Operators assigned at the CSC [Computer Services
Center], just like any other Computer Operators in other units,
[should be] included as members of the bargaining unit," 13 after
finding that "[e]vidently, the Computer Operators are presently
doing clerical and routinary work and had nothing to do with [the]
setting of management policies for the University, as [may be]
gleaned from the duties and responsibilities attached to the
position and embodied in the CSC [Computer Services Center]
brochure. They may have, as argued by the University, access to
vital information regarding the University's operations but they are
not necessarily confidential." 14 Regarding the discipline officers,
the voluntary arbitrator ". . . believes that this type of employees
belong (sic) to the rank-and-file on the basis of the nature of their
job." 15 With respect to the employees of the College of St.
Benilde, the voluntary arbitrator found that the College of St.
Benilde has a personality separate and distinct from the University
and thus, held ". . . that the employees therein are outside the
bargaining unit of the University's rank-and-file employees." 16
On the second issue regarding the propriety of the inclusion of a
union shop clause in the collective bargaining agreement, in
addition to the existing maintenance of membership clause, the
voluntary arbitrator opined that a union shop clause ". . . is not a
restriction on the employee's right of (sic) freedom of association
but rather a valid form of union security while the CBA is in force
and in accordance with the Constitutional policy to promote
unionism and collective bargaining and negotiations. The parties
therefore should incorporate such union shop clause in their
CBA." 17
On the third issue with respect to the use of the "last-in-first-out"
method in case of retrenchment and transfer to other schools or
units, the voluntary arbitrator upheld the ". . . elementary right and
prerogative of the management of the University to select and/or
choose its employees, a right equally recognized by the
Constitution and the law. The employer, in the exercise of this
right, can adopt valid and equitable grounds as basis for lay-off or
separation, like performance, qualifications, competence, etc.
Similarly, the right to transfer or reassign an employee is an
employer's exclusive right and prerogative." 18
Regarding the fourth issue concerning salary increases for the
second and third years of the collective bargaining agreement, the
voluntary arbitrator opined that the ". . .proposed budget of the
University for SY 1992-93 could not sufficiently cope up with the
demand for increases by the Union. . . . . . . . With the present
financial condition of the University, it cannot now be required to
grant another round of increases through collective bargaining
without exhausting its coffers for other legitimate needs of the
University as an institution," 19 thus, he ruled that ". . . the
University can no longer be required to grant a second round of
increase for the school years under consideration and charge the
same to the incremental proceeds." 20
On the fifth issue as to the Union's demand for a reduction of the
workload of the union president, special leave benefits and
indefinite union leave with pay, the voluntary arbitrator rejected
the same, ruling that unionism ". . . is no valid reason for the
reduction of the workload of its President," 21 and that there is ". . .
no sufficient justification to grant an indefinite leave." 22 Finding
that the Union and the Faculty Association are not similarly
situated, technically and professionally, 23 and that "[w]hile
professional growth is highly encouraged on the part of the rank-
and-file employees, this educational advancement would not
serve in the same degree as demanded of the faculty
members," 24 the voluntary arbitrator denied the Union's demand
for special leave benefits.
On the last issue regarding the duration of the collective
bargaining agreement, the voluntary arbitrator ruled that ". . .
when the parties forged their CBA and signed it on 19 November
1990, where a provision on duration was explicitly included, the
same became a binding agreement between them.
Notwithstanding the Submission Agreement, thereby reopening
this issue for resolution, this Voluntary Arbitrator is constrained to
respect the original intention of the parties, the same being not
contrary to law, morals or public policy." 25 As to the economic
aspect of the collective bargaining agreement, the voluntary
arbitrator opined that the ". . . economic provisions of the CBA
shall be re-opened after the third year in compliance with the
mandate of the Labor Code, as amended." 26
Subsequently, both parties filed their respective motions for
reconsideration which, however, were not entertained by the
voluntary arbitrator "pursuant to existing rules and jurisprudence
governing voluntary arbitration cases." 27
On March 5, 1993, the University filed with the Second Division of
this Court, a petition for certiorari with temporary restraining order
and/or preliminary injunction assailing the decision of the
voluntary arbitrator, as having been rendered "in excess of
jurisdiction and/or with grave abuse of
discretion." 28 Subsequently, on May 24, 1993, the Union also filed
a petition for certiorari with the First Division. 29 Without giving due
course to the petition pending before each division, the First and
Second Divisions separately resolved to require the respondents
in each petition, including the Solicitor General on behalf of the
voluntary arbitrator, to file their respective Comments. 30 Upon
53
motion by the Solicitor General dated July 29, 1993, both petitions
were consolidated and transferred to the Second Division. 31
In his consolidated Comment 32 filed on September 9, 1993 on
behalf of voluntary arbitrator Buenaventura C. Magsalin, the
Solicitor General agreed with the voluntary arbitrator's assailed
decision on all points except that involving the employees of the
College of St. Benilde. According to the Solicitor General, the
employees of the College of St. Benilde should have been
included in the bargaining unit of the rank-and-file employees of
the University. 33 The Solicitor General came to this conclusion
after finding ". . . sufficient evidence to justify the Union's proposal
to consider the University and the CSB [College of St. Benilde] as
only one entity because the latter is but a mere integral part of the
University," to wit: 34
1. One of the duties and responsibilities of the CSB's
Director of Academic Services is to coordinate with the
University's Director of Admissions regarding the
admission of freshmen, shiftees and transferees (Annex
"3" of the University's Reply);
2. Some of the duties and responsibilities of the CSB's
Administrative Officer are as follows:
A. xxx xxx xxx
4. Recommends and implements personnel policies and
guidelines (in accordance with the Staff Manual) as well
as pertinent existing general policies of the university as
a whole. . . . .
12. Conducts and establishes liaison with all the offices
concerned at the Main Campus as well (sic) with other
government agencies on all administrative-related
matters. . . .
B. xxx xxx xxx
7. Handles processing, canvassing and direct purchasing
of all requisitions worth more than P10,000 or less.
Coordinates and canvasses with the Main Campus all
requisitions worth more than P10,000. . . .
C. xxx xxx xxx
7. Plans and coordinates with the Security and Safety
Committee at the Main Campus the development of a
security and safety program during times of emergency
or occurrence of fire or other natural calamities. . . .
(Annex "4" of the University's Reply).
3. The significant role which the University assumes in
the admission of students at the CSB is revealed in the
following provisions of the CSB's Bulletin for Arts and
Business Studies Department for the schoolyear 1992-
1993, thus:
Considered in the process of admission for a (sic) high
school graduate applicants are the following criteria:
results of DLSU College Entrance Examination . . . .
Admission requirements for transferees are: . . . and an
acceptable score in the DLSU admission test. . . .
Shiftees from DLSU who are still eligible to enroll may be
admitted in accordance with the DLSU policy on shifting.
Considering that there sometimes exist exceptional
cases where a very difficult but temporary situation
renders a DLSU student falling under this category a last
chance to be re-admitted provided he meets the cut-off
scores required in the qualifying examination
administered by the university. . . .
He may not be remiss in his study obligations nor incur
any violation whatsoever, as such will be taken by the
University to be an indication of his loss of initiative to
pursue further studies at DLSU. In sch (sic) a case, he
renders himself ineligible to continue studying at DLSU.
DLSU thus reserves the right to the discontinuance of
the studies of any enrolee whose presence is inimical to
the objectives of the CSB/DLSU. . . .
As a college within the university, the College of St.
Benilde subscribes to the De La Salle Mission."
(Annexes "C-1," "C-2," and "C-3" of the Union's
Consolidated Reply and Rejoinder)
4. The academic programs offered at the CSB are
likewise presented in the University's Undergraduate
Prospectus for schoolyear 1992-1993 (Annex "D" of the
Union's Consolidated Reply and Rejoinder).
5. The Leave Form Request (Annex "F" of the Union's
Position Paper) at the CSB requires prior permission
from the University anent leaves of CSB employees, to
wit:
AN EMPLOYEE WHO GOES ON LEAVE WITHOUT
PRIOR PERMISSION FROM THE UNIVERSITY OR
WHO OVEREXTENDS THE PERIOD OF HIS
APPROVED LEAVE WITHOUT SECURING
AUTHORITY FROM THE UNIVERSITY, OR WHO
REFUSE TO BE RECALLED FROM AN APPROVED
LEAVE SHALL BE CONSIDERED ABSENT WITHOUT
LEAVE AND SHALL BE SUBJECT TO DISCIPLINARY
ACTION.
6. The University officials themselves claimed during the
1990 University Athletic Association of the Philippines
(UAAP) meet that the CSB athletes represented the
University since the latter and the CSB comprise only
one entity.
On February 9, 1994, this Court resolved to give due course to
these consolidated petitions and to require the parties to submit
their respective memoranda. 35
In its memorandum filed on April 28, 1994, 36 pursuant to the
above-stated Resolution, 37 the University raised the following
issues for the consideration of the Court: 38
I.
WHETHER OR NOT GRAVE ABUSE OF DISCRETION
WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE INCLUDED, WITHIN THE
BARGAINING UNIT COMPRISING THE UNIVERSITY'S
RANK-AND-FILE EMPLOYEES, THE COMPUTER
OPERATORS ASSIGNED AT THE UNIVERSITY'S
COMPUTER SERVICES CENTER AND THE
UNIVERSITY'S DISCIPLINE OFFICERS, AND WHEN
HE EXCLUDED THE COLLEGE OF SAINT BENILDE
EMPLOYEES FROM THE SAID BARGAINING UNIT.
II.
WHETHER OR NOT GRAVE ABUSE OF DISCRETION
WAS COMMITTED BY THE VOLUNTARY
54
 ARBITRATOR WHEN HE UPHELD THE UNION'S
DEMAND FOR THE INCLUSION OF A UNION SHOP
CLAUSE IN THE PARTIES' COLLECTIVE
BARGAINING AGREEMENT.
III.
WHETHER OR NOT GRAVE ABUSE OF DISCRETION
WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE DENIED THE UNION'S
PROPOSAL FOR THE "LAST-IN-FIRST-OUT" METHOD
OF LAY-OFF IN CASES OF RETRENCHMENT.
IV.
WHETHER OR NOT GRAVE ABUSE OF DISCRETION
WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE RULED THAT THE
UNIVERSITY CAN NO LONGER BE REQUIRED TO
GRANT A SECOND ROUND OF WAGE INCREASES
FOR THE SCHOOL YEARS 1991-92 AND 1992-93 AND
CHARGE THE SAME TO THE INCREMENTAL
PROCEEDS.
V.
WHETHER OR NOT GRAVE ABUSE OF DISCRETION
WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE DENIED THE UNION'S
PROPOSALS ON THE DELOADING OF THE UNION
PRESIDENT, IMPROVED LEAVE BENEFITS AND
INDEFINITE UNION LEAVE WITH PAY.
The Union, on the other hand, raised the following issues, in its
memorandum, 39 filed pursuant to Supreme Court Resolution
dated February 9, 1994, 40 to wit; that the voluntary arbitrator
committed grave abuse of discretion in:
(1) FAILING AND/OR REFUSING TO PIERCE THE
VEIL OF CORPORATE FICTION OF THE COLLEGE
OF ST. BENILDE-DLSU DESPITE THE PRESENCE OF
SUFFICIENT BASIS TO DO SO AND IN FINDING THAT
THE EMPLOYEES THEREAT ARE OUTSIDE OF THE
BARGAINING UNIT OF THE DLSU'S RANK-AND-FILE
EMPLOYEES. HE ALSO ERRED IN HIS
INTERPRETATION OF THE APPLICATION OF THE
DOCTRINE;
(2) DENYING THE PETITIONER'S PROPOSAL FOR
THE "LAST-IN FIRST-OUT" METHOD OF LAY-OFF IN
CASE OF RETRENCHMENT AND IN UPHOLDING THE
ALLEGED MANAGEMENT PREROGATIVE TO
SELECT AND CHOOSE ITS EMPLOYEES
DISREGARDING THE BASIC TENETS OF SOCIAL
JUSTICE AND EQUITY UPON WHICH THIS
PROPOSAL WAS FOUNDED;
(3) FINDING THAT THE MULTISECTORAL
COMMITTEE IN THE RESPONDENT UNIVERSITY IS
THE LEGITIMATE GROUP WHICH DETERMINES AND
SCRUTINIZES ANNUAL SALARY INCREASES AND
FRINGE BENEFITS OF THE EMPLOYEES;
(4) HOLDING THAT THE 70% SHARE IN THE
INCREMENTAL TUITION PROCEEDS IS THE ONLY
SOURCE OF SALARY INCREASES AND FRINGE
BENEFITS OF THE EMPLOYEES;
(5) FAILING/REFUSING/DISREGARDING TO
CONSIDER THE RESPONDENT UNIVERSITY'S
FINANCIAL STATEMENTS FACTUALLY TO
DETERMINE THE FORMER'S CAPABILITY TO GRANT
THE PROPOSED SALARY INCREASES OVER AND
ABOVE THE 70% SHARE IN THE INCREMENTAL
TUITION PROCEEDS AND IN GIVING WEIGHT AND
CONSIDERATION TO THE RESPONDENT
UNIVERSITY'S PROPOSED BUDGET WHICH IS
MERELY AN ESTIMATE.
(6) FAILING TO EQUATE THE POSITION AND
RESPONSIBILITIES OF THE UNION PRESIDENT
WITH THOSE OF THE PRESIDENT OF THE FACULTY
ASSOCIATION WHICH IS NOT EVEN A LEGITIMATE
LABOR ORGANIZATION AND IN SPECULATING THAT
THE PRESIDENT OF THE FACULTY ASSOCIATION
SUFFERS A CORRESPONDING REDUCTION IN
SALARY ON THE ACCOUNT OF THE REDUCTION OF
HIS WORKLOAD; IN FAILING TO APPRECIATE THE
EQUAL RIGHTS OF THE MEMBERS OF THE UNION
AND OF THE FACULTY FOR PROFESSIONAL
ADVANCEMENT AS WELL AS THE DESIRABLE
EFFECTS OF THE INSTITUTIONALIZATION OF THE
SPECIAL LEAVE AND WORKLOAD REDUCTION
BENEFITS. 41
The question which now confronts us is whether or not the
voluntary arbitrator committed grave abuse of discretion in
rendering the assailed decision, particularly, in resolving the
following issues: (1) whether the computer operators assigned at
the University's Computer Services Center and the University's
discipline officers may be considered as confidential employees
and should therefore be excluded from the bargaining unit which
is composed of rank and file employees of the University, and
whether the employees of the College of St. Benilde should also
be included in the same bargaining unit; (2) whether a union shop
clause should be included in the parties' collective bargaining
agreement, in addition to the existing maintenance of membership
clause; (3) whether the denial of the Union's proposed "last-in-
first-out" method of laying-off employees, is proper; (4) whether
the ruling that on the basis of the University's proposed budget,
the University can no longer be required to grant a second round
of wage increases for the school years 1991-92 and 1992-93 and
charge the same to the incremental proceeds, is correct; (5)
whether the denial of the Union's proposals on the deloading of
the union president, improved leave benefits and indefinite union
leave with pay, is proper; (6) whether the finding that the multi-
sectoral committee in the University is the legitimate group which
determines and scrutinizes the annual salary increases and fringe
benefits of the employees of the University, is correct; and (7)
whether the ruling that the 70% share in the incremental tuition
proceeds is the only source of salary increases and fringe benefits
of the employees, is proper.
Now, before proceeding to the discussion and resolution of the
issues raised in the pending petitions, certain preliminary matters
call for disposition. As we reiterated in the case of Caltex Refinery
Employees Association (CREA) vs. Jose S. Brillantes, 42 the
following are the well-settled rules in a petition
for certiorari involving labor cases. "First, the factual findings of
quasi-judicial agencies (such as the Department of Labor and
Employment), when supported by substantial evidence, are
binding on this Court and entitled to great respect, considering the
expertise of these agencies in their respective fields. It is well-
established that findings of these administrative agencies are
generally accorded not only respect but even finality. 43
Second, substantial evidence in labor cases is such amount of
relevant evidence which a reasonable mind will accept as
adequate to justify a conclusion. 44
55
Third, in Flores vs. National Labor Relations Commission, 45 we
explained the role and function of Rule 65 as an extraordinary
remedy:
It should be noted, in the first place, that the instant
petition is a special civil action for certiorari under Rule
65 of the Revised Rules of Court. An extraordinary
remedy, its use is available only and restrictively in truly
exceptional cases — those wherein the action of an
inferior court, board or officer performing judicial or
quasi-judicial acts is challenged for being wholly void on
grounds of jurisdiction. The sole office of the writ
of certiorari is the correction of errors of jurisdiction
including the commission of grave abuse of discretion
amounting to lack or excess of jurisdiction. It does not
include correction of public respondent NLRC's
evaluation of the evidence and factual findings based
thereon, which are generally accorded not only great
respect but even finality.
No question of jurisdiction whatsoever is being raised
and/or pleaded in the case at bench. Instead, what is
being sought is a judicial re-evaluation of the adequacy
or inadequacy of the evidence on record, which is
certainly beyond the province of the extraordinary writ
of certiorari. Such demand is impermissible for it would
involve this Court in determining what evidence is
entitled to belief and the weight to be assigned it. As we
have reiterated countless times, judicial review by this
Court in labor cases does not go so far as to evaluate
the sufficiency of the evidence upon which the proper
labor officer or office based his or its determination but is
limited only to issues of jurisdiction or grave abuse of
discretion amounting to lack of jurisdiction. (emphasis
supplied).
With the foregoing rules in mind, we shall now proceed to discuss
the merit of these consolidated petitions.
We affirm in part and modify in part.
On the first issue involving the classification of the computer
operators assigned at the University's Computer Services Center
and discipline officers, the University argues that they are
confidential employees and that the Union has already recognized
the confidential nature of their functions when the latter agreed in
the parties' 1986 collective bargaining agreement to exclude the
said employees from the bargaining unit of rank-and-file
employees. As far as the said computer operators are concerned,
the University contends that ". . . the parties have already
previously agreed to exclude all positions in the University's
Computer Services Center (CSC), which include the positions of
computer operators, from the collective bargaining unit. . . . . . . .
" 46 The University further contends that ". . . the nature of the
work done by these Computer Operators is enough justification
for their exclusion from the coverage of the bargaining unit of the
University's rank-and-file employees. . . . . . . ." 47 According to the
University, the Computer Services Center, where these computer
operators work, ". . . processes data that are needed by
management for strategic planning and evaluation of systems. It
also houses the University's confidential records and information
[e.g. student records, faculty records, faculty and staff payroll
data, and budget allocation and expenditure related data] which
are contained in computer files and computer-generated reports. .
. . . . . . Moreover, the Computer Operators are in fact the
repository of the University's confidential information and data,
including those involving and/or pertinent to labor relations. . . . . .
. ." 48
As to the discipline officers, the University maintains that " . . .
they are likewise excluded from the bargaining unit of the rank-
and-file employees under the parties' 1986 CBA. The Discipline
Officers are clearly alter egos of management as they perform
tasks which are inherent in management [e.g. enforce discipline,
act as peace officers, secure peace and safety of the students
inside the campus, conduct investigations on violations of
University regulations, or of existing criminal laws, committed
within the University or by University employees] . . . . . . . " 49 The
University also alleges that "the Discipline Officers are privy to
highly confidential information ordinarily accessible only to
management." 50
With regard to the employees of the College of St. Benilde, the
Union, supported by the Solicitor General at this point, asserts
that the veil of corporate fiction should be pierced, thus, according
to the Union, the University and the College of St. Benilde should
be considered as only one entity because the latter is but a mere
integral part of the University. 51
The University's arguments on the first issue fail to impress us.
The Court agrees with the Solicitor General that the express
exclusion of the computer operators and discipline officers from
the bargaining unit of rank-and-file employees in the 1986
collective bargaining agreement does not bar any re-negotiation
for the future inclusion of the said employees in the bargaining
unit. During the freedom period, the parties may not only renew
the existing collective bargaining agreement but may also propose
and discuss modifications or amendments thereto. With regard to
the alleged confidential nature of the said employees' functions,
after a careful consideration of the pleadings filed before this
Court, we rule that the said computer operators and discipline
officers are not confidential employees. As carefully examined by
the Solicitor General, the service record of a computer operator
reveals that his duties are basically clerical and non-confidential in
nature. 52 As to the discipline officers, we agree with the voluntary
arbitrator that based on the nature of their duties, they are not
confidential employees and should therefore be included in the
bargaining unit of rank-and-file employees.
The Court also affirms the findings of the voluntary arbitrator that
the employees of the College of St. Benilde should be excluded
from the bargaining unit of the rank-and-file employees of Dela
Salle University, because the two educational institutions have
their own separate juridical personality and no sufficient evidence
was shown to justify the piercing of the veil of corporate fiction. 53
On the second issue involving the inclusion of a union shop
clause in addition to the existing maintenance of membership
clause in the collective bargaining agreement, the University
avers that ". . . it is in the spirit of the exercise of the constitutional
right to self-organization that every individual should be able to
freely choose whether to become a member of the Union or not.
The right to join a labor organization should carry with it the
corollary right not to join the same. This position of the University
is but in due recognition of the individual's free will and capability
for judgment." 54 The University assails the Union's demand for a
union shop clause as ". . . definitely unjust and amounts to
oppression. Moreover, such a demand is repugnant to democratic
principles and the constitutionally guaranteed freedom of
individuals to join or not to join an association as well as their right
to security of tenure, particularly, on the part of present
employees." 55
The Union, on the other hand, counters that the Labor Code, as
amended, recognizes the validity of a union shop agreement in
Article 248 thereof which reads:
Art. 248. Unfair labor practices of employers. —
xxx xxx xxx
56
 (e) To discriminate in regard to hire or tenure of
employment or any term or condition of
employment in order to encourage or
discourage membership in any labor
organization. Nothing in this Code or in any
other law shall prevent the parties from
requiring membership in a recognized collective
bargaining agent as a condition for
employment, except of those employees who
are already members of another union at the
time of the signing of the collective bargaining
agreement. . . . . . . ." (emphasis supplied)
We affirm the ruling of the voluntary arbitrator for the
inclusion of a union shop provision in addition to the
existing maintenance of membership clause in the
collective bargaining agreement. As the Solicitor General
asserted in his consolidated Comment, the University's
reliance on the case of Victoriano vs. Elizalde Rope
Workers' Union 56 is clearly misplaced. In that case, we
ruled that ". . . the right to join a union includes the right
to abstain from joining any union. . . . . . . . The right to
refrain from joining labor organizations recognized by
Section 3 of the Industrial Peace Act is, however, limited.
The legal protection granted to such right to refrain from
joining is withdrawn by operation of law, where a labor
union and an employer have agreed on a closed shop,
by virtue of which the employer may employ only
members of the collective bargaining union, and the
employees must continue to be members of the union for
the duration of the contract in order to keep their jobs. . .
. . . . ." 57
On the third issue regarding the Union's proposal for the
use of the "last-in-first-out" method in case of lay-off,
termination due to retrenchment and transfer of
employees, the Union relies on social justice and equity
to support its proposition, and submits that the
University's prerogative to select and/or choose the
employees it will hire is limited, either by law or
agreement, especially where the exercise of this
prerogative might result in the loss of employment. 58 The
Union further insists that its proposal is ". . . in keeping
with the avowed State policy '(q) To ensure the
participation of workers in decision and policy-making
processes affecting their rights, duties and welfare' (Art.
211, Labor Code, as amended)." 59
On the other hand, the University asserts its
management prerogative and counters that "[w]hile it is
recognized that this right of employees and workers to
'participate in policy and decision-making processes
affecting their rights and benefits as may be provided by
law' has been enshrined in the Constitution (Article III,
[should be Article XIII], Section 3, par. 2), said
participation, however, does not automatically entitle the
Union to dictate as to how an employer should choose
the employees to be affected by a retrenchment
program. The employer still retains the prerogative to
determine the reasonable basis for selecting such
employees." 60
We agree with the voluntary arbitrator that as an
exercise of management prerogative, the University has
the right to adopt valid and equitable grounds as basis
for terminating or transferring employees. As we ruled in
the case of Autobus Workers' Union (AWU) and Ricardo
Escanlar vs. National Labor Relations
Commission, 61 "[a] valid exercise of management
prerogative is one which, among others, covers: work
assignment, working methods, time, supervision of
workers, transfer of employees, work supervision, and
the discipline, dismissal and recall of workers. Except as
provided for, or limited by special laws, an employer is
free to regulate, according to his own discretion and
judgment, all aspects of employment." (emphasis
supplied)
On the fourth issue involving the voluntary arbitrator's
ruling that on the basis of the University's proposed
budget, the University can no longer be required to grant
a second round of wage increases for the school years
1991-92 and 1992-93 and charge the same to the
incremental proceeds, we find that the voluntary
arbitrator committed grave abuse of discretion amounting
to lack or excess of jurisdiction. As we ruled in the case
of Caltex Refinery Employees Association (CREA)
vs. Jose S. Brillantes, 62 ". . . . . . . [w]e believe that the
standard proof of a company's financial standing is its
financial statements duly audited by independent and
credible external auditors." 63 Financial statements
audited by independent external auditors constitute the
normal method of proof of profit and loss performance of
a company. 64 The financial capability of a company
cannot be based on its proposed budget because a
proposed budget does not reflect the true financial
condition of a company, unlike audited financial
statements, and more importantly, the use of a proposed
budget as proof of a company's financial condition would
be susceptible to abuse by scheming employers who
might be merely feigning dire financial condition in their
business ventures in order to avoid granting salary
increases and fringe benefits to their employees.
On the fifth issue involving the Union's proposals on the
deloading of the union president, improved leave
benefits and indefinite union leave with pay, we agree
with the voluntary arbitrator's rejection of the said
demands, there being no justifiable reason for the
granting of the same.
On the sixth issue regarding the finding that the multi-
sectoral committee in the University is the legitimate
group which determines and scrutinizes the annual
salary increases and fringe benefits of the employees of
the University, the Court finds that the voluntary
arbitrator did not gravely abuse his discretion on this
matter. From our reading of the assailed decision, it
appears that during the parties' negotiations for a new
collective bargaining agreement, the Union demanded
for a 25% and 40% salary increase for the second and
third years, respectively, of the collective bargaining
agreement. 65 The University's counter-proposal was for
a 10% increase for the third year. 66 After the meeting of
the multi-sectoral committee on budget, which is
composed of students, parents, faculty, administration
and union, the University granted across-the-board
salary increases of 11.3% and 19% for the second and
third years, respectively. 67 While the voluntary arbitrator
found that the said committee ". . . decided to grant the
said increases based on the University's viability which
were exclusively sourced from the tuition fees. . . . . . . .,"
no finding was made as to the basis of the committee's
decision. Be that as it may, assuming for the sake of
argument that the said committee is the group
responsible for determining wage increases and fringe
benefits, as ruled by the voluntary arbitrator, the
committee's determination must still be based on duly
audited financial statements following our ruling on the
fourth issue.1âwphi1
On the seventh and last issue involving the ruling that
the 70% share in the incremental tuition proceeds is the
only source of salary increases and fringe benefits of the
57
 employees, the Court deems that any determination of
this alleged error is unnecessary and irrelevant, in view
of our rulings on the fourth and preceding issues and
there being no evidence presented before the voluntary
arbitrator that the University held incremental tuition fee
proceeds from which any wage increase or fringe benefit
may be satisfied.
WHEREFORE, premises considered, the petitions in
these consolidated cases, G.R. No. 109002 and G.R.
No. 110072 are partially GRANTED. The assailed
decision dated January 19, 1993 of voluntary arbitrator
Buenaventura Magsalin is hereby AFFIRMED with the
modification that the issue on salary increases for the
second and third years of the collective bargaining
agreement be REMANDED to the voluntary arbitrator for
definite resolution within one month from the finality of
this Decision, on the basis of the externally audited
financial statements of the University already submitted
by the Union before the voluntary arbitrator and forming
part of the records.1âwphi1.nêt
SO ORDERED.
Bellosillo, Mendoza, Quisumbing and De Leon, Jr., JJ.,
concur.
G.R. No. 156658 March 10, 2004
BONIFACIO ASUFRIN, JR., petitioner,
vs.
SAN MIGUEL CORPORATION and the COURT OF
APPEALS, respondents.
DECISION
YNARES-SANTIAGO, J.:
Coca Cola Plant, then a department of respondent San Miguel
Beer Corporation (SMC), hired petitioner as a utility/miscellaneous
worker in February 1972. On November 1, 1973, he became a
regular employee paid on daily basis as a Forklift Operator. On
November 16, 1981, he became a monthly paid employee
promoted as Stock Clerk.
Sometime in 1984, the sales office and operations at the Sum-ag,
Bacolod City Sales Office were reorganized. Several positions
were abolished including petitioner’s position as Stock Clerk. After
reviewing petitioner’s qualifications, he was designated
warehouse checker at the Sum-ag Sales Office.
On April 1, 1996, respondent SMC implemented a new marketing
system known as the "pre-selling scheme" at the Sum-ag Beer
Sales Office. As a consequence, all positions of route sales and
warehouse personnel were declared redundant. Respondent
notified the DOLE Director of Region VI that 22 personnel of the
Sales Department of the Negros Operations Center1 would be
retired effective March 31, 1995.
Respondent SMC thereafter wrote a letter2 to petitioner informing
him that, owing to the implementation of the "pre-selling
operations" scheme, all positions of route and warehouse
personnel will be declared redundant and the Sum-ag Sales
Office will be closed effective April 30, 1996. Thus, from April 1,
1996 to May 15, 1996, petitioner reported to respondent’s
Personnel Department at the Sta. Fe Brewery, pursuant to a
previous directive.
Thereafter, the employees of Sum-ag sales force were informed
that they can avail of respondent’s early retirement package
pursuant to the retrenchment program, while those who will not
avail of early retirement would be redeployed or absorbed at the
Brewery or other sales offices. Petitioner opted to remain and
manifested to Acting Personnel Manager Salvador Abadesco his
willingness to be assigned to any job, considering that he had
three children in college.3
Petitioner was surprised when he was informed by the Acting
Personnel Manager that his name was included in the list of
employees who availed of the early retirement package.
Petitioner’s request that he be given an assignment in the
company was ignored by the Acting Personnel Manager.
Petitioner thus filed a complaint for illegal dismissal with the
NLRC, docketed as RAB Case No. 06-06-10233-96. On
December 27, 1996, the Labor Arbiter dismissed the complaint for
lack of merit. Petitioner appealed to the National Labor Relations
Commission (NLRC) which set aside the Labor Arbiter’s decision
and ordered respondent SMC to reinstate petitioner to his former
or equivalent position with full backwages.4
Respondent filed a petition with the Court of Appeals which
reversed the decision of the NLRC and reinstated the judgment of
the Labor Arbiter dismissing the complaint for illegal dismissal.
Petitioner’s motion for reconsideration5was denied in a Resolution
dated December 11, 2002.6
Hence, this petition for review assigning the following errors:
1. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS, WITH DUE RESPECT, COMMITTED GRAVE ABUSE
OF DISCRETION IN HOLDING THAT PETITIONER WAS "NOT
SINGLED-OUT FOR TERMINATION, AS MANY OTHERS WERE
ALSO ADVERSELY AFFECTED."
2. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS COMMITTED GROSS MISAPPREHENSION OF
FACT WHEN IT AFFIRMED THE FINDING OF THE LABOR
ARBITER THAT THE POSITION OF PETITIONER BECAME
REDUNDANT AT THE SUM-AG SALES OFFICES.
3. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS COMMITTED GRAVE ABUSE OF DISCRETION
WHEN IT HELD THAT THE DISMISSAL OF PETITIONER WAS
VALID.
4. THE HONORABLE PUBLIC RESPONDENT COURT OF
APPEALS ERRED IN DISMISSING THE ENTIRE RELIEFS
PRAYED FOR BY THE PETITIONER.
The primordial issue to be resolved is whether or not the dismissal
of petitioner is based on a just and authorized cause.
Factual findings of administrative bodies, being considered
experts in their fields, are binding on this Court. However, this is a
general rule which holds true only when established exceptions
do not obtain. One of these exceptive circumstances is when the
findings of the Labor Arbiter and the NLRC are conflicting.
Considering that the ruling of the Labor Arbiter was reversed by
the NLRC whose judgment was in turn overturned by the
appellate court, it behooves us in the exercise of our equity
jurisdiction to determine which findings are more conformable to
the evidentiary facts.7
In the case at bar, petitioner was dismissed on the ground of
redundancy, one of the authorized causes for dismissal. 8 In Dole
Philippines, Inc. v. NLRC,9 citing the leading case of Wiltshire File
58
Co., Inc. v. NLRC,10 we explained the nature of redundancy as an
authorized cause for dismissal thus:
. . . redundancy in an employer’s personnel force necessarily or
even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior
to the termination of his services, does not show that his position
had not become redundant. Indeed, in any well-organized
business enterprise, it would be surprising to find duplication of
work and two (2) or more people doing the work of one person.
We believe that redundancy, for purposes of the Labor Code,
exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by
the enterprise.
The determination that employee’s services are no longer
necessary or sustainable and, therefore, properly terminable is an
exercise of business judgment of the employer. The wisdom or
soundness of this judgment is not subject to discretionary review
of the Labor Arbiter and the NLRC, provided there is no violation
of law and no showing that it was prompted by an arbitrary or
malicious act.11 In other words, it is not enough for a company to
merely declare that it has become overmanned. It must produce
adequate proof that such is the actual situation to justify the
dismissal of the affected employees for redundancy.12
Persuasive as the explanation proffered by respondent may be to
justify the dismissal of petitioner, a number of disturbing
circumstances, however, leave us unconvinced.
First, of the 23 SMC employees assigned at the Sum-ag Sales
Office/Warehouse, 9 accepted the offer of SMC to avail of the
early retirement whose separation benefits was computed at
250% of their regular pay. The rest, including petitioner, did not
accept the offer. Out of the remaining fourteen 14, only petitioner
clearly manifested, through several letters,13 his desire to be
redeployed to the Sta. Fe Brewery or any sales office – and for
any position not necessarily limited to that of a warehouse
checker. In short, he was even willing to accept a demotion just to
continue his employment. Meanwhile, other employees who did
not even write a letter to SMC were redeployed to the Sta. Fe
Brewery or absorbed by other offices/outlets outside Bacolod
City.14
Second, petitioner was in the payroll of the Sta. Fe Brewery and
assigned to the Materials Section, Logistics Department, although
he was actually posted at the Sum-ag Warehouse.15 Thus, even
assuming that his position in the Sum-ag Warehouse became
redundant, he should have been returned to the Sta. Fe Brewery
where he was actually assigned and where there were vacant
positions to accommodate him.
Third, it appears that despite respondent’s allegation that it
ceased and closed down its warehousing operations at the Sum-
ag Sales Office, actually it is still used for warehousing activities
and as a transit point where buyers and dealers get their
stocks.16 Indeed, the Sum-ag Office is strategically situated on the
southern part of Bacolod City making it convenient for dealers
from the southern towns of Negros Occidental to get their stocks
and deposit their empty bottles in the said warehouse, thereby
decongesting the business activities at the Sta. Fe Brewery.
Fourth, in selecting employees to be dismissed, a fair and
reasonable criteria must be used, such as but not limited to (a)
less preferred status, e.g. temporary employee; (b) efficiency; and
(c) seniority.17 In the case at bar, no criterion whatsoever was
adopted by respondent in dismissing petitioner. Furthermore, as
correctly observed by the NLRC, respondent "has not shown how
the cessation of operations of the Sum-ag Sales Office
contributed to the ways and means of improving effectiveness of
the organization with the end in view of efficiency and cutting
distribution overhead and other related costs. Respondent, thus,
clearly resorted to sweeping generalization[s] in dismissing
complainant."18 Indeed, petitioner’s predicament may have
something to do with an incident where he incurred the ire of an
immediate superior in the Sales Logistics Unit for exposing certain
irregularities committed by the latter.19
In the earlier case of San Miguel Corporation v.
NLRC,20 respondent’s reasons for terminating the services of its
employees in the very same Sum-ag Sales Office was rejected, to
wit:
Even if private respondents were given the option to retire, be
retrenched or dismissed, they were made to understand that they
had no choice but to leave the company. More bluntly stated, they
were forced to swallow the bitter pill of dismissal but afforded a
chance to sweeten their separation from employment. They either
had to voluntarily retire, be retrenched with benefits or be
dismissed without receiving any benefit at all.
What was the true nature of petitioner’s offer to private
respondents? It was in reality a Hobson’s choice.21 All that the
private respondents were offered was a choice on the means or
method of terminating their services but never as to the status of
their employment. In short, they were never asked if they wanted
to work for petitioner.
In the case at bar, petitioner is similarly situated. It bears stressing
that whether it be by redundancy or retrenchment or any of the
other authorized causes, no employee may be dismissed without
observance of the fundamentals of good faith.
It is not difficult for employers to abolish positions in the guise of a
cost-cutting measure and we should not be easily swayed by such
schemes which all too often reduce to near nothing what is left of
the rubble of rights of our exploited workers.22 Given the nature of
petitioner’s job as a Warehouse Checker, it is inconceivable that
respondent could not accommodate his services considering that
the warehousing operations at Sum-ag Sales Office has not shut
down.
All told, to sustain the position taken by the appellate court would
be to dilute the workingman’s most important right: his
constitutional right to security of tenure. While respondent may
have offered a generous compensation package to those whose
services were terminated upon the implementation of the "pre-
selling scheme," we find such an offer, in the face of the prevailing
facts, anathema to the underlying principles which give life to our
labor statutes because it would be tantamount to likening an
employer-employee relationship to a salesman and a purchaser of
a commodity. It is an archaic abomination. To quote what has
been aptly stated by former Governor General Leonard Wood in
his inaugural message before the 6th Philippine Legislature on
October 27, 1922 "labor is neither a chattel nor a commodity, but
human and must be dealt with from the standpoint of human
interest."23
As has been said: "We do not treat our workers as merchandise
and their right to security of tenure cannot be valued in precise
peso-and-centavo terms. It is a right which cannot be allowed to
be devalued by the purchasing power of employers who are only
too willing to bankroll the separation pay of their illegally
dismissed employees to get rid of them."24 This right will never be
respected by the employer if we merely honor it with a price tag.
The policy of "dismiss now and pay later" favors moneyed
employers and is a mockery of the right of employees to social
justice.25
59
WHEREFORE, in view of all the foregoing, the petition is
GRANTED. The Decision of the Court of Appeals in CA-G.R. SP
No. 53521 dated April 10, 2002, and the Resolution dated
December 11, 2002 denying petitioner’s Motion for
Reconsideration, are SET ASIDE. The decision of the National
Labor Relations Division dated February 20, 1998 is
REINSTATED. Accordingly, petitioner’s dismissal is declared
illegal, and respondent is ordered to reinstate him to his former or
equivalent position, with full backwages computed from April 1,
1996 up to his actual reinstatement. Respondent is likewise
ordered to pay petitioner the sum equivalent to ten percent (10%)
of his total monetary award as attorney’s fees.
SO ORDERED.
G.R. No. 181738 January 30, 2013
GENERAL MILLING CORPORATION, Petitioner,
vs.
VIOLETA L. VIAJAR, Respondent.
DECISION
REYES, J.:
This is a Petition1 for Review on Certiorari under Rule 45 of the
Rules of Court filed by petitioner General Milling Corporation
(GMC), asking the Court to set aside the Decision2 dated
September 21, 2007 and the Resolution3dated January 30, 2008
of the Court of Appeals (CA) in CA-G.R. SP No. 01734; and to
reinstate the Decision4dated October 28, 2005 and
Resolution5 dated January 31, 2006 of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000416-05.
The antecedent facts are as follows:
GMC is a domestic corporation with principal office in Makati City
and a manufacturing plant in Lapu-Lapu City.
In October 2003, GMC terminated the services of thirteen (13)
employees for redundancy, including herein respondent, Violeta
Viajar (Viajar). GMC alleged that it has been gradually downsizing
its Vismin (Visayas-Mindanao) Operations in Cebu where a
sizeable number of positions became redundant over a period of
time.6
On December 2, 2003, Viajar filed a Complaint7 for Illegal
Dismissal with damages against GMC, its Human Resource
Department (HRD) Manager, Johnny T. Almocera (Almocera),
and Purchasing Manager, Joel Paulino before the Regional
Arbitration Branch (RAB) No. VII, NLRC, Cebu City.
In her Position Paper,8 Viajar alleged that she was employed by
GMC on August 6, 1979 as Invoicing Clerk. Through the years,
the respondent held various positions in the company until she
became Purchasing Staff.
On October 30, 2003, Viajar received a Letter-Memorandum
dated October 27, 2003 from GMC, through Almocera, informing
her that her services were no longer needed, effective November
30, 2003 because her position as Purchasing Staff at the
Purchasing Group, Cebu Operations was deemed redundant.
Immediately thereafter, the respondent consulted her immediate
superior at that time, Thaddeus Oyas, who told her that he too
was shocked upon learning about it.9
When Viajar reported for work on October 31, 2003, almost a
month before the effectivity of her severance from the company,
the guard on duty barred her from entering GMC’s premises. She
was also denied access to her office computer and was restricted
from punching her daily time record in the bundy clock.10
On November 7, 2003, Viajar was invited to the HRD Cebu Office
where she was asked to sign certain documents, which turned out
to be an "Application for Retirement and Benefits." The
respondent refused to sign and sought clarification because she
did not apply for retirement and instead asserted that her services
were terminated for alleged redundancy. Almocera told her that
her signature on the Application for Retirement and Benefits was
needed to process her separation pay. The respondent also
claimed that between the period of July 4, 2003 and October 13,
2003, GMC hired fifteen (15) new employees which aroused her
suspicion that her dismissal was not necessary.11 At the time of
her termination, the respondent was receiving the salary rate of
₱19,651.41 per month.12
For its part, the petitioner insisted that Viajar’s dismissal was due
to the redundancy of her position. GMC reasoned out that it was
forced to terminate the services of the respondent because of the
economic setbacks the company was suffering which affected the
company’s profitability, and the continuing rise of its operating and
interest expenditures. Redundancy was part of the petitioner’s
concrete and actual cost reduction measures. GMC also
presented the required "Establishment Termination Report" which
it filed before the Department of Labor and Employment (DOLE)
on October 28, 2003, involving thirteen (13) of its employees,
including Viajar. Subsequently, GMC issued to the respondent
two (2) checks respectively amounting to ₱440,253.02 and
₱21,211.35 as her separation pay.13
On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No.
VII, Cebu City, rendered a Decision, the decretal portion of which
reads:
WHEREFORE, foregoing considered, judgment is hereby
rendered declaring that respondents acted in good faith in
terminating the complainant from the service due to redundancy
of works, thus, complainant’s refusal to accept the payment of her
allowed separation pay and other benefits under the law is NOT
JUSTIFIED both in fact and law, and so, therefore complainant’s
case for illegal dismissal against the herein respondents and so
are complainant’s monetary claims are hereby ordered
DISMISSED for lack of merit.
SO ORDERED.14
The LA found that the respondent was properly notified on
October 30, 2003 through a Letter-Memorandum dated October
27, 2003, signed by GMC’s HRD Manager Almocera, that her
position as Purchasing Staff had been declared redundant. It also
found that the petitioner submitted to the DOLE on October 28,
2003 the "Establishment Termination Report." The LA even
faulted the respondent for not questioning the company’s action
before the DOLE Regional Office, Region VII, Cebu City so as to
compel the petitioner to prove that Viajar’s position was indeed
redundant. It ruled that the petitioner complied with the
requirements under Article 283 of the Labor Code, considering
that the nation was then experiencing an economic downturn and
that GMC must adopt measures for its survival.15
Viajar appealed the aforesaid decision to the NLRC. On October
28, 2005, the NLRC promulgated its decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the Decision of the Labor
Arbiter declaring the validity of complainant’s termination due to
redundancy is hereby AFFIRMED. Respondent General Milling
Corporation is hereby ordered to pay complainant’s separation
pay in the amount of ₱461,464.37.
60
SO ORDERED.16
The NLRC, however, stated that it did not agree with the LA that
Viajar should be faulted for failing to question the petitioner’s
declaration of redundancy before the DOLE Regional Office,
Region VII, Cebu City. It was not imperative for Viajar to challenge
the validity of her termination due to
redundancy.17 Notwithstanding, the NLRC affirmed the findings of
the LA that Viajar’s dismissal was legal considering that GMC
complied with the requirements provided for under Article 283 of
the Labor Code and existing jurisprudence, particularly citing
Asian Alcohol Corporation v. NLRC.18 The NLRC further stated
that Viajar was aware of GMC’s "reduction mode," as shown in
the GMC Vismin Manpower Complement, as follows:
No. of Employees
Year Manpower Profile Terminated
(Redundancy)
2000 795
2001 782
WHEREFORE, premises considered, this Petition for Certiorari is
GRANTED. The Decision, dated 28 October 2005, and
Resolution, dated 31 January 2006 respectively, of public
respondent National Labor Relations Commission-Fourth Division,
Cebu City, in NLRC Case No. V-000416-05 (RAB VII-12-2495-03)
are SET ASIDE. A new judgment is entered DECLARING the
dismissal ILLEGAL and ordering respondent to reinstate petitioner
without loss of seniority rights and other privileges with full
backwages inclusive of allowances and other benefits computed
from the time she was dismissed on 30 November 2003 up to the
date of actual reinstatement. Further, moral and exemplary
damages, in the amount of Fifty Thousand Pesos ([P]50,000.00)
each; and attorney’s fees equivalent to ten percent (10%) of the
total monetary award, are awarded.
Costs against respondent.
SO ORDERED.21
Aggrieved by the reversal of the NLRC decision, GMC filed a
motion for reconsideration. However, in its Resolution dated
January 30, 2008, the CA denied the same; hence, this petition.
The petitioner argues that the factual findings of the NLRC,
affirming that of the LA must be accorded respect and finality as it
is supported by evidence on record. Both the LA and the NLRC
found the petitioner’s evidence sufficient to terminate the
employment of respondent on the ground of redundancy. The
evidence also shows that GMC has complied with the procedural
and substantive requirements for a valid termination. There was,
therefore, no reason for the CA to disturb the factual findings of
the NLRC.23
The rule is that factual findings of quasi-judicial agencies such as
the NLRC are generally accorded not only respect, but at times,
even finality because of the special knowledge and expertise
gained by these agencies from handling matters falling under their
specialized jurisdiction.24 It is also settled that this Court is not a
trier of facts and does not normally embark in the evaluation of
evidence adduced during trial.25 This rule, however, allows for
exceptions. One of these exceptions covers instances when the
findings of fact of the trial court, or of the quasi-judicial agencies
concerned, are conflicting or contradictory with those of the CA.
When there is a variance in the factual findings, it is incumbent
upon the Court to re-examine the facts once again.26

2002 736 41 Furthermore, another exception to the general rule is when the
The petitioner raises the following issues, to wit: said findings are not supported by substantial evidence or if on
2003 721 24 the basis of the available facts, the inference or conclusion arrived
I. THE DECISION OF SEPTEMBER 21, 2007 AND THE at is manifestly erroneous.27Factual findings of administrative
2004 697 16 RESOLUTION OF JANUARY 30, 2008 OF THE COURT agencies are not infallible and will be set aside when they fail the
OF APPEALS ARE CONTRARY TO LAW AND test of arbitrariness.28 In the instant case, the Court agrees with
696 (As of June ESTABLISHED JURISPRUDENCE. the CA that the conclusions arrived at by the LA and the NLRC
2005 0619
2005) are manifestly erroneous.
II. THE DECISION OF SEPTEMBER 21, 2007 AND THE
The NLRC stated that the characterization of positions as RESOLUTION OF JANUARY 30, 2008 OF THE COURT GMC claims that Viajar was validly dismissed on the ground of
redundant is an exercise of the employer’s business judgment OF APPEALS VIOLATE THE LAW AND ESTABLISHED redundancy which is one of the authorized causes for termination
and prerogative. It also ruled that the petitioner did not exercise JURISPRUDENCE ON THE OBSERVANCE OF of employment. The petitioner asserts that it has observed the
this prerogative in bad faith and that the payment of separation RESPECT AND FINALITY TO FACTUAL FINDINGS OF procedure provided by law and that the same was done in good
pay in the amount of ₱461,464.37 was in compliance with Article THE NATIONAL LABOR RELATIONS COMMISSION. faith. To justify the respondent’s dismissal, the petitioner
283 of the Labor Code.20 presented: (i) the notification Letter-Memorandum dated October
III. THE COURT OF APPEALS COMMITTED GRAVE 27, 2003 addressed to the respondent which was received on
ABUSE OF DISCRETION IN ITS DECISION OF October 30, 2003;29 (ii) the "Establishment Termination Report" as
Respondent Viajar filed a Motion for Reconsideration which was prescribed by the DOLE;30 (iii) the two (2) checks issued in the
denied by the NLRC in its Resolution dated January 31, 2006. SEPTEMBER 21, 2007 AND RESOLUTION OF
JANUARY 30, 2008 AS THE SAME ARE CONTRARY respondent’s name amounting to ₱440,253.02 and ₱21,211.35 as
TO THE EVIDENCE ON RECORD.22 separation pay;31 and (iv) the list of dismissed employees as of
Undaunted, Viajar filed a petition for certiorari before the CA. In June 6, 2006 to show that GMC was in a "reduction mode." 32 Both
the now assailed Decision dated September 21, 2007, the CA the LA and the NLRC found these sufficient to prove that the
granted the petition, reversing the decision of the NLRC in the The petition is denied. dismissal on the ground of redundancy was done in good faith.
following manner:
The Court does not agree.
61
Article 283 of the Labor Code provides that redundancy is one of
the authorized causes for dismissal. It reads:
Article 283. Closure of establishment and reduction of personnel.
– The employer may also terminate the employment of any
employee due to the installment of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year.
(Emphasis supplied)
From the above provision, it is imperative that the employer must
comply with the requirements for a valid implementation of the
company’s redundancy program, to wit: (a) the employer must
serve a written notice to the affected employees and the DOLE at
least one (1) month before the intended date of retrenchment; (b)
the employer must pay the employees a separation pay
equivalent to at least one month pay or at least one month pay for
every year of service, whichever is higher; (c) the employer must
abolish the redundant positions in good faith; and (d) the
employer must set fair and reasonable criteria in ascertaining
which positions are redundant and may be abolished. 33
In Smart Communications, Inc., v. Astorga,34 the Court held that:
The nature of redundancy as an authorized cause for dismissal is
explained in the leading case of Wiltshire File Co., Inc. v. National
Labor Relations Commission, viz:
"x x x redundancy in an employer’s personnel force necessarily or
even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior
to termination of his services does not show that his position had
not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and
two (2) or more people doing the work of one person. We believe
that redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the
enterprise."
The characterization of an employee’s services as superfluous or
no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The
wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation
of law or arbitrary or malicious action is not shown.35 (Emphasis
supplied and citations omitted)
While it is true that the "characterization of an employee’s
services as superfluous or no longer necessary and, therefore,
properly terminable, is an exercise of business judgment on the
part of the employer,"36 the exercise of such judgment, however,
must not be in violation of the law, and must not be arbitrary or
malicious. The Court has always stressed that a company cannot
simply declare redundancy without basis. To exhibit its good faith
and that there was a fair and reasonable criteria in ascertaining
redundant positions, a company claiming to be over manned must
produce adequate proof of the same.
We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37
In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not
enough for a company to merely declare that it has become
overmanned (sic). It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
In Panlilio v. National Labor Relations Commission, we held that
evidence must be presented to substantiate redundancy such as
but not limited to the new staffing pattern, feasibility
studies/proposal, on the viability of the newly created positions,
job description and the approval by the management of the
restructuring.38 (Emphasis supplied and citations omitted)
In the instant case, the Court agrees with the CA when it held that
the petitioner failed to present substantial proof to support GMC’s
general allegations of redundancy. As shown from the records,
the petitioner simply presented as its evidence of good faith and
compliance with the law the notification letter to respondent
Viajar;39 the "Establishment Termination Report" it submitted to
the DOLE Office;40 the two (2) checks issued in the respondent’s
name amounting to ₱440,253.02 and ₱21,211.35;41 and the list of
terminated employees as of June 6, 2006.42 We agree with the
CA that these are not enough proof for the valid termination of
Viajar’s employment on the ground of redundancy.
The letter-memorandum which contains general allegations is not
enough to convince this Court that Viajar’s termination of
employment due to redundancy was warranted under the
circumstances. There is no showing that GMC made an
evaluation of the existing positions and their effect to the
company. Neither did GMC exert efforts to present tangible proof
that it was experiencing business slow down or over hiring. The
"Establishment Termination Report" it submitted to the DOLE
Office did not account for anything to justify declaring the
positions redundant. The Court notes that the list of terminated
employees presented by GMC was a list taken as of June 6, 2006
or almost three years after the respondent was illegally dismissed
and almost a year after the LA promulgated its decision. While the
petitioner had been harping that it was on a "reduction mode" of
its employees, it has not presented any evidence (such as new
staffing pattern, feasibility studies or proposal, viability of newly
created positions, job description and the approval of the
management of the restructuring,43 audited financial documents
like balance sheets, annual income tax returns and
others)44 which could readily show that the company’s declaration
of redundant positions was justified. Such proofs, if presented,
would suffice to show the good faith on the part of the employer or
that this business prerogative was not whimsically exercised in
terminating respondent’s employment on the ground of
redundancy. Unfortunately, these are wanting in the instant case.
The petitioner only advanced a self-serving general claim that it
was experiencing business reverses and that there was a need to
reduce its manpower complement.
On the other hand, the respondent presented proof that the
petitioner had been hiring new employees while it was firing the
old ones,45 negating the claim of redundancy. It must, however,
be pointed out that in termination cases, like the one before us,
the burden of proving that the dismissal of the employees was for
a valid and authorized cause rests on the employer. It was
incumbent upon the petitioner to show by substantial evidence
that the termination of the employment of the respondent was
62
validly made and failure to discharge that duty would mean that
the dismissal is not justified and therefore illegal.46
Furthermore, the Court cannot overlook the fact that Viajar was
prohibited from entering the company premises even before the
effectivity date of termination; and was compelled to sign an
"Application for Retirement and Benefits." These acts exhibit the
petitioner’s bad faith since it cannot be denied that the respondent
was still entitled to report for work until November 30, 2003. The
demand for her to sign the "Application for Retirement and
Benefits" also contravenes the fact that she was terminated due to
redundancy. Indeed, there is a difference between voluntary
retirement of an employee and forced termination due to
authorized causes.
In Quevedo v. Benguet Electric Cooperative, Incorporated, 47 this
Court explained the difference between retirement and
termination due to redundancy, to wit:
While termination of employment and retirement from service are
common modes of ending employment, they are mutually
exclusive, with varying juridical bases and resulting benefits.
Retirement from service is contractual (i.e. based on the bilateral
agreement of the employer and employee), while termination of
employment is statutory (i.e. governed by the Labor Code and
other related laws as to its grounds, benefits and procedure). The
benefits resulting from termination vary, depending on the cause.
For retirement, Article 287 of the Labor Code gives leeway to the
parties to stipulate above a floor of benefits.
xxxx
The line between voluntary and involuntary retirement is thin but it
is one which this Court has drawn. Voluntary retirement cuts
employment ties leaving no residual employer liability; involuntary
retirement amounts to a discharge, rendering the employer liable
for termination without cause. The employee’s intent is the focal
point of analysis. In determining such intent, the fairness of the
process governing the retirement decision, the payment of
stipulated benefits, and the absence of badges of intimidation or
coercion are relevant parameters.48 (Emphasis supplied and
citations omitted)
Clearly, the instant case is not about retirement since the term
has its peculiar meaning and is governed by Article 287 of the
Labor Code. Rather, this is a case of termination due to
redundancy under Article 283 of the Labor Code. Thus, the
demand of GMC for the respondent to sign an "Application for
Retirement and Benefits" is really suspect.
Finally, the Court agrees with the CA that the award of moral and
exemplary damages is proper.1âwphi1 The Court has awarded
moral damages in termination cases when bad faith, malice or
fraud attend the employee’s dismissal or where the act oppresses
labor, or where it was done in a manner contrary to morals, good
customs or public policy.49 We quote with favor the findings of the
CA:
We also award moral and exemplary damages to petitioner. While
it is true that good faith is presumed, the circumstances
surrounding the dismissal of petitioner negate its existence. Moral
damages may be recovered only where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted
an act oppressive to labor, and done in a manner contrary to
morals, good customs or public policy while exemplary damages
are recoverable only if the dismissal was done in a wanton,
oppressive, or malevolent manner. To reiterate, immediately after
receipt of her termination letter which was effective on 30
November 2003, petitioner was no longer treated as an employee
of respondent as early as the 31st of October 2003; she was
already barred from entering the company premises; she was
deprived access to her office computer; and she was excluded
from the bandy [sic] clock. She was also made to sign documents,
including an "APPLICATION FOR RETIREMENT AND
BENEFITS" in the guise of payment of her separation pay. When
petitioner confronted her immediate superior regarding her
termination, the latter’s shock aggravated her confusion and
suffering. She also learned about the employment of a number of
new employees, several of whom were even employed in her
former department. Petitioner likewise suffered mental torture
brought about by her termination even though its cause was not
clear and substantiated.50(Citations omitted)
WHEREFORE, the petition is DENIED. The Decision dated
September 21, 2007 of the Court of Appeals, as well as its
Resolution dated January 30, 2008 in CA-G.R. SP No. 01734, are
hereby AFFIRMED.
SO ORDERED.
G.R. No. 207253 August 20, 2014
CRISPIN B. LOPEZ, Petitioner,
vs.
IRVINE CONSTRUCTION CORP. and TOMAS SY
SANTOS, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the
Decision2 dated September 14, 2012 and the Resolution3dated
April 12, 2013 of the Court of Appeals (CA) in CA-GR. SP No.
108385-MIN which annulled and set aside the Resolutions dated
October 31, 20084 and February 12, 20095 of the National Labor
Relations Commission (NLRC) in NLRC LAC No. 01-000428-
2008, and thereby dismissed petitioner Crispin B. Lopez's (Lopez)
complaint for illegal dismissal.
The Facts
Respondent Irvine Construction Corp. (Irvine) is a construction
firm with office address at San Juan, Manila.6 It initially hired
Lopez as laborer in November 1994 and, thereafter, designated
him as a guard at its warehouse in Dasmarifias, Cavite in the year
2000, with a salary of ₱238.00 per day and working hours from 7
o'clock in the morning until 4 o'clock in the afternoon, without any
rest day.7 On December 18, 2005, Lopez was purportedly
terminated from his employment, whereupon he was told "Jkaw
ay lay-off muna."8 Thus, on January 10, 2006, he filed a
complaint9 for illegal dismissal with prayer for the payment of
separation benefits against Irvine before the NLRC Sub-Regional
Arbitration Branch No. IV in San Pablo City, Laguna, docketed as
NLRC Case No. SRAB-IV 1-8693-06-Q.
For its part, Irvine denied Lopez's claims, alleging that he was
employed only as a laborer who, however, sometimes doubled as
a guard. As laborer, Lopez's duty was to bring construction
materials from the suppliers' vehicles to the company warehouse
when there is a construction project in Cavite.10 As evidenced by
an Establishment Termination Report11 dated December 28, 2005
which Irvine previously submitted before the Department of Labor
and Employment (DOLE), Lopez was, however, temporarily laid-
off on December 27, 2005 after the Cavite project was
finished.12 Eventually, Lopez was asked to return to work through
a letter13 dated June 5, 2006 (return to work order), allegedly sent
to him within the six ( 6) month period under Article 286 of the
Labor Code which pertinently provides that "[t]he bona-fide
suspension of the operation of a business or undertaking for a
period not exceeding six (6) months x x x shall not terminate
63
employment." As such, Irvine argued that Lopez's filing of the
complaint for illegal dismissal was premature.14
The LA Ruling
On December 6, 2007, the Labor Arbiter (LA) rendered a
Decision15 ruling that Lopez was illegally dismissed. The LA did
not give credence to Irvine's argument that the lack of its project in
Cavite resulted in the interruption of Lopez's employment in view
of Irvine's contradictory averment that Lopez was merely
employed on temporary detail and that he only doubled as a
guard. Granting that Lopez's work as a laborer or as a guard was
really affected by the suspension of the operations of Irvine in
Cavite, the LA still discredited Irvine's lay-off claims considering
that the return to work order Irvine supposedly sent to Lopez was
not even attached to its pleadings. Hence, without any proof that
Lopez was asked to return to work, the LA concluded that the
dismissal of Lopez went beyond the six-month period fixed by
Article 286 of the Labor Code and was therefore deemed to be a
permanent one effectuated without a valid cause and due
process.16 Accordingly, Irvine was ordered to pay Lopez the sum
of ₱272,222.l 7, consisting of Pl 76,905.70 as backwages and
other statutory benefits, and ₱95,316.00 as separation pay. 17
At odds with the LA's ruling, Irvine elevated the matter on
appeal18 to the NLRC.
The NLRC Ruling
On October 31, 2008, the NLRC rendered a
Resolution19 upholding the LA's ruling.
It debunked Irvine's contention that Lopez was not illegally
dismissed since he was merely placed on temporary lay-off due to
the lack of project in Cavite for the reason that there was no
indication, much less substantial evidence, that Lopez was a
project employee who was assigned to carry out a specific project
or undertaking, with the duration and scope specified at the time
of the engagement. In this relation, it observed that Lopez worked
with Irvine since 1994 and therefore earned the disputable
presumption that he was a regular employee entitled to security of
tenure.20 Thus, since Lopez was not relieved for any just or
authorized cause under Articles 282 and 283 of the Labor Code,
the NLRC upheld the LA's finding that he was illegally
dismissed.21
Dissatisfied, Irvine filed a motion for reconsideration22 which was,
however, denied in a Resolution23 dated February 12, 2009;
hence, it filed a petition for certiorari24 before the CA.
The CA Ruling
The CA granted Irvine's certiorari petition in a Decision25 dated
September 14, 2012, thereby reversing the NLRC.
It held that Lopez's complaint for illegal dismissal was prematurely
filed since there was no indicia that Lopez was actually prevented
by Irvine from returning to work or was deprived of any work
assignments or duties.26 On the contrary, the CA found that Lopez
was asked to return to work within the six-month period under
Article 286 of the Labor Code. Accordingly, it concluded that
Lopez was merely temporarily laid off, and, thus, he could not
have been dismissed.27
Aggrieved, Lopez sought reconsideration28 but the same was
denied in a Resolution29 dated April 12, 2013, hence, this petition.
The Issue Before the Court
The core issue for the Court's resolution is whether or not the CA
erred in finding that the NLRC gravely abused its discretion in
affirming the LA's ruling that Lopez was illegally dismissed.
The Court's Ruling
The petition is meritorious.
Ruling on the propriety of Irvine's course of action in this case
preliminarily calls for a determination of Lopez's employment
status - that is, whether Lopez was a project or a regular
employee.
Case law states that the principal test for determining whether
particular employees are properly characterized as "project
employees" as distinguished from "regular employees," is whether
or not the "project employees" were assigned to carry out a
"specific project or undertaking," the duration and scope of which
were specified at the time the employees were engaged for that
project. The project could either be (1) a particular job or
undertaking that is within the regular or usual business of the
employer company, but which is distinct and separate, and
identifiable as such, from the other undertakings of the company;
or (2) a particular job or undertaking that is not within the regular
business of the corporation. In order to safeguard the rights of
workers against the arbitrary use of the word "project" to prevent
employees from attaining the status of regular employees,
employers claiming that their workers are project employees
should not only prove that the duration and scope of the
employment was specified at the time they were engaged, but
also that there was indeed a project.30
In this case, the NLRC found that no substantial evidence had
been presented by Irvine to show that Lopez had been assigned
to carry out a "specific project or undertaking," with its duration
and scope specified at the time of engagement. In view of the
weight accorded by the courts to factual findings of labor tribunals
such as the NLRC, the Court, absent any cogent reason to hold
otherwise, concurs with its ruling that Lopez was not a project but
a regular employee.31 This conclusion is bolstered by the
undisputed fact that Lopez had been employed by Irvine since
November 1994,32 or more than 10 years from the time he was
laid off on December 27, 2005.33 Article 280 of the Labor Code
provides that any employee who has rendered at least one year of
service, whether such service is continuous or broken, shall be
considered a regular employee:
Art. 280. Regular and casual employment. The provisions of
written agreement to the contrary notwithstanding and regardless
of the oral agreement of the parties, an employment shall be
deemed to be regular where the employee has been engaged to
perform activities which are usually necessary or desirable in the
usual business or trade of the employer, except where the
employment has been fixed for a specific project or undertaking
the completion or termination of which has been determined at the
time of the engagement of the employee or where the work or
service to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered
by the preceding paragraph: Provided, That any employee who
has rendered at least one year of service, whether such service is
continuous or broken, shall be considered a regular employee x x
x. (Emphasis supplied)
As a regular employee, Lopez is entitled to security of tenure,
and, hence, dismissible only if a just or authorized cause exists
therefor. Article 279 of the Labor Code states this fundamental
rule:
64
Art. 279. Security of tenure. In cases of regular employment, the
employer shall not terminate the services of an employee except
for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to
reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his
actual reinstatement. (Emphasis supplied)
Among the authorized causes for termination under Article 283 of
the Labor Code is retrenchment, or what is sometimes referred to
as a "lay-off':
Art. 283. Closure of Establishment and Reduction of Personnel.
The employer may also terminate the employment of any
employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (Emphases supplied)
It is defined as the severance of employment, through no fault of
and without prejudice to the employee, resorted to by
management during the periods of business recession, industrial
depression, or seasonal fluctuations, or during lulls caused by
lack of orders, shortage of materials, conversion of the plant to a
new production program or the introduction of new methods or
more efficient machinery, or of automation.34 Elsewise stated, lay-
off is an act of the employer of dismissing employees because of
losses in the operation, lack of work, and considerable reduction
on the volume of its business, a right recognized and affirmed by
the Court.35 However, a lay-off would be tantamount to a
dismissal only if it is permanent. When a lay-off is only temporary,
the employment status of the employee is not deemed terminated,
but merely suspended.36
Pursuant to Article 286 of the Labor Code, the suspension of the
operation of business or undertaking in a temporary lay-off
situation must not exceed six (6) months:37
ART. 286. When Employment not Deemed Terminated. The
bona-fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the
fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall
reinstate the employee to his former position without loss of
seniority rights if he indicates his desire to resume his work not
later than one (1) month from the resumption of operations of his
employer or from his relief from the military or civic duty.
(Emphasis supplied)
Within this six-month period, the employee should either be
recalled or permanently retrenched. Otherwise, the employee
would be deemed to have been dismissed, and the employee
held liable therefor. As pronounced in the case of PT & T Corp. v.
NLRC:38
[Article 283 of the Labor Code as above-cited] x x x speaks of a
permanent retrenchment as opposed to a temporary lay-off as is
the case here. There is no specific provision of law which treats of
a temporary retrenchment or lay-off and provides for the
requisites in effecting it or a period or duration therefor. These
employees cannot forever be temporarily laid-off. To remedy this
situation or fill the hiatus, Article 286 may be applied but only by
analogy to set a specific period that employees may remain
temporarily laid-off or in floating status. Six months is the period
set by law that the operation of a business or undertaking may be
suspended thereby suspending the employment of the employees
concerned. The temporary lay-off wherein the employees likewise
cease to work should also not last longer than six months. After
six months, the employees should either be recalled to work or
permanently retrenched following the requirements of the law, and
that failing to comply with this would be tantamount to dismissing
the employees and the employer would thus be liable for such
dismissal.39 (Emphasis supplied)
Notably, in both a permanent and temporary lay-off, jurisprudence
dictates that the one-month notice rule to both the DOLE and the
employee under Article 283 of the Labor Code, as above cited, is
.mandatory.40 Also, in both cases, the lay-off, being an exercise of
the employer's management prerogative, must be exercised in
good faith - that is, one which is intended for the advancement of
employers' interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or
under valid agreements.41 Instructive on the nature of a lay-off as
a management prerogative is the following excerpt from the case
of Industrial Timber Corporation v. NLRC:42
Closure or [suspension] of operations for economic reasons is,
therefore, recognized as a valid exercise of management
prerogative. The determination to cease [or suspend] operations
is a prerogative of management, which the State does not usually
interfere with, as no business or undertaking [is] required to
continue operating at a loss simply because it has to maintain its
workers in employment. Such an act would be tantamount to a
taking of property without due process of law. 43
In the case at bar, Irvine asserts that it only temporarily laid-off
Lopez from work on December 27, 2005 for the reason that its
project in Cavite had already been finished. To support its claim, it
submitted the following pieces of evidence: (a) a copy of an
Establishment Termination Report44 evidencing Lopez's lay-off;
(b) a copy of the return to work order dated June 5, 2006;45 and
(c) an affidavit46 from Irvine's personnel manager, Aguinaldo
Santos, which purports that said return to work order was sent to
Lopez by ordinary mail on June 5, 2006. The CA gave credence
to the foregoing and thus granted Irvine's certiorari petition against
the NLRC ruling which affirmed the LA's finding of illegal
dismissal.
The CA is mistaken.
As the NLRC correctly ruled in this case, Lopez, who, as earlier
discussed was a regular employee of Irvine, was not merely
temporarily laid off from work but was terminated from his
employment without any valid cause therefor; thus, the proper
disposition is to affirm the LA's ruling that Lopez had been illegally
dismissed.
Although the NLRC did not expound on the matter, it is readily
apparent that the supposed lay-off of Lopez was hardly justified
considering the absence of any causal relation between the
cessation of Irvine's project in Cavite with the suspension of
Lopez's work. To repeat, Lopez is a regular and not a project
employee. Hence, the continuation of his engagement with Irvine,
either in Cavite, or possibly, in any of its business locations,
should not have been affected by the culmination of the Cavite
65
project alone. In light of the well-entrenched rule that the burden
to prove the validity and legality of the termination of employment
falls on the employer,47 Irvine should have established the bona
fide suspension of its business operations or undertaking that
would have resulted in the temporary lay-off of its employees for a
period not exceeding six (6) months in accordance with Article
286 of the Labor Code. As enunciated in Nasipit Lumber Co. v.
National Organization of Workingmen (NOWM),48 citing
Somerville Stainless Steel Corporation v. NLRC:49
[T]he burden of proving, with sufficient and convincing evidence,
that such closure or suspension is bona fide falls upon the
employer. As we ruled in Somerville Stainless Steel Corporation
v. NLRC:
Considering the severe consequences occasioned by
retrenchment on the livelihood of the employee(s) to be
dismissed, and the avowed policy of the State - under Sec. 3, Art.
XIII of the Constitution, and Art. 3 of the Labor Code - to afford full
protection to labor and to assure the employee's right to enjoy
security of tenure, the Court reiterates that "not every loss
incurred or expected to be incurred by a company will justify
retrenchment. The losses must be substantial and the
retrenchment must be reasonably necessary to avert such losses.
Settled is the rule that the employer bears the burden of proving
this allegation of the existence or imminence of substantial losses,
which by its nature is an affirmative defense. It is the duty of the
employer to prove with Clear and satisfactory evidence that
legitimate business reasons exist to justify retrenchment. Failure
to do so "inevitably results in a finding that the dismissal is.
unjustified." And the determination of whether an employer has
sufficiently and successfully discharged this burden of proof "is
essentially a question of fact for the Labor Arbiter and the NLRC
to determine."
Otherwise, such ground for termination would be susceptible to
abuse by scheming employers who might be merely feigning
business losses or reverses in their business ventures to ease out
employees.50 (Emphasis supplied; citations omitted)
In this case, Irvine failed to prove compliance with the parameters
of Article 286 of the Labor Code. As the records would show, it
merely completed one of its numerous construction projects which
does not, by and of itself, amount to a bona .fide suspension of
business operations or undertaking. In invoking Article 286 of the
Labor Code, the paramount consideration should be the dire
exigency of the business of the employer that compels it to put
some of its employees temporarily out of work.51 This means that
the employer should be able to prove that it is faced with a clear
and compelling economic reason which reasonably forces it to
temporarily shut down its business operations or a particular
undertaking, incidentally resulting to the temporary lay-off of its
employees.
Due to the grim economic consequences to the employee, case
law states that the employer should also bear the burden of
proving that there are no posts available to which the employee
temporarily out of work can be assigned.52 Thus, in the case of
Mobile Protective & Detective Agency v. Ompad,53 the Court
found that the security guards therein were constructively
dismissed considering that their employer was not able to show
any dire exigency justifying the latter's failure to give said
employees any further assignment, viz.:
[Article 286 of the Labor Code] has been applied by analogy to
security guards in a security agency who are placed "off detail" or
on "floating" status. In security agency parlance, to be placed "off
detail" or on "floating" status means "waiting to be posted."
Pursuant to Article 286 of the Labor Code, to be put off detail or in
floating status requires no less than the dire exigency of the
employer's bona fide suspension of operation, business or
undertaking. In security services, this happens when there is a
surplus of security guards over available assignments as when
the clients that do not renew their contracts with the security
agency are more than those clients that do and the new ones that
the agency gets.
Again, petitioners only alleged that respondent's last assignment
was with VVCC for the period of September 29 to October 31,
1997.1âwphi1 He was not given further assignment as he
allegedly went on AWOL and lost interest to work. As explained,
these claims are unconvincing. Worse still, they are inadequate
under the law. The records do not show that there was a lack of
available post after October 1997. It appears that petitioners
simply stopped giving respondent any assignment. Absent any
dire exigency justifying their failure to give respondent further
assignment, the only logical conclusion is that respondent was
constructively dismissed.54 (Emphases supplied)
The same can be said of the employee in this case as no
evidence was submitted by Irvine to show any dire exigency
which rendered it incapable of assigning Lopez to any of its
projects. Add to this the fact that Irvine did not proffer any
sufficient justification for singling out Lopez for lay-off among its
other three hundred employees, thereby casting a cloud of doubt
on Irvine's good faith in pursuing this course of action. Verily,
Irvine cannot conveniently suspend the work of any of its
employees in the guise of a temporary lay-off when it has not
shown compliance with the legal parameters under Article 286 of
the Labor Code. With Irvine failing to prove such compliance, the
resulting legal conclusion is that Lopez had been constructively
dismissed; and since the same was effected without any valid
cause and due process, the NLRC properly affirmed the LA's
ruling that Lopez's dismissal was illegal.
In light of the foregoing, the CA therefore erred in granting Irvine's
certiorari petition. Indeed, a petition for certiorari should only be
granted when grave abuse of discretion exists - that. is, when a
court or tribunal acts in a capricious or whimsical exercise of
judgment as is equivalent to lack of jurisdiction.55 These qualities
of capriciousness and whimsicality the Court finds wanting in any
of the NLRC's actions in this case; as such, the reversal of the
CA's Decision is hereby warranted.
WHEREFORE, the petition is GRANTED. The Decision dated
September 14, 2012 and the Resolution dated April 12, 2013 of
the Court of Appeals in CA-G.R. SP No. 108385-MIN are hereby
REVERSED and SET ASIDE. The Resolutions dated October 31,
2008 and February 12, 2009 of the National Labor Relations
Commission in NLRC LAC No. 01-000428-2008 are
REINSTATED.
SO ORDERED.
G.R. No. 115394 September 27, 1995
FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG,
JUANITO CUSTODIO, CRISANTA LACSAM, SATURNINO
GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA
POTESTAD, EVANGELINE AGNADO, RESTITUTO
GLORIOSO, JANESE DE LOS REYES, RODOLFO SANCHEZ,
WILMA ORBELLO, DAISY PASCUA, and ALEX
MASAYA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, G.T.I.
SPORTSWEAR CORPORATION and/or BENEDICTO
YUJUICO, respondents.
DAVIDE, JR., J.:
66
This is a special civil action for certiorari under Rule 65 of the
Rules of Court to set aside for having been rendered with grave
abuse of discretion the decision of 29 November 19931 and
resolution of 9 February 19942 of public respondent National
Labor Relations Commission (NLRC) in NLRC NCR CA Case No.
004673-93. The former modified the decision of 26 February 1993
of the Labor Arbiter3 by setting aside the award of back wages,
proportionate 13th month pay for 1991 and attorney's fees, while
the latter denied the motion to reconsider the former.
The antecedent facts as disclosed by the decisions of the Labor
Arbiter and the NLRC, as well as by the pleadings of the parties,
are not complicated.
The petitioners were among the thirty-eight (38) regular
employees of private respondent GTI Sportswear Corporation
(hereinafter GTI), a corporation engaged in the manufacture and
export of ready-to-wear garments, who were given "temporary lay-
off" notices by the latter on 22 January 1991 due to alleged lack of
work and heavy losses caused by the cancellation of orders from
abroad and by the garments embargo of 1990.
Believing that their "temporary lay-off" was a ploy to dismiss them,
resorted to because of their union activities and was in violation of
their right to security of tenure since there was no valid ground
therefor, the 38 laid-off employees filed with the Labor Arbiter's
office in the National Capital Region complaints for illegal
dismissal, unfair labor practice, underpayment of wages under
Wage Orders Nos. 01 and 02, and non-payment of overtime pay
and 13th month pay.4
Private respondent GTI denied the claim of illegal dismissal and
asserted that it was its prerogative to lay-off its employees
temporarily for a period not exceeding six months to prevent
losses due to lack of work or job orders from abroad, and that the
lay-off affected both union and non-union members. It justified its
failure to recall the 38 laid-off employees after the lapse of six
months because of the subsequent cancellations of job orders
made by its foreign principals, a fact which was communicated to
the petitioners and the other complainants who were all offered
severance pay. Twenty-two (22) of the 38 complainants accepted
the separation pay. The petitioners herein did not.
The cases then involving those who accepted the separation pay
were pro tanto dismissed with prejudice.
In his decision of 26 February 1993 with respect to the claims of
the petitioners, Labor Arbiter Pablo C. Espiritu, Jr. found for them
and disposed as follows:
WHEREFORE, above premises considered,
judgment is hereby rendered finding
Respondent, G.T.I. Sportswear Corporation,
liable for constructive dismissal, underpayment
of wages under NCR 01 and 02, and 13th-
month pay differentials and concomitantly,
Respondent corporation is hereby ordered:
a. To pay the following
complainants backwages
from the time of their
constructive dismissal (July
22, 1991) till promulgation
considering that
reinstatement is no longer
decreed: . . .
b. To pay complainants
separation pay of 1/2 month
for every year of service in
lieu of reinstatement in the
following amounts: . . .
c. To pay complainants 13th-
month pay differentials arising
out of underpayment of
wages and proportionate
13th-month pay for 1991 in
the following amounts: . . .
d. To pay complainants
underpayment of wages
under NCR Wage 01 and
NCR Wage 02 in the
following amounts: . . .
e. To pay complainants the
amount of P120,618.87
representing 10% attorney's
fees based on the total
judgment award of
P1,326,807.63.
The claims for unfair labor practice,
nonpayment of overtime pay, moral damages,
and exemplary damages are hereby denied for
lack of merit.
SO ORDERED.5
In support of the disposition, the Labor Arbiter made the following
ratiocinations:
On the validity of the temporary lay-off, this
Arbitration Branch finds that there was ample
justification on the part of Respondent company
to lay-off temporarily some of its employees to
prevent losses as a result of the reduction of the
garment quota allocated to Respondent
company due to the garment embargo of 1990.
In fact, in the months of March, April, and May
of 1991 respondent company received several
messages/correspondence from its foreign
principals informing them (Respondent) that
they are canceling/transferring some of their
quotas/orders to other countries. The evidence
presented by Respondent company proves this
fact (Exhibits "12", "13", "14", "15", "15-A", "16",
"17" and Annexes "5", "6", "7", showing the
different documentary evidence on cancellation
of orders and forced leave schedules of workers
due to lack of work). This is sustainable, as in
this case, where the Respondent found it
unnecessary to continue employing some of its
workers because of business recession, lack of
materials to work on due to government
controls (garments embargo) and due to the
lack of the demand for export quota from its
principal foreign buyers.
Although, as a general rule, Respondent
company has the prerogative and right to resort
to temporary lay-off, such right is likewise
limited to a period of six (6) months applying
Art. 286 of the Labor Code on suspension of
employer-employee relationship not exceeding
six (6) months.
In this case, respondent company was justified
in the temporary lay-off of some of its
67
employees. However, Respondent company
should have recalled them after the end of the
six month period or at the least reasonably
informed them (complainants) that the
Respondent company is still not in a position to
recall them due to the continuous drop of
demand in the export market (locally or
internationally), thereby extending the
temporary lay-off with a definite period of recall
and if the same cannot be met, then the
company should implement retrenchment and
pay its employees separation pay. Failing in this
regard, respondent company chose not to recall
nor send notice to the complainants after the
lapse of the six (6) month period. Hence, there
is in this complaint a clear case of constructive
dismissal. While there is a valid reason for the
temporary lay-off, the same is also limited to a
duration of six months. Thereafter the
employees, complainants herein, are entitled
under the law (Art. 286) to be recalled back to
work. As result thereof, the temporary lay-off of
the complainants from January 22, 1991 (date
of lay-off) to July 22, 1991 is valid, however,
thereafter complainants are already entitled to
backwages, in view of constructive dismissal,
due to the fact that they were no longer recalled
back to work. Complainants cannot be placed
on temporary lay-off forever. The limited period
of six (6) months is based provisionally too
prevent circumvention on the right to security of
tenure and to prevent grave abuse of discretion
on the part of the employer. However, since
during the trial it was proven, as testified by the
Vice-President for marketing and personnel
manager, that the lack of work and selection of
personnel continued to persist and considering
the antagonism and hostility displayed by both
litigants, as observed by this Arbiter, during the
trial of this case and in view of the strained
relations between the parties, reinstatement of
the complainants would not be prudent. (Divine
Word High School vs. NLRC, G.R. 72207, 6
Aug. 1986; Esmalin vs. NLRC, G.R. 67880, 15
Sept. 1989; Hernandez vs. NLRC, G.R. 34302,
10 Aug. 1989). Hence, separation pay of 1/2
month for every year of service in lieu of
reinstatement is in order. . . .
On the issue of monetary claims this Arbitration
Branch finds that Respondent is liable for
underpayment of wages under NCR Wage
Order 01 and 02 considering that respondent
failed to rebut the claims of the complainants.
Respondent failed to show proof by means of
payrolls to disprove the claim of the
complainants. Complainants are also entitled to
their proportionate 13th-month pay differentials
as a result of the underpayment of wages under
NCR-01 and 02 and likewise to their
proportionate 13th-month pay for 1991 for the
month of January 1991. . . .
However, complainants are entitled to
reasonable attorney's fees considering they
were forced to engage the services of counsel
in order to fully ventilate their rights and
grievances in accordance with the Labor Code
as amended.6
The Labor Arbiter found no sufficient evidence to prove the
petitioners' charges of unfair labor practice, overtime pay, and for
moral and exemplary damages.
Private respondent GTI seasonably appealed the aforesaid
decision to the NLRC, which docketed the appeal as NLRC NCR
CA Case No. 004673-93.
In its challenged decision, the NLRC concurred with the findings
of the Labor Arbiter that there was a valid lay-off of the petitioners
due to lack of work, but disagreed with the latter's ruling granting
back wages after 22 July 1991. The NLRC justified its postulation
as follows:
However, we cannot sustain the findings of the
Labor Arbiter in awarding the complainants
backwages after July 22, 1991 in view of
constructive dismissal, it being acknowledged
by him that ". . . during the trial it was proven, as
testified by the Vice-President for marketing and
personnel manager, that the lack of work and
selection of personnel continued to persist . . ."
Besides, it was not denied by the complainants
that during the proceeding of the case, the
respondents conveyed to the complainants the
impossibility of having them recalled in view of
the continued unavailability of work as the
economic recession of the respondent's
principal market persisted. In fact, the
respondent company offered to complainants
payment of their separation pay which offer
[w]as accepted by 22 out of 38 complainants.
Having established lack of work, it necessarily
follow[s] that retrenchment did take place and
not constructive dismissal. Dismissal by its
term, presuppose that there was still work
available and that the employer terminated the
services of the employee therefrom. The same
cannot be said of the case at bar. The
complainants did not question the evidence of
lack of work on account of reduction of
government quota or cancellation of orders.
Art. 286 of the Labor Code is precised [sic] in
this regards when it provided that:
Art. 286. When employment
not deemed terminated. —
The bona fide suspension of
the operation of a business or
undertaking for a period not
exceeding six (6) months, . . .
shall not terminate
employment . . . .
It is only after the six months period that an
employee can be presumed to have been
terminated.7
It thus set aside the awards for back wages, proportionate 13th
month pay for 1991, and for attorney's fees which it found to be
without basis, and disposed as follows:
WHEREFORE, premises considered the
decision of the Labor Arbiter dated February 26,
1993 is hereby modified by deleting the award
of backwages, the proportionate 13th month
pay for 1991 and attorney's fees for lack of legal
basis and direct, the payment of separation pay
equal to one-half month salary for every year of
service as of July 22, 1991.8
68
Unable to accept the NLRC judgment, the petitioners filed this
special civil action for certiorari. They contend that the NLRC
acted without or in excess of jurisdiction or with grave abuse of
discretion when it: (a) ruled that there was a valid and legal
reduction of business and in sustaining the theory of redundancy
in justifying the dismissal of the petitioners; (b) failed to apply in
full the provisions of law and of jurisprudence as to the full
payment of back wages in cases of illegal dismissal; and (c)
deleted the award of attorney's fees.
We gave due course to this petition after the filing of the separate
comments to the petition by the public and private respondents
and the petitioners' reply to the public respondent's comment.
The petitioners' first contention is based on a wrong premise or on
a miscomprehension of the statement of the NLRC. What the
NLRC sustained and affirmed is not redundancy,
but retrenchment as a ground for termination of employment.
They are not synonymous but distinct and separate grounds
under Article 283 of the Labor Code, as amended.9
Redundancy exists where the services of an employee are in
excess of what is reasonably demanded by the actual
requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by
the enterprise.10
Retrenchment, on the other hand, is used interchangeably with
the term "lay-off." It is the termination of employment initiated by
the employer through no fault of the employee's and without
prejudice to the latter, resorted to by management during periods
of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned by lack of orders, shortage
of materials, conversion of the plant for a new production program
or the introduction of new methods or more efficient machinery, or
of automation.11 Simply put, it is an act of the employer of
dismissing employees because of losses in the operation of a
business, lack of work, and considerable reduction on the volume
of his business, a right consistently recognized and affirmed by
this Court.12
Article 283 of the Labor code which covers retrenchment, reads
as follows:
Art. 283. Closure of establishment and
reduction of personnel. — The employer may
also terminate the employment of any employee
due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the
establishment or undertaking unless the closing
is for the purpose of circumventing the
provisions of this Title, by servicing a written
notice on the workers and the Ministry of Labor
and Employment at least one (1) month before
the intended date thereof. In case of termination
due to the installation of labor saving devices or
redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever
is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of
operations of establishment or undertaking not
due to serious business losses or financial
reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever
is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
This provision, however, speaks of a permanent
retrenchment as opposed to a temporary lay-off as is the
case here. There is no specific provision of law which
treats of a temporary retrenchment or lay-off and
provides for the requisites in effecting it or a period or
duration therefor. These employees cannot forever be
temporarily laid-off. To remedy this situation or fill the
hiatus, Article 286 may be applied but only by analogy to
set a specific period that employees may remain
temporarily laid-off or in floating status.13 Six months is
the period set by law that the operation of a business or
undertaking may be suspended thereby suspending the
employment of the employees concerned. The
temporary lay-off wherein the employees likewise cease
to work should also not last longer than six months. After
six months, the employees should either be recalled to
work or permanently retrenched following the
requirements of the law, and that failing to comply with
this would be tantamount to dismissing the employees
and the employer would thus be liable for such dismissal.
To determine, therefore, whether the petitioners were validly
retrenched or were illegally dismissed, we must determine
whether there was compliance with the law regarding a valid
retrenchment at anytime within the six month-period that they
were temporarily laid-off.
Under the aforequoted Article 283 of the Labor Code, there are
three basic requisites for a valid retrenchment:
(1) the retrenchment is necessary to prevent
losses and such losses are proven;
(2) written notice to the employees and to the
Department of Labor and Employment at least
one month prior to the intended date of
retrenchment; and
(3) payment of separation pay equivalent to one
month pay or at least 1/2 month pay for every
year of service, whichever is higher.
As for the first requisite, whether or not an employer would
imminently suffer serious or substantial losses for economic
reasons is essentially a question of fact for the Labor Arbiter and
the NLRC to determine.14 Here, both the Labor Arbiter and the
NLRC found that the private respondent was suffering and would
continue to suffer serious losses, thereby justifying the
retrenchment of some of its employees, including the petitioners.
We are not prepared to disregard this finding of fact. It is settled
that findings of quasi-judicial agencies which have acquired
expertise in the matters entrusted to their jurisdiction are accorded
by this Court not only with respect but with finality if they are
supported by substantial evidence.15 The latter means that
amount of relevant evidence which a reasonable mind might
accept as adequate to justify a conclusion.16 In the instant case,
no claim was made by any of the parties that such a finding was
not supported by substantial evidence. Furthermore, the
petitioners did not appeal the finding of the Labor Arbiter that their
temporary lay-off to prevent losses was amply justified. They
cannot now question this finding that there is a valid ground to lay-
off or retrench them.
The requirement of notice to both the employees concerned and
the Department of Labor and Employment (DOLE) is mandatory
and must be written and given at least one month before the
intended date of retrenchment. In this case, it is undisputed that
the petitioners were given notice of the temporary lay-off. There
69
is, however, no evidence that any written notice to permanently
retrench them was given at least one month prior to the date of
the intended retrenchment. The NLRC found that GTI conveyed to
the petitioners the impossibility of recalling them due to the
continued unavailability of work.17 But what the law requires is
a written notice to the employees concerned and that requirement
is mandatory.18 The notice must also be given at least one month
in advance of the intended date of retrenchment to enable the
employees to look for other means of employment and therefore
to ease the impact of the loss of their jobs and the corresponding
income.19 That they were already on temporary lay-off at the time
notice should have been given to them is not an excuse to forego
the one-month written notice because by this time, their lay-off is
to become permanent and they were definitely losing their
employment.
There is also nothing in the records to prove that a written notice
was ever given to the DOLE as required by law. GTI's position
paper,20 offer of exhibits,21 Comment to the Petition,22 and
Memorandum23 in this case do not mention of any such written
notice. The law requires two notices — one to the employee/s
concerned and another to the DOLE — not just one. The notice to
the DOLE is essential because the right to retrench is not an
absolute prerogative of an employer but is subject to the
requirement of law that retrenchment be done to prevent losses.
The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by facts. 24
With respect to the payment of separation pay, the NLRC found
that GTI offered to give the petitioners their separation pay but
that the latter rejected such offer which was accepted only by 22
out of the 38 original complainants in this case.25 As to when this
offer was made was not, however, proven. All that the parties, the
Labor Arbiter and the NLRC stated in their respective pleadings
and decisions was that the offer and payment were made during
the pendency of the illegal dismissal case with the Labor Arbiter.
But with or without this offer of separation pay, our conclusion
would remain the same: that the retrenchment of the petitioners is
defective in the face of our finding that the required notices to both
the petitioners and the DOLE were not given.
The lack of written notice to the petitioners and to the DOLE does
not, however, make the petitioners' retrenchment illegal such that
they are entitled to the payment of back wages and separation
pay in lieu of reinstatement as they contend. Their retrenchment,
for not having been effected with the required notices, is merely
defective. In those cases where we found the retrenchment to be
illegal and ordered the employees' reinstatement and the payment
of back wages, the validity of the cause for retrenchment, that is
the existence of imminent or actual serious or substantial losses,
was not proven.26 But here, such a cause is present as found by
both the Labor Arbiter and the NLRC. There is only a violation by
GTI of the procedure prescribed in Article 283 of the Labor Code
in effecting the retrenchment of the petitioners.
It is now settled that where the dismissal of an employee is in fact
for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of or for failure to observe
due process. The sanction, in the nature of indemnification or
penalty, depends on the facts of each case and the gravity of the
omission committed by the employer and has ranged from
P1,000.00 as in the cases of Wenphil vs. National Labor Relations
Commission,27 Seahorse Maritime Corp. vs. National Labor
Relations Commission,28 Shoemart, Inc. vs. National Labor
Relations Commission,29 Rubberworld (Phils.), Inc. vs. National
Labor Relations Commission,30 Pacific Mills,
Inc. vs. Alonzo, 31 and Aurelio vs. National Labor Relations
Commission32 to P10,000.00 in Reta vs. National Labor Relations
Commission33 and Alhambra Industries, Inc. vs. National Labor
Relations Commission.34 More recently, in Worldwide Papermills,
Inc. vs. National Labor Relations Commission,35 the sum of
P5,000.00 was awarded to the employee as indemnification for
the employer's failure to comply with the requirements of
procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award of
back wages. But because the required notices of the petitioners'
retrenchment were not served upon the petitioners and the DOLE,
GTI must be sanctioned for such failure and thereby required to
indemnify each of the petitioners the sum of P2,000.00 which we
find to be just and reasonable under the circumstances of this
case.
As for the award of the 13th-month pay made by the Labor Arbiter
and deleted by the NLRC, we do not find anything in the decision
of the NLRC to support the deletion of this award other than its
opinion that there is lack of legal basis to support such an award,
without, however, furnishing any explanation for this finding. Thus,
the award of the 13th-month pay made and sufficiently justified by
the Labor Arbiter must be reinstated as prayed for by the
petitioners.
Also, the petitioners are entitled to an award for attorney's fees
pursuant to paragraph 7, Article 2208 of the Civil Code which
must, however, be reasonable. The award of P120,618.87, which
is equivalent to ten percent (10%) of the amounts recovered, as
attorney's fees should be reduced to P25,000.00, an amount we
find to be reasonable. The ten percent (10%) attorney's fees
provided for in Article 111 of the Labor Code and Section 11, Rule
VIII, Book III of the Implementing Rules is the maximum; hence,
any amount less than that may be awarded as the circumstances
of the case may warrant.
WHEREFORE, the instant petition is partially GRANTED and the
challenged decision of public respondent National Labor Relations
Commission in NLRC NCR CA Case No. 004673-93 is modified
by reversing and setting aside its deletion of the awards in the
Labor Arbiter's decision of proportionate 13th month pay for 1991
and attorney's fees, the latter being reduced to P25,000.00.
Separation pay equivalent to one-half (1/2) month pay for every
year of service shall be computed from the dates of the
commencement of the petitioners' respective employment until the
end of their six-month temporary lay-off which is 22 July 1991. In
addition, private respondent G.T.I. Sportswear Corporation is
ordered to pay each of the petitioners the sum of P2,000.00 as
indemnification for its failure to observe due process in effecting
the retrenchment.
Costs against the private respondent.
SO ORDERED.
G.R. No. 111105 June 27, 1995
ROLANDO REVIDAD, PABLITO LALUNA, RAFAEL ANGELES,
TEODORO ROSARIO, ROMEO REVIDAD, JACINTO GRUTA,
JOSE ESPAÑOL, FLORENTINO LOCSIN, ROGELIO
PARADERO, MARCELINO DEROTA, ARMANDO CABALES,
BENJAMIN MONTESA and RAYMOND VIDAL, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and
ATLANTIC, GULF AND PACIFIC COMPANY OF MANILA,
INC., respondents.
REGALADO, J.:
70
This original action for certiorari seeks to nullify the decision
rendered by public respondent National Labor Relations
Commission (NLRC) on July 14, 19931 which reversed the
decision of the labor arbiter and ordered the dismissal of herein
petitioners' complaint for illegal dismissal.
It appears that sometime in March, 1988, private respondent
Atlantic, Gulf and Pacific Company of Manila, Inc. (hereafter, AG
& P ) terminated the services of 178 employees, including herein
petitioners, under a redundancy program. As a consequence, a
complaint for illegal dismissal with prayer for reinstatement was
filed by herein petitioners (except Jose Español) with public
respondent and docketed in its Arbitration Branch as NLRC-NCR
Cases
Nos. 00-01-00489-89, 00-01-00515-89, 00-01-00643-89, 00-01-
01143-89, and 00-03-01216-89. These cases were subsequently
decided in favor of petitioners, as a result of which they were
reinstated on July 8, 1991 and assigned to the Batangas plant of
private respondent.
The records show, however, that pursuant to Presidential
Directive No. 0191 2 issued on July 25, 1991 by the company's
president and containing management's decision to lay off 40% of
the employees due to financial losses incurred from 1989-1990,
AG & P implemented and effected, starting August 3, 1991, the
temporary lay-off of some 705 employees. By reason thereof, the
AG & P United Rank and File Association (URFA, for facility),
which was the employees' union, staged a strike. 3
In a conciliation conference over the labor dispute held before the
National Conciliation and Mediation Board on August 13, 1991,
the parties agreed to submit the legality of the lay-offs to voluntary
arbitration. Accordingly, the case was filed with Voluntary
Arbitrator Romeo B. Batino, entitled "AG & P United Rank and File
Association vs. AG & P Company of Manila. Inc.," on the principal
issue of whether the massive lay-off, in the exercise of AG & P's
management prerogative, constituted a violation of their existing
collective bargaining agreement which would be tantamount to an
unfair labor practice. This issue was eventually resolved by the
voluntary arbitrator in a decision dated January 7, 1992 where it
was held that AG & P had the right to exercise its management
prerogative to temporarily lay off its employees owing to the
unfavorable business climate being experienced by the company
consequent to the financial reverses it suffered from 1987 to
1991. 4
In the meantime, as found by public respondent in its
decision, 5 the three labor unions then existing at AG & P met on
September 7, 1991 with the corporation's management officials at
its Batangas plant in a conference presided by Congressman
Hernando B. Perez and wherein the Parties arrived at the
following agreement:
1. The Company agrees to extend financial
assistance to all temporarily laid off or to be laid
off employees the equivalent of two (2) months
pay to be paid as follows: The first one month
pay on September 15, 1991 and the second
one month pay on or before December 10,
1991. The said financial assistance shall be
deductible from the employees' separation pay
should they not be resolved by the company
within the six-month lay off period or from cook
benefit due them should they not be recalled.
2. The supervisors' claim that, the separation
pay of supervisors should be computed on the
basis of one month pay for every year of service
in accordance with precedent adopted by the
Company for supervisors who were terminated
in the post. The Company agrees to consider
this claim favorably should the supervisors be
able to establish with convincing proof that
there is really such precedent in the Company.
3. There should be consultations between the
Unions in BMFY and the Company before any
temporary lay-off of employees in BMFY should
be effected and the parties agree that a
dialogue to discuss such matters be undertaken
by them.
4. The LAKAS-NFL agree(s) to the
understanding specified in paragraph 1
abovestated concerning the financial assistance
to be extended to those who were temporarily
laid off or to be laid off in BMFY. It is clear,
however, that the financial assistance due on or
before December 10, 1991 shall no longer be
effected regarding employees who might have
been recalled in the meantime.
5-A-See page 3 of this agreement.
5. The temporarily laid off employees who might
find jobs elsewhere during the period of lay-off
will be paid their separation pay in accordance
with the CBA/Labor Code or existing Company
Policy applicable.
6. The notice of Strike filed by the AG & P
Supervisory Employees Union is hereby
withdrawn from the DOLE.
7. The pickets shall be lifted immediately by
BMFY and AGPEC upon signing of this
agreement.
8. There shall be no retaliatory charges by one
against the other in relation to this labor dispute.
9. All non-laid off employees will report
immediately to the Company on Monday,
December 9, 1991.
5-A. The Lakas-NFL requests that employees
belonging to LAKAS who were or may be
temporarily laid off and may not be recalled
within six months from lay-off shall have the
option to be paid their separation pay or let their
temporary lay-off status be extended up to the
time when jobs would become available and
their services are needed by the Company.
10. All laid off employees will be given
preference in hiring as long as they meet the
qualifications requested for the position or job
opening.6
On September 17, 1991, herein petitioners were served a notice
of temporary lay-off, the text of which reads as follows:
Pursuant to the agreement dated September 7,
1991 among Unions and AG & P, represented
by Atty. Pedro F. Perez, we regret to advi(s)e
you that you are part of the employee(s) to be
placed on Temporary Lay-off, after exhausti(on)
of your Vacation Leave credits if there is any.
71
 Henceforth, you will be immediately placed on
priority reserve list for both overseas and
domestic assignments and should the Company
need your service, we will advise you
accordingly.
Kindly present this letter to Finance Department
to Mr. Sammy O. De Guzman to collect your
temporary financial assistance equivalent to two
months basic pay as follows, one month on 15
September 1991 and one month on 10
December 1991. If you will be recalled within
the 6 month lay-off period, then the financial
assistance shall be deductible from your salary
in six (6) equal installments semi-monthly.7
Thereafter, petitioners received their respective financial
assistance and they signed a pro forma authorization in favor of
AG & P to deduct from the separation pay due them the amount
of financial assistance received pursuant to the aforesaid
agreement of September 7, 1991.
As earlier stated, it was on January 7, 1992 when the voluntary
arbitrator rendered a decision finding justification for the mass lay-
off of the AG & P employees caused by financial reverses
suffered by the company.
On February 11, 1992, considering that petitioners were not being
recalled by the AG & P management, they filed a complaint for
illegal dismissal and unfair labor practice against AG & P before
respondent commission where it was docketed as NLRC Case
No. NCR-00-02-00996-92. On August 24, 1992, Labor Arbiter
Nieves V. de Castro rendered judgment 8 ordering the
reinstatement of petitioners, with payment of full back wages, on
the ground that AG & P failed to substantiate the alleged losses it
incurred in 1991 which resulted in the retrenchment of its
operations. The labor arbiter explicated in her aforesaid decision
that while it had been established that private respondent suffered
serious losses from 1987 to 1990, it allegedly failed to prove
continuous losses in 1991 which would justify the temporary lay-
off of herein petitioners, thus:
. . . . But respondent failed to submit any
evidence to show that indeed it was
continuously suffering from serious losses in
1991. While it is well settled that AG & P
suffered from serious losses from 1987 up to
1990, respondent failed to establish lawful basis
for effecting another lay-off on September 17,
1991. And even if the said lay-off was relative to
an agreement between the Management and
the Union existing thereat, the same may only
be given an imprimatur if and when the parties
thereto have justifiable reasons therefor, and
provided further that it will not adversely affect
the rights and interests of others.
Respondent cannot forever make use of the
losses incurred in a specific period of time and
which was the basis of a previous lay-off as a
ground (for) another lay-off every time or
anytime it thought of terminating, an employee
or a batch of employees.9
On appeal, public respondent NLRC reversed and set aside the
decision of the labor arbiter, and dismissed the complaint for
illegal dismissal for lack of merit. In ruling that the order of
reinstatement with payment of backwages has no basis in fact
and in law, public respondent declared that, contrary to the labor
arbiter's findings, there was only one lay-off, that is, the lay-off
effected on September 17, 1991 the legality of which had already
been passed upon and upheld in the voluntary arbitration
proceedings. Hence, this petition which prays for the affirmance in
totoof the labor arbiter's decision.
Petitioners argue that public respondent gravely abused its
discretion and committed serious errors or law when it held that —
1. Petitioners' dismissal was valid because it
was due to private respondent's serious losses
when in fact there is no evidence to justify this;
moreover, the latter failed: (a) to serve on the
Department of Labor and Employment a written
notice of termination at least one month before
petitioners' dismissal; (b) to observe fair and
reasonable standards in effecting retrenchment;
and (c) to show that it first instituted cost
reduction measures in other areas of production
before undertaking retrenchment as a last
resort and, therefore, their dismissal is against
the doctrine laid down in RCPI v. NLRC and
Mendero, G.R. Nos. 101181-84, June 22, 1992.
2. It has no more basis to affirm the labor
arbiter's decision for the reason that petitioners
had received monetary consideration for their
dismissal when said consideration is short of
what the parties' CBA or the law accords to
petitioners. 10
Petitioners contend that their lay-off on September 17, 1991
cannot be justified by the losses suffered by AG & P from 1989 to
1990 since it had not been shown that such losses continued up
to 1991; that their lay-off was merely in retaliation to an adverse
decision against AG & P rendered by the NLRC in an earlier case
involving the same parties, which resulted in the reinstatement of
herein petitioners on July 8, 1991; that the termination of
petitioners' employment on September 17, 1991 could not have
been the subject of the voluntary arbitration proceedings before
Voluntary Arbitrator Batino, contrary to the findings of public
respondent NLRC that there was only one lay-off, considering that
the issue involved therein was the legality of the mass lay-off of
more than 705 employees of AG & P which, however, did not
include herein petitioners; and that if such allegation of AG & P
were true, it could have easily invoked the voluntary arbitration
case as res judicata to the aforesaid illegal termination case
subsequently filed by petitioners, but which AG & P did not do.
Petitioners further contend that assuming arguendo that indeed
there was only one lay-off, their temporary lay-off supposedly due
to retrenchment is illegal because: (a) AG & P failed to show that
it incurred losses in 1991 to justify such termination; (b) no written
notice of termination was submitted with the Department of Labor
and Employment one month before the date of the temporary lay-
off; (c) AG & P failed to observe fair and reasonable standards in
effecting retrenchment; and (d) there is no showing that cost
reduction measures were undertaken before management
resorted to retrenchment of employees. Finally, it is claimed that
petitioners merely received financial assistance which does not,
however, bar them from questioning the legality of their dismissal,
aside from the fact that they have not been given their separation
pay.
We find that the temporary lay-off of herein petitioners is valid and
justified, and that by reason of management's failure to recall
them, their services shall be considered duly terminated and they
shall be entitled to separation pay equivalent to one month pay or
at least one-half (½) month pay for every year of service,
whichever is higher. The financial assistance which petitioners
have received shall be deducted from the amount of separation
72
pay they will receive, pursuant to Paragraph 1 of the September
7, 1991 agreement.
We are not, however, in accord with the findings of public
respondent that the subject of voluntary arbitration proceedings
was the September 17, 1991 lay-off of herein petitioners, which
allegedly was the one and only lay-off effected by AG & P. Private
respondent AG & P does not deny nor controvert the allegation in
the position paper submitted by the AG & P-URFA with the
voluntary arbitrator that the AG & P management started the
actual implementation of the company's Presidential Directive No.
0191 on August 3, 1991 by effecting the temporary lay-off of more
than 705 employees. Thus, the lay-off of herein petitioners on
September 17, 1991 cannot be validly asserted as the only lay-off
subject of the aforementioned voluntary arbitration proceedings.
On the contrary, it is more logical to conclude from the evidence
on record that there could have possibly been not just one or two
separate and unrelated terminations because what was actually
involved here was a continuing process or correlated series of
temporary lay-offs implemented by private respondent on the
basis of its president's directive for retrenchment by reason of the
financial reverses being suffered by the company.
This fact may be clearly deduced from a reading of the position
paper submitted by the AG & P-URFA with the voluntary
arbitrator 11 wherein it is categorically stated that as of the date
thereof, that is, October 17, 1991, "the lay-off program has
continued even as the parties agreed to submit its legality or
illegality to voluntary arbitration." The union's position paper
merely echoed the sentiment expressed by its president, Nicanor
Melano, in a letter addressed to the AG & P Head of Employee
Relations, Judge Pedro Reyes, dated August 17, 1991, 12 in effect
condemning management for continuously laying off employees
despite the pendency of the labor dispute before the voluntary
arbitrator, and demanding that the company cease from pursuing
its retrenchment scheme.
Suppletorily, there was the agreement 13 of September 7, 1991
executed by and between AG & P, on the one hand, and the three
unions, on the other, which has been repeatedly adverted to. Said
agreement was actually an offshoot of the strike staged by the
employees which was triggered by the implementation of the
mass lay-offs. A cursory perusal thereof indeed makes it quite
clear that the crux of the negotiations between management and
its employees concerns the manner with which future possible
lay-offs would be implemented and the financial assistance to be
extended to those employees already laid off or who may be laid
off. Thus, paragraph 3 of the agreement states that "(t)here
should be consultations between the Unions in BMFY and the
Company before any temporary lay-off of employees in BMFY
should be effected and the parties agree that a dialogue to
discuss such matters be undertaken by them." It is thereby
unmistakable, from the plain and simple wordings of the
agreement, that the company would continue to exercise its
management prerogative to lay off employees as the need arises,
but subject to the conditions imposed therein.
The fact that the three unions which negotiated with management
acquiesced to the aforequoted third stipulation should be deemed
an admission and recognition on their part that there would be a
continuing need to lay off employees as a consequence of the
dwindling financial capacity of the company to maintain its existing
work force. It would have been quite absurd and unnatural for the
union to have agreed to additional lay-offs in the future if it did not
unqualifiedly believe that there truly existed a persisting and
irreversible financial instability in the business concerns of AG &
P.
Petitioners were temporarily laid off pursuant to this agreement
which, not being contrary to law, morals and public policy, is valid
and binding between the parties. More importantly, it will be noted
that the AG & P-URFA did not as much as raise an objection nor
file a protest against such lay-offs, as it would have been wont to
do had petitioners' assertions really been true. And, confirmatory
thereof, herein petitioners never raised the issue that the
consultation requirement contained in the agreement was not
resorted to or followed before their lay-off was effected. It would,
therefore, be safe to assure that such procedure had been
followed, thereby lending credence to the obvious fact that the
services of petitioners were legally terminated.
The bare allegation that the dismissal of petitioners was a
retaliatory move by the company after the former won in an earlier
illegal termination case and by reason of which they were
reinstated by the latter, without any supporting evidence to prove
bad faith or ill motive on the part of the company, cannot stand
against and is diametrically opposed to the findings in the
voluntary arbitration proceedings. Voluntary Arbitrator Batino
declared in no uncertain terms, after an assiduous and
painstaking evaluation of the documentary evidence and position
papers submitted by the parties, that the exercise of AG & P's
management prerogative to lay off employees was fair,
reasonable and just and that it was neither oppressive, malicious,
harsh, nor vindictive. Worse, it was there stated that the union, to
which herein petitioners belonged, never imputed bad faith or ill
motives in the selection of the employees to be temporarily laid
off. This finding is totally contradictory to the indefensible
hypothesis invoked by petitioners which, from the very stare, was
bound to fail considering the circumstances obtaining in this case.
We are accordingly convinced, and so hold, that both the
retrenchment program of private respondent and the dismissal of
petitioners were valid and legal.
First, it has been sufficiently and convincingly established by AG
& P before the voluntary arbitrator that it was suffering financial
reverses. Even the rank and file union at AG & P did not contest
the fact that management had been undergoing financial
difficulties for the past several years. Hence, the voluntary
arbitrator considered this as an admission that indeed AG & P
was actually experiencing adverse business conditions which
would justify the exercise of its management prerogative to
retrench in order to avoid the not so remote possibility of the
closure of the entire business which, in the opinion of the
voluntary arbitrator, would in the last analysis be adverse to both
the management and the union.
Second, the voluntary arbitrator's conclusions were premised
upon and substantiated by the audited financial statements and
the auditor's reports of AG & P for the years 1987 to
1991. 14 These, financial statements audited by independent
external auditors constitute the normal and reliable method of
proof of the profit and loss performance of a company. 15
Third, contrary to petitioners' asseverations, proof of actual
financial losses incurred by the company is not a condition sine
qua non, for retrenchment. Retrenchment is one of the economic
grounds to dismiss employees, which is resorted to by an
employer primarily to avoid or minimize business losses. 16 The
law recognizes this under Article 283 of the Labor Code which
provides that:
Art. 283. Closure of establishment and
reduction of personnel. — The employer may
also terminate the employment of any employee
due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the
establishment or undertaking, unless the
closing is for the purpose of circumventing the
provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor
73
 and Employment at least one (1) month before
the intended date thereof. In case of termination
due to the installation of labor saving devices or
redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever
is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of
operations of establishment or undertaking not
due to serious business losses or financial
reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever
is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
In its ordinary connotation, the phrase "to prevent losses" means
that retrenchment or termination of the services of some
employees is authorized to be undertaken by the employer
sometime before the anticipated losses are actually sustained or
realized. It is not, in other words, the intention of the lawmaker to
compel the employer to stay his hand and keep all his employees
until after losses shall have in fact materialized. If such an intent
were expressly written into the law, that law may well be
vulnerable to constitutional attack as unduly taking property from
one man to be given to another.
At the other end of the spectrum, it seems equally clear that not
every asserted possibility of loss is sufficient legal warrant for the
reduction of personnel. In the nature of things, the possibility of
incurring losses is constantly present, in greater or lesser degree,
in the carrying on of business operations, since some, indeed
many, of the factors which impact upon the profitability or viability
of such operations may be substantially outside the control of the
employer. 17
On the bases of these considerations, it follows that the employer
bears the burden to prove his allegation of economic or business
reverses with clear and satisfactory evidence, it being in the
nature of an affirmative defense. 18 As earlier discussed, we are
fully persuaded that the private respondent has been and is
besieged by a continuing downtrend in both its business
operations and financial resources, thus amply justifying its resort
to drastic cuts in personnel and costs.
To the point of being plethoric, the explanation advanced by
private respondent in its position paper submitted to the voluntary
arbitrator is highly enlightening and is here quoted in full:
Figure 1 shows, in bar graph form, the
comparative Net Income or Net Loss of the
Company from 1987 to 1990 as well as the
projected Net Loss for 1991. The graph clearly
illustrates the financial hemorrhage being
endured by the Company. The Net Incomes of
1968 and 1989 (P2.6 million and P5.8 million,
respectively) dwindles into insignificance beside
the net Losses of 1987 and 1990 as well as the
estimated Net Loss for 1991 (P35.4 million,
P76.2 million and P250 million, respectively).
Moreover, the P54.8 million Net Income of 1989
is due solely to the dissolution of 2 subsidiaries
which resulted in a "paper gain" of about P134
million. In other words, there was an actual loss
of about 80 million but a paper gain of P54
million in 1989.
xxx xxx xxx
Figure 2, on the other hand, shows the
dwindling number of projects being undertaken
by the Company for the past four years. As of
August 1991, there are only 17 ongoing projects
of the Company (as compared to the 1987 peak
of 67), 13 of which are mere carry-overs from
the previous years. The projects being the main
source of the Company's revenues, the graph in
Figure 2 further confirms the severe losses
being suffered by the Company.
xxx xxx xxx
With retained earnings at the financially
comfortable level of more than P400 million, it
may be suggested, that the Company delay
implementation of the decisions to streamline,
centralize, retrench, and cut expenses in
general, in the hope that the situation of the
Company's financial conditions proves that this
suggestion is not viable. Figure 3 proves this by
showing, in bar graph form, a comparative
study of the Company's Working Capital for the
period 1987 to 1990. The legend "Working
Capital — source" indicates the amount
generated by the Company during the fiscal
year. "Working Capital — use" indicates the
amount used by the Company during the fiscal
year. And "Inc/Dec in Working Capital" indicates
the increase or decrease in Working Capital at
fiscal year's end. It is readily seen from Figure 3
that, except for 1988, more working capital was
used than was generated for the period under
study and the same is chronically being
depleted. This means that the Company is
running out of money to pay for its bills.
xxx xxx xxx
Figure 4 plots the Current Ratio of the Company
over time. "Current Ratio" is the ratio of a firm's
Current Assets to its Current Liabilities. It thus
measures the firm's ability to immediately pay
its current debts. The rule of thumb prescribes a
Current Ratio of 2, meaning, for every peso of
short-term debt, there should be two pesos of
cash or "near-cash" available. Figure 4 clearly
shows that as early as 1987, the Company is
below par. Worse, in 1990, the Current Ratio is
less than 1. This means that it has more short-
terms debts than current assets. 19
We might as well make mention of the fact that as early as March
4, 1991, the President of AG & P had issued Circular No. CEO-
191, 20 addressed to all AG & P employees wherein they were
apprised of the financial difficulties of the company and of the
decisions made by its board of directors aimed at arresting any
further dissipation of company resources. It informed the
employees that "we simply no longer have the resources required
to fully support anything much beyond our mainline activities. We
each must therefore now make a choice to either stand solidly
behind these critical moves poise ourselves for an eventual
collapse. According to private respondent AG & P, the decision
was calculated to turn the company into a lean and trim
centralized organization, by shedding off marginal business
activities, in the process availing of the Company's Retirement
Plan and retrenching personnel in the affected areas whenever
necessary. The circular is more than sufficient notice to AG & P
employees, as well as herein petitioners, of the then impending
decision of the company to carry out its retrenchment program for
the reasons therein stated.
74
Anent the mandatory written notice to be filed with the labor
department one month before retrenchment, 21 we are of the
considered opinion that the proceedings had before the voluntary
arbitrator, where both parties were given the opportunity to be
heard and present evidence in their favor, constitute substantial
compliance with the requirement of the law. The purpose of this
notice requirement is to enable the proper authorities to ascertain
whether the closure of the business is being done in good faith
and is not just a pretext for evading compliance with the just
obligations of the employer to the affected employees. 22 In fact,
the voluntary arbitration proceedings more than satisfied the
intendment of the law considering that the parties were accorded
the benefit of a hearing, 23 in addition to the right to present their
respective position papers and documentary evidence.
For that matter, hearing and investigation by the employer, where
the reason for termination is retrenchment due to financial
reverses and not to an act attributable to the employee, is not
even required because it is considered a surplusage under
existing jurisprudence. Hence, it has been held that:
. . . Where, as in the instant case, the ground
for dismissal or termination of services does not
relate to a blameworthy act or omission on the
part of the employee, there appears to us no
need for an investigation and hearing to be
conducted by the employer who does not, to
begin with, allege any malfeasance or non-
feasance on the part of the employee. In such
case, there are no allegations which the
employee should refute and defend himself
from. Thus, to require petitioner Wiltshire to
hold a hearing, at which private respondent
would have had the right to be present, on the
business and financial circumstances
compelling retrenchment and resulting in
redundancy, would be to impose upon the
employer an unnecessary and inutile hearing as
a condition for legality of termination.
This is not to say that the employee may not
contest the reality or good faith character of the
retrenchment or redundancy asserted as
grounds for termination of services. The
appropriate forum for such controversion would,
however, be the Department of Labor and
Employment and not an investigation or hearing
to be held by the employer itself. It is precisely
for this reason that an employer seeking to
terminate services of an employee or
employees because of "closure of business
establishment and reduction of personnel," is
legally required to give written notice not only to
the employee but also to the Department of
Labor and Employment at least one month
before effectivity date of the termination. 24
At any rate, considering that the Office of the Voluntary Arbitrator
is under the jurisdiction of the Department of Labor and
Employment, it would be superfluous to still require the service of
notice with the latter when proceedings have already been
initiated with the former precisely to carry out the very purpose for
which said notice is intended.
In Lopez Sugar Corporation vs. Federation of Free Workers, et
al., supra, this Court set out the general standards in terms of
which the acts of an employer in retrenching or reducing the
number of its employees must be appraised, to wit:
. . . . Firstly, the losses expected should be
substantial and not merely de minimis in extent.
If the loss purportedly sought to be forestalled
by retrenchment is clearly shown to be
insubstantial and inconsequential in character,
the bona fide nature of the retrenchment would
appear to be seriously in question. Secondly,
the substantial loss apprehended must be
reasonably imminent, as such imminence can
be perceived objectively and in good faith by
the employer. There should, in other words, be
a certain degree of urgency for the
retrenchment, which is after all a drastic
recourse with serious consequences for the
livelihood of the employees retired or otherwise
laid off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably
necessary and likely to effectively prevent the
expected losses. The employer should have
taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other
costs than labor costs. . . .
Lastly, but certainly not the least important,
alleged losses if already realized, and the
expected imminent losses sought to be
forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring
this quantum of proof is apparent; any less
exacting standard of proof would render too
easy the abuse of this ground for termination or
services of employees. . . .
It is obvious from the preceding discussions that the aforequoted
guidelines have been faithfully met by the company.
As a final word, let it be reiterated herein what we have heretofore
said, that the law in protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer. While the
Constitution is committed to the policy of social justice and the
protection of the working class, it should not be supposed that
every labor dispute will be automatically decided in favor of labor.
Management also has its own rights, which as such are entitled to
respect and enforcement in the interest of simple fair play. Out of
its concern for those with less privileges in life, the Supreme Court
has inclined more often than not toward the worker and upheld his
cause with his conflicts with the employer. Such favoritism,
however, has not blinded the Court to rule that justice is in every
case for the deserving, to be dispensed in the light of the
established facts and applicable law and doctrine. 25
WHEREFORE, the decision appealed from is hereby AFFIRMED,
with the modification that private respondent Atlantic, Gulf and
Pacific Company of Manila, Inc. is ORDERED to pay herein
petitioners their separation pay equivalent to one month pay or at
least one-half (1/2) month pay for every year of service, whichever
is higher. The financial assistance which herein petitioners may
have received shall be deducted from the separation pay to which
they are entitled.
G.R. No. 92772 November 28, 1996
SAN MIGUEL JEEPNEY SERVICE and MAMERTO
GALACE, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, EDELBERTO
PADUA and 23 OTHERS,1 respondents.
PANGANIBAN, J.:
75
 May workers who are paid on commission basis be
considered regular employees, and therefore entitled to
separation pay? What constitutes "serious business
losses" under Art. 283 of the Labor Code which may
justify closure or cessation of operations of business
establishments and the laying-off of employees without
need of paying separation pay?
The foregoing questions are resolved in this special civil action
for certiorari alleging grave abuse of discretion by public
respondent National Labor Relations Commission 2 in its
Resolution 3 promulgated on February 28, 1990 in NLRC case
RB-III-03-12-0201-87, which modified the decision of Labor
Arbiter Oswald B. Lorenzo dated August 29, 1988.
The Facts
The 23 complainants were formerly working (as drivers,
dispatchers and mechanic) with petitioner San Miguel Jeepney
Service (SMJS), with services ranging from two to eight years.
Petitioner SMJS had a contract with the U.S. Naval Base Facility
located in San Miguel, San Antonio, Zambales, to provide
transportation services to personnel and dependents inside said
facility. When the said contract expired on 02 May 1988, petitioner
Galace, owner and general manager of SMJS, "opted not to
renew the existing contract nor bid on the new contract", 4 due to
financial difficulties, he having suffered a net loss the prior year.
As a consequence, the services of the complainants were
terminated. By that time, however, the 23 had already filed a
complaint for non-compliance with the minimum wage law from
1980 onwards, plus non-payment of the 13th month pay, legal
holiday pay, overtime pay, service incentive leave pay and
separation pay. In their position paper, complainants claimed that
they were drivers (except for Edna Farin and Brainly Aglibot who
worked as dispatchers, and Abner Martinez who was a mechanic-
dispatcher) and all of them were receiving their pay based on
commission basis, which was below the statutory minimum wage.
They further alleged, among others, that their work entitled them
to overtime pay, legal holiday pay and severance pay, which were
not paid to them.
Petitioners on the other hand rejected any liability for the money
claims. In refutation of the complainants' claims, they submitted a
position paper stating:
1. Legal Holiday Pay — Complainants are not
entitled. (a) the casual dispatchers have no fix
(sic) day of work, they merely act as substituted
(sic); and (b) the drivers-complainants, who are
purely on commission basis are not entitled to
legal holiday pay (Rule IV, Holiday Pay, Sec. 1
(e), Implementing Rules of the Labor Code).
2. 13th month pay: — Not applicable to
complainants who are purely on commission
basis (Sec. 3 (e), Rules and Regulations
Implementing P.D. 851) Complainants casual-
dispatchers are not allowed 13th month pay
because they are not (paid on) monthly basis.
3. Underpayment of Minimum Wage:
Complainants-drivers are not wage earners.
They are not paid on the basis of their work-
hours rendered but on the percentages of their
collections representing fares from their
passengers. They control their own collections.
There is no basis of minimum wage in relation
to their commissions taken by them.
The complainants-casual dispatchers are well
over their minimum wage.
4. Overtime pay. — Complainants cannot claim
overtime pay. They control their own time. The
amount of their percentages depend on how
industrious they are in looking for paying
passengers. Hence, complainants control their
pay, not the respondents. So, why give
overtime pay to one who is really working on
such a (sic) time?
5. Separation Day. — All the complainants
stopped working when(ever) they pleased. At
least respondent Mamerto Galace has given all
the complainants notice on July 17, 1988
(should be 1987) that his contract will terminate
on February 3, 1988 and after this date,
complainants went on strike. How could they be
entitled to separation pay when they willfully
stopped working without the fault of the
respondents(?)
6. Service Incentive Day: — This is not
applicable to the complainants who are purely
on commission basis (Rule V, Sec. 1 (d),
Implementing Rules and Regulations of the
Labor Code).
The arbiter ruled that insofar as the claims for holiday pay, 13th
month pay and service incentive pay were concerned, under the
Rules Implementing PD 851, the complainants were not entitled to
such benefits, being workers on a purely commission basis. With
respect to the alleged underpayment of minimum wage, the
arbiter held that "since the complainants-drivers control(led) their
own collections and time, . . . there could be no basis to determine
minimum wage in relation to their commissions . . . Moreover, a
perusal of the Complaint . . . shows a clear admission of payment
of the latter on commission basis at the rate of 14.4% of their
collections. . . (T)he failure of the complainants-drivers to state in
their Complaint and pleadings the amount of their alleged
underpayment only reflects that complainants themselves were
unsure if they were underpaid or not. Hence this Arbiter finds no
basis to grant the same." (The foregoing findings by the arbiter
were subsequently cited with approval by the respondent NLRC.)
It seems that the arbiter also went on to hold implicitly that the
drivers were not regular employees of SMJS. He stated:
(Insofar) as the cases of Edna Farin and Brainly
Aglibot and Abner Martinez are concerned, we
rule that they are entitled to the difference of the
underpayment of their wages as their jobs are
different from that of complainants-drivers, but
regular employees of respondents, in
accordance with Article(s) 280 and 281 of the
Labor Code as amended. These three (3)
employees having been found to have been
dismissed without due process of law are
entitled to separation pay equivalent to one-half
(1/2) month for every year of service. (emphasis
supplied).
He likewise held that the non-renewal of the contract with
the US Naval Base is a closure or cessation of
operations NOT due to serious business losses under
Art. 283 of the Labor Code, and that being the case, the
drivers became entitled to one-half (1/2) month pay for
every year of service. All other claims, such as for
overtime pay and the like, were dismissed for lack of
both legal basis and evidence to support the same.
However, the arbiter ordered payment of P1,000.00 to
each of the complainants-drivers by way of financial
76
 assistance, considering their length of service. The
dispositive portion of the arbiter's decision reads: 5
WHEREFORE, premises considered, judgment
is hereby rendered ordering respondents to pay
complainants Edna Farin, Brainly Aglibot and
Abner Martinez the differentials for
underpayment of wages, as well as, their
severance pay, equivalent to one-half (1/2)
month for every year of service.
Respondents are further ordered to extend by
way of financial assistance in the amount of
P1,000.00 each or a total of P19,000.00.
On appeal, the respondent Commission modified the arbiter's
ruling, holding that "all the complainants are regular employees in
the contemplation of Article 281 (now Art. 280) of the Labor Code,
which provides that employment "shall be deemed regular when
the employee performs activities which are usually necessary and
desirable in the usual business or trade . . . "; respondent
Commission thus ruled that the complainants are entitled to
separation pay of one-half month for every year of service, by
virtue of the non-renewal of the transportation contract with the
naval base. However, finding that the complainants did not ask for
financial assistance, the NLRC deleted the award of P1,000.00 for
the each of the complainants. The fallo of the Commission's
Resolution states: 6
WHEREFORE, in the light of the preceding
disquisition, the judgment appealed from is
hereby modified, in that the award of P1,000.00
each to the complainants for financial
assistance is deleted. The respondent is
ordered to pay all the complainants their
separation pay equivalent to one-half (1/2)
month for every year of service.
Dissatisfied, petitioners brought this petition for certiorari under
Rule 65 of the Rules of Court on April 19, 1990.
The Issues
7 to financial reverses. Finally, petitioners argue that in order to
The issues raised by petitioners are as follows:
I (petitioner then shows the decreases in gross incomes for 1985,
The respondent NLRC acted in grave abuse of
its discretion in awarding separation pay in
favor of respondents, such award not being
warranted by the facts and the law.
II
Assuming arguendo that such award of
separation pay is warranted by law, the
respondent NLRC nevertheless gravely abused
its discretion in making said award in the
absence of the requisite factual basis therefor.
Petitioners concede that the NLRC may have been correct after
all in holding that complainants/private respondents were regular
employees, for they acknowledged albeit grudgingly that "the
above ruling seems to be tinged with reason and authority".
Nevertheless, they contend that they cannot be held liable for
separation pay for "petitioner SMJS had been experiencing
financial reverses since 1986". 8 Petitioners cited the figures
provided by petitioner Galace showing "sliding incomes": 9
Our gross receipt in 1985
amounted to P846,459.25
Our gross receipt in 1986
amounted to 676,748.75
—————
So, our income decreased in
1986 by P169,710.50
Our gross income in 1986
was P676,748.75
Our gross income in 1987
was 534,204.71
—————
Our income decreased in
1987 by P142,544.04
Petitioners also fault the NLRC for acknowledging in its findings of
fact (p. 2 of the Resolution) that SMJS had experienced financial
reverses while at the same time holding that the closure of SMJS
was simply due to non-renewal of its transportation contract, and
thereby implying unfairly that SMJS did not cease operations due
award separation pay, there must be some numerical and factual
basis (e.g. latest salary rate) for the computation thereof, which
they claim is absent in this case, as complainants were earning
commissions, which of course varied from period to period.
The Court's Ruling
We shall discuss the two issues raised by the petition in reverse
order: first, the factual bases for "serious business losses" and
then, the applicability and computation of separation pay.
No Serious Business Losses
As petitioners themselves admitted, what they suffered were
"sliding incomes", in other words, decreasing gross revenues.
What the law speaks of is serious business losses or financial
reverses. Clearly, sliding incomes are not necessarily losses,
much less serious business losses within the meaning of the law.
In this connection, we are reminded of our previous ruling that
"the requisites of a valid retrenchment are: (a) the losses
expected should be substantial and not merely de minimis in
extent; (b) the substantial losses apprehended must be
reasonably imminent; (c) the retrenchment must be reasonably
necessary and likely to effectively prevent the expected losses;
and (d) the alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled, must be proved by
sufficient and convincing
evidence." 10 We have also held that adverse business conditions
justify the exercise of management prerogative to retrench in
order to avoid the not-so-remote possibility of closure of the entire
business. 11 At the other end of the spectrum, it seems equally
clear that not every asserted possibility of loss is sufficient legal
warrant for reduction of personnel. In the nature of things, the
possibility of incurring losses is constantly present, in greater or
lesser degree, in the carrying on of business operations, since
some, indeed many, of the factors which impact upon the
profitability or viability of such operations may be substantially
outside the control of the employer.12
All the foregoing considerations simply require that the employer
bears the burden of proving his allegation of economic or
business reverses with clear and satisfactory evidence, it being in
the nature of an affirmative defense. 13 Apparently, the petitioners'
evidence failed to persuade the public respondent, and it is not
difficult to understand why. The petition made reference to a
position paper dated March 10, 1988, 14 in which petitioner Galace
admitted that "I did not ask to renew our contract with the Navy
Exchange because our income had been consistently going down
77
1986 and 1987). It became clear to me as early as of (sic) July
last year that I shall not be able to continue operating because of
the sliding incomes. So, in August, I announced that I would not
renew my contract." Apparently, petitioner did not renew his
contract because of "sliding incomes", and not because of serious
business losses.
In the same position paper, he also stated that "(i)n 1987, I
incurred a loss of P40,471.69 from operation. . . . From 1980 to
1986, or in the six years of previous operations, I had managed to
make a profit in spite of all the expenses." Such loss per se,
absent any other evidence, and viewed in the light of the amounts
of gross receipts the business generated historically, may not be
deemed the serious business loss contemplated by law, and thus
cannot justify the non-payment of separation pay. Neither did
petitioners present any evidence whatsoever regarding the impact
of the said net loss on the business (extent of impairment of
equity, loss of liquidity, and so forth) nor on expected losses that
would have been incurred had operations been continued (under,
say, a new contract with the base).
Moreover, we note that in the same position paper, petitioner
Galace admitted that he had been persistently refusing to
recognize the union organized among his employees, which
undoubtedly had to do with the work stoppage that he later
complained of. In brief, we are of the belief that the cessation of
operations and closure of SMJS were, in the ultimate analysis,
triggered by factors other than a P40,000.00 loss. We therefore
find no grave abuse of discretion on the part of respondent
Commission in ordering the payment of separation pay equivalent
to one-half month's wage for every year of service.
Propriety of Granting Separation Pay
Public respondent had found the private respondents — drivers,
dispatchers and mechanic — to be regular employees, 15 and, as
mentioned earlier, petitioners yielded to said ruling, terming it
"tinged with reason and authority". But even if they had not
conceded thus, it is obvious that public respondent is correct. The
rationale for this ruling is simply that the complainants/private
respondents were unarguably performing work necessary and
desirable in the business of SMJS. Without the services rendered
by private respondents, petitioners could not have conducted their
business of providing transportation services within the naval
base. This plus the fact that private respondents had each
rendered from two to eight years of service cause them to come
squarely within the ambit of Art. 280 of the Labor Code; beyond
dispute, they were not only employees, but regular employees, as
correctly held by public respondent.
The mere fact that they were paid on commission basis does not
affect or change their status as regular employees. The test for
determining whether an employee is regular or casual has nothing
to do with the manner of computing or paying a employee's wages
or compensation. Rather,
The primary standard, . . ., of determining a
regular (as against casual) employment is
the reasonable connection between the
particular activity performed by the employee in
relation to the usual business or trade of the
employer. The test is whether the former is
usually necessary or desirable in the usual
business or trade of the employer. The
connection can be determined by considering
the nature of the work performed and its relation
to the scheme of the particular business or
trade in its entirety. Also, if the employee has
been performing the job for at least one
year, even if the performance is not continuous
or merely intermittent, the law deems the
repeated and continuing need for its
performance as sufficient evidence of the
necessity if not indispensability of that activity to
the business. Hence, the employment is also
considered regular, but only with respect to
such activity and while such activity
exists." 16 (emphasis supplied)
On the other hand, we should hasten to add that while in this
particular case, these "commission-basis" employees involved
were regular employees (by operation of law, plus of course, the
fact that their status as employees had never been challenged at
any stage of the present case), it does not follow that every
employee paid (whether wholly or partly) on commission basis
can be considered a regular employee, or an employee at all, for
that matter. While this caveat may seem rather elementary, it is
still needful to stress that there are many lines of business legally
and legitimately engaging the services of workers, who are paid
on commission basis to perform activities desirable and
necessary for such businesses, without creating any kind of
employer-employee relationship at any time. A case in point
is Singer Sewing Machine Company vs. Drilon, 17 where certain
individuals were hired to work as collectors or "collecting agents"
of the company but per written agreement were to be considered
at all times as independent contractors and not employees of the
company. The key issue in Singer was whether these so-called
independent contractors were in reality employees. After applying
the control test, this Court held: 18
The nature of the relationship between a
company and its collecting agents depends on
the circumstances of each particular
relationship. Not all collecting agents are
employees and neither are all collecting agents
independent contractors. The collectors could
fall under either category depending on the
facts of each case.
The (Collection Agency) Agreement confirms
the status of the collecting agent in this case as
an independent contractor not only because he
is explicitly described as such but also because
the provisions permit him to perform collection
services for the company without being subject
to the control of the latter except only as to the
result of his work.
xxx xxx xxx
The Court finds the contention of the
respondents that the union members are
employees under Article 280 of the Labor Code
to have no basis. The definition that regular
employees are those who perform activities
which are desirable and necessary for the
business of the employer is not determinative in
this case. Any agreement may provide that one
party shall render services for and in behalf of
another for a consideration (no matter how
necessary for the latter's business) even without
being hired as an employee. This is precisely
true in the case of an independent
contractorship as well as in an agency
agreement. The Court agrees with the
petitioner's argument that Article 280 is not the
yardstick for determining the existence of an
employment relationship because it merely
distinguishes between two kinds of
employees, i.e., regular employees and casual
employees, for purposes of determining the
right of an employee to certain benefits, to join
or form a union, or to security of tenure. Article
78
 280 does not apply where the existence of an
employment relationship is in dispute.
(emphasis ours)
Having said that, we return to the instant case and, at the risk of
being repetitive, reiterate that in this case there was no question
about the existence of employer-employee relationship between
petitioners and private respondents. Art. 280 therefore can be
properly applied to the present case, to confirm the regular-
employee status of the private respondents.
Prescinding from the foregoing, as such regular employees,
private respondents are entitled to security of tenure and their
services may be terminated only for causes provided by law.
Likewise, they are also to be accorded the benefits provided
under the Labor Code, including inter alia separation pay for loss
of employment resulting from retrenchment to prevent losses or
closure/cessation of operation not due to serious business losses.
The Solicitor General in his Comment suggested that, being
regular employees, they are likewise entitled to the protection of
minimum wage statutes. 19 Hence, the separation pay due them
may be computed on the basis of the minimum wage prevailing at
the time their services were terminated by petitioners. We agree.
Executive Order No. 178 fixed the minimum wage for non-
agricultural workers working outside Metro Manila at P53.00 a day
effective October 1, 1987. Thus, we utilize this figure as the basis
for computing private respondents' separation pay.
WHEREFORE, in view of the foregoing, the assailed Resolution
of public respondent NLRC is hereby AFFIRMED. The separation
pay of the private respondents equivalent to one-half month pay
for every year of service shall be computed at the then prevailing
minimum daily wage of P53.00.
SO ORDERED.
G.R. Nos. 184903 October 10, 2012
DIGITAL TELECOMMUNICATIONS PHILIPPINES,
INC., Petitioner,
vs.
DIGITEL EMPLOYEES UNION (DEU), ARCELO RAFAEL A.
ESPLANA, ALAN D. LICANDO, FELICITO C. ROMERO, JR.,
ARNOLD D. GONZALES, REYNEL FRANCISCO B. GARCIA,
ZOSIMO B. PERALTA, REGINO T. UNIDAD and JIM L.
JAVIER, Respondents.
DECISION
PEREZ, J.:
This treats of the petition for review filed by Digital
Telecommunications Philippines, Inc. (Digitel) assailing the 18
June 2008 Decision1 and 9 October 2008 Resolution of the Court
of Appeals 10th Division in CA-G.R. SP No. 91719, which affirms
the Order of the Secretary of Labor and Employment directing
Digitel to commence Collective Bargaining Agreement (CBA)
negotiations and in CA-G.R. SP No. 94825, which declares the
dismissal of affected Digitel employees as illegal.
The facts, as borne by the records, follow.
By virtue of a certification election, Digitel Employees Union
(Union) became the exclusive bargaining agent of all rank and file
employees of Digitel in 1994. The Union and Digitel then
commenced collective bargaining negotiations which resulted in a
bargaining deadlock. The Union threatened to go on strike, but
then Acting Labor Secretary Bienvenido E. Laguesma assumed
jurisdiction over the dispute and eventually directed the parties to
execute a CBA.2
However, no CBA was forged between Digitel and the Union.
Some Union members abandoned their employment with Digitel.
The Union later became dormant.
Ten (10) years thereafter or on 28 September 2004, Digitel
received from Arceo Rafael A. Esplana (Esplana), who identified
himself as President of the Union, a letter containing the list of
officers, CBA proposals and ground rules.3The officers were
respondents Esplana, Alan D. Licando (Vice-President), Felicito
C. Romero, Jr. (Secretary), Arnold D. Gonzales (Treasurer),
Reynel Francisco B. Garcia (Auditor), Zosimo B. Peralta (PRO),
Regino T. Unidad (Sgt. at Arms), and Jim L. Javier (Sgt. at Arms).
Digitel was reluctant to negotiate with the Union and demanded
that the latter show compliance with the provisions of the Union’s
Constitution and By-laws on union membership and election of
officers.
On 4 November 2004, Esplana and his group filed a case for
Preventive Mediation before the National Conciliation and
Mediation Board based on Digitel’s violation of the duty to
bargain. On 25 November 2004, Esplana filed a notice of strike.
On 10 March 2005, then Labor Secretary Patricia A. Sto. Tomas
issued an Order4 assuming jurisdiction over the labor dispute.
During the pendency of the controversy, Digitel Service, Inc.
(Digiserv), a non-profit enterprise engaged in call center servicing,
filed with the Department of Labor and Employment (DOLE) an
Establishment Termination Report stating that it will cease its
business operation. The closure affected at least 100 employees,
42 of whom are members of the herein respondent Union.
Alleging that the affected employees are its members and in
reaction to Digiserv’s action, Esplana and his group filed another
Notice of Strike for union busting, illegal lock-out, and violation of
the assumption order.
On 23 May 2005, the Secretary of Labor ordered the second
notice of strike subsumed by the previous Assumption Order.5
Meanwhile, on 14 March 2005, Digitel filed a petition with the
Bureau of Labor Relations (BLR) seeking cancellation of the
Union’s registration on the following grounds: 1) failure to file the
required reports from 1994-2004; 2) misrepresentation of its
alleged officers; 3) membership of the Union is composed of rank
and file, supervisory and managerial employees; and 4)
substantial number of union members are not Digitel employees. 6
In a Decision dated 11 May 2005, the Regional Director of the
DOLE dismissed the petition for cancellation of union registration
for lack of merit. The Regional Director ruled that it does not have
jurisdiction over the issue of non-compliance with the reportorial
requirements. He also held that Digitel failed to adduce
substantial evidence to prove misrepresentation and the mixing of
non-Digitel employees with the Union. Finally, he declared that
the inclusion of supervisory and managerial employees with the
rank and file employees is no longer a ground for cancellation of
the Union’s certificate of registration.7
The appeal filed by Digitel with the BLR was eventually dismissed
for lack of merit in a Resolution dated 9 March 2007, thereby
affirming the 11 May 2005 Decision of the Regional Director.
CA-G.R. SP No. 91719
In an Order dated 13 July 2005, the Secretary of Labor directed
Digitel to commence the CBA negotiation with the Union. Thus:
79
WHEREFORE, all the foregoing premises considered, this Office
hereby orders:
1. DIGITEL to commence collective bargaining negotiation with
DEU without further delay; and,
2. The issue of unfair labor practice, consisting of union-busting,
illegal termination/lockout and violation of the assumption of
jurisdiction, specifically the return-to-work aspect of the 10 March
2005 and 03 June 2005 orders, be CERTIFIED for compulsory
arbitration to the NLRC.8
Digitel moved for reconsideration on the contention that the
pendency of the petition for cancellation of the Union’s certificate
of registration is a prejudicial question that should first be settled
before the DOLE could order the parties to bargain collectively.
On 19 August 2005, then Acting Secretary Manuel G. Imson of
DOLE denied the motion for reconsideration, affirmed the 13 July
2005 Order and reiterated the order directing parties to
commence collective bargaining negotiations.9
On 14 October 2005, Digitel filed a petition, docketed as CA-G.R.
SP No. 91719, before the Court of Appeals assailing the 13 July
and 19 August 2005 Orders of the DOLE Secretary and attributing
grave abuse of discretion on the part of the DOLE Secretary for
ordering Digitel to commence bargaining negotiations with the
Union despite the pendency of the issue of union legitimacy.
CA-G.R. SP No. 94825
In accordance with the 13 July 2005 Order of the Secretary of
Labor, the unfair labor practice issue was certified for compulsory
arbitration before the NLRC, which, on 31 January 2006, rendered
a Decision dismissing the unfair labor practice charge against
Digitel but declaring the dismissal of the 13 employees of Digiserv
as illegal and ordering their reinstatement. The Union manifested
that out of 42 employees, only 13 remained, as most had already
accepted separation pay. The dispositive portion of the Decision
reads:
WHEREFORE, premises considered, the charge of unfair labor
practice is hereby DISMISSED for lack of merit. However, the
dismissal of the remaining thirteen (13) affected employees is
hereby declared illegal and DIGITEL is hereby ORDERED to
reinstate them to their former position with full backwages up to
the time they are reinstated, computed as follows:
x x x x.10
Upon motion for reconsideration filed by Digitel, four (4) affected
employees, namely Ma. Loreta Eser, Marites Jereza, Leonore
Tuliao and Aline G. Quillopras, were removed from entitlement to
the awards pursuant to the deed of quitclaim and release which
they all signed.11
In view of this unfavorable decision, Digitel filed another petition
on 9 June 2006 in CA-G.R. SP No. 94825 before the Court of
Appeals, challenging the above NLRC Decision and Resolution
and arguing mainly that Digiserv employees are not employees of
Digitel.
Ruling of the Court of Appeals
On 18 June 2008, the Tenth Division of the Court of Appeals
consolidated the two petitions in CA-G.R. SP No. 91719 and CA-
G.R. SP No. 94825, and disposed as follows:
WHEREFORE, the petition in CA-G.R. SP No. 91719
is DISMISSED. The July 13, 2005 Order and the August 19, 2005
Resolution of the DOLE Secretary are AFFIRMED in toto. With
costs.
The petition in CA-G.R. SP No. 94825 is partially GRANTED, with
the effect that the assailed dispositions must be MODIFIED, as
follows:
1) In addition to the order directing reinstatement and payment of
full backwages to the nine (9) affected employees, Digital
Telecommunications Philippines, Inc. is furthered ORDERED,
should reinstatement is no longer feasible, to pay separation pay
equivalent to one (1) month pay, or one-half (1/2) month pay for
every year of service, whichever is higher.
2) The one hundred thousand (Ph₱ 100,000.00) peso-fine
imposed on Digital Telecommunications Philippines, Inc.
is DELETED. No costs.12
The Court of Appeals upheld the Secretary of Labor’s Order for
Digitel to commence CBA negotiations with the Union and
emphasized that the pendency of a petition for the cancellation of
a union’s registration does not bar the holding of negotiations for a
CBA. The Court of Appeals sustained the finding that Digiserv is
engaged in labor-only contracting and that its employees are
actually employees of Digitel.
Digitel filed a motion for reconsideration but was denied in a
Resolution dated 9 October 2008.
Hence, this petition for review on certiorari.
Digitel argues that the Court of Appeals seriously erred when it
condoned the act of the Secretary of Labor in issuing an
assumption order despite the pendency of an appeal on the issue
of union registration. Digitel maintains that it cannot be compelled
to negotiate with a union for purposes of collective bargaining
when the very status of the same as the exclusive bargaining
agent is in question.
Digitel insists that had the Court of Appeals considered the nature
of the activities performed by Digiserv, it would reach the
conclusion that Digiserv is a legitimate contractor. To bolster its
claim, Digitel asserts that the affected employees are registered
with the Social Security System, Pag-ibig, Bureau of Internal
Revenue and Philhealth with Digiserv as their employer. Digitel
further contends that assuming that the affected Digiserv
employees are employees of Digitel, they were nevertheless
validly dismissed on the ground of closure of a department or a
part of Digitel’s business operation.
The three issues raised in this petition are: 1) whether the
Secretary of Labor erred in issuing the assumption order despite
the pendency of the petition for cancellation of union registration;
2) whether Digiserv is a legitimate contractor; and 3) whether
there was a valid dismissal.
The pendency of a petition
for cancellation of union
registration does not preclude
collective bargaining.
The first issue raised by Digitel is not novel. It is well-settled that
the pendency of a petition for cancellation of union registration
does not preclude collective bargaining.
The 2005 case of Capitol Medical Center, Inc. v. Hon. Trajano13 is
apropos. The respondent union therein sent a letter to petitioner
requesting a negotiation of their CBA. Petitioner refused to
bargain and instead filed a petition for cancellation of the union’s
80
certificate of registration. Petitioner’s refusal to bargain forced the
union to file a notice of strike. They eventually staged a strike. The
Secretary of Labor assumed jurisdiction over the labor dispute
and ordered all striking workers to return to work. Petitioner
challenged said order by contending that its petition for
cancellation of union’s certificate of registration involves a
prejudicial question that should first be settled before the
Secretary of Labor could order the parties to bargain collectively.
When the case eventually reached this Court, we agreed with the
Secretary of Labor that the pendency of a petition for cancellation
of union registration does not preclude collective bargaining, thus:
That there is a pending cancellation proceeding against the
respondent Union is not a bar to set in motion the mechanics of
collective bargaining. If a certification election may still be ordered
despite the pendency of a petition to cancel the union’s
registration certificate (National Union of Bank Employees vs.
Minister of Labor, 110 SCRA 274), more so should the collective
bargaining process continue despite its pendency. We must
emphasize that the majority status of the respondent Union is not
affected by the pendency of the Petition for Cancellation pending
against it. Unless its certificate of registration and its status as the
certified bargaining agent are revoked, the Hospital is, by express
provision of the law, duty bound to collectively bargain with the
Union.14
Trajano was reiterated in Legend International Resorts Limited v.
Kilusang Manggagawa ng Legenda (KML-Independent).15 Legend
International Resorts reiterated the rationale for allowing the
continuation of either a CBA process or a certification election
even during the pendency of proceedings for the cancellation of
the union’s certificate of registration. Citing the cases of
Association of Court of Appeals Employees v. Ferrer-
Calleja16 and Samahan ng Manggagawa sa Pacific Plastic v. Hon.
Laguesma,17 it was pointed out at the time of the filing of the
petition for certification election – or a CBA process as in the
instant case – the union still had the personality to file a petition
for certification − or to ask for a CBA negotiation – as in the
present case.
Digiserv is a labor-only contractor.
Labor-only contracting is expressly prohibited by our labor laws.
Article 106 of the Labor Code defines labor-only contracting as
"supplying workers to an employer [who] does not have
substantial capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers
recruited and placed by such person are performing activities
which are directly related to the principal business of such
employer."
Section 5, Rule VIII-A, Book III of the Omnibus Rules
Implementing the Labor Code (Implementing Rules), as amended
by Department Order No. 18-02, expounds on the prohibition
against labor-only contracting, thus:
Section 5. Prohibition against labor-only contracting. − Labor-only
contracting is hereby declared prohibited. For this purpose, labor-
only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any
of the following elements are present:
i) The contractor or subcontractor does not have substantial
capital or investment which relates to the job, work or service to
be performed and the employees recruited, supplied or placed by
such contractor or subcontractor are performing activities which
are directly related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the
performance of the work of the contractual employee.
The foregoing provisions shall be without prejudice to the
application of Article 248 (c) of the Labor Code, as amended.
xxxx
The "right to control" shall refer to the right reserved to the person
for whom, the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.
The law and its implementing rules allow contracting
arrangements for the performance of specific jobs, works or
services. Indeed, it is management prerogative to farm out any of
its activities, regardless of whether such activity is peripheral or
core in nature. However, in order for such outsourcing to be valid,
it must be made to an independent contractor because the current
labor rules expressly prohibit labor-only contracting.18
After an exhaustive review of the records, there is no showing that
first, Digiserv has substantial investment in the form of capital,
equipment or tools. Under the Implementing Rules, substantial
capital or investment refers to "capital stocks and subscribed
capitalization in the case of corporations, tools, equipment,
implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or
completion of the job, work or service contracted out." The NLRC,
as echoed by the Court of Appeals, did not find substantial
Digiserv’s authorized capital stock of One Million Pesos (₱
1,000,000.00). It pointed out that only Two Hundred Fifty
Thousand Pesos (₱ 250,000.00) of the authorized capital stock
had been subscribed and only Sixty-Two Thousand Five Hundred
Pesos (₱ 62,500.00) had been paid up. There was no increase in
capitalization for the last ten (10) years.19
Moreover, in the Amended Articles of Incorporation, as well as in
the General Information Sheets for the years 1994, 2001 and
2005, the primary purpose of Digiserv is to provide manpower
services. In PCI Automation Center, Inc. v. National Labor
Relations Commission,20 the Court made the following distinction:
"the legitimate job contractor provides services while the labor-
only contractor provides only manpower. The legitimate job
contractor undertakes to perform a specific job for the principal
employer while the labor-only contractor merely provides the
personnel to work for the principal employer." The services
provided by employees of Digiserv are directly related to the
business of Digitel, as rationalized by the NLRC in this wise:
It is undisputed that as early as March 1994, the affected
employees, except for two, were already performing their job as
Traffic Operator which was later renamed as Customer Service
Representative (CSR). It is equally undisputed that all throughout
their employment, their function as CSR remains the same until
they were terminated effective May 30, 2005. Their long period of
employment as such is an indication that their job is directly
related to the main business of DIGITEL which is
telecommunications. Because, if it was not, DIGITEL would not
have allowed them to render services as Customer Service
Representative for such a long period of time.21
Furthermore, Digiserv does not exercise control over the affected
employees. The NLRC highlighted the fact that Digiserv shared
the same Human Resources, Accounting, Audit and Legal
Departments with Digitel which manifested that it was Digitel who
exercised control over the performance of the affected
employees. The NLRC also relied on the letters of commendation,
plaques of appreciation and certification issued by Digitel to the
Customer Service Representatives as evidence of control.
81
Considering that Digiserv has been found to be engaged in labor-
only contracting, the dismissed employees are deemed
employees of Digitel.
Section 7 of the Implementing Rules holds that labor-only
contracting would give rise to: (1) the creation of an employer-
employee relationship between the principal and the employees of
the contractor or sub-contractor; and (2) the solidary liability of the
principal and the contractor to the employees in the event of any
violation of the Labor Code.
Accordingly, Digitel is considered the principal employer of
respondent employees.
The affected employees were
illegally dismissed.
In addition to finding that Digiserv is a labor-only contractor,
records teem with proof that its dismissed employees are in fact
employees of Digitel. The NLRC enumerated these evidences,
thus:
That the remaining thirteen (13) affected employees are indeed
employees of DIGITEL is sufficiently established by the facts and
evidence on record.
It is undisputed that the remaining affected employees, except for
two (2), were already hired by DIGITEL even before the existence
of DIGISERV. (The other two (2) were hired after the existence of
DIGISERV). The UNION submitted a sample copy of their
appointment paper (Annex "A" of UNION’s Position Paper,
Records, Vol. 1, p. 100) showing that they were appointed on
March 1, 1994, almost three (3) months before DIGISERV came
into existence on May 30, 1994 (Annex "B", Ibid, Records, Vol. 1,
p. 101). On the other hand, not a single appointment paper was
submitted by DIGITEL showing that these remaining affected
employees were hired by DIGISERV.
It is equally undisputed that the remaining, affected employees
continuously held the position of Customer Service
Representative, which was earlier known as Traffic Operator, from
the time they were appointed on March 1, 1994 until they were
terminated on May 30, 2005. The UNION alleges that these
Customer Service Representatives were under the Customer
Service Division of DIGITEL. The UNION’s allegation is correct.
Sample of letter of commendations issued to Customer Service
Representatives (Annexes "C" and "C-1" of UNION’s Position
Paper, Records, p. 100 and 111) indeed show that DIGITEL has a
Customer Service Division which handles its Call Center
operations.
Further, the Certificates issued to Customer Service
Representative likewise show that they are employees of
DIGITEL (Annexes "C-5", "C-6" - "C-7" of UNION’s Position
Paper, Records, Vol. 1, pp. 115 to 117), Take for example the
"Service Award" issued to Ma. Loretta C. Esen, one of the
remaining affected employees (Annex "C-5", Supra). The "Service
Award" was signed by the officers of DIGITEL – the VP-Customer
Services Division, the VP-Human Resources Division and the
Group Head-Human Resources Division. It was issued by
DIGITEL to Esen thru the above named officers "In recognition of
her seven (7) years continuous and valuable contributions to the
achievement of Digitel’s organization objectives". It cannot be
gainsaid that it is only the employer that issues service award to
its employees.22 (Emphasis not supplied)
As a matter of fact, even before the incorporation of Digiserv, the
affected employees were already employed by Digitel as Traffic
Operators, later renamed as Customer Service Representatives.
As an alternative argument, Digitel maintains that the affected
employees were validly dismissed on the grounds of closure of
Digiserv, a department within Digitel.
In the recent case of Waterfront Cebu City Hotel v. Jimenez, 23 we
referred to the closure of a department or division of a company
as retrenchment. The dismissed employees were undoubtedly
retrenched with the closure of Digiserv.
For a valid retrenchment, the following elements must be present:
(1) That 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;
(2) That the employer served written notice both to the employees
and to the Department of Labor and Employment at least one
month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation
pay equivalent to one (1) month pay or at least ½ month pay for
every year of service, whichever is higher;
(4) That the employer 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 security of
tenure; and
(5) That the employer used fair and reasonable criteria in
ascertaining who would be dismissed and who would be retained
among the employees, such as status, efficiency, seniority,
physical fitness, age, and financial hardship for certain workers. 24
Only the first 3 elements of a valid retrenchment had been here
satisfied. Indeed, it is management prerogative to close a
department of the company. Digitel’s decision to outsource the
call center operation of the company is a valid reason to close
down the operations of a department under which the affected
employees were employed. Digitel cited the decline in the volume
of transaction of operator-assisted call services as supported by
Financial Statements for the years 2003 and 2004, during which
Digiserv incurred a deficit of ₱ 163,624.00 and ₱ 164,055.00,
respectively.25 All affected employees working under Digiserv
were served with individual notices of termination. DOLE was
likewise served with the corresponding notice. All affected
employees were offered separation pay. Only 9 out of the 45
employees refused to accept the separation pay and chose to
contest their dismissal before this Court.
The fifth element regarding the criteria to be observed by Digitel
clearly does not apply because all employees under Digiserv were
dismissed. The instant case is all about the fourth element, that is,
whether or not the affected employees were dismissed in good
faith. We find that there was no good faith in the retrenchment.
Prior to the cessation of Digiserv’s operations, the Secretary of
Labor had issued the first assumption order to enjoin an
impending strike. When Digiserv effected the dismissal of the
affected employees, the Union filed another notice of strike.
Significantly, the Secretary of Labor ordered that the second
notice of strike be subsumed by the previous assumption order.
Article 263(g) of the Labor Code provides:
When, in his opinion, there exists a labor dispute causing or likely
to cause a strike or lockout in an industry indispensable to the
national interest, the Secretary of Labor and Employment may
82
assume jurisdiction over the dispute and decide it or certify the
same to the Commission for compulsory arbitration. Such
assumption or certification shall have the effect of automatically
enjoining the intended or impending strike or lockout as specified
in the assumption or certification order. If one has already taken
place at the time of assumption or certification, all striking or
locked out employees shall immediately return to work and the
employer shall immediately resume operations and readmit all
workers under the same terms and conditions prevailing before
the strike or lockout. The Secretary of Labor and Employment or
the Commission may seek the assistance of law enforcement
agencies to ensure the compliance with this provision as well as
with such orders as he may issue to enforce the same.
The effects of the assumption order issued by the Secretary of
Labor are two-fold. It enjoins an impending strike on the part of
the employees and orders the employer to maintain the status
quo.
There is no doubt that Digitel defied the assumption order by
abruptly closing down Digiserv. The closure of a department is not
illegal per se. What makes it unlawful is when the closure is
undertaken in bad faith. In St. John Colleges, Inc. v. St. John
Academy Faculty and Employees Union,26 bad faith was
evidenced by the timing of and reasons for the closure and the
timing of and reasons for the subsequent opening. There, the
collective bargaining negotiations between St. John and the Union
resulted in a bargaining deadlock that led to the filing of a notice
of strike. The labor dispute was referred to the Secretary of Labor
who assumed jurisdiction.
Pending resolution of the dispute, St. John closed the school
prompting the Union to file a complaint for illegal dismissal and
unfair labor practice. The Union members alleged that the closure
of the high school was done in bad faith in order to get rid of the
Union and render useless any decision of the SOLE on the CBA
deadlocked issues. We held that closure was done to defeat the
affected employees’ security of tenure, thus:
The determination of whether SJCI acted in bad faith depends on
the particular facts as established by the evidence on record. Bad
faith is, after all, an inference which must be drawn from the
peculiar circumstances of a case. The two decisive factors in
determining whether SJCI acted in bad faith are (1) the timing of,
and reasons for the closure of the high school, and (2) the timing
of, and the reasons for the subsequent opening of a college and
elementary department, and, ultimately, the reopening of the high
school department by SJCI after only one year from its closure.
Prior to the closure of the high school by SJCI, the parties agreed
to refer the 1997 CBA deadlock to the SOLE for assumption of
jurisdiction under Article 263 of the Labor Code. As a result, the
strike ended and classes resumed. After the SOLE assumed
jurisdiction, it required the parties to submit their respective
position papers. However, instead of filing its position paper, SJCI
closed its high school, allegedly because of the "irreconcilable
differences between the school management and the Academy’s
Union particularly the safety of our students and the financial
aspect of the ongoing CBA negotiations." Thereafter, SJCI moved
to dismiss the pending labor dispute with the SOLE contending
that it had become moot because of the closure. Nevertheless, a
year after said closure, SJCI reopened its high school and did not
rehire the previously terminated employees.
Under these circumstances, it is not difficult to discern that the
closure was done to defeat the parties’ agreement to refer the
labor dispute to the SOLE; to unilaterally end the bargaining
deadlock; to render nugatory any decision of the SOLE; and to
circumvent the Union’s right to collective bargaining and its
members’ right to security of tenure. By admitting that the closure
was due to irreconcilable differences between the Union and
school management, specifically, the financial aspect of the
ongoing CBA negotiations, SJCI in effect admitted that it wanted
to end the bargaining deadlock and eliminate the problem of
dealing with the demands of the Union. This is precisely what the
Labor Code abhors and punishes as unfair labor practice since
the net effect is to defeat the Union’s right to collective
bargaining.27 (Emphasis not supplied)
As in St. John, bad faith was manifested by the timing of the
closure of Digiserv and the rehiring of some employees to
Interactive Technology Solutions, Inc. (I-tech), a corporate arm of
Digitel. The assumption order directs employees to return to work,
and the employer to reinstate the employees. The existence of the
assumption order should have prompted Digitel to observe the
status quo. Instead, Digitel proceeded to close down Digiserv.
The Secretary of Labor had to subsume the second notice of
strike in the assumption order. This order notwithstanding, Digitel
proceeded to dismiss the employees.
The timing of the creation of I-tech is dubious. It was incorporated
on 18 January 2005 while the labor dispute within Digitel was
pending. I-tech’s primary purpose was to provide call
center/customer contact service, the same service provided by
Digiserv. It conducts its business inside the Digitel office at 110 E.
Rodriguez Jr. Avenue, Bagumbayan, Quezon City. The former
head of Digiserv, Ms. Teresa Taniega, is also an officer of I-tech.
Thus, when Digiserv was closed down, some of the employees
presumably non-union members were rehired by I-tech.
Thus, the closure of Digiserv pending the existence of an
assumption order coupled with the creation of a new corporation
performing similar functions as Digiserv leaves no iota of doubt
that the target of the closure are the union member-employees.
These factual circumstances prove that Digitel terminated the
services of the affected employees to defeat their security of
tenure. The termination of service was not a valid retrenchment; it
was an illegal dismissal of employees.
It needs to be mentioned too that the dismissal constitutes an
unfair labor practice under Article 248(c) of the Labor Code which
refers to contracting out services or functions being performed by
union members when such will interfere with, restrain or coerce
employees in the exercise of their rights to self-organization. At
the height of the labor dispute, occasioned by Digitel’s reluctance
to negotiate with the Union, I-tech was formed to provide, as it did
provide, the same services performed by Digiserv, the Union
members’ nominal employer.
Under Article 279 of the Labor Code, an illegally dismissed
employee is entitled to backwages and reinstatement. Where
reinstatement is no longer viable as an option, as in this case
where Digiserv no longer exists, separation pay equivalent to one
(1) month salary, or one-half (1/2) month pay for every year of
service, whichever is higher, should be awarded as an
alternative.28 The payment of separation pay is in addition to
payment of backwages.29
Indeed, while we have found that the closure of Digiserv was
undertaken in bad faith, badges thereof evident in the timing of
Digiserv’s closure, hand in hand, with I-tech’s creation, the closure
remains a foregone conclusion. There is no finding, and the Union
makes no such assertion, that Digiserv and I-tech are one and the
same corporation. The timing of Digiserv’s closure and I-tech’s
ensuing creation is doubted, not the legitimacy of I-tech as a
business process outsourcing corporation providing both inbound
and outbound services to an expanded local and international
clientele.30
The finding of unfair labor practice hinges on Digitel’s contracting-
out certain services performed by union member-employees to
interfere with, restrain or coerce them in the exercise of their right
to self-organization.
83
We have no basis to direct reinstatement of the affected
employees to an ostensibly different corporation. The surrounding
circumstance of the creation of I-tech point to bad faith on the part
of Digitel, as well as constitutive of unfair labor practice in
targeting the dismissal of the union member-employees.
However, this bad faith does not contradict, much less negate, the
impossibility of the employees’ reinstatement because Digiserv
has been closed and no longer exists.
Even if it is a possibility that I-tech, as though Digitel, can absorb
the dismissed union member-employees as I-tech was
incorporated during the time of the controversy with the same
primary purpose as Digiserv, we would be hard pressed to
mandate the dismissed employees’ reinstatement given the lapse
of more than seven (7) years.
This length of time from the date the incident occurred to its
Resolution31 coupled with the demonstrated litigiousness of the
disputants: (1) with all sorts of allegations thrown by either party
against the other; (2) the two separate filings of a notice of strike
by the Union; (3) the Assumption Orders of the DOLE; (4) our own
finding of unfair labor practice by Digitel in targeting the union
member-employees, abundantly show that the relationship
between Digitel and the union member-employees is strained.
Indeed, such discordance between the parties can very well be a
necessary consequence of the protracted and branched out
litigation. We adhere to the oft-quoted doctrine that separation pay
may avail in lieu of reinstatement if reinstatement is no longer
practical or in the best interest of the parties.32
Under the doctrine of strained relations, the payment of
separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or
viable. On one hand, such payment liberates the employee from
what could be a highly oppressive work environment. On the other
hand, it releases the employer from the grossly unpalatable
obligation of maintaining in its employ a worker it could no longer
trust.33
Finally, an illegally dismissed employee should be awarded moral
and exemplary damages as their dismissal was tainted with unfair
labor practice.34 Depending on the factual milieu, jurisprudence
has awarded varying amounts as moral and exemplary damages
to illegally dismissed employees when the dismissal is attended
by bad faith or fraud; or constitutes an act oppressive to labor; or
is done in a manner contrary to good morals, good customs or
public policy; or if the dismissal is effected in a wanton,
oppressive or malevolent manner.35 1âwphi1
In Nueva Ecija I Electric Cooperative, Inc. (NEECO I) Employees
Association v. National Labor Relations Commission, we intoned:
Unfair labor practices violate the constitutional rights of workers
and employees to self-organization, are inimical to the legitimate
interests of both labor and management, including their right to
bargain collectively and otherwise deal with each other in an
atmosphere of freedom and mutual respect; and disrupt industrial
peace and hinder the promotion of healthy and stable labor-
management relations. As the conscience of the government, it is
the Court’s sworn duty to ensure that none trifles with labor
rights.36
We awarded moral damages in the amount of ₱ 10,000.00 and
likewise awarded ₱ 5,000.00 as exemplary damages for each
dismissed employee.
In the recent case of Purefoods Corporation v. Nagkakaisang
Samahang Manggagawa ng Purefoods Rank-and-File,37 we
awarded the aggregate amount of ₱ 500,000.00 as moral and
exemplary damages to the illegally dismissed union member-
employees which exact number was undetermined.
In the case at hand, with the Union’s manifestation that only 13
employees remain as respondents, as most had already accepted
separation pay, and consistent with our finding that Digitel
committed an unfair labor practice in violation of the employees’
constitutional right to self-organization, we deem it proper to
award each of the illegally dismissed union member-employees
the amount of ₱ 10,000.00 and ₱ 5,000.00 as moral and
exemplary damages, respectively.
WHEREFORE, the Petition is DENIED. The Decision of the Court
of Appeals in CA-G.R. SP No. 91719 is AFFIRMED, while the
Decision in CA-G.R. SP No. 94825 declaring the dismissal of
affected union member-employees as illegal is MODIFIED to
include the payment of moral and exemplary damages in amount
of ₱ 10,000.00 and ₱ 5,000.00, respectively, to each of the
thirteen (13) illegally dismissed union-member employees.
Petitioner Digital Telecommunications Philippines, Inc.
is ORDERED to pay the affected employees backwages and
separation pay equivalent to one (1) month salary, or one-half
(1/2) month pay for every year of service, whichever is higher.
Let this case be REMANDED to the Labor Arbiter for the
computation of monetary claims due to the affected employees.
SO ORDERED.
G.R. No. 115414 August 25, 1998
PHILIPPINE TUBERCULOSIS SOCIETY, INC., petitioner,
vs.
NATIONAL LABOR UNION and NATIONAL LABOR
RELATIONS COMMISSION, respondents.
MENDOZA, J.:
This is a petition for certiorari to set aside the decision, dated
August 31, 1993, and the resolution, dated April 20, 1994, of the
National Labor Relations Commission declaring the retrenchment
of one hundred sixteen (116) employees of petitioner Philippine
Tuberculosis Society, Inc. invalid and ordering the reinstatement
of thirty-eight (38) employees and the payment of backwages to
them. The rest of the employees were dropped from the complaint
after it was found that they had executed deeds of quitclaim
releasing petitioner from liability.
The facts of the instant case are as follows:
The Philippine Tuberculosis Society, Inc. is a non-stock and non-
profit domestic corporation with the primary objective of fighting
tuberculosis in the Philippines. It has employees who are
represented by private respondent National Labor Union.
In the proceedings before the NLRC, it was shown that, in 1989,
the Society began to experience serious financial difficulties when
it incurred a deficit of P2 million. The shortfall increased to
P9,100,000.00 in 1990 and was certain to become worse were it
not for quick measures taken by petitioner. 1
First, the Society leased a property in Tayuman to a fastfood
outlet, cancelled its service agreement with a janitorial company,
and sold its equity in the Philippine Long Distance Telephone
Company (PLDT). Second, it withdrew from the Pag-Ibig Fund
Program, negotiated with the Government Service Insurance
System for the restructuring of its obligations, and applied for
exemption from minimum wage increases. Finally, it disapproved
the overtime pay of supervisory and managerial employees,
obtained the waiver of personnel of their entitlement to wage
84
differentials, and implemented the retrenchment of one hundred
sixteen (116) employees.2 The retrenchment is the subject of the
present suit.
On September 27, 1991, respondent NLU filed a notice of strike
against the Society with the National Conciliation and Mediation
Board (NCMB), charging the Society with unfair labor practice in
terminating the services of the aforementioned employees.
Conferences were scheduled by the NCMB, which however failed
to resolve the case. On November 6, 1991, then Secretary of
Labor and Employment Ruben Torres certified the case to the
NLRC on the ground that the labor dispute seriously affected the
national interest.
On August 31, 1993, the NLRC rendered a decision declaring as
invalid the retrenchment of the employees concerned on the
ground that the Society did not take seniority into account in their
selection. The NLRC held:
The seniority factor, an indispensable criterium
for a retrenchment program to be valid, was
admittedly not employed in the selection
process. It was omitted in favor of the very
subjective criteria of dependability, adaptability,
trainability, job performance, discipline, and
attitude towards work. Because of this failure, a
number of those retrenched were senior in
years of service to some of those retained. This
failure . . . certainly invalidates the retrenchment
program. 3
In its resolution dated April 20, 1994, the NLRC excluded seventy-
eight (78) of the one hundred sixteen (116) employees whom it
had ordered reinstated on the ground that they had executed
deeds of quitclaim releasing the Society from further liability. The
resolution of the NLRC stated:
Finding that there is no opposition to the said
quitclaims, the same are approved and the
employees who executed the same are
excluded/dropped as complainants herein who
are to be reinstated as ordered.
WHEREFORE, the resolution of this
Commission promulgated on August 31, 1993 is
hereby modified by dropping/deleting the herein
above-named employees who executed
quitclaims as party complainants.4
In its present petition, the Society charges that:
RESPONDENT COMMISSION COMMITTED
PALPABLE AND PATENT ERROR IN
DECLARING AS INVALID THE
RETRENCHMENT PROGRAM
IMPLEMENTED BY RESPONDENT FOR
FAILURE TO EMPLOY THE CRITERIUM OF
SENIORITY IN THE SELECTION PROCESS
OF THE EMPLOYEES TO BE
RETRENCHED. 5
Art. 283 of the Labor Code provides:
The employer may also terminate the
employment of any employee due to the
installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or
cessation of operations of the establishment or
undertaking unless the closing is for the
purpose of circumventing the provisions of this
title, by serving a written notice on the workers
and the Department of Labor and Employment
at least one (1) month before the intended date
thereof. In case of termination due to the
installation of labor-saving devices or
redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at
least one (1) month pay or to at least one (1)
month pay for every year of service, whichever
is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of
operations of establishment or undertaking not
due to serious business losses or financial
reverses, the separation pay shall be equivalent
to at least one (1) month pay or at least one-half
(1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6)
months shall be considered as one (1) whole
year.
Clearly, retrenchment or reduction of the workforce in
cases of financial difficulties is recognized as a ground
for the termination of employment. In Sebuguero v.
NLRC, 6 this Court essayed on the nature of this form of
termination of employment, thus:
Retrenchment . . . is the termination of
employment initiated by the employer through
no fault of the employees and without prejudice
to the latter, resorted to by management during
periods of business recession, industrial
depression, or seasonal fluctuations, or during
lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new
production program or the introduction of new
methods or more efficient machinery or of
automation. Simply put, it is an act of the
employer of dismissing employees because of
losses in the operation of a business, lack of
work, and considerable reduction on the volume
of his business, a right consistently recognized
and affirmed by this Court.
Although petitioner is a non-stock and non-profit organization,
retrenchment as a measure adopted to stave off threats to its
existence is available to it. Article 278 of the Labor Code states
that the fiscal measures recognized therein which an employer
may validly adopt apply to "all establishments or undertakings,
whether for profit or not."
However, the employer's prerogative to layoff employees is
subject to certain limitations set forth in Lopez Sugar Corporation
v. Federation of Free Workers 7 as follows:
Firstly, the losses expected should be
substantial and not merely de minimis in extent.
If the loss purportedly sought to be forestalled
by retrenchment is clearly shown to be
insubstantial and inconsequential in character,
the bonafide nature of the retrenchment would
appear to be seriously in question. Secondly,
the substantial loss apprehended must be
reasonably imminent, as such imminence can
be perceived objectively and in good faith by
the employer. There should, in other words, be
a certain degree of urgency for the
retrenchment, which is after all a drastic
recourse with serious consequences for the
livelihood of the employees retired or otherwise
laid-off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably
85
 necessary and likely to effectively prevent the
expected losses. The employer should have
taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other
costs than labor costs. An employer who, for
instance, lays off substantial numbers of
workers while continuing to dispense fat
executive bonuses and perquisites or so-called
"golden parachutes," can scarcely claim to be
retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional
policy of providing "full protection" to labor, the
employer's prerogative to bring down labor
costs by retrenching must be exercised
essentially as a measure of last resort, after
less drastic means — e.g., reduction of both
management and rank-and-file bonuses and
salaries, going on reduced time, improving
manufacturing efficiencies, trimming of
marketing and advertising costs, etc. — have
been tried and found wanting.
Lastly, but certainly not the least important,
alleged losses if already realized, and the
expected imminent losses sought to be
forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring
this quantum of proof is readily apparent: any
less exacting standard of proof would render
too easy the abuse of this ground for
termination of services of employees.
In addition to the above, the retrenchment must be implemented
in a just and proper manner. As held in Asiaworld Publishing
House, Inc. v. Ople, 8
there must be fair and reasonable criteria to be
used in selecting employees to be dismissed,
such as: (a) less preferred status (e.g.
temporary employee); (b) efficiency rating; and
(c) seniority.
In this case, respondent NLU denies that the Society has suffered
financial reverses and alleges that the real reason for the layoff of
the employees was the desire of the Society's board of directors
to cut expenses in anticipation of loss of government aid as a
result of the elimination of the President's power to nominate
candidates to the board. In addition, respondent union charges
that the funds for the payment of salaries and other obligations
are being used in stock trading. For these reasons, respondent
prays that the resolution, dated April 20, 1994, of the NLRC,
insofar as it excludes from reinstatement and the payment of
backwages the seventy-eight (78) employees who signed
quitclaims releasing petitioner from liability, be set aside. 9
As the union has not filed a petition for certiorari, its role in this
case as respondent is to defend the resolution, not to seek its
annulment. However, instead of filing a comment as required in
the resolution of this Court, respondent NLU filed a "Comment
and Petition." This attempt to make the comment likewise serve
as a petition cannot make up for the union's failure to file a
separate petition. It should be noted that the union's "Comment
and Petition" was filed more than the three (3) months considered
as the "reasonable period" after receipt of the NLRC resolution. In
addition, it is dismissible for failure of the union to pay the filing
fee and to comply with the requirements to attach to the petition a
certified true copy of the resolution being questioned, indicate the
date of receipt of the same, and attach a certificate of nonforum
shopping.
Consequently, whether petitioner has indeed suffered financial
distress justifying the retrenchment of employees cannot be
raised in issue by the union. The exclusion from the order to
reinstate and to pay backwages of the seventy-eight (78)
employees who signed quitclaims releasing petitioner from liability
is not in issue either. Indeed, this action was brought by petitioner
on the sole issue of whether in disregarding seniority as a factor in
laying off the remaining thirty-eight (38) employees, petitioner
acted arbitrarily.
It should also be pointed out that what respondent is raising are
actually questions of fact, the determination of which is beyond
the scope of a petition for certiorari. Our function in this case is
limited to determining whether the NLRC committed grave abuse
of discretion when it ruled that seniority is an indispensable factor
in determining the particular employees subject of retrenchment.
In determining this question, our function is at an end the moment
we find that there is substantial evidence to support the labor
agency's decision. Of course, the substantiality of the evidence
must take into account whatever matters included in the record
which fairly detract from its weight.
Indeed, there is substantial evidence in the record to support the
NLRC's finding that the Society suffered financial distress as a
result of growing deficits which were not likely to abate. Petitioner
presented to the NLRC the balance sheets, financial statements,
and the reports of its external auditors for the years 1989 and
1990. We cannot, therefore, say that the finding of the NLRC is
unsupported by substantial evidence. Accordingly, the NLRC
could rightly conclude:
Given the claim of the Society that its present
financial troubles were occasioned by a dearth
of funding from its traditional sources of
revenue, . . . it is Our considered view that the
Society's claim to retrench employees, . . . is
valid. 10
Nor do we think the NLRC erred in holding that though the Society
was justified in ordering a retrenchment, its implementation of the
scheme rendered the retrenchment invalid. That is because in
selecting the employees, the Society disregarded altogether the
factor of seniority. As the NLRC noted:
We noted with concern that the criteria used by
the Society failed to consider the seniority factor
in choosing those to be retrenched, a failure
which, to our mind, should invalidate the
retrenchment, as the omission immediately
makes the selection process unfair and
unreasonable. Things being equal, retaining a
newly hired employee and dismissing one who
had occupied the position for years, even if the
scheme should result in savings for the
employer, since he would be paying the
newcomer a relatively smaller wage, is simply
unconscionable and violative of the senior
employee's tenurial rights. In Villena vs. NLRC,
193 SCRA 686, February 7, 1991, the Supreme
Court considered the seniority factor an
important ingredient for the validity of a
retrenchment program. According to the Court,
the following legal procedure should be
observed for a retrenchment to be valid; (a)
one-month prior notice to the employee as
prescribed by Article 282 of the Labor Code;
and b) use of a fair and reasonable criteria in
carrying out the retrenchment program, such as
1) less preferred status (as in the case of
temporary employees) 2) efficiency rating, 3)
seniority, and 4) proof of claimed financial
losses.
86
 Amelita Doria, one of the employees
retrenched, for instance, worked with the
Society for 31 years, her latest position being
that of a Head Nurse. From 1982 up to 1990,
she was President of the QI Nurses
Association. Another employee retrenched,
despite being more senior than those retained,
was Isabel Guille, a nurse who worked for the
Society for 11 years. She was the incumbent
President of the QI Nurses Association at the
time of her retrenchment. Buenaventura
Vazquez worked with the Society since 1958
continuously up to 1991, when he was included
among those retrenched. What makes his case
particularly noticeable is that he was retrenched
after he filed an application for retirement as he
was already of retirable age. Relatedly, he
swears in an Affidavit that as an audit examiner,
"I know full (sic) well that the PTS is not
bankrupt and in financial distress as it has many
real estate properties and assets to pay benefits
to retiring and separated employees. After all
the PTS is a non-profit organization established
for profit." Another is Premia Dumlao, who
submitted an Affidavit attesting to the fact that
she worked with the Society since 1955
continuously up to 1991, when she was
retrenched despite her 37 years of service with
the Society. She attests that her "retrenchment
is arbitrary and illegal as the guidelines did not
provide for the consideration of the ages,
lengths of service and retirability of the
retrenched employees." 11
Petitioner claims that the retrenchment of employees was based
on a number of criteria, to wit: 1) whether the positions of the
employees are to be retained or abolished; 2) the qualifications
required by the positions to be retained, modified, or created; and
3) the attitude, discipline, efficiency, flexibility, and trainability of
the employees. 12Petitioner has not shown however, that the four
employees were selected for retrenchment because they did not
meet these criteria. All it says is the following:
22. Petitioner PTSI respectfully submits that the
fallacy of the above-stated decision lies in the
respondent NLRC's appreciation of
complainants Amelita Doria's (thereafter Doria),
Isabel Guillen's (hereafter Guillen),
Buenaventura Vasquez's (hereafter Vasquez)
and Premia Dumlao's (hereafter Dumlao)
assertions. Respondent NLRC swallowed hook,
line and sinker the complainants' allegation that
they were retrenched because of their old age
to pre-empt their retirements. This is not wholly
accurate, the reasons are that:
23. First, petitioner PTSI did not solely base its
recommendation to retrench the complainants
because of their old age. Taking into
consideration the nature and demands of the
positions held by the employees and the need
to provide efficient health and medical services
to tubercular patients, petitioner PTSI also took
into consideration other criteria such as
"dependability, adaptability, trainability and
actual job performance and attitude towards
work."
24. The evidence on record would show that
complainants' ratings with respect to the criteria
of dependability, actual job performance and
attitude towards work do not meet the
standards of petitioner PTSI. The evaluation
reveals that:
a] Complainant Doria was not willing to work on
rotation basis, especially on night duty. This
jeopardizes the efficiency of petitioner PTSI to
provide the best possible care to its patients,
not to mention a possible demoralization among
her other co-workers for the preferential
treatment that would be given to her.
b] Complainants Dumlao and Guillen were not
able to cope with the workload of a nursing aide
and a nurse, respectively.
c] Complainant Vasquez, on the other hand,
had already applied for retirement under RA
660.
25. In other words, there is present in this case
legal basis to justify the retrenchment of the
employees. Mere seniority of an employee,
should not shield said employee from the
effects of an employer's exercise of the right to
retrench due to serious financial reverses,
especially if proof of such losses had been
established by competent evidence. 13
Beyond these generalizations, petitioner has not explained why
the said employees had to be laid off without considering their
many years of service to the Society. The fact that these
employees had accumulated seniority credits indicates that they
had been retained in the employ of the Society because of loyal
and efficient service. The burden of proving the contrary is on
petitioner.
WHEREFORE, the petition is hereby DISMISSED for lack of
showing that in rendering its decision, dated August 31, 1993, and
its resolution, dated April 20, 1994, the National Labor Relations
Commission committed grave abuse of discretion.
SO ORDERED.
G.R. No. 175040 April 6, 2010
FRANCIS RAY TALAM, Petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, 4th DIVISION,
CEBU CITY, THE SOFTWARE FACTORY, INC. and/or TERESA
GRAPILON, Office Manager, and WOLFGANG HERMLE, Chief
Executive Officer,Respondents.
DECISION
BRION, J.:
We resolve the present Petition for Review on Certiorari1 filed by
Francis Ray Talam (Talam) seeking to set aside the Decision2 of
the Nineteenth Division of the Court of Appeals (CA) dated July
31, 2006 and its Resolution3 dated September 29, 2006 rendered
in CA-G.R.-SP No. 01760.4
THE ANTECEDENTS
The facts of the case are summarized below.
The respondent, The Software Factory, Inc. (TSFI), is a domestic
corporation engaged in providing information technology and
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computer consultancy to the public. It holds office in Makati City.
In April 2001, it employed Talam as a full-time programmer.
In the latter part of 2001 and in 2002, TSFI suffered financial
reverses. Its external financial auditor advised that it cut on its
payroll expenses which accounted for 41% of its total operating
costs.5 TSFI heeded the advice and decided to retrench some of
its employees, using as basis its employees' service income and
contribution margins to the company. TSFI found that Talam was
one of two employees with the least or with no income
contribution for the year 2002. Consequently, respondents Teresa
Grapilon (Grapilon), TSFI's Office Manager, and Wolfgang Hermle
(Hermle), Chief Executive Officer, verbally informed Talam that
his services with the company would be terminated thirty (30)
days after September 27, 2002. Thereafter, TSFI notified Talam in
writing of the termination of his employment.6 The notice was
dated October 1, 2002, but received by Talam on October 4,
2002.7 On November 6, 2002, or after a month, Talam signed a
Release and Quitclaim8 in consideration and receipt of
₱89,954.00 in compensation and other benefits.9
On November 29, 2002, Talam questioned the legality of his
separation from the service through a complaint for illegal
dismissal and illegal deduction, with claims for service incentive
leave pay, damages and attorney's fees against TSFI, Grapilon
and Hermle, before the National Labor Relations Commission
(NLRC) in Cebu City.
THE COMPULSORY ARBITRATION PROCEEDINGS
Talam alleged before the Labor Arbiter that his dismissal from
employment was illegal because the company did not comply with
the requisites under Article 283 of the Labor Code for a valid
retrenchment action.
On the other hand, TSFI argued that Talam had been validly
dismissed. It contended that retrenchment is one of the authorized
causes under the Labor Code for termination of employment, and
sought the dismissal of the complaint on the ground of improper
venue; Talam should have filed the complaint in the City of
Makati, his place of work, rather than in Cebu City, his
homeplace.
On October 28, 2003, Executive Labor Arbiter Reynoso A.
Belarmino rendered a decision10 declaring Talam's dismissal
illegal and directing TSFI to pay Talam separation benefits,
backwages and 13th month pay in the aggregate amount of
₱260,560.00. The arbiter held that while it is TSFI's right to reduce
its workforce to prevent losses, it failed to present evidence that
the company adopted a retrenchment program and there was also
no evidence showing clearly that Talam should be retrenched. He
disregarded the release and quitclaim executed by Talam
declaring that he was compelled to accept the monetary
consideration behind it out of necessity. He however ruled out
reinstatement as "the parties can no longer work together in
mutual trust."
TSFI appealed to the NLRC. In a Decision dated February 21,
2005,11 the NLRC Fourth Division set aside the labor arbiter's
ruling and dismissed Talam's complaint without prejudice, for
improper venue. It ruled that Talam should have filed the
complaint with the NLRC-Regional Arbitration Branch in the
National Capital Region which has jurisdiction over the workplace
in Makati City. Talam sought a reconsideration which the NLRC
granted in a resolution promulgated on May 25, 2005.12 It set
aside its earlier decision and rendered a new one affirming with
modification the labor arbiter's decision. Like the Labor Arbiter, it
nullified the release and quitclaim signed by Talam. The NLRC
found Talam's dismissal valid by reason of retrenchment, but
deleted the award of separation pay "in view of payment."
TSFI moved for reconsideration of the NLRC resolution which was
partially granted in another resolution dated September 27,
2005.13 This time, the NLRC deleted the award of backwages and
13th month pay, but ordered the company to pay Talam
₱30,000.00 as nominal damages for violating his right to
procedural due process, citing Jaka Food Processing Corp. v.
Darwin Pacot, et al.,14 where the Court held that although the
complainant's dismissal was based on an authorized cause,
nominal damages were awarded because of the respondent's
failure to comply with the notice requirement. The NLRC ruled that
the non-observance of the notice requirement will not invalidate
Talam's separation on the ground of retrenchment; thus, the
award of full backwages was not proper.
Talam moved for reconsideration, but the NLRC denied the
motion on January 31, 2006.15 Talam thereafter sought relief from
the CA through a petition for certiorari under Rule 65 of the Rules
of Court,16 charging the NLRC with grave abuse of discretion for
its resolutions of September 27, 2005 and January 31, 2006. In
particular, Talam questioned the deletion of the award to him of
backwages and 13th month pay.
THE CA DECISION
In its decision rendered on July 31, 2006,17 the CA denied the
petition for lack of merit. It found Talam's separation from the
service by reason of retrenchment to be valid. However, while it
acknowledged that TSFI was suffering from financial losses as
confirmed by the report of independent external auditor Leah A.
Villanueva,18 it ruled that the company failed to give Talam the
notice required by law.19 It noted that on September 27, 2002,
TSFI, through Grapilon and Hermle, verbally advised Talam of his
separation from the service due to retrenchment. On October 1,
2002,20 TSFI sent Talam and the Department of Labor and
Employment (DOLE) separate notices with different effectivity
dates of Talam's termination of employment: the notice to Talam
was to be effective October 27, 2002, while the notice to DOLE
was effective October 16, 2002. The CA also noted that Talam's
employment contract provided for two month's notice.21
The CA opined that although the law mandated that the written
notice of termination of employment for authorized causes should
be served at least one month before the effective date of the
termination, the employment contract should prevail because it
does not violate the minimum requirement under Article 283 of the
Labor Code. Even if Article 283 were to be followed, the CA
added, TSFI still failed to comply with the notice requirement
considering that the notices to Talam and to DOLE were for less
than thirty (30) days.
Although Talam's dismissal was due to a cause authorized by law,
the CA deemed TSFI liable for nominal damages for violation of
Talam's right to procedural due process. The appellate court
affirmed with modification the assailed NLRC decision. It
increased to ₱50,000.00 the nominal damages of ₱30,000.00
awarded by the NLRC. The CA found support in the Court's ruling
in the Jaka Food Processing case,22 the same ruling relied upon
by the NLRC, for its award of nominal damages. Specifically, the
CA found appropriate the Court's pronouncement in Jaka that "if
the dismissal is based on an authorized cause under Article 283,
but the employer failed to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was
initiated by the employer's exercise of management prerogative,"
as distinguished from Agabon v. National Labor Relations
Commission23 where the dismissal was for a just cause but due to
non-compliance with procedural due process, the employer was
made to pay ₱30,000.00 in nominal damages.
Talam moved for reconsideration of the decision, but the CA
denied the motion in a resolution promulgated on September 29,
2006.24 Hence, the present recourse to the Court.
88
 THE PETITION
The petition submits that the CA seriously erred and/or committed
grave abuse of discretion in: (1) justifying the retrenchment of
Talam on the basis alone of the report of the external auditor; (2)
justifying the retrenchment despite the TSFI's failure to observe
fair and reasonable standards for a valid retrenchment and to first
institute cost reduction measures; and (3) applying the cases
of Jaka Food Processing Corporation v. Darwin Pacot, et al.
and Agabon v. NLRC.
Talam contends that while it may be true that audited financial
statements normally serve as proofs of the profit and loss
performance of a company, the financial statements relied upon
by the company do not show that TSFI was in dire financial straits
nor was it suffering, or will imminently suffer, drastic business
losses; the losses were insubstantial or inconsequential; contrary
to TSFI's claim, a closer look at the Schedule of Operating
Expenses for the year ended December 31, 2002 and September
2002 would show that the company's payroll did not actually cover
41% of its total operating expenses but only 16%, considering that
much of the expense is allotted to management fees, not to
mention that there were expenses incurred for recruitment
services; the alleged losses were not imminent as there were only
two (2) employees (Ronilo Raymundo and Talam) who were
retrenched; in fact, TSFI immediately hired employees for the
position occupied by Talam; at the time Talam was retrenched,
there were five (5) probationary employees who became regular
employees on October 1, 2002, four (4) of whom had lower
contribution margins.
Talam further contends that if TSFI was indeed experiencing
financial difficulties, it could also have reduced its other operating
expenses to abate the losses. Further, Talam argues that TSFI
failed to provide reasonable criteria in implementing its
retrenchment program as the alleged cause of Talam's dismissal
– that he had the least contribution margin to the company – is not
a valid cause for dismissal under Articles 282 and 283 of the
Labor Code; be that as it may, he did not have the highest
negative contribution margin.
To prove his point, Talam claims that the table of contribution
margins25 relied upon by TSFI is incomplete and inaccurate as
there was a total of nineteen (19) consultants at the time, yet the
table listed only seventeen (17); he had a negative contribution
because the TSFI management did not give him the chance to be
engaged in projects; while it is true that he had no service income
for 2002, this was primarily because he was assigned to work in
the office on a special project.
On November 23, 2007, Talam filed a Memorandum 26 reiterating
essentially the same arguments raised in the petition.
The Case for TSFI
By way of a Comment filed on February 16, 200727 and a
Memorandum dated November 3, 2007,28 TSFI prays for the
dismissal of the petition for lack of merit, contending that Talam's
arguments are merely a rehash of his previous arguments before
the NLRC and the CA. Specifically, it argues that the petition
raises only factual issues which are not proper subjects of appeal
under the Rules of Court;29 Talam is estopped from questioning
the CA decision because what he wanted had already been
granted by the CA; Talam's retrenchment is valid and supported
by evidence and he is only entitled to nominal damages pursuant
to law and jurisprudence.
TSFI contends that the petition's procedural defect is evident in
the following questions it raised: (1) was the company suffering
from substantial financial losses to justify a retrenchment? (2) was
the retrenchment based on fair and reasonable standards? (3) did
Talam have the highest negative contribution margin to justify his
dismissal? These questions, TSFI posits, cannot be resolved
without the Court reviewing or evaluating the evidence. On the
assumption that Talam may properly raise these questions, TSFI
contends that the factual determination regarding the validity of
the retrenchment cannot be disturbed anymore because findings
of fact of administrative bodies like the NLRC, as well as those of
the CA, are binding upon the Court.
Despite the foregoing, TSFI maintains that Talam is estopped
from assailing the CA decision of July 31, 2006 because what he
wanted had already been granted by the appellate court. It then
explains that the NLRC resolution of September 27, 2005,30 which
Talam questioned before the CA, deleted the award of backwages
and 13th month pay to Talam, but awarded him nominal damages
of ₱30,000.00 for the company's non-compliance with procedural
due process. The CA affirmed the award but increased the
amount to ₱50,000.00. This CA response elicited a reaction from
Talam with the statement that "if factual circumstances of
the Jaka case are the same as in this instant case, then the
indemnity in favor of the Petitioner should have been fixed also in
the amount of Fifty Thousand Pesos (₱50,000.00)."31 TSFI
submits that by his very own words, Talam "has conceded" that
an increase in the amount of indemnity awarded to him would
already be acceptable and this the CA already granted.
On the validity of its retrenchment action, TSFI posits that the
cost-cutting measure it carried out measured up to the standard
imposed by law and jurisprudence. It maintains that it did not only
expect but had already suffered substantial losses, as reported by
its external auditor and as established by its financial records;32 as
of December 31, 2002, it had accumulated losses amounting to
₱2,475,418.00 which constituted 96.41% of stockholders’ equity
of ₱7,700,000.00.33 It argues further that the fact that it retrenched
only two employees did not mean its losses were not imminent; it
did not have to dismiss all its employees because it also needed
to survive, not to completely shut down; in any event, reducing its
17 consultants by two represented already 11% of its workforce.
TSFI likewise disputes Talam's submission that its payroll
expense did not actually represent 41% but only 16%. Talam's
salary is a direct cost included in the account of "salaries and
wages and incentives" in the schedule of direct cost as shown in
the financial statements, not in the schedule of operating
expenses; this account indicates an expense of ₱6,397,568.00,
which is at least 43% of the total direct costs. It adds that
supervisors and managerial employees should also be
compensated for their work. With respect to the five (5)
probationary employees who were made regular employees in
October 2002, TSFI explains that they were working on a project
that was then in mid-stream and, considering their know-how in
the project, could not just be assigned to Talam.
TSFI takes exception to Talam's claim that it has increased the
number of its consultants to twenty (20) and is preparing to
transfer or has transferred to a new and bigger office space. It
maintains that there is absolutely no proof to the allegation; it was
a factual matter not raised in the earlier proceedings and cannot
thus be raised for the first time on appeal; assuming it is true, the
conditions during the years 1999 to 2002 were different from the
present conditions and if the company was able to weather the
financial crisis during those years, it was because it undertook
measures that enabled it to survive and become financially able
again; it used as an office a small room (a mere cubicle) during
the crises years; it had only a two-person support staff in the
persons of Grapilon and Hermle, and it had reduced the salaries
of its employees by as much as 30%.
TSFI insists that Talam was retrenched because he had the
highest negative contribution margin, contrary to his claim that he
"did not have the lowest contribution margin among the
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consultants of the company." It argues that as shown in the profit
and loss statement,34 Talam had the highest negative contribution
margin of ₱511,621.77, followed by another consultant with a
negative contribution margin of ₱501,582.46; Talam's
performance as a consultant resulted in a net loss to the company
of ₱511,621.77. It submits that Talam was not chosen by any of
its clients as shown by the fact that since January 2002 until his
separation, he had no service income. It posits that it cannot be
expected to maintain an employment consultant whose services
the clients do not need. It insists that the contribution margin or
service income is a fair and reasonable criterion in deciding who
to retrench.
The Ruling of the Court
On Matters of Procedure
TSFI asks the Court to dismiss the present petition on the ground
that it is procedurally defective as, allegedly, it raises only
questions of fact, in contravention of the requirement under Rule
45 of the Rules of Court that an appeal by certiorari shall raise
only questions of law. While the petition indeed poses factual
issues – i.e., whether the company was suffering from substantial
losses to justify a retrenchment measure, whether it observed fair
and reasonable standards in implementing a retrenchment, and
whether Talam deserved to be retrenched – we deem it proper to
examine the facts ourselves in view of the conflicting factual
findings among the Labor Arbiter, the NLRC and the CA.35
Additionally, TSFI preliminarily submits that Talam is estopped
from assailing the CA decision because the appellate court
already granted what he asked for when the CA increased to
₱50,000.00 the amount of nominal damages awarded to him.
On this point, TSFI is wrong. It took out of context Talam's
statement in his petition36 that if the facts in the Jakacase were
similar to his case, then the nominal damages should have been
fixed at ₱50,000.00. TSFI overlooked the fact that Talam prayed
for annulment of the NLRC resolutions of September 27, 2005
and January 31, 2006, particularly with respect to the deletion of
the grant of backwages and 13th month pay. The statement
alluded to cannot, by itself, bar Talam from pursuing what he
prayed for, which was not limited to nominal damages alone. He
was simply making a statement regarding the need for
consistency in the application of the Court’s rulings.
Another issue for preliminary consideration is Talam's insistent
questioning of the validity of the retrenchment TSFI had
undertaken. TSFI posits that he is barred from harping on the
issue because he failed to move for reconsideration of the NLRC's
May 25, 2005 resolution declaring the validity of his dismissal by
reason of retrenchment.37
Again, TSFI’s argument is untenable. TSFI itself filed a motion
for reconsideration of the said resolution,38 which the NLRC
disposed of through its resolution of September 27, 2005, a copy
of which was furnished Talam's counsel. Having failed to file a
motion for reconsideration of the May 25, 2005 resolution, can
Talam move for reconsideration of the NLRC's September 27,
2005 resolution?
In the case of Sadol v. Pilipinas Kao, Inc., et al.39 where the
company lost the right to appeal from a decision of the NLRC but
the other party appealed from the same decision, the Court ruled
that the company could file a motion for reconsideration of the
NLRC decision on appeal. The procedural situation in this case
being the same as in Sadol, we hold that Talam did not lose the
right to question the validity of his dismissal as, in fact, he sought
a reconsideration of the NLRC September 27, 2005 resolution
sustaining his dismissal on the ground of retrenchment. As we
said in Sadol, the rules of technicality must yield to the broader
interest of justice.
The Merits of the Case
We now resolve the issue of whether there was a valid cause for
Talam’s dismissal.
We answer in the affirmative.
The CA committed no reversible error in affirming the NLRC ruling
that Talam was validly dismissed on the ground of retrenchment.
We come to this conclusion based on the following
considerations:
First. The decision to retrench had a basis; it was not simulated
nor resorted to for the purpose of getting rid of employees. The
decision was upon the recommendation of the company’s external
auditor Leah A. Villanueva, as contained in her letter to the TSFI
Board of Directors in October 2002.40 The letter reads:
I have reviewed your Profit and Loss Statement for the period
January to September 2002 and the Accompanying Projected
Profit and Loss Statement for the last quarter of 2002. Net Loss
for the period ending amounted to CHF337,616. Average
Operating Expenses per month amounted to CHF100,117 and
Average Actual Revenue per month amounted to CHF63,163.
Based on existing clients, revenue for the last quarter is projected
at CHF191,400 and Operating Expenses for the last quarter is
projected at CHF341,507 resulting to a projected Net Loss of
CHF150,107 at the end of year 2002.
To minimize net loss and cash deficiency, I recommend cost
cutting measures on your Payroll Expenses Account which makes
41% of your Total Operating Expenses. I suggest that you review
contribution margin per consultant and compensation packages of
personnel in the executive and support group. [underscoring
supplied]
As the CA noted, the standard proof of a company’s financial
standing is its financial statements duly audited by credible
external auditors.41 We see nothing in the records which impugns
Villanueva's assessment of the financial condition of TSFI at the
time material to the case.
Second. The cost-cutting measure recommended involved
reduction of TSFI’s payroll expense account which, as the auditor
found, makes up 41% of the company’s total operating expenses.
Talam insinuates that the share in the company’s operating costs
of personnel expenses is misleading, contending that the bulk of
the expense goes into management fees. While this may be so, it
cannot be denied that the management group is still part of the
personnel component of the company, and absent any showing of
bad faith, the choice of who should be retrenched must be
conceded to the company for as long as there exists a basis for it.
In the present case, we note that the auditor suggested that TSFI
"review the contribution margin per consultant and compensation
packages of personnel in the executive and support group."
Again, absent any showing of bad faith, we cannot fault the
company for choosing the option of looking at the margins of
contribution of the consultants to the income of the company as
primary retrenchment standard. It is just unfortunate that based on
this yardstick, Talam came out as one of two consultants with very
high negative contribution margins and was therefore chosen for
retrenchment.
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Talam disputes the unfavorable assessment of his performance
as a consultant, arguing that among nineteen (19) consultants of
the company (not seventeen [17], as listed by TSFI), there were
four (4) employees who had lower contribution margins; he had
no contribution income for 2002 because he was assigned to do
office work and was not being given projects.
While Talam may not have the least contribution margin, he
himself admitted that he had no contribution income for 2002 and
tried to explain this away by saying that he was assigned at the
office and he was not being given projects. Management,
however, countered that TSFI’s clients did not choose him or ask
for his services – a management claim Talam did not dispute. The
company satisfactorily explained, too, how it viewed and
compared the negative contribution margin. In these lights, TSFI
cannot be blamed for choosing him after considering the
employees’ respective contributions to the company’s main
business of computer consultancy.
Third. Talam was dismissed due to a cause authorized by law –
retrenchment to prevent losses.42 At the time of Talam’s
dismissal, TSFI’s financial condition, as found by the external
auditor, showed that it was not just expecting losses, it already
suffered a net income loss of ₱2,474,418.00 and retained
earnings deficit of ₱7,424,250.00 for the period ending December
31, 2002.43
Talam tried to negate this dire financial picture claiming that the
very financial statement cited by TSFI showed a net income of
₱298,725.00,44 referring to the period ending on September 30,
2002. Such a claim, however, cannot erase the fact that the
company had suffered substantial accumulated losses of
₱2,474,418.00 as of the end of December 2002.45 For a small
company like TSFI (with only twenty [20] employees), the losses it
suffered were not merely de minimis in extent but were, at the
time Talam was dismissed, actual and with more losses
reasonably imminent. Significantly, the employer objectively and
in good faith perceived the imminence of more losses as it was
based on the report of its external auditor.
Fourth. TSFI resorted to other measures to abate its losses. It
claimed that during the crises period, it used as an office a small-
room (a mere cubicle) with only a two-person support staff in the
persons of Grapilon and Hermle; it reduced the salaries of its
employees by as much as 30%. This submission by the company
is substantiated by the schedule of Operating Expenses for the
year ended December 31, 2002 and September 30, 2002. 46 A
quick glance at the schedule readily shows a reduction of TSFI’s
operating expenses across the board. The schedule indicates a
substantial decrease in the operating expenses, from
₱5,733,735.00 in September 2002 to ₱1,698,552.36 as of the end
of December 2002.
On the whole, we find that TSFI satisfied the requisites for a valid
retrenchment.47
The Release and Quitclaim
Independently of the above considerations, we note that Talam
executed a Release and Quitclaim48 on November 6, 2002 at
about the time his separation from the service was to take effect,
in consideration of ₱89,954.00 in compensation and other
benefits.49 The labor arbiter and the NLRC did not consider the
release and quitclaim as a bar to the filing of the complaint, saying
that Talam had no choice but to sign the document out of
necessity. The CA chose to be silent about it; in effect, affirming
the labor tribunal's findings on the matter.
The CA erred in glossing over the legal effect of Talam's release
and quitclaim. It should not have been nullified. Talam was not an
unlettered employee;50 he was an information technology
consultant and must have been fully aware of the consequences
of what he was entering into.51 The quitclaim was a voluntary act
as there is no showing that he was coerced into executing the
instrument; he received a valuable consideration for his less than
two years of service with the company. Thus, from all indications,
the release and quitclaim was a valid and binding undertaking that
should have been recognized by the labor authorities and the
CA.1avvphi1
While the law looks with disfavor upon releases and quitclaims by
employees who are inveigled or pressured into signing them by
unscrupulous employers seeking to evade their legal
responsibilities, a legitimate waiver representing a voluntary
settlement of a laborer's claims should be respected by the courts
as the law between the parties.52 In our view, Talam's release and
quitclaim fall into the category of legitimate waivers as defined by
the Court.
In executing the release and quitclaim, Talam had unquivocably
signified his acceptance of his separation from the service as
communicated to him in writing by TSFI on October 1,
2002,53 after the company management verbally discussed the
matter with him. In fact, on the day he received the written notice
of his separation (October 4, 2002), he was issued, upon his
request, a certification54 that he "is a former employee of The
Software Factory Inc." who joined the company "on April 15, 2001
until October 31, 2002 as a Programmer."
With the foregoing backdrop in Talam’s execution of the release
and quitclaim, we find the filing of the illegal dismissal case tainted
with bad faith on his part for he has already "released and forever
discharged" the company "from any and all claims of damages
and other liability, any from any and all manner of claims, cause
or causes of actions whatsoever x x x against them." 55
Given the release and quitclaim, we do not see how TSFI can be
made to answer for failure to afford Talam procedural due
process. The release and quitclaim, to our mind, erased whatever
infirmities there might have been in the notice of termination as
Talam had already voluntarily accepted his dismissal through the
release and quitclaim. With this acceptance, the written notice
became academic; the notice, after all, is merely a protective
measure put in place by law and serves no useful purpose after
protection has been assured. We thus find no basis for the
conclusion that TSFI violated procedural due process and should
pay nominal damages.
All told, we find the petition to be without merit. The complaint
should be dismissed.
WHEREFORE, premises considered, the petition is hereby
DENIED. The assailed decision and resolution of the Court of
Appeals are AFFIRMED but MODIFIED to DELETE the award of
nominal damages. Accordingly, the complaint is DISMISSED.
Costs against the petitioner.
SO ORDERED.
ARTURO D. BRION
Associate Justice
WE CONCUR:
ANTONIO T. CARPIO
Associate Justice
Chairperson
MARIANO C. DEL ROBERTO A. ABAD
CASTILLO Associate Justice
91
 Associate Justice Resolution dated March 25, 2009 denying the motion for WHEREFORE, premises considered, judgment is hereby
reconsideration thereof in CA-G.R. SP No. 02237. rendered as follows:

JOSE PORTUGAL PEREZ

Facts 1. DECLARING that respondents had committed unfair
Associate Justice
labor practice against complainants;

ATTESTATION
I attest that the conclusions in the above Decision had been
reached in consultation before the case was assigned to the writer
of the opinion of the Court’s Division.
ANTONIO T. CARPIO
Associate Justice
Chairperson
CERTIFICATION
Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairperson’s Attestation, it is hereby certified that the
conclusions in the above Decision were reached in consultation
before the case was assigned to the writer of the opinion of the
Court’s Division.
The petitioners were elementary and high school academic and
non-academic personnel employed by MountCarmel College
(respondent), located in New Escalante, Negros Occidental.
InApril 1999, the petitioners were informed of their retrenchment
by the respondent due to the closure of the elementary and high
school departments of the school. The petitioners contend that
such closure was merely a subterfuge of their termination due to
their union activities. According tothe petitioners, they organized a
union in 1997 (Mount Carmel College Employees Union
[MCCEU]), and were in the process of negotiating with the
respondent as regards their collective bargaining agreement when
the respondent decided to close the two departments in June
1999.2 The petitioners alleged that such closure was motivated by
ill-will just to get rid of the petitioners who were all union members
because in June 2001, the school re-opened its elementary and
high school departments with newly-hired teachers. They claimed
for the remaining separation pay differentials since what they
received was only computed at 15 days for every year of service
when theywere retrenched.3
2. DECLARING that complainantswere illegally
dismissed by respondents;
3. ORDERING respondents to pay complainants their
corresponding separation pay in lieu of reinstatement, in
the amount equivalent to their remaining 15 days for
every year of service and their back wages including the
retirement benefits of Milagros Gempesala in the total
amount of ₱3,257,637.90as per computation in the
hereto attached sheet;
4. ORDERING respondents to pay complainants
attorney’s fees in an amount equivalent to 10%of the
total judgment award which is ₱325,763.79 thereby
making a total claim of ₱3,583,401.69, the same to be
deposited with the Cashier of this Office within ten (10)
days from receipt of this Decision for proper disposition.

REYNATO S. PUNO
Chief Justice
G.R. No. 187621 September 24, 2014
MOUNT CARMEL COLLEGE EMPLOYEES UNION
(MCCEU)/RUMOLO S. BASCAR, MARIBEL TESALUNA,
ROLANDO TESALUNA, KENNETH BENIGNOS, MARILYN
MANGULABNAN, EMELINA I. NACION AL, JODELYN
REBOTON, EVERSITA S. BASCAR, MAE BAYLEN, ERNA E.
MAHILUM, EVELYN R. ANTONES,Petitioners,
vs.
MOUNT CARMEL COLLEGE, INCORPORATED, Respondent.
DECISION
REYES, J.:
This is a petition for review assailing the Decision1 dated
November 19, 2008 of the Court of Appeals (CA) and the
The respondent, on the other hand, denied committing any act of
unfair labor practice and alleged that their retrenchment was valid
as it was due to the financial losses it suffered as result of a
decline in its enrolment. The respondent claimed that as it was,
the expenses for its academic and non-academic personnel were
already eating into its budget portion allocated for capital and
administrative development, and that the teachers’ demand for
increased salaries and benefits, coupled with the decline in the
enrolment, left the school with no choice but to close down its
grade school and high school departments.4
Ruling of the Labor Arbiter
In the Decision dated May 7, 2004, the Labor Arbiter (LA)
declared the petitioners to have been illegally dismissed, among
others. According to the LA, the respondent’s alleged losses were
not serious as its financial statements even showed a net surplus.
Thus, the LA ordered the respondent to pay the petitioners
separation pay in lieu of reinstatement, plus attorney’s fees. 5
The dispositive portion of the LA Decision provides:
All other claims are hereby dismissed for lack of merit.
SO ORDERED.6
Ruling of the NLRC
Aggrieved, the respondent appealedto the National Labor
Relations Commission (NLRC). The petitioners, on the other
hand, questioned the appeal bond posted by the respondent.
Subsequently, in the Decision dated May 25, 2005, the NLRC
reversed the LA decision, ruling that: (1) the respondent’s failure
to attach a copy of the appeal bond and other documents to the
Appeal Memorandum furnished to the petitioners is a minor
defect; (2) the respondent acted in good faith when it procured the
appeal bond from Country Bankers and Insurance Corporation
(CBIC), which, it turned out, was blacklisted at that time (March
15, 2004); and since CBIC was already included in the list of the
Supreme Court’s accredited bonding companies from February 1,
2005 until July 31, 2005,there is no more impediment for CBIC to
"make good" its bond; and (3) the petitioners’ retrenchment is an
exercise by the respondent of its management prerogative and
the latter’s state of finances justifies the same.7

92
 Ruling of the Court of Appeals
In the assailed decision promulgated on November 19, 2008, the
CA did not find any grave abuse of discretion committed by the
NLRC and thus, affirmed its decision. The CA found no factual
basis for the petitioners’ allegation that the school closed down for
purposes of union busting, and that the school cannot be
compelled tooperate at a loss, as shown by its financial
statements. The CA also ruled that the respondent cannot be
compelled to re-hire the petitioners when it later re-opened as it
has the discretion in the hiring of its employees.8
The petitioners sought reconsideration of the assailed decision,
which was denied by the CA in its Resolution dated March 25,
2009.9
Hence, this petition, where the following issues were raised:
I. THE HONORABLE COURT OF APPEALS ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION WHEN IT
INTENTIONALLY IGNORED THE ISSUES RAISED IN THE
PETITION REGARDING THE BLATANT VIOLATIONS
COMMITTED BY RESPONDENT IN NOT COMPLYING WITH
THE STRICT REQUIREMENTS LAID DOWN IN SECTION 6
RULE VI OF THE 2002 NEW RULES OF THE NLRC AS WELL
AS THE MEMORANDUM NO. 1-01 DATED JANUARY 13, 2004
OF THE HONORABLE CHAIRMAN ROY V. SEÑERES;
II. THE HONORABLE COURT [OF] APPEALS ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN SUSTAINING THE
DECISION OF THE HONORABLE NLRC DESPITE THE
ESTABLISHED FACT ON RECORD THAT THE NLRC
BLATANTLY IGNORED THE MARCH 15, 2004 MEMORANDUM
OF HONORABLE CHAIRMAN ROY V. SEÑERES;
III. THE HONORABLE COURT OF APPEALS ERRED AND
COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING
TO LACK OR EXCESS OF JURISDICTION IN SUSTAINING THE
DECISION OF THE HONORABLE NLRC DESPITE THE
ESTABLISHED FACT ON RECORD THAT THE GROUNDS
CITED BY THE PUBLIC RESPONDENT TO SUPPORT
CLOSURE ARE BEREFT OF EVEN JUST SUBSTANTIAL
EVIDENCE WHILE THE PRESENCE OF BAD FAITH/MALICE
ARE OBVIOUS.10
Settled is the rule that when supported by substantial evidence,
factual findings made by quasi-judicial and administrative bodies
are accorded great respect and even finality by the courts. These
findings are not infallible, though; when there is a showing that
they were arrived at arbitrarily or in disregard of the evidence on
record, they may be examined by the courts.11 In this case,
inasmuch as the LA’s conclusions differ from that of the NLRC
and the CA, the Court must now exerciseits power of review and
resolve the issues raised by the petitioners. In undertaking such
review, the Court bears in mind that the CA decision must be
examined from the prism of whether it correctly determined the
presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision
on the merits of the case was correct.12
Thus, the first question that must be resolved is whether the CA
correctly ruled that the NLRC did notcommit any grave abuse of
discretion when it allowed the respondent’s appealdespite the
blacklisting of CBIC at the time it issued the appeal bond.
Article 223 of the Labor Code, as amended, sets forth the rules on
appeal from the LA’s monetary award: Art. 223.
Appeal. – x x x.
xxxx
In case of a judgment involving a monetary award, an appeal by
the employer may be perfected only upon the posting ofa cash or
surety bond issued by a reputable bonding company duly
accredited by the Commissionin the amount equivalent tothe
monetary award in the judgment appealed from. (Emphasis ours)
At the time of the respondent’s filing of its appeal from the LA
decision in 2004, the rules of procedure in force was the New
Rules of Procedure of the NLRC, as amended by NLRC
Resolution No. 01-02, Series of 2002, Section 6 of which
provides:
Sec. 6. BOND. - In case the decision of the Labor Arbiter or the
Regional Director involves a monetaryaward, an appeal by the
employer may be perfected only upon the posting of a cash or
surety bond. The appeal bond shall either bein cash or surety in
anamount equivalent to the monetary award, exclusive of
damages and attorney’s fees.
In case of surety bond, the same shall be issued by a reputable
bonding company duly accredited by the Commission or the
Supreme Court, and shall be accompanied by:
(a) a joint declaration under oath by the employer, his
counsel, and the bonding company, attesting that the
bond posted is genuine, and shall be in effect until final
disposition of the case. (b) a copy of the indemnity
agreement between the employer- appellant and
bonding company; and
(c) a copy of security deposit or collateral securing the
bond.
A certified true copy of the bond shall be furnished by the
appellant to the appellee who shall verify the regularity and
genuineness thereof and immediately report to the Commission
any irregularity.
Upon verification by the Commission that the bond is irregular or
not genuine, the Commission shall cause the immediate dismissal
of the appeal.
xxxx
Section 6 requiring the issuance of a bond by a reputable bonding
company duly accredited by the NLRCor the Supreme Court was
substantially carried over to the 2005 Revised Rules of Procedure
of the NLRC13 and the 2011 NLRC Rules of Procedure.14 In this
regard, the Court has ruled that in a judgment involving a
monetary award, the appeal shall be perfected onlyupon: (1) proof
of payment ofthe required appeal fee; (2) posting of a cash or
surety bond issued by a reputable bonding company; and (3) filing
of a memorandum of appeal.15
In this case, it was not disputedthat at the time CBIC issued the
appeal bond, it was already blacklisted by the NLRC. The latter,
however, opined that "respondents should not be faulted if the
Bacolod branch office of the bonding company issued the surety
bond" and that "[r]espondents acted in good faithwhen they
transacted with the bonding company for the issuance of the
surety bond."16
Good faith, however, is not an excuse for setting aside the
mandatory and jurisdictional requirement of the law. In Cawaling
v. Menese,17 the Court categorically ruled that the defense of
93
good faith does not render the issued bond valid. The Court
further ruled that –
It was improper to honor the appeal bond issued by a surety
company which was no longer accredited by thisCourt. Having no
authority toissue judicial bonds not only does Intra Strata cease to
be a reputable surety company — the bond it likewiseissued was
null and void.
x x x It is not within respondents’ discretion to allow the filing of
the appeal bond issued by a bonding company with expired
accreditation regardless of its pending application for renewal of
accreditation. x x x.18 (Emphasis ours)
The condition of posting a cash or surety bond is not a
meaningless requirement – it is meant to assure the workers that
if they prevail in the case, they will receive the money judgment in
their favor upon the dismissal of the former’s appeal.19 Such aim
is defeated ifthe bond issued turned out to be invalid due to the
surety company’s expired accreditation.20 Much more in this case
where the bonding company was blacklisted at the time it issued
the appeal bond. The blacklisting of a bonding company is not a
whimsical exercise. When a bonding company is blacklisted, it
meant that it committed certain prohibited acts and/or violations of
law, prescribed rules and regulations.21Trivializing it would release
a blacklisted bonding company from the effects sought to be
achieved by the blacklisting and would make the entire process
insignificant. Also, the lifting of CBIC’s blacklisting on January 24,
2005 does not render the bond it issued on March 15, 2004
subsequently valid. It should be stressed that what the law
requires isthat the appeal bond must be issued by a reputable
bonding company duly accredited by the NLRC or the Supreme
Court at the time of the filing of the appeal. To rule otherwise
would make the requirement ineffective, and employers using "fly-
by-night" and untrustworthy bonding companies could easily
manipulate their obligation to post a valid bond by raising such
justification.
On the foregoing point alone, it isclear that the CA committed a
reversible error when it ruled out any grave abuse of discretion on
the part of the NLRC in admitting the respondent’s appeal and
reversing the decision of the LA. It should be stressed that the
requirement of the posting of an appeal bond by a reputable
company is jurisdictional.22It cannot be subject to the NLRC’s
discretion and there is a "little leeway for condoning a liberal
interpretation of the rule."23 Even if the Court were to relax the
rules and consider the respondent’s appeal, the Court still finds
that the CAcommitted an error when it ruled that the NLRC did not
commit grave abuse of discretion in finding that the petitioners’
retrenchment was valid under the circumstances of the case.
Retrenchment, as an authorized cause for the dismissal of
employees, finds basis in Article 28324 of the Labor Code, which
states:
Art. 283. Closure of establishment and reduction of personnel. –
The employer may also terminate the employment of any
employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month before
the intended date thereof. x x x. In case ofretrenchment to prevent
losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
Standards25 have been laid down by the Court in order to prevent
its abuse by an employer, to wit:
(1) That 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;
(2) That the employer served writtennotice both to the
employees and to the Department of Labor and
Employment at least one month prior to the intended
date of retrenchment;
(3) That the employer pays the retrenched employees
separation pay equivalent to one (1) month pay or at
Financial Statement
least one-half (½) month pay for every year of service,
whichever is higher; Gross Revenues
Personnel Expenses
(4) That the employer exercises its prerogative to
retrench employees in good faith for the advancement
Net Surplusof
its interest and not to defeat or circumvent the
employees’ right to security of tenure; and
(5) That the employer used fair and reasonable criteria in
ascertaining who would be dismissed and who would be
retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial
hardship for certain workers.26 (Emphasis ours)
In the present case, the respondent’s justification for
implementing the retrenchment of the petitioners was due to the
alleged closure or cessation of its elementary and high school
departments. According to them, the continued operations of
these departments was an exercise of management prerogative
to protect its business and it was no longer viable to maintain the
two departments as it was already being subsidized by the college
department. As proof thereof, the respondent submitted its
audited Financial Statements for the years 1997, 1998 and 1999.
Respondent also alleged that such closure was recognized by the
"Tuition Fee Law," which mandates that 70% of the tuition
incremental proceeds should be allocated for salaries, wages and
other benefits of its personnel. Respondent claimed that in its
case, personnel benefits are already "eating into" the portion of
the budget allocated for capital and administrative development,
and faced further with the demands of the employees of additional
increase insalaries and benefits, it had "no choice" but to close
down.27
The burden of proving that the termination of services is for a valid
or authorized cause rests upon the employer.1âwphi1 In
termination by retrenchment, not every loss incurred or expected
to be incurred by an employer can justify retrenchment. 28 The
employer must prove, among others, that the losses are
substantial and that the retrenchment is reasonably necessary to
avert such losses.29 In this case, while the respondent may have
presented its Financial Statements, the respondent,
nevertheless,failed to establish with reasonable certainty that the
proportion of its revenues are largely expended for its elementary
and high school personnel salaries, wages and other benefits. Its
Financial Statements30 showed the following figures, among
others:
1997 1998 1
10,529,810.39 12,603,283.12 1
6,273,646.00 7,199,859.58
405,091.76 769,460.93
94
The Financial Statements pertain to itsassets, liabilities, gross
revenues and expenses for the entire college system, that is, from
elementary, high school to the college department. The expenses
for the elementary and high school departments were not set out
in detail and instead, were lumped together with the college
department. Such detail becomes material in the light of the
respondent’s claim that the personnel expenses for the
elementary and high school departments were "eating into" the
portion of its budget allocated for other purposes. There could be
no practical basis from which the respondent’s claim finds
support. Aside from this, the respondent failed to present any
proof establishing how the continued operations of the elementary
and high school departments has become impracticable. The
respondent merely assumed, which the NLRC and CA improperly
sustained, that "[f]aced with the intractable demands of
complainant Union for additional increases in salaries and
economic benefits, with the steady decline in enrolment and the
increase in overhead expenses, respondent had no choice but to
close down the two departments and make do with the College
Department x x x."31 There is nothing on record showing how the
respondent came up with such conclusion, save for the alleged
decline in its elementary and high school enrolment, and no
feasibility studies, analysis, or at the very least, an academic
projection was presented to validate its "forecast." Note that the
Financial Statements show that the respondent was not operating
at a loss but actually had surplus, albeit at a minimum. Thus, it
has been held that –
Not every loss incurred or expected to be incurred by a company
will justify retrenchment. The losses must be substantial and the
retrenchment must be reasonably necessary to avert such losses.
The employer bears the burden of proving the existence or the
imminence of substantial losses with clear and satisfactory
evidence that there are legitimate business reasons justifying a
retrenchment. Should the employer fail to do so, the dismissal
shall be deemed unjustified.32 (Emphasis ours)
The respondent, likewise, cannot rely on the alleged condition in
the Tuition Fee Law that "70% of tuition incremental proceeds
should be allocated for the payment of salaries, wages and other
benefits of the school’s academic and non-academic
personnel."33 In the first place, the Tuition Fee Law34 alluded to by
the respondent refers to R.A. No. 6728, as amended35 or the
"Government Assistance to Students and Teachers in Private
Education Act." Section 5 ofR.A. No. 6728 allowsthe increase in
tuition fees in private educational institutions and provides for the
allocation of the increment, to wit:
(2) Assistance under paragraph (1), subparagraphs (a) and (b)
shall be granted and tuition fees under subparagraph (c) may be
increased, on the condition that seventy percent (70%) of the
amount subsidized allotted for tuition fee or of the tuition fee
increases shall go to the payment of salaries, wages, allowances
and other benefits of teaching and non-teaching personnelx x x
and may be used to cover increases as provided for in the
collective bargaining agreements existing or in force at the time
when this Act is approved and made effective: x x x At least
twenty percent (20%) shall go to the improvement or
modernization of buildings, equipment, libraries, laboratories,
gymnasia and similar facilities and to the payment of other costs
of operation. x x x.
The 70% allocation presupposes an increase in a school’s tuition
fee, which was not established in this case.1âwphi1Moreover, the
Court has already ruled that the 70% allocation set by law is only
the minimum, and not the maximum percentage, and there is
actually a 10% portion the disposition of which the law does not
regulate.36 Even assuming that the allocation provided by law is
applicable in the respondent’s situation, the bare fact that the
expenses allotted for the salaries, wages and benefits of the
respondent’s personnel exceeded the minimum allocation, without
more, does not constitute reasonable justification for the closure
of its elementary and high school departments, and the
retrenchment of the petitioners. The respondent must establish by
substantial and convincing evidence that the impending losses it
expected to incur, based on suchallocation, were imminent and
that the retrenchment it conducted was necessary to prevent such
losses. Another factor that militates against the respondent’s
reason was that it re-opened after two years, due to the "clamor"
for its re-opening. This is contrary to the respondent’s "perceived"
impendingloss considering that there was actually a demand for
its educational services. While enrolment may have declined, the
Court is not convinced that the closure of the elementary and high
school departments was a reasonable necessity, especially in the
absence of any showing on the part of the respondent that it
explored other less drastic and/or cost-saving measures to avoid
serious financial or economic problems.37
Finally, on the petitioners’ allegation that the closure and their
retrenchment amounted to unfair labor practice, suffice it to say
that the petitioners failed to discharge its burden of proving that
the retrenchment was motivated by ill will, bad faith or malice, or
that it was aimed at interfering with their right to self-organize.
While the confluence of the circumstances make it suspect, the
Court is not convinced that the respondent's acts affected, in
whatever manner, the petitioners' right to self-organization.38
WHEREFORE, the petition is GRANTED. The Decision dated
November 19, 2008 and Resolution dated March 25, 2009 of the
Court of Appeals in CA-G.R. SP No. 02237 are SET ASIDE. The
Labor Arbiter Decision dated May 7, 2004 is REINSTATED with
the MODIFICATION in that its finding of unfair labor practice is
REVERSED. In all other respects, the same is AFFIRMED.
SO ORDERED.
BIENVENIDO L. REYES
Associate Justice
G.R. No. 48532 August 31, 1992
HERNANDO B. CONWI, JAIME E. DY-LIACCO, VICENTE D.
HERRERA, BENJAMIN T. ILDEFONSO, ALEXANDER
LACSON, JR., ADRIAN O. MICIANO, EDUARDO A. RIALP,
LEANDRO G. SANTILLAN, and JAIME A.
SOQUES, petitioners,
vs.
THE HONORABLE COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.
G.R. No. 48533 August 31, 1992
ENRIQUE R. ABAD SANTOS, HERNANDO B. CONWI, TEDDY
L. DIMAYUGA, JAIME E. DY-LIACCO, MELQUIADES J.
GAMBOA, JR., MANUEL L. GUZMAN, VICENTE D. HERRERA,
BENJAMIN T. ILDEFONSO, ALEXANDER LACSON, JR.,
ADRIAN O. MICIANO, EDUARDO A. RIALP and JAIME A.
SOQUES, petitioners,
vs.
THE HONORABLE COURT OF TAX APPEALS and
COMMISSIONER OF INTERNAL REVENUE, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioners.
NOCON, J.:
Petitioners pray that his Court reverse the Decision of the public
respondent Court of Tax Appeals, promulgated September 26,
19771 denying petitioners' claim for tax refunds, and order the
Commissioner of Internal Revenue to refund to them their income
95
taxes which they claim to have been erroneously or illegally paid
or collected.
As summarized by the Solicitor General, the facts of the cases are
as follows:
Petitioners are Filipino citizens and employees
of Procter and Gamble, Philippine
Manufacturing Corporation, with offices at
Sarmiento Building, Ayala Avenue, Makati,
Rizal. Said corporation is a subsidiary of Procter
& Gamble, a foreign corporation based in
Cincinnati, Ohio, U.S.A. During the years 1970
and 1971 petitioners were assigned, for certain
periods, to other subsidiaries of Procter &
Gamble, outside of the Philippines, during
which petitioners were paid U.S. dollars as
compensation for services in their foreign
assignments. (Paragraphs III, Petitions for
Review, C.T.A. Cases Nos. 2511 and 2594,
Exhs. D, D-1 to D-19). When petitioners in
C.T.A. Case No. 2511 filed their income tax
returns for the year 1970, they computed the
tax due by applying the dollar-to-peso
conversion on the basis of the floating rate
ordained under B.I.R. Ruling No. 70-027 dated
May 14, 1970, as follows:
From January 1 to February
20, 1970 at the conversion
rate of P3.90 to U.S. $1.00;
From February 21 to
December 31, 1970 at the
conversion rate of P6.25 to
U.S. $1.00
Petitioners in C.T.A. Case No. 2594 likewise
used the above conversion rate in converting
their dollar income for 1971 to Philippine peso.
However, on February 8, 1973 and October 8,
1973, petitioners in said cases filed with the
office of the respondent Commissioner,
amended income tax returns for the above-
mentioned years, this time using the par value
of the peso as prescribed in Section 48 of
Republic Act No. 265 in relation to Section 6 of
Commonwealth Act No. 265 in relation to
Section 6 of Commonwealth Act No. 699 as the
basis for converting their respective dollar
income into Philippine pesos for purposes of
computing and paying the corresponding
income tax due from them. The aforesaid
computation as shown in the amended income
tax returns resulted in the alleged
overpayments, refund and/or tax credit.
Accordingly, claims for refund of said over-
payments were filed with respondent
Commissioner. Without awaiting the resolution
of the Commissioner of the Internal Revenue on
their claims, petitioners filed their petitioner for
review in the above-mentioned cases.
Respondent Commissioner filed his Answer to
petitioners' petition for review in C.T.A. Case
No. 2511 on July 31, 1973, while his Answer in
C.T.A. Case No. 2594 was filed on August 7,
1974.
Upon joint motion of the parties on the ground
that these two cases involve common question
of law and facts, that respondent Court of Tax
Appeals heard the cases jointly. In its decision
dated September 26, 1977, the respondent
Court of Tax Appeals held that the proper
conversion rate for the purpose of reporting and
paying the Philippine income tax on the dollar
earnings of petitioners are the rates prescribed
under Revenue Memorandum Circulars Nos. 7-
71 and 41-71. Accordingly, the claim for refund
and/or tax credit of petitioners in the above-
entitled cases was denied and the petitions for
review dismissed, with costs against petitioners.
Hence, this petition for review on certiorari. 2
Petitioners claim that public respondent Court of Tax Appeals
erred in holding:
1. That petitioners' dollar earnings are receipts derived from
foreign exchange transactions.
2. That the proper rate of conversion of petitioners' dollar earnings
for tax purposes in the prevailing free market rate of exchange
and not the par value of the peso; and
3. That the use of the par value of the peso to convert petitioners'
dollar earnings for tax purposes into Philippine pesos is
"unrealistic" and, therefore, the prevailing free market rate should
be the rate used.
Respondent Commissioner of Internal Revenue, on the other
hand, refutes petitioners' claims as follows:
At the outset, it is submitted that the subject
matter of these two cases are Philippine income
tax for the calendar years 1970 (CTA Case No.
2511) and 1971 (CTA Case No. 2594) and,
therefore, should be governed by the provisions
of the National Internal Revenue Code and its
implementing rules and regulations, and not by
the provisions of Central Bank Circular No. 42
dated May 21, 1953, as contended by
petitioners.
Section 21 of the National Internal Revenue
Code, before its amendment by Presidential
Decrees Nos. 69 and 323 which took effect on
January 1, 1973 and January 1, 1974,
respectively, imposed a tax upon the taxable
net income received during each taxable year
from all sources by a citizen of the Philippines,
whether residing here or abroad.
Petitioners are citizens of the Philippines
temporarily residing abroad by virtue of their
employment. Thus, in their tax returns for the
period involved herein, they gave their legal
residence/address as c/o Procter & Gamble
PMC, Ayala Ave., Makati, Rizal (Annexes "A" to
"A-8" and Annexes "C" to "C-8", Petition for
Review, CTA Nos. 2511 and 2594).
Petitioners being subject to Philippine income
tax, their dollar earnings should be converted
into Philippine pesos in computing the income
tax due therefrom, in accordance with the
provisions of Revenue Memorandum Circular
No. 7-71 dated February 11, 1971 for 1970
income and Revenue Memorandum Circular
No. 41-71 dated December 21, 1971 for 1971
income, which reiterated BIR Ruling No. 70-027
dated May 4, 1970, to wit:
96
 For internal revenue tax
purposes, the free marker
rate of conversion (Revenue
Circulars Nos. 7-71 and 41-
71) should be applied in order
to determine the true and
correct value in Philippine
pesos of the income of
petitioners. 3
After a careful examination of the records, the laws involved and
the jurisprudence on the matter, We are inclined to agree with
respondents Court of Tax Appeals and Commissioner of Internal
Revenue and thus vote to deny the petition.
This basically an income tax case. For the proper resolution of
these cases income may be defined as an amount of money
coming to a person or corporation within a specified time, whether
as payment for services, interest or profit from investment. Unless
otherwise specified, it means cash or its equivalent. 4 Income can
also be though of as flow of the fruits of one's labor. 5
Petitioners are correct as to their claim that their dollar earnings
are not receipts derived from foreign exchange transactions. For a
foreign exchange transaction is simply that — a transaction in
foreign exchange, foreign exchange being "the conversion of an
amount of money or currency of one country into an equivalent
amount of money or currency of another." 6 When petitioners were
assigned to the foreign subsidiaries of Procter & Gamble, they
were earning in their assigned nation's currency and were ALSO
spending in said currency. There was no conversion, therefore,
from one currency to another.
Public respondent Court of Tax Appeals did err when it concluded
that the dollar incomes of petitioner fell under Section 2(f)(g) and
(m) of C.B. Circular No. 42. 7
The issue now is, what exchange rate should be used to
determine the peso equivalent of the foreign earnings of
petitioners for income tax purposes. Petitioners claim that since
the dollar earnings do not fall within the classification of foreign
exchange transactions, there occurred no actual inward
remittances, and, therefore, they are not included in the coverage
of Central Bank Circular No. 289 which provides for the specific
instances when the par value of the peso shall not be the
conversion rate used. They conclude that their earnings should be
converted for income tax purposes using the par value of the
Philippine peso.
Respondent Commissioner argues that CB Circular No. 289
speaks of receipts for export products, receipts of sale of foreign
exchange or foreign borrowings and investments but not income
tax. He also claims that he had to use the prevailing free market
rate of exchange in these cases because of the need to ascertain
the true and correct amount of income in Philippine peso of dollar
earners for Philippine income tax purposes.
A careful reading of said CB Circular No. 289 8 shows that the
subject matters involved therein are export products, invisibles,
receipts of foreign exchange, foreign exchange payments, new
foreign borrowing and
investments — nothing by way of income tax payments. Thus,
petitioners are in error by concluding that since C.B. Circular No.
289 does not apply to them, the par value of the peso should be
the guiding rate used for income tax purposes.
The dollar earnings of petitioners are the fruits of their labors in
the foreign subsidiaries of Procter & Gamble. It was a definite
amount of money which came to them within a specified period of
time of two yeas as payment for their services.
Section 21 of the National Internal Revenue Code, amended up to
August 4, 1969, states as follows:
Sec. 21. Rates of tax on citizens or
residents. — A tax is hereby imposed upon the
taxable net income received during each
taxable year from all sources by every
individual, whether a citizen of the Philippines
residing therein or abroad or an alien residing in
the Philippines, determined in accordance with
the following schedule:
xxx xxx xxx
And in the implementation for the proper enforcement of the
National Internal Revenue Code, Section 338 thereof empowers
the Secretary of Finance to "promulgate all needful rules and
regulations" to effectively enforce its provisions. 9
Pursuant to this authority, Revenue Memorandum Circular Nos. 7-
71 10 and 41-71 11 were issued to prescribed a uniform rate of
exchange from US dollars to Philippine pesos for INTERNAL
REVENUE TAX PURPOSES for the years 1970 and 1971,
respectively. Said revenue circulars were a valid exercise of the
authority given to the Secretary of Finance by the Legislature
which enacted the Internal Revenue Code. And these are
presumed to be a valid interpretation of said code until revoked by
the Secretary of Finance himself. 12
Petitioners argue that since there were no remittances and
acceptances of their salaries and wages in US dollars into the
Philippines, they are exempt from the coverage of such circulars.
Petitioners forget that they are citizens of the Philippines, and
their income, within or without, and in these cases wholly without,
are subject to income tax. Sec. 21, NIRC, as amended, does not
brook any exemption.
Since petitioners have already paid their 1970 and 1971 income
taxes under the uniform rate of exchange prescribed under the
aforestated Revenue Memorandum Circulars, there is no reason
for respondent Commissioner to refund any taxes to petitioner as
said Revenue Memorandum Circulars, being of long standing and
not contrary to law, are valid. 13
Although it has become a worn-out cliche, the fact still remains
that "taxes are the lifeblood of the government" and one of the
duties of a Filipino citizen is to pay his income tax.
WHEREFORE, the petitioners are denied for lack of merit. The
dismissal by the respondent Court of Tax Appeals of petitioners'
claims for tax refunds for the income tax period for 1970 and 1971
is AFFIRMED. Costs against petitioners.
SO ORDERED.
G.R. No. 172363 March 7, 2008
JUVY M. MANATAD, petitioner,
vs.
PHILIPPINE TELEGRAPH AND TELEPHONE
CORPORATION, respondent.
DECISION
CHICO-NAZARIO, J.:
97
Before this Court is a Petition for Review on Certiorari[1]under Paper, petitioner mainly alleged that the retrenchment program YEAR PROFIT LOSSES
Rule 45 of the Revised Rules of Court filed by petitioner Juvy M. adopted by respondent was illegal for it was gaining profits for the 1995 P29,868,406.0
Manatad seeking the reversal and the setting aside of the period of July 1997 to June 1998. In support of her allegation that
1996 P52,112,986.0
Decision2 dated 12 July 2005 and the Resolution3 dated 22 March respondent was obtaining profits, petitioner presented the central
2006 of the Court of Appeals in CA-G.R. SP No. 79440. The Visayas Operating Margin Reports6 showing the respondent's 1997 P1,491,532.00
appellate court, in its assailed Decision and Resolution, reversed gross revenue and net profits in the region for the period in 1998 P557,892,627.0
the Decisions4 of the National Labor Relations Commission question: 1999 P 770,552,970.00
(NLRC) and the Labor Arbiter declaring the dismissal of Manatad
from employment illegal. The dispositive portion of the Court of
Month Gross Revenue Net Profit To support its claim, respondent submitted its financial statements
Appeals Decision reads:
July 1997 P2,496,981.31 for the fiscal period of 30 June 1996 to 30 June 1998 audited by
P775,742.82
August 1997 2,314,527.75 independent auditors. Independent public accountants, Sycip
662,812.13
WHEREFORE, the petition is GRANTED. The Decision Gorres Velayo (SGV) & Co., reported that respondent incurred a
dated 18 September 2001 and Resolution dated 22 July September 1997 2,308,364.14 604,924.51
substantial loss of about P558 Million which resulted in a deficit of
2003 of [NLRC] as well as the Decision dated 14 July October 1997 2,403,083.30 649,583.33
about P574 Million as of 30 June 1998. Respondent has been
1999 of the Labor Arbiter are REVERSED and SET November 1997 1,965,446.44 367,956.48
negotiating with its creditors for the suspension of payments until
ASIDE. However, [herein respondent] is hereby ordered December 1997 2,391,721.94 the completion of an acceptable restructuring plan.9
657,023.23
to pay [herein petitioner] Php43,5000.00 as separation
pay. No costs.5 January 1998 2,649,857.35 825,581.17
February 1998 2,611,029.13 On 14 January 1999, the Labor Arbiter rendered a Decision in
702,132.23
March 1998 2,340,166.83 favor of petitioner ruling that the retrenchment program
488,549.78
The present controversy stems from the following antecedent implemented by respondent was invalid. According to the Labor
factual and procedural facts: April 1998 2,199,814.78 230,380.21
Arbiter, respondent failed to prove that it was suffering from
May 1998 2,186,735.40 403,416.66
serious financial reverses warranting the implementation of a
In September 1988, petitioner was employed by respondent June 1998 2,240,238.94 500,656.64
retrenchment program. Mere comparative statements of income
Philippine Telegraph and Telephone Corporation (PT&T) as junior submitted by respondent was not a conclusive proof of serious
clerk with a monthly salary of P3,839.74. She was later promoted business losses, more so when their authenticity was suspected
Petitioner further belied respondent's contention that it was
as Account Executive, the position she held until she was for lack of signature of the one who prepared it. Consequently,
suffering from serious financial reverses by presenting
temporarily laid off from employment on 1 September 1998. 7 petitioner's separation from employment effected pursuant to an
respondent's Special Order No. 98-21 granting an increase in the
unjustified retrenchment program, was illegal. The dispositive
salaries of its employees under Job Grade 8 and 9 in the amount
Petitioner's temporary separation from employment was pursuant portion of the Labor Arbiter's Decision reads:
of P2,300.00 a month effective January 1998. Petitioner's
to the Temporary Staff Reduction Program adopted by evidence supposedly showed that it was still economically viable
respondent due to serious business reverses. On 16 November for respondent to continue its business operations without WHEREFORE, premises considered, judgment is hereby
1998, petitioner received a letter from respondent inviting her to downsizing its workforce. Petitioner thus prayed for the award of rendered ordering the respondent Philippine Telephone
avail herself of its Staff Reduction Program Package equivalent to separation pay in the amount of P107,000.00, unpaid salary, and Telegraph Corp. (PT&T) to pay the complainant
one-month salary for every year of service, one and one-half prorated 13thmonth pay, unpaid vacation leave benefits and Juvy Manatad the following:
month salary, pro-rated 13th month pay, conversion to cash of attorney's fees.
unused vacation and sick leave credits, and Health Maintenance 1. Separation pay --
Organization and group life insurance coverage until full payment
On the other hand, respondent asserted that petitioner was 2. Backwages --
of the separation package. Petitioner, however, did not opt to avail
separated from service pursuant to a valid retrenchment 3. Unpaid wages --
herself of the said package. On 26 February 1999, petitioner
implemented by the company. Retrenchment is an authorized 4. Vacation and sick leave pay --
received a Notice of Retrenchment from respondent permanently
cause for the employer to terminate the services of an employee.
dismissing her from employment effective 16 February 1999. 5. Proportionate 13th month pay --
Due to huge business losses suffered by respondent in the sum
of P684,096,285.00 from 1995-1998, it was constrained to arrest 6. Attornet's fee --
Consequently, petitioner filed a Complaint for illegal dismissal escalating operating costs by downsizing its workforce. TOTAL -- P
against respondent, its Regional Director for Visayas Reynaldo Less Advances --
Macrohon, and its President and Chief Executive Officer Marilyn P
Respondent claimed that it was suffering from serious financial
Eleonor Santiago before the Labor Arbiter claiming the award of
reverses from 1995 up to 1999, as shown below:
separation pay, damages and attorney's fees. In her Position

98
 The other claims and the case against respondents
Reynaldo Machoron and Marilyn Santiago are dismissed
for lack of merit.10
Dissatisfied, petitioner appealed to the NLRC arguing that the
Labor Arbiter gravely abused its discretion in sustaining the
illegality of petitioner's dismissal. In ruling that respondent's
retrenchment program was unjustified, the Labor Arbiter
disregarded the financial statements submitted by the respondent
which were audited by independent auditors showing that it was in
dire financial distress.
On 18 September 2001, the NLRC rendered a
Decision11 affirming with modification the Labor Arbiter Decision.
The NLRC sustained the Labor Arbiter's findings with respect to
respondent's failure to substantiate its claim of financial reverses.
It further noted that the Department of Labor and Employment
(DOLE) was not notified by the respondent of its retrenchment
program as required by law. The NLRC Decision thus decreed:
WHEREFORE, the Decision of the Labor Arbiter dated
July 14, 1999 is affirmed with the modification that
respondents Reynaldo Macrohon and Marilyn Santiago
are also ordered jointly and severally liable with PT&T,
for the payment of the judgment award.12
The Motion for Reconsideration filed by respondent was denied
by the NLRC in its Resolution dated 22 June 2002.
On Certiorari, the Court of Appeals reversed the NLRC and the
Labor Arbiter Decisions and upheld the validity of respondent's
retrenchment program.13 The appellate court was fully persuaded
that the respondent was besieged by a continuing downtrend in its
business operations and severe financial losses which justified its
immediate drastic reduction of personnel.14 The financial standing
of respondent cannot be determined by the performance of a
single branch or unit alone but by the performance of all its
branches integrated as a whole. In addition, the comparative
statements of income prepared by independent auditors constitute
a normal method of proving the profit and loss performance of a
business company. Finally, the Court of Appeals also observed
that respondent duly complied with the requirement of service of
notice to the employee one month before the intended date of
retrenchment.
Similarly ill-fated was petitioner's Motion for Reconsideration
which was denied by the Court of Appeals in a Resolution 15 dated
22 March 2006.
Petitioner is now before this Court via the Petition at bar raising
the following issues:
I.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN DECLARING THAT PETITIONER WAS NOT
ILLEGALLY DISMISSED;
II.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN FINDING THAT THE RETRENCHMENT
MADE BY PRIVATE RESPONDENT WAS VALID AND
LEGAL WHEN PETITIONER DID NOT GIVE
CONSENT;
III.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN NOT DECLARING THAT THE ALLEGED
LOSSES OF PRIVATE RESPONDENT WAS ALTERED
TO CONFORM WITH THE EVIDENCE OF PETITIONER
SHOWING PROFITS IN THE CENTRAL VISAYAS
OPERATIONS GROUP;
IV.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN FINDING THAT PETITIONER IS BOUND
BY THE COLLECTIVE BARGAINING AGREEMENT
[CBA] WHEN SHE IS NOT A UNION MEMBER;
V.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN DELETING THE AWARD OF SEPARATION
PAY, BACKWAGES, UNPAID WAGES, VACATION
AND SICK LEAVE PAY, PROPORTIONATE
13th MONTH PAY, AND ATTORNEY'S FEES.16
The present controversy hinges on the sole issue of whether or
not the retrenchment program implemented by respondent was
valid.
The pertinent provision of the Labor Code reads:
Art. 283. Closure of establishment and reduction of
personnel. - The employer may also terminate the
employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the worker and the
[Department] of Labor and Employment at least one (1)
month before the intended date thereof. In case of
termination due to the installation of labor saving devices
or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered as one (1)
whole year.
Retrenchment is the termination of employment initiated by the
employer through no fault of the employees and without prejudice
to the latter, resorted to by management during periods of
business recession; industrial depression; or seasonal
fluctuations, during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program,
or the introduction of new methods or more efficient machinery or
automation. Retrenchment is a valid management prerogative. It
is, however, subject to faithful compliance with the substantive
and procedural requirements laid down by law and
jurisprudence.17 In the discharge of these requirements, it is the
employer who bears the onus, being in the nature of affirmative
defense.18
For a valid retrenchment, the following requisites must be
complied with: (a) the retrenchment is necessary to prevent
losses and such losses are proven; (b) written notice to the
employees and to the DOLE at least one month prior to the
99
intended date of retrenchment; and (c) payment of separation pay
equivalent to one-month pay or at least one-half month pay for
every year of service, whichever is higher.19
Jurisprudential standards for the losses which may justify
retrenchment have been reiterated by this Court in a long line of
cases to forestall management abuse of this prerogative, viz:
Firstly, the losses expected should be substantial and
not merely de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown
to be insubstantial and inconsequential in character,
the bonafide nature of the retrenchment would appear to
be seriously in question. Secondly, the substantial loss
apprehended must be reasonably imminent, as such
imminence can be perceived objectively and in good
faith by the employer. There should, in other words, be a
certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for
the livelihood of the employees retired or otherwise laid-
off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably necessary
and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e., cut other
costs than labor costs. An employer who, for instance,
lays off substantial numbers of workers while continuing
to dispense fat executive bonuses and perquisites or so-
called "golden parachutes", can scarcely claim to be
retrenching in good faith to avoid losses. To impart
operational meaning to the constitutional policy of
providing "full protection" to labor, the employer's
prerogative to bring down labor costs by retrenching
must be exercised essentially as a measure of last
resort, after less drastic means - e.g., reduction of both
management and rank-and-file bonuses and salaries,
going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising
costs, etc.—have been tried and found wanting.
Lastly, but certainly not the least important, alleged
losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by
sufficient and convincing evidence. The reason for
requiring this quantum of proof is readily apparent: any
less exacting standard of proof would render too easy
the abuse of this ground for termination of services of
employees.20
In the case at bar, respondent instituted a retrenchment program
to arrest its alleged escalating financial losses by downsizing its
workforce. Respondent claimed that a significant portion of its
operational expenses went to manpower resources constraining it
to implement measures to reduce the number of employees so as
to revive its fiscal condition.
In rejecting respondent's claim of economic reverses, the Labor
Arbiter cast doubt on the authenticity of the financial statements
submitted by respondent, since these were not signed by the
person who prepared them. The Labor Arbiter likewise ruled that
even if the financial statements were valid, they still did not meet
the quantum of proof needed in order to establish losses. These
findings were affirmed by the NLRC.
Banking on the Labor Arbiter and NLRC Decisions, petitioner now
insists that respondent failed to prove that it was suffering from
substantial loss that would justify the retrenchment. She asserts
that respondent was in sound fiscal condition when it embarked
on the reduction of its personnel, thus, making the retrenchment
program invalid.
We do not agree.
The theories espoused by the opposing parties must be weighed
together with the evidence adduced and in consonance with the
evidentiary principles decreed by law and jurisprudence. We
cannot favor the bare assertions and empty figures submitted by
the petitioner over the financial statements audited by
independent auditors presented by respondent without
transgressing the basic rule in assessing business losses,
entrenched in jurisprudence.
Upon examination of the evidence adduced by both parties, we
are convinced that, indeed, respondent experienced serious
financial crises as shown in the financial statements audited by
independent auditors, SGV & Co. and Alba Ledesma & Co. It is
unlikely therefore that respondent was just feigning business
losses in order to ease out employees. To quote the conclusion
by SGV & Co. in its Report of Independent Public Accountants:
The accompanying financial statements have been
prepared assuming that the Company will continue as a
going concern. The Company has incurred a
substantial loss of about P558 million for the year
ended June 30, 1998, which resulted to a deficit of
about P574 million as of June 30, 1998. As discussed
in Note 1, the company has negotiated with its creditors
for the suspension of payments affecting its outstanding
balances as of June 30, 1998 until the completion of an
acceptable restructuring plan. The suspension of
payments covers a period of sixty (60) days from the
signing of the Memorandum of Agreement dated August
26, 1998. The Company's ability to continue as a going
concern depends, among others, on the completion of an
acceptable restructuring plan. The financial statements
do not include any adjustments that might result from the
outcome of these uncertainties.21 (Emphasis supplied.)
The financial statements reflect that respondent suffered
substantial loss in the amount of P558 Million by 30 June 1998.
The Report of SGV & Co. substantiates the alleged precarious
financial condition of the respondent. 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. Abella22:
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 Commission23:
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 years, may
100
 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.
Being guided accordingly, we find that respondent was fully
justified in implementing a retrenchment program since it was
undergoing business reverses, not only for a single fiscal year, but
for several years prior to and even after the program. In a span of
six years, respondent realized profits only in one year, in 1997.
We thus quote with approval the disquisition of the Court of
Appeals:
As shown in the financial statements, during the years
ended June 1995, 1996, 1998, 1999 and 2000, [herein
respondent] incurred net losses of P40 million, P85
million, P555 million, P558 million, P700 million
and P1.196 billion, respectively, resulting in a deficit
of P2.169 billion as of June 30, 2000. We note, however,
that [herein respondent] earned income in 1997 in the
amount of P1.4 million. But it is clear that petitioner
suffered a major setback when after earning P1.4 Million
(as of June 1997), [respondent] posted an astronomical
financial loss of P555 million in the succeeding year (as
of June 1998).24
Even if we take into consideration the figures submitted by
petitioner and accede to her position that respondent was gaining
substantial profits from its Central Visayas office, the said
numbers, nonetheless, do not bespeak respondent's overall
financial standing in light of the fact that respondent is operating
nationwide and the Central Visayas office is only one of its many
branches. Losses or gains of a business entity cannot be fully
assessed by isolating or selecting only particular branches or
offices. There are recognized accounting principles and methods
by which the business firm's performance can be objectively and
thoroughly evaluated at the end of every fiscal year, and the
assessment accurately reported in the company's financial
statement.
That the financial statements are audited by independent auditors
safeguards the same from the manipulation of the figures therein
to suit the company's needs. The auditing of financial reports by
independent external auditors are strictly governed by national
and international standards and regulations for the accounting
profession. It bears to stress that the financial statements
submitted by respondent were audited by reputable auditing firms.
Hence, petitioner's assertion that respondent merely manipulated
its financial statements to make it appear that it was suffering from
business losses that would justify the retrenchment is incredible
and baseless.
In addition, the fact that the financial statements were audited by
independent auditors settles any doubt on the authenticity of
these documents for lack of signature of the person who prepared
it. As reported by SGV & Co., the financial statements presented
fairly, in all material aspects, the financial position of the
respondent as of 30 June 1998 and 1997, and the results of its
operations and its cash flows for the years ended, in conformity
with the generally accepted accounting principles.25
In fact, even granting arguendo that respondent was not
experiencing losses, it is still authorized by Article 28326 of the
Labor Code to cease its business operations. Explicit in the said
provision is that closure or cessation of business operations is
allowed even if the business is not undergoing economic losses.
The owner, for any bona fide reason, can lawfully close shop
anyone. Just as no law forces anyone to go into business, no law
can compel anybody to continue in it. It would indeed be
stretching the intent and spirit of the law if we were to unjustly
interfere with the management's prerogative to close or cease its
business operations, just because said business operations are
not suffering any loss or simply to provide the worker's continued
employment.27
The law recognizes the right of every business entity to reduce its
work force if the same is made necessary by compelling
economic factors which would endanger its existence or stability.
In spite of overwhelming support granted by the social justice
provisions of our Constitution in favor of labor, the fundamental
law itself guarantees, even during the process of tilting the scales
of social justice towards workers and employees, "the right of
enterprises to reasonable returns of investment and to expansion
and growth." To hold otherwise would not only be oppressive and
inhuman, but also counter-productive and ultimately subversive of
the nation's thrust towards a resurgence in our economy which
would ultimately benefit the majority of our people. Where
appropriate and where conditions are in accord with law and
jurisprudence, the Court has authorized valid reductions in the
work force to forestall business losses, the hemorrhaging of
capital, or even to recognize an obvious reduction in the volume
of business which has rendered certain employees redundant. 28
We also find that the respondent complied with the requisite
notices to the employee and the DOLE to effect a valid
retrenchment. Petitioner failed to refute that she received the
written notice of retrenchment from respondent on 16 November
1998. Although respondent failed to furnish DOLE with a formal
letter notifying it of the retrenchment, it still substantially complied
with the requirement. Since the National Conciliation and
Mediation Board, the reconciliatory arm of DOLE, supervised the
negotiation for separation package, we agree with the Court of
Appeals that it would be superfluous to still require respondent to
serve notice of the retrenchment to DOLE.
The separation package offered by respondent to its employees
was way above the minimum requirement set by law. Aside from
the separation pay equivalent to one-month salary for every year
of service, respondent offered additional monetary benefits such
as one and a half month salary, pro-rated 13th month pay,
conversion of unused sick and vacation leave credits, and Health
Maintenance Organization and group life insurance coverage until
full payment of the separation package.
Petitioner's proposition that she was not a union member and,
therefore, not legally bound by the terms of the Collective
Bargaining Agreement, is irrelevant in the instant controversy.
Non-membership in a union does not exempt an employee from
the application of Article 283 of the Labor Code which enumerates
the authorized causes for terminating employment. In this case,
petitioner was terminated pursuant to the retrenchment program
implemented by respondent. As discussed above, the respondent
complied with the legal requirements for a valid retrenchment.
Therefore, petitioner's separation from employment was legal and
valid.
Consequently, petitioner is not entitled to backwages. It is well
settled that backwages may be granted only when there is a
finding of illegal dismissal.29 Nevertheless, petitioner is entitled to
separation pay as provided under respondent's Staff Reduction
Program Package equivalent to one-month salary for every year
of service, one and a half month salary, pro-rated 13th month pay,
conversion to cash of unused vacation and sick leave credits, and
Health Maintenance Organization and group life insurance
coverage until full payment of the separation package.
WHEREFORE, premises considered, the instant Petition
is DENIED. The Court of Appeals Decision dated 12 July 2005
and its Resolution dated 22 March 2006 in CA-G.R. SP No. 79440
are hereby AFFIRMED. Costs against the petitioner.
SO ORDERED.
101
G.R. No. 187214 August 14, 2013
SANOH FULTON PHILS., INC. and MR. EDDIE
JOSE, Petitioners,
vs.
EMMANUEL BERNARDO and SAMUEL
TAGHOY, Respondents.
DECISION
PEREZ, J.:
Thus petition for review seeks to annul the 23 January 2008
Decision1 and 13 March 2009 Resolution2 of the Court of Appeals
which declared that petitioner Sanoh Fulton Phils., Inc. (Sanoh)
illegally dismissed respondent employees.
Sanoh is a domestic corporation engaged in the manufacture of
automotive parts and wire condensers for home appliances. Its
Wire Condenser Department employed 61 employees.
Respondents belonged to this department.
In view of job order cancellations relating to the manufacture of
wire condensers by Matsushita, Sanyo and National Panasonic,
Sanoh decided to phase out the Wire Condenser Department. On
22 December 2003, the Human Resources Manager of Sanoh
informed the 17 employees, 16 of whom belonged to the Wire
Condenser Department, of retrenchment effective 22 January
2004. All 17 employees are union members.
1. Rene Dasco employees, respondents Emmanuel Bernardo and Samuel
Taghoy, and Manny Santos persisted.
2. Reynaldo Chavez
The complainants alleged that there was no valid cause for
3. Joey MaQuillao retrenchment and in effecting retrenchment, there was a violation
of the "first in-last out" and "last in-first out" (LIFO) policy
embodied in the Collective Bargaining Agreement.
4. Jerson Mendoza
Sanoh, on the other hand, asserted that retrenchment was a valid
5. David Almeron exercise of management prerogative. Sanoh averred that some
employees who were hired much later were either assigned to
6. Nicanor Malubay other departments or were bound by the terms of their job training
agreement to stay with the company for 3 years.
7. Alejandro Hontanosas
On 18 July 2005, the Labor Arbiter rendered a
8. Reynaldo Abayon Decision5 dismissing the complaint for illegal dismissal. The
dispositive portion of the decision reads:
9. Gerome Glor
WHEREFORE, premises considered, judgment is hereby
rendered DISMISSING the complaint of RENE DASCO, ADONIS
10. Edralin Descalzota NOO, ARMANDO NOBLEZA, ISAGANI REGINALDO, JOEY
MAQUILLAO, NICANOR MALUBAY, JEROME GLOR,
11. Isagani Reginaldo REYNALDO ABAYON, DAVID ALMERON, RUELITO
MAGTIBAY, EDRALIN DESCALZOTA, ALEJANDRO
HONTANOSAS, REYNALDO CHAVES and JERSON MENDOZA.
12. Ruelito Magtibay
Respondent company however is ordered to pay the separation
pay of the following:
13. Adonis Noo
EMMANUEL BERNARDO - ₱53,339.52
14. Armando Nobleza

A grievance conference was held where the affected employees SAMUEL TAGHOY - 58,968.00
15. Emmanuel Bernardo
were informed of the following grounds for retrenchment:
MANNY SANTOS - 69,120.68
16. Samuel Taghoy
1) Lack of local market. GRAND TOTAL ₱181,428.20 6

17. Manny Santos4

2) Competition from imported products.
3) Phasing out of Wire Condenser Department.3
Two succeeding conciliation conferences were likewise held but
the parties failed to reach an amicable settlement. Thus, two (2)
separate complaints for illegal dismissal, docketed as NLRC Case
No. RAB-IV-1-18788-04-C and NLRC Case No. RAB-IV-02-
18844-04-C, were filed by the following complainants:
Sanoh on its part, filed a petition for declaration of the partial
closure of its Wire Condenser Department and valid retrenchment
of the 17 employees, docketed as NLRC Case No. RAB-IV-01-
18762-04-C.
During the course of the proceedings before the Labor Arbiter, 14
of the 17 employees executed individual quitclaims. Hence, their
interest in the cases was dismissed with prejudice. Only 3
On appeal, the National Labor Relations Commission (NLRC)
affirmed in toto the decision of the Labor Arbiter in its
Resolution7 dated 23 May 2006. The NLRC held that "the
retrenchment x x x was a valid exercise of management
prerogative, more so, since the said decision was premised on the
‘permanent lack of orders from major clients.’"8The NLRC found
no violation of the company’s LIFO policy because the employees
involved were bound under a training agreement to render three
(3) years of continuous service. The NLRC also sustained the
award of separation pay to the three (3) employees.

102
Respondents filed a motion for reconsideration but the NLRC
denied said motion in its 16 August 2006
Resolution.9Respondents filed a petition for certiorari before the
Court of Appeals.
The appellate court summed up respondents’ arguments in this
wise:
(a) Their dismissal was without just cause and
retrenchment was unjustified;
(b) There was no justifiable ground to retrench the
employees because the retrenchment was intended to
prevent losses and the company was not losing;
(c) After the retrenchment, the Wire Condenser
Department was not phased out and there was no need
to reduce or retrench the personnel;
(d) There has been no closure of the Wire Condenser
Department and no redundancy of work.10
On 23 January 2008, the Court of Appeals overturned the findings
of the Labor Arbiter and the NLRC, and ruled that Sanoh failed to
prove the existence of substantial losses that would justify a valid
retrenchment. The Court of Appeals also upheld the quitclaim
executed by complainant Manny Santos, thus he was deemed to
have released Sanoh from his monetary claims. The appellate
court disposed as follows:
WHEREFORE, the Petition insofar as petitioner Manny Santos is
dismissed. As regards petitioners Emmanuel B. Bernardo and
Samuel Taghoy, respondent company is found guilty of illegal
dismissal and is ordered to reinstate petitioners Emmanuel B.
Bernardo and Samuel Taghoy with full backwages. Where
reinstatement is no longer feasible because the positions
previously held no longer exist, respondent company is ordered to
pay backwages plus, in lieu of reinstatement, separation pay for
every year of service, whichever is higher.11
Sanoh now questions the reversal by the Court of Appeals of the
decisions of the Labor Arbiter and the NLRC. The position of the
parties is unchanged.
Sanoh insists that it is the prerogative of management to effect
retrenchment as long as it is done in good faith. Sanoh relies on
letters from its customers showing cancellation of job orders to
prove that it is suffering from serious losses. In addition, Sanoh
claims that it had, in fact, closed down the Wire Condenser
Department in view of serious business losses.
On the other hand, respondents argue that the Wire Condenser
Department was not phased out and there was no need to
retrench the personnel. Respondents point out that Sanoh even
made the retained employees render substantial overtime work.
Respondents refute the allegation of serious business losses by
producing documentary evidence to the contrary.
The Labor Arbiter and the NLRC were one in upholding the
retrenchment as a valid exercise of Sanoh’s management
prerogative. The NLRC further observed that the decision to
retrench was premised on the permanent lack of orders from
major clients.12
After scouring the records, we are in full accord with the decision
of the Court of Appeals.
To justify retrenchment, Sanoh invokes as grounds serious
business losses resulting in the closure of the Wire Condenser
Department, to which respondents belonged. In the same
breadth, Sanoh also contends that its decision to close the Wire
Condenser Department is within its right even in the absence of
business losses as long as it is done in good faith.
Sanoh’s two-tiered argument rests on the application of Article
283 of the Labor Code, which provides:
ART. 283. Closure of establishment and reduction of personnel.
— The employer may also terminate the employment of any
employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or to at least one-half
(1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
Retrenchment to prevent losses and closure not due to serious
business losses are two separate authorized causes for
terminating the services of an employee. In J.A.T. General
Services v. NLRC,13 the Court took the occasion to draw the
distinction between retrenchment and closure, to wit:
Closure of business, on one hand, is the reversal of fortune of the
employer whereby there is a complete cessation of business
operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of business
as an authorized cause for
termination of employment aims to prevent further financial drain
upon an employer who cannot pay anymore his employees since
business has already stopped. On the other hand, retrenchment is
reduction of personnel usually due to poor financial returns so as
to cut down on costs of operations in terms of salaries and wages
to prevent bankruptcy of the company. It is sometimes also
referred to as down-sizing. Retrenchment is an authorized cause
for termination of employment which the law accords an employer
who is not making good in its operations in order to cut back on
expenses for salaries and wages by laying off some employees.
The purpose of retrenchment is to save a financially ailing
business establishment from eventually collapsing.16
The respective requirements to sustain their validity are likewise
different.
For retrenchment, the three (3) basic requirements are: (a) proof
that the retrenchment is necessary to prevent losses or impending
losses; (b) service of written notices to the employees and to the
Department of Labor and Employment at least one (1) month prior
to the intended date of retrenchment; and (c) payment of
separation pay equivalent to one (1) month pay, or at least one-
half (1/2) month pay for every year of service, whichever is
higher.14In addition, jurisprudence has set the standards for
losses which may justify retrenchment, thus:
(1) the losses incurred are substantial and not de minimis; (2) the
losses are actual or reasonably imminent; (3) the retrenchment is
reasonably necessary and is likely to be effective in preventing
the expected losses; and (4) the alleged losses, if already
103
incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing evidence.15
Upon the other hand, in termination, the law authorizes
termination of employment due to business closure, regardless of
the underlying reasons and motivations therefor, be it financial
losses or not. However, to put a stamp to its validity, the
closure/cessation of business must be bona fide, i.e., its purpose
is to advance the interest of the employer and not to defeat or
circumvent the rights of employees under the law or a valid
agreement.16
In termination cases either by retrenchment or closure, the burden
of proving that the termination of services is for a valid or
authorized cause rests upon the employer.17 Not every loss
incurred or expected to be incurred by an employer can justify
retrenchment. The employer must prove, among others, that the
losses are substantial and that the retrenchment is reasonably
necessary to avert such losses.18 And to repeat, in closures, the
bona fides of the employer must be proven.
In this case, there was no valid retrenchment. Nor was there a
closure of business.
We are mindful of the principle that losses in the operation of the
enterprise, lack of work, or considerable reduction on the volume
of business may justify an employer to reduce the work force. But
a lull caused by lack of orders or shortage of materials must be of
such nature as would severely affect the continued business
operations of the employer to the detriment of all and sundry if not
properly addressed.19
Sanoh asserts that cancelled orders of wire condensers led to the
phasing out of the Wire Condenser Department which triggered
retrenchment. Sanoh presented the letters of cancellation given
by Matsushita and Sanyo as evidence of cancelled
orders.1âwphi1 The evidence presented by Sanoh barely
established the connection between the cancelled orders and the
projected business losses that may be incurred by Sanoh. Sanoh
failed to prove that these cancelled orders would severely impact
on their production of wire condensers.
We held in Lambert Pawnbrokers and Jewelry Corporation v.
Binamira,20 that the losses must be supported by sufficient and
convincing evidence and the normal method of discharging this is
by the submission of financial statements duly audited by
independent external auditors.21 It was aptly observed by the
appellate court that no financial statements or documents were
presented to substantiate Sanoh’s claim of loss of ₱7 million per
month.1âwphi1And a business lull caused by lack of orders which
could have justified retrenchment was not shown by petitioner. As
observed once more by the Court of Appeals, petitioner failed to
present proof of the extent of the reduced order and its
contribution to the sustainability of its business.
On the other hand, respondents’ refutations of the employer’s
reason for retrenchment were supported by documentary
evidence. Respondents explained that Matsushita had four (4)
outstanding orders of condensers of refrigerators: Model 17-20,
Model 1404, Model 802 and Model 602. It was only in March 2004
that Model 17-20 and Model 1404 were phased out and only in
July 2004 that Model 802 was phased out. However, Model 602
remained and the order of Matsushita had been increased from
500 to 1600 units monthly from July 2004.22
With respect to the Sanyo account, respondent assert that Sanyo
had sufficient stocks for three (3) months which explained why it
did not order from Sanyo. However, beginning February 2004,
Sanyo resumed making orders.23
Respondents added that despite the cancellation of some orders
by Matsushita and Sanyo, the additional orders made by
Concepcion Industries and Uni-Magma more than compensated
the losses incurred on the cancelled orders.24
Verily, Sanoh failed to discharge its burden of submitting
competent proof to show the substantial business losses it
suffered warranting retrenchment. Contrarily, respondents amply
proved that the cancelled orders did not seriously create a dent on
Sanoh’s financial standing. Respondents further presented the
production target and actual production of the Wire Condenser
Department for the year 2005, to prove that the department had
realized income for that year.
Sanoh would then argue that it did not even have to prove
business losses when it decided to close down the Wire
Condenser Department because the law recognizes the right of
management to cease business operations. As already stated, the
burden of proving that the closure was bona fide, rests upon the
employer. Sanoh made a categorical statement that the Wire
Condenser Department was totally closed. The documentary
evidence presented by respondents, however, negate Sanoh’s
statement. In other words, Sanoh lacked bona fides even in its
assertion that Wire Condenser Department had closed down.
Respondents disclose that this department had gone full blast in
its operations, even with substantial overtime operations
immediately after their dismissal was effected. Moreover,
respondents assert that Sanoh still hired employees after the so-
called retrenchment.
Respondents submitted the time sheets of the Wire Condenser
Department for the months of January up to July 200425 which
showed that some of the employees had been rendering overtime
work after retrenchment was effected presumably to compensate
the lack of manpower in that department.
As the Wire Condenser Department is still in operation and no
business losses were proven by Sanoh, the dismissal of
respondents was unlawful. Resultingly, respondents are entitled
to reinstatement without loss of seniority rights and other
privileges and to full backwages, computed from the time the
compensation was withheld up to the time of actual reinstatement.
Present law says that if reinstatement is not feasible, the payment
of full backwages shall be made from the date of dismissal until
finality of judgment.
Verily, in this case, reinstatement is no longer practical in view of
the length of time that had elapsed tl·01n the time of respondents'
dismissal.26 As held in EDI Staff Builders International Inc. v.
Magsino, apart from backwages, respondents should be awarded
separation pay.
WHEREFORE the petition is DENIED. The Decision of the Court
of Appeals dated 23 January 2008 and its Resolution dated 13
March 2009 are hereby AFFIRMED WITH MODIFICATION that
respondents shall be awarded backwages from the time of
dismissal up to finality of this judgment, with interest at the rate of
six percent (6%) per annum which shall he increased to twelve
percent (12%) after the finality of this judgment and separation
pay equivalent to one-half (1/2) month pay for every year of
service.
SO ORDERED.
JOSE PORTUGAL PEREZ
Associate Justice
WE CONCUR:
104
 See Separate Concurring Opinion This is an appeal, via a petition for review under Rule 45, from the
ANTONIO T. CARPIO Decision1 dated November 18, 2004 of the Court of Appeals (CA)
Associate Justice in CA-G.R. SP No. 84790 which reversed and set aside the
Chairperson Resolutions dated September 23, 20022 and January 30, 2004 of
the National Labor Relations Commission (NLRC) in NLRC NCR
CA No. 028205-01, and reinstated the February 27, 2001
MARIANO C. DEL
ARTURO D. BRION Decision3 of the Labor Arbiter in NLRC Case No. RAB-IV-9-
CASTILLO
Associate Justice 11454-99-R.
Associate Justice
The Facts
ESTELA M. PERLAS-BERNABE
Associate Justice
From the petition and its annexes, the respondent’s comment
thereto, and the parties’ respective memoranda, the Court gathers
ATTESTATION the following facts:
I attest that the conclusions in the above Decision had been In April 1994, respondent Mitsubishi Motors Philippines
reached in consultation before the case was assigned to the writer Corporation (MMPC) hired petitioner Alfredo A. Mendros, Jr. as
of the opinion or the Court’s Division. regular body prepman, later promoting him as assembler major in
the company’s manufacturing division.
ANTONIO T. CARPIO
Associate Justice Due to the severe drastic slump of its vehicle sales brought about
Chairperson by the financial crisis that hit the country and other Asian
economies in 1997, MMPC, per its audited financial statements,
sustained a financial loss of PhP 470 million in 1997 and PhP 771
CERTIFICATION
million in 1998. In the face of these setbacks and in a bid to
cushion the impact of its business reversals and continue
Pursuant to Section 13, Article VIII of the Constitution and the
operations, MMPC implemented various cost-cutting measures,
Division Chairperson's Attestation, I certify that the conclusions in
such as but not limited to: cost reduction on the use office
the above Decision had been reached in consultation before the
supplies and energy, curtailment of representation and travel
case was assigned to the writer of the opinion of the Court's
expenses, employment-hiring freeze, separation of casuals and
Division.
trainees, manpower services (guards and janitorial services)
reduction, intermittent plant shutdowns, and reduced work week
MARIA LOURDES P. A. SERENO for managerial and other monthly-salaried personnel.
Chief Justice
In February 1998, MMPC finally instituted the first stage of its
G.R. No. 169780 February 16, 2009 retrenchment program affecting around 531 hourly manufacturing
employees, a step which later proved not adequate enough to
ALFREDO A. MENDROS, JR., Petitioner, stem business reverses. Hence, after holding special labor-
vs. management meetings with the hourly union, MMPC launched a
MITSUBISHI MOTORS PHILS. CORPORATION temporary lay-off program to cover some 170 hourly employees.
(MMPC), Respondent. This batch included Alfredo who, sometime in January 1999,
received a letter dated December 19, 1998, informing him of the
temporary suspension of his employment, inclusive of benefits. As
DECISION
there indicated, the temporary lay-off scheme, initiated due to
continuing business contraction, was for six months from January
VELASCO, JR., J.: 4 to July 2, 1999.
In the interim, MMPC updated the temporarily-suspended Alfredo,
et al. of its business condition.
As later events unfolded, the temporary lay-off move was still not
enough to avert further losses. In fact, the market situation even
slid down. This development impelled MMPC to embark on
another retrenchment program affecting the hourly employees.
Accordingly, on May 31, 1999, MMPC sent separate notices to
Alfredo and other affected personnel advising them of their
permanent lay-off, but with retrenchment benefits, effective July 2,
1999. The drop in company sales and market share was the
stated reason for MMPC’s latest move. As in the first instance, a
copy of the audited financial statements (AFS) was not appended
to the letter-notice to substantiate, as Alfredo would later bemoan,
the acute business losses MMPC claimed to have suffered.
It may be mentioned at this juncture that the July 1999
retrenchment of 170 hourly employees was preceded by the
retrenchment of monthly-salaried MMPC employees. In effect,
therefore, the lay-off of the 170 employees was the second
retrenchment implemented by MMPC in 1999 and the third since
1998.
On June 1, 1999, a letter dated May 31, 1999 and addressed to
Director Alex Maraan was filed with the Department of Labor and
Employment (DOLE), advising him that the temporary lay-off of
the 170 MMPC hourly employees is being made permanent
effective July 2, 1999 due to continuing adverse market
conditions.
In September 1999, Alfredo filed a case for illegal dismissal and
damages before the NLRC’s Regional Arbitration Branch No. IV,
docketed as NLRC Case No. RAB-IV-9-11454-99-R.
The Ruling of the Labor Arbiter
Conciliation efforts having failed, hearings were held, followed by
a directive for the submission of position papers. In its position
paper, MMPC defined the criteria used in considering employees
for retrenchment. And among the documents it filed together with
its pleadings were its 1997-1996 and 1998-1997 Financial
Statements prepared by SGV & Co. On February 27, 2001, Labor
Arbiter Enrico Portillo rendered a Decision finding for MMPC and
against Alfredo, his complaint for illegal temporary lay-off and
retrenchment being dismissed.4
105
From the arbiter’s ruling, Alfredo appealed to the NLRC, its appeal
docketed as NLRC NCR CA No. 028205-01.
The Ruling of the NLRC
The NLRC saw things differently. By Resolution dated September
23, 2002, the NLRC’s First Division reversed and set aside the
decision of Labor Arbiter Portillo, disposing as follows:
IN VIEW THEREOF, the judgment appealed from is hereby
REVERSED and SET ASIDE and a new one ENTERED declaring
the temporary lay-off / retrenchment as illegal and ordering the
respondent [MMPC] to immediately reinstate the complainant
[Alfredo] to his former position without loss of seniority rights and
other benefits accorded the regular employees pursuant to their
Collective Bargaining Agreement, with full backwages which as of
September 16, 2002 amounts to P447,349.99.
A ten percent (10%) attorney’s fee is likewise adjudged.
The computation submitted by the Computation and Examination
Unit is hereby adopted as Annex "A" and an integral part hereof.
SO ORDERED.5
While it agreed with the labor arbiter’s holding on MMPC’s
compliance with the substantive and procedural requirements for
retrenchment, the NLRC deemed the merit rating system adopted
by MMPC as additional and dominant criterion for retrenchment to
be erroneous and arbitrary, being against the parties’ then
prevailing Collective Bargaining Agreement (CBA). The CBA,
according to the NLRC, listed only "seniority" and "needs of the
company" as determinative factors in the selection of who shall be
laid off. To the NLRC, MMPC’s arbitrary way and the fact that it
did not notify Alfredo beforehand of the additional criterion, not to
mention the findings of the merit valuation, vitiated the
retrenchment proceedings.
By Resolution of January 30, 2004, the NLRC denied MMPC’s
motion for reconsideration, sending the company to the CA on a
petition for certiorari, its recourse docketed as CA-G.R. SP No.
84790.
The Ruling of the CA
On November 18, 2004, the appellate court rendered the
appealed Decision finding for MMPC, the dispositive portion of
which reads, as follows:
WHEREFORE, finding merit in the petition, We hereby GRANT
the same. The assailed Resolutions of public respondent National
Labor Relations Commission (NLRC) are hereby REVERSED and
SET ASIDE and the Decision of the Labor Arbiter dated February
27, 2001 is hereby REINSTATED.
SO ORDERED.6
In reinstating the labor arbiter’s ruling and setting aside that of the
NLRC, the appellate court addressed two central issues: first,
whether MMPC used fair and reasonable criteria in ascertaining
who would be retrenched; and second, whether MMPC should
have had furnished Alfredo copies of its AFS and the findings of
its merit evaluation. It resolved the first issue in the affirmative and
the second in the negative.1avvphi1
Following the denial of his motion for reconsideration, per the
CA’s resolution of September 13, 2005, Alfredo interposed this
petition.
The Issues
Petitioner Alfredo, through his Memorandum, raises the following
issues for our consideration:
I.
WHETHER OR NOT PETITIONER’S RETRENCHMENT WAS
ILLEGAL.
A.
WHETHER OR NOT MERIT RATING AND RANKING ARE PART
OF THE CBA MANDATED CRITERIA IN DETERMINING THE
REGULAR EMPLOYEE TO BE RETRENCHED.
B.
WHETHER OR NOT [MMPC] CAN VALIDLY ADOPT MERIT
RATING AND RANKING AS PART OF THE CRITERIA IN
DETERMINING THE REGULAR EMPLOYEE TO BE
RETRENCHED.
C.
WHETHER OR NOT [MMPC] SHOULD HAVE DISCLOSED IN
ITS NOTICE OF RETRENCHMENT TO PETITIONER, THE
LATTER’S LOW MERIT RATING AND RANKING AS THE
PRINCIPAL REASON FOR HIS RETRENCHMENT AND
FURNISHED PETITIONER WITH THE CORRESPONDING [AFS]
TO SUBSTANTIATE ITS CLAIM OF LOSSES.
D.
WHETHER OR NOT PETITIONER’S RETRENCHMENT CAN BE
DEEMED VALID JUST BECAUSE [MMPC’S] EARLIER
RETRENCHMENT OF HIS OTHER CO-EMPLOYEES HAD
BEEN ADJUDGED BY OUR COURTS TO BE VALID.
II.
WHETHER OR NOT THE [CA] CORRECTLY FOUND THAT THE
NLRC COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
REVERSING AND SETTING ASIDE THE DECISION OF LABOR
ARBITER PORTILLO AND ORDERING THE REINSTATEMENT
x x x.7
The fundamental issues tendered actually boil down to the legality
and/or validity of Alfredo’s temporary lay-off and eventual
retrenchment.
The Court’s Ruling
We deny the petition.
The right of management to retrench or to lay-off workers to meet
clear and continuing economic threats or during periods of
economic recession to prevent losses is recognized8 by Article
283 of the Labor Code, as amended, partly providing:
Art. 283. Closure of establishment and reduction of personnel.––
The employer may also terminate the employment of any
employee due to x x x retrenchment to prevent losses or the
closing or cessation of operations of the establishment x x x by
106
serving a written notice on the worker and the [DOLE] at least one
month before the intended date thereof. x x x In case of
retrenchment to prevent losses, the separation pay shall be
equivalent to one (1) month pay or at least one-half month pay for
every year of service whichever is higher. x x x (Emphasis ours.)
Decisional law teaches that the requirements for a valid
retrenchment are: (1) that the retrenchment is reasonably
necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, and
real, or only if expected, are reasonably imminent as perceived
objectively and in good faith by the employer; (2) that the
employer serves written notice both to the employees concerned
and the DOLE at least a month before the intended date of
retrenchment; (3) that the employer pays the retrenched
employee separation pay in an amount prescribed by the Code;
(4) that the employer exercises its prerogative to retrench in good
faith; and (5) that it uses fair and reasonable criteria in
ascertaining who would be retrenched or retained.9
In F.F. Marine Corporation v. National Labor Relations
Commission, the Court expounded on the concept, requisites, and
justification of retrenchment in the following wise:
Retrenchment is the termination of employment initiated by the
employer through no fault of the employees x x x resorted to by
management during periods of business recession, industrial
depression, or seasonal fluctuations or during lulls occasioned by
lack of orders, shortage of materials, conversion of the plant for a
new production program or the introduction of new methods or
more efficient machinery, or of automation. Retrenchment is a
valid management prerogative. It is, however, subject to faithful
compliance with the substantive and procedural requirements laid
down by law and jurisprudence.
There are three (3) basic requisites for a valid retrenchment to
exist, to wit: (a) the retrenchment is necessary to prevent losses
and such losses are proven; (b) written notice to the employees
and to the DOLE at least one (1) month prior to the intended date
of retrenchment; and (c) payment of separation pay x x x.
Jurisprudential standards to justify retrenchment have been
reiterated by this Court in a long line of cases to forestall
management abuse of this prerogative, viz:
. . . . Firstly, the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature of the
retrenchment would appear to be seriously in question. Secondly,
the substantial loss apprehended must be reasonably imminent,
as such imminence can be perceived objectively and in good faith
by the employer. There should, in other words, be a certain
degree of urgency for the retrenchment, which is after all a drastic
recourse with serious consequences x x x. Because of the
consequential nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively prevent the
expected losses. The employer should have taken other
measures prior or parallel to retrenchment to forestall losses, i.e.,
cut other costs than labor costs. An employer who, for instance,
lays off substantial numbers of workers while continuing to
dispense fat executive bonuses and perquisites or so-called
"golden parachutes", can scarcely claim to be retrenching in good
faith to avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to labor, the
employer’s prerogative to bring down labor costs by
retrenching must be exercised essentially as a measure of
last resort, after less drastic means—e.g., reduction of both
management and rank-and-file bonuses and salaries, going on
reduced time, x x x costs, etc.—have been tried and found
wanting.
Lastly, x x x alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be
proved by sufficient and convincing evidence. The reason for
requiring this quantum of proof is readily apparent: any less
exacting standard of proof would render too easy the abuse of this
ground for termination of services of employees.10 (Emphasis
supplied.)
Given the foregoing legal perspective, the resolution of the basic
core issue should be in the affirmative. We are one with the
appellate court in finding that the essential requisites for a valid
retrenchment laid down by law and jurisprudence are obtaining.
First, there can hardly be any dispute that MMPC suffered
substantial and heavy losses in FY 1997 and continued to bleed
in 1998. Even the NLRC conceded this reality. To be precise,
MMPC, as duly shown in its AFS for those fiscal years,11 incurred
an aggregate loss of PhP 1.242 billion for its two-year operation.
To be sure, the AFS in question and necessarily the figures
appearing therein cannot be assailed as self-serving, as these
documents were prepared and signed by SGV & Co., a firm of
reputable independent external auditors. Any suggestion that a
billion peso plus loss is de minimis in extent has to be dismissed
for sheer absurdity.
Alfredo’s lament about not being furnished a copy of the 1997-
1996 and 1998-1997 AFS and other financial documents, as well
as the finding of the merit evaluation rating, at the time he was
notified of his lay-off cannot be accorded tenability. The CA
explained succinctly why:
x x x There is no law or rule that requires an employer to furnish
an employee to be retrenched copies of its [AFS] and other
documents (e.g. finding of its merit evaluation). The law only
requires that the employer serve a written notice of the
retrenchment on the employee concerned and the [DOLE] at least
one (1) month before the intended date thereof. [Alfredo’s]
contention that he should have been notified of his merit rating in
order for him to seek a clarification and even a reconsideration of
the same from [MMPC] is without merit. The appropriate forum for
an employee to contest the reality or good faith character of the
retrenchment asserted as ground for dismissal from employment
is before the [DOLE].12 (Citation omitted.)
Second, Alfredo cannot plausibly feign ignorance that MMPC was
in dire straights in 1997 and 1998. Neither can he impugn the
bona fides of MMPC’s retrenchment strategy. Recall that MMPC,
while experiencing business reverses, implemented expense-
cutting measures starting from reduction on the use of utilities and
office supplies, curtailing of representation and travel expenses
and deferring the implementation of set projects and programs. It
froze hiring and letting its casual employees and trainees go. And
as the records show, a reduced work week was set in place for
managerial employees who, doubtless at management’s behest,
agreed to a 5% salary cut. In fine, the retrenchment of Alfredo’s
batch on July 2, 1999 was not a spur-of-the-moment decision, but
was resorted to after cutbacks to minimize operational expenses
have been explored, but failed to forestall business losses. In fact,
MMPC risked and in fact faced suits by effecting two earlier
retrenchment actions, itself an indicium that it imposed the
retrenchment on Alfredo in good faith, not to circumvent his
security of tenure.
Third, it bears to state that the aforequoted Art. 283 of the Code
uses the phrase "retrenchment to prevent losses." The phrase
necessarily implies that retrenchment may be effected even in the
event only of imminent, impending, or expected losses. 13 The
employer need not wait for substantial losses to materialize before
exercising ultimate and drastic option to prevent such losses. In
107
the case at bench, MMPC was already financially hemorrhaging
before finally resorting to retrenchment.
Fourth, MMPC had complied with the prior written notice and
separation pay requirements. Alfredo was duly apprised of his fate
a month before the effectivity of his retrenchment, and the DOLE
duly informed likewise a month before the July 2, 1999 effectivity
through a letter dated May 31, 1999 sent on June 1, 1999. And as
determined by the labor arbiter, it appears that the retrenched
employees have already received their separation benefits of one-
month salary for every year of service,14 except perhaps those
who opted to challenge their retrenchment.
Finally, as the Court sees it, the merit rating system MMPC
adopted as one of the criteria for selecting who are to be eased
out was fair and reasonable under the premises. Alfredo, of
course, latches the success of his cause principally on the
propriety of the criteria thus adopted, faulting the CA in the
manner it construed Art. V of the CBA then governing the
employer-employee relationship between MMPC and the hourly
employees.lawphil.net
For clarity, we reproduce the pertinent provisions of Art. V of the
CBA on lay-off and other personnel/employee movements,
specifically Sections 1 to 6, to wit:
ARTICLE V
PROMOTIONS, TRANSFERS, LAY-OFFS AND RECALLS
SECTION 1. FACTORS TO BE FOLLOWED IN EMPLOYEE
MOVEMENTS –– In the exercise of customary functions of
Management as regards promotions, transfer, lay-off and recall,
the COMPANY shall be guided by the following: Seniority,
Efficiency and Attitude, Job Knowledge and Potential, and
Attendance and the COMPANY shall exercise just and fair
evaluation of such factors. It is understood that this provision is
applicable only to members of the bargaining unit and to
movements within the bargaining unit.
SECTION 2. In the application of the foregoing criteria, the
following definition shall be observed
(a) SENIORITY; Defined:
1. Department Seniority — starts from
the day of permanent assignment to a
Production Department or Non-
Production Department.
2. Job Security — starts from the day
of permanent assignment to the job in
Production or Non-Production
Department.
3. Corporate Seniority — starts as of
the first day of the probationary period
of a regular employee.
(b) EFFICIENCY AND ATTITUDE — is defined
as follows:
1. Ability to perform good work in
accordance with COMPANY
standards.
2. Ability to cooperate with supervisory
staff and fellow employees.
3. Readiness to accept supervisor’s
instructions and to perform them
properly.
4. Compliance with COMPANY
policies, rules and regulations.
5. Physical fitness.
(c) JOB KNOWLEDGE AND POTENTIAL — as
defined as follows:
1. Knowledge and ability to perform
the job in accordance with COMPANY
standards.
2. Possession of broad knowledge of
various types of work which will assure
satisfactory performance of other work
assignments.
3. Adaptability to learn new work
procedures.
4. Ability to improve work methods.
(d) ATTENDANCE is defined as follows:
Promptness in reporting to work; in other words, prompt
observance of time signals, scheduled starting time, morning and
afternoon breaktime, lunch time and quitting time. x x x
SECTION 3. PROMOTIONS — Promotion is the movement of a
qualified employee to a higher job classification or lateral
movement to a higher level within the same job classification and
shall entitle such employee to the appropriate wage range
applicable to the new position or job level.
xxxx
SECTION 4. TRANSFERS –– Transfers are considered
movements from one job assignment to another, either on a
temporary or permanent basis. In all cases of transfers, whether
temporary or permanent, the COMPANY will be guided by the
factors mentioned in Section 1 above.
xxxx
SECTION 5. LAY-OFFS – Lay-Offs shall be guided by the
following factors:
(a) TEMPORARY LAY-OFF — is the
adjustment or reduction in work force due to x x
x and other causes that will necessitate the
temporary reduction of work force.
(b) PERMANENT LAY-OFF — is a reduction in
work force due to decrease in COMPANY
business.
(c) LAY-OFF PROCEDURE –– in case of lay-off
whether in the Production or Non-Production
Departments, all temporary, casual and
probationary employees will be laid-off
first. Regular employees will be laid-off
taking into consideration corporate
seniority (last-in, first-out) and the needs of
the COMPANY.
108
 (d) No employee will be upgraded due to lay-off.
SECTION 6. RECALLS TO WORK –– When there is a need to
increase the work force after a lay-off, preference shall be given to
retrenched employees on the basis of corporate seniority and
provided they are qualified for the job opening. (Emphasis ours.)
Alfredo argues that since Art. V, Sec 5(c) of the CBA provides for
only two factors, i.e., (1) seniority (last-in, first-out) and (2) the
needs of the company, to be considered in retrenching MMPC
employees, the company is bereft of authority to arbitrarily impose
other factors or criteria in effecting his retrenchment.
We are not persuaded.
Evaluation Method Used by MMPC in Determining the
Employees to be Retrenched Is in Accord with the CBA
It is well-entrenched that if the terms of a contract are clear and
leave no doubt as to the intention of the contracting parties, the
literal meaning of the stipulations shall control.15 Courts, in
appropriate cases, will intervene only when the terms of the
contract are ambiguous or uncertain and only to construe them to
seek the real intent of the parties and not to alter
them.16lawphil.net
Just as settled is the rule that contracts should be so construed as
to harmonize and give effect to the different provisions of these
contracts.17 Under Art. 137418 of the Civil Code, contracts cannot
be construed by parts; stipulations and clauses must be
considered in relation to one another to give effect to the whole.
The legal effect of a contract is not determined alone by any
particular provision disconnected from all others, but from the
whole read together.19
Following the above rules, the aforequoted Secs. 1 and 2 should
be read as qualifying the factors mentioned in the succeeding
Sec. 5(c). It may be that Sec. 5(c) mentions only "seniority" and
"needs of the company" as factors to be considered in the
retrenchment selection process. But these twin factors cannot
plausibly be given exclusivity for Sec. 1 is clear in that the factors
or criteria provided therein, i.e., seniority, efficiency and attitude,
job knowledge and potential, and attendance, are to be
considered in the exercise of management as regards lay-off,
among other personnel movements. Sec. 5 ought not to be
treated alone, isolated from kindred provisions.
Sec. 1, Art. V of the CBA, to reiterate, allows MMPC, in the
exercise of its customary management functions and prerogatives
on matters of promotions, transfer, lay-off, and recall, to consider
as guiding norms the following factors or criteria: "Seniority,
Efficiency and Attitude, Job Knowledge and Potential, and
Attendance." And to complement this prerogative, the company, in
the same section, is given the discretion to "exercise just and fair
evaluation of such factors," meaning that the company is
accorded a reasonable latitude to assign a corresponding weight
to each factor. On the other hand, Sec. 2 merely defines or
describes the factors or criteria mentioned in Sec. 1.
As couched, Sec. 1 is explicit in providing the criteria or factors for
all employee movements. A reading of the other provisos would
show the following: Sec. 3 on PROMOTIONS does not specifically
mention any criterion or factor, logically implying that the factors
expressly mentioned in Sec. 1 shall apply to promotional
appointments; Sec. 4 on TRANSFERS, on the other hand,
provides that the factors mentioned in Sec. 1 apply; Sec. 5 on
LAY-OFFS provides the factors of seniority and needs of the
company; while Sec. 6 on RECALLS TO WORK provides the sole
factor of seniority. Given the way the provisions were couched
relative to Sec. 1, it is clear to our mind, despite the seeming
limited factors provided in Secs. 5 and 6, that the factors or
criteria provided in Sec. 1, as defined in Sec. 2, encompass and
apply to all employee movements.
Alfredo’s posture that the Sec. 1 criteria are to be viewed as a
general standard and must be made to yield to those specifically
provided in Sec. 5(c) is specious at best and does not commend
itself for concurrence.
As aptly noted by the CA, the Sec. 5(c) "needs of the company"
factor, if viewed by its lonesome self without linking it to the Sec. 1
criteria, would be a meaningless, if not unreasonable, standard.
Worse still, it may well-nigh give MMPC a carte blanche and
unchecked license to determine what the needs of the company
would be relative to the lay-off, retrenchment, or retention of any
employee. Such construal as espoused by Alfredo cannot be
allowed for Sec. 1 expressly mandates the use of salient criteria
to be considered in lay-off situation and other personnel
movements. In all, there is really no irreconcilable conflict
between Secs. 1 and 5; they can and ought to be harmonized and
read in conjunction with each other.
The proper view, therefore, is that the Sec. 1 criteria qualify the
factors of "seniority and needs of the company" in Sec. 5(c).
Stated a bit differently, Sec. 5(c) should be understood in the light
of Sec. 1 which, to stress, provides seniority, efficiency and
attitude, job knowledge and potential, and attendance as among
the factors that should guide the company in choosing the
employees to be laid-off or kept. All other things being equal, a
company would necessarily need to retain those who had
rendered dedicated and highly efficient service and whose
knowledge, attendance, and potential hew with company
standards. Any other measure would be senseless in the
business viewpoint. Accordingly, the merit rating used by MMPC
based on Sec. 5 in conjunction with and as qualified by the factors
provided under Sec. 1 is fair and reasonable, and, to be sure, well
within the contemplation of the parties’ CBA. In fact, Alfredo,
shorn of the contention that the merit rating is against the CBA,
has not shown any arbitrariness on the part of MMPC in the
evaluation, selection, and retrenchment of employees.
We end this ponencia by taking stock that 60 of the first batch of
531 hourly employees retrenched in February 1998 challenged
the legality of their retrenchment on the very same issue of
arbitrariness in the implementation of the rating evaluation
system. The labor arbiter, the NLRC, and effectively the CA were
one in their ruling that the retrenchment program and the
evaluation method used by MMPC passed the test of
reasonableness and were arrived at in good faith; thus, the
retrenchment was held legal and valid. In G.R. No. 155406, the
Court found no reversible error in the CA judgment and dismissed
the petition of the retrenched employees, thereby upholding the
validity of retrenchment undertaken by respondent
company.20 The same result obtains in the instant petition.
WHEREFORE, the instant petition is hereby DENIED for lack of
merit. Accordingly, the Decision dated November 18, 2004 of the
CA and its Resolution of September 13, 2005 in CA-G.R. SP No.
84790 are hereby AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 80770 August 10, 1989
INTERNATIONAL HARDWARE, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (THIRD
DIVISION) and BONIFACIO PEDROSO, respondents.
Pepino Law Office for petitioner.
109
Puerto, Falcon and Associates Labor and Law Offices for private
respondent.
GANCAYCO, J.:
The singular issue in this case is whether or not an employee who
had been retrenched or otherwise separated from the service of
an employer who, in turn, suffered financial losses and revenues
is entitled to separation pay.
Private respondent Bonifacio Pedroso was employed by petitioner
first, as a truck helper, and later as a delivery truck driver with a
monthly salary of P900.00 starting from 1966 until December
1984 when the number of working days of private respondent was
reduced to just two days a week due to the financial losses
suffered by the business of petitioner. Thus, private respondent
filed a complaint for illegal dismissal and the payment of
separation pay in the Department of Labor and Employment
(DOLE).
In a decision dated September 12, 1985, the labor arbiter ruled
that inasmuch as the working arrangement of private respondent
was rotated in such a way that the number of his working days
had been substantially reduced for more than six (6) months since
December, 1984 and considering that the financial crisis of
petitioner has not eased, private respondent is entitled to the
payment of separation pay as if he was actually retrenched, in the
amount of P8,100.00.
Petitioner brought an appeal to the respondent National Labor
Relations Commission (NLRC). In a decision dated July 3, 1987,
the NLRC affirmed the said decision of the labor arbiter. The
NLRC held that there was in effect a "constructive dismissal" of
private respondent considering that his rotation of work was not
with his consent and that the same was not reported to the DOLE,
and considering further that more than six (6) months have
already lapsed but the financial crisis of petitioner had not been
adverted to.
Petitioner now filed this petition for review which should have
been be a petition for certiorari under Rule 65 of the Rules of
Court, wherein it is alleged that the NLRC committed a grave
abuse of discretion in affirming the payment of separation pay to
private respondent when he had not been actually dismissed from
the service.
Article 283 of the Labor Code provides as follows:
ART. 283. Closure of establishment and
reduction of personnel. —The employer may
also terminate the employment of any employee
due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the
establishment or undertaking unless the closing
is for the purpose of circumventing the
provisions of this title, by serving a written
notice on the workers and the Ministry of Labor
and Employment at least one (1) month before
the intended date thereof In case of termination
due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever
is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of
operations of establishment or undertaking not
due to serious business losses or financial
reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2)
month pay for every year of service, whichever
is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
Under the foregoing provision of law, an employer may terminate
the employment of any employee due to the following causes: (1)
installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) the closing or cessation of
operation of the establishment or undertaking, unless the closing
is for the purpose of circumventing the provisions of law. It is
required that to effect such termination of any employee, the
employer must serve a written notice on the workers and the
DOLE at least one (1) month before the intended date thereof.
The purpose of such previous notice to DOLE must be to enable it
to ascertain the verity of the cause for termination of employment.
In case of termination due to the installation of labor-saving
devices or redundancy the worker affected thereby shall be
entitled to separation pay equivalent to at least one (1) month pay
or to at least one month pay for every year of service, whichever
is higher. However, in case of retrenchment to prevent losses and
in cases of closure or cessation of operations of the establishment
or undertaking not due to serious business losses or financial
reverses, the separation pay shall be equivalent to one (1) month
pay or at least one-half (1/2) month pay for every year of service,
whichever is higher.
In this case, it is admitted that private respondent had not been
terminated or retrenched by petitioner but that due to financial
crisis the number of working days of private respondent was
reduced to just two days a week. Petitioner could not have been
expected to notify DOLE of the retrenchment of private
respondent under the circumstances for there was no intention to
do so on the part of petitioner.
By the same token, if an employee consented to his retrenchment
or voluntarily applied for retrenchment with the employer due to
the installation of labor-saving devices, redundancy, closure or
cessation of operation or to prevent financial losses to the
business of the employer, the required previous notice to the
DOLE is not necessary as the employee thereby acknowledged
the existence of a valid cause for termination of his employment.
Nevertheless, considering that private respondent had been
rotated by petitioner for over six (6) months due to the serious
losses in the business so that private respondent had been
effectively deprived a gainful occupation thereby, and considering
further that the business of petitioner was ultimately closed and
sold off, the Court finds, and so holds that the NLRC correctly
ruled that private respondent was thereby constructively
dismissed or retrenched from employment. Under Article 286 of
the Labor Code, it is provided as follows:
ART. 286. When employment not deemed
terminated. — The bonafide suspension of the
operation of a business or undertaking for a
period not exceeding six months, or the
fulfillment by the employee of a military or civic
duty shall not terminate employment in all such
cases, the employer shall reinstate the
employee to his former position without loss of
seniority rights if he indicates his desire to
resume his work not later than one month from
the resumption of operations of his employer or
from his relief from the military or civic duty.
From the foregoing it is clear that when the bona fide suspension
of the operation of a business or undertaking exceeds six (6)
months then the employment of the employee shall be deemed
terminated.
110
Thus, private respondent is entitled to one (1) month pay or at
least (1/2) month pay for every year of service, whichever is
higher. The Court assumes that the award of P8,100.00
separation pay in favor of the private respondent was computed in
accordance with the foregoing formula as provided by law.
Otherwise, it should be recomputed accordingly.
WHEREFORE, the petition is DISMISSED for lack of merit,
without pronouncement as to costs. This decision is immediately
executory.
SO ORDERED.
Narvasa, Cruz, Griñ;o-Aquino and Medialdea, JJ., concur.
G.R. No. 100092 December 29, 1995
CENTRAL AZUCARERA DE LA CARLOTA, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FOURTH
DIVISION, CEBU CITY and REYNALDO
DECREPITO, respondents.
KAPUNAN, J.:
This petition for certiorari under Rule 65 of the Revised Rules of
Court seeks to set aside the decision of the National Labor
Relations Commission promulgated on 24 January 1991 in NLRC-
RAB-VI-06-09-10344-89 reversing the decision of Labor Arbiter
Cesar P. Sideno dated 27 March 1989 and the resolution dated
14 March 1991 denying petitioner's motion for reconsideration
thereof.
Derived from the record are the antecedent facts:
Private respondent Reynaldo Decrepito began his employment
with petitioner in April 1981 and worked his way up to his present
position as Accounting Clerk II, earning a monthly salary of
P1,801.00.1
On 31 March 1987 petitioner's Board of Directors passed a
resolution authorizing its Vice President-Resident Manager to
undertake and implement a comprehensive cost reduction
program to address petitioner's financial difficulties "on account of
huge financial losses suffered due to a big production shortfall (in
the) last crop year (which) was further aggravated by the
reduction of areas planted to cane in the district and the recent
dry spell."2
Subsequently, petitioner apprised Reynaldo Decrepito of his
dismissal due to retrenchment through a memorandum dated 18
June 1987 terminating his services effective 23 June 1987.3
Decrepito received P2,622.00 as retrenchment pay and on 27
July 1987 he executed a Release and Quitclaim absolving
petitioner from any and all claims or liabilities.4
Alleging that the retrenchment program resorted to by petitioner
was not based on valid grounds, on 16 September 1988, private
respondent Decrepito filed a complaint against petitioner for
reinstatement with backwages, moral damages and attorney's
fees.
On 27 March 1989, Labor Arbiter Cesar D. Sideno dismissed the
case for lack of merit. He opined that private respondent freely
accepted the retrenchment and its concomitant effects as
evidenced by his receipt of separation pay and the release and
quitclaim he voluntarily signed. He was, therefore, estopped from
questioning the same. The Labor Arbiter, likewise, ruled that
petitioner was not precluded from hiring qualified persons to
technical and sensitive positions, observing that private
respondent failed to prove that he was qualified to fill up said
positions.5
On appeal, the NLRC, in its assailed decision dated 24 January
1991, reversed the decision of the Labor Arbiter on grounds that
petitioner failed to comply with both the substantive and
procedural requirements of a valid retrenchment. The dispositive
portion reads thus:
WHEREFORE, in view of all the foregoing, the
decision appealed from is REVERSED and SET
ASIDE and a new one entered finding the
dismissal of complainant illegal. Respondent is
hereby ordered to reinstate the complainant to
his former position or substantially equivalent
position without loss of seniority and to pay his
backwages for three (3) years without
qualification or deduction.
The attorney's fees is hereby fixed at
P2,500.00.
The amount of P2,622.00 received by the
complainant as separation pay and his
acknowledged debt of P11,737.00 less payment
he may have made on said account, if any,
shall be deducted from the award of backwages
herein.
All other claims are dismissed.
SO ORDERED.6
Aggrieved, petitioner challenged the aforementioned decision on
the following grounds:
A
The Respondent Commission whimsically and
capriciously disregarded petitioner's clear and
unrebutted evidence that there was justifiable
and legal basis for retrenchment.
B
The Respondent Commission whimsically and
capriciously concluded that the petitioner has
the propensity to abuse the privilege granted
the employees under Article 283 of the Labor
Code.
C
The Respondent Commission whimsically and
capriciously concluded that the petitioner has
no criterion in the implementation of
retrenchment process.
D
The Respondent Commission whimsically and
capriciously required the petitioner to prove
losses in order to validly adopt and implement
retrenchment of employees.
111
 E xxx xxx xxx
The Respondent Commission totally
disregarded and whimsically ignored the
findings of the Honorable Labor Arbiter that
respondent Decrepito fully and voluntarily
accepted his retrenchment, with full knowledge
of its effects and consequences.
F be insubstantial and inconsequential in
The Respondent Commission ordered
reinstatement with backwages, notwithstanding
the fact that the retrenchment of respondent
Decrepito was for just causes and voluntarily
accepted by the private respondent.7
The petition has no merit and we deny the same.
The controversy may be narrowed down to two main issues:
a) Whether or not the dismissal of private respondent due to
retrenchment was valid and justified, and;
b) Whether or not private respondent was estopped from
questioning his dismissal on the basis of the release and quitclaim
he allegedly freely signed.
We shall resolve the issues sequentially.
Art. 283 of the Labor Code8 allows employers to dismiss
employees on economic grounds and retrenchment, to avoid or
minimize business losses, is one such ground.
Retrenchment is a management prerogative, a means to protect
and preserve the employer's viability and ensure his survival.
When confronted by trying times, this Court should respect and
uphold such prerogative, subject, however, to faithful compliance
by management with the substantive and procedural requirements
laid down by law and jurisprudence.
On the substantive aspect, the employer should comply with the
so-called "four standards of retrenchment" as enumerated and
elucidated in the case of Lopez Sugar Corporation v. Federation
of Free Workers:9
We consider it may be useful to sketch the
general standards in terms of which the acts of
petitioner employer must be
appraised. Firstly, the losses expected should
be substantial and not merely de minimis in
extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to
character, the bonafide nature of the
retrenchment would appear to be seriously in
question. Secondly, the substantial loss
apprehended must be reasonably imminent, as
such imminence can be perceived objectively
and in good faith by the employer. There
should, in other words, be a certain degree of
urgency for the retrenchment, which is after all
a drastic recourse with serious consequences
for the livelihood of the employees retired or
otherwise laid-off. Because of the consequential
nature of retrenchment, it must, thirdly, be
reasonably necessary and likely to effectively
prevent the expected losses. The employer
should have taken other measures prior or
parallel to retrenchment to forestall losses, i.e.,
cut other costs than labor costs. An employer
who, for instance, lays off substantial numbers
of workers while continuing to dispense fat
executive bonuses and perquisites or so-called
"golden parachutes", can scarcely claim to be
retrenching in good faith to avoid losses. To
impart operational meaning to the constitutional
policy of providing "full protection" to labor, the
employer's prerogative to bring down labor
costs by retrenching must be exercised
essentially as a measure of last resort, after
less drastic means — e.g., reduction of both
management and rank-and-file bonuses and
salaries, going on reduced time, improving
manufacturing efficiencies, trimming of
marketing and advertising costs, etc. — have
been tried and found wanting.
Lastly, but certainly not the least important,
alleged losses if already realized, and the
expected imminent losses sought to be
forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring
this quantum of proof is readily apparent: any
less exacting standard of proof would render
too easy the abuse of this ground for
termination of services of employees.
(Emphasis ours.)
xxx xxx xxx
In the case at bench, petitioner dismally failed to present
adequate, credible and persuasive evidence that it was in dire
financial straits and indeed suffering, or will imminently suffer,
from drastic business losses.
A litany of woes, from a labor strike way back in 1982 to the
various crises endured by the sugar industry, droughts, the 1983
assassination of former Senator Benigno Aquino, Jr., high crop
loan interests, spiralling prices of fertilizers and spare parts, the
depression of sugar prices in the world market, cutback in the
U.S. sugar quota, abandonment of productive areas because of
the insurgency problem and the absence of fair and consistent
government policies may have contributed to the unprecedented
decline in sugar production in the country,10 but there is no solid
evidence that they translated into specific and substantial losses
that would necessitate retrenchment. Just exactly what negative
effects were borne by petitioner as a result, petitioner failed to
underscore.
In the case of Indino v. NLRC, we held thus:
It is almost an inflexible rule that employers who
contemplate terminating the services of their
workers cannot be so arbitrary and ruthless as
to find flimsy excuses for their decisions. This
must be so considering that the dismissal of an
employee from work involves not only the loss
of his position but more important, his means of
livelihood. Applying this caveat to the case at
bar, it was therefore incumbent for respondent
DISC, before putting into effect any
retrenchment process on its work force, to show
by convincing evidence that it was being
wrecked by serious financial problems. Simply
stating its state of insolvency or its impending
doom will not be sufficient. To do so would
render the security of tenure of workers and
employees illusory. In a grander scale, to hold
112
 as valid and legal the respondent DISC's act
would be disastrous to labor. Any employer
desirous of ridding itself of its employees could
then easily do so without need to adduce proof
in support of its action. We can not
countenance this. Security of tenure is a right
guaranteed to employees and workers by the
Constitution and should not be denied on the
basis of mere speculation. 11 (Emphasis ours.)
We give little consideration to the certification issued by the Sugar
Regulatory Administration illustrating the decline in petitioner's
sugar production. A similar allegation was made by Lopez Sugar
Corporation against the Federation of Free Workers and we
answered in this wise:
xxx xxx xxx
The submissions made by petitioner in this
respect are basically that from the crop year
1975-1976 to the crop year 1980-1981, the
amount of cane deliveries made to petitioner
Central was declining and that the degree of
utilization of the mill's capacity and the sugar
recovery from the cane actually processed,
were similarly declining. . . .
The principal difficulty with petitioner's case as
above presented was that no proof of actual
declining gross and net revenues were
submitted. No audited financial statements
showing the financial condition of petitioner
corporation during the above mentioned crop
years were submitted. Since financial
statements audited by independent external
auditors constitute the normal method of proof
of the profit and loss performance of a
company, it is not easy to understand why
petitioner should have failed to submit such
financial statements.
Moreover, while petitioner made passing
reference to cost reduction measures it had
allegedly undertaken, it was, once more, a fairly
conspicuous failure to specify the cost-reduction
measures actually undertaken in good faith
before resorting to retrenchment. . . .
.12 (Emphasis ours.)
xxx xxx xxx
As fairly observed by the Office of the Solicitor General:
Petitioner has not shown that alleged decrease
in its production has correspondingly reduced
its income resulting in serious business losses.
It has likewise failed to show how the dismissal
of an office clerk, like private respondent, would
effectively avert further losses and improve its
financial condition.13
Petitioner, in the case at bench, even admitted that it did not
present evidence to prove its business losses. Its rationale that
"because of the timely retrenchments to prevent losses, these
losses were avoided and therefore cannot be proven to have
been incurred" 14 is simply absurd. We have always emphasized
that:
. . . (I)t is essentially required that the alleged
losses in business operations must be prove(n).
(National Federation of Labor Unions [NAFLU]
vs. Ople, 143 SCRA 124 [1986]). Otherwise,
said ground for termination would be
susceptible to abuse by scheming employers
who might be merely feigning business losses
or reverses in their business ventures in order
to ease out employees.15
Petitioner, likewise, failed to comply with the procedural requisites
of Art. 283 of the Labor Code. The law mandatorily requires that
written notice be given to both the employee concerned and the
DOLE at least one (1) month prior to the intended date of
retrenchment to enable the former to find other employment and
the latter to determine the validity of said retrenchment.16
True, petitioner sent private respondent a
memorandum 17 regarding the retrenchment. However, this was
given only five (5) days before the effectivity of said retrenchment.
Worse, the notice of retrenchment was received by the
Department of Labor and Employment (DOLE) only on 1 July
1987 or after private respondent was dismissed.18Such
perfunctory "compliance" cannot be countenanced for it defeats
the purpose of requiring notice in the first place.
On the issue of estoppel, it will suffice to reiterate our ruling
in Lourdes Marcos, et al. v. NLRC:19
We have heretofore explained that the reason
why quitclaims are commonly frowned upon as
contrary to public policy, and why they are held
to be ineffective to bar claims for the full
measure of the workers' legal rights, is the fact
that the employer and the employee obviously
do not stand on the same footing. The employer
drove the employee to the wall. The latter must
have to get hold of money. Because, out of job,
he had to face the harsh necessities of life. He
thus found himself in no position to resist
money proffered. His, then, is a case of
adherence, not of choice. One thing sure,
however, is that petitioners did not relent on
their claim. They pressed it. They are deemed
not have waived any of their rights.
WHEREFORE, the petition for certiorari is hereby DISMISSED
and the decision of the NLRC is hereby AFFIRMED.
SO ORDERED.
G.R. No. 149011 June 28, 2005
SAN MIGUEL CORPORATION, petitioner
vs.
PROSPERO A. ABALLA, BONNY J. ABARING, EDWIN M.
ADLA-ON, ALVIN C. ALCALDE, CELANIO D. ARROLLADO,
EDDIE A. ARROLLADO, REYNALDO T. ASONG, RENE A.
ASPERA, JOEL D. BALATERIA, JOSEPH D. BALATERIA,
JOSE JOLLEN BALLADOS, WILFREDO B. BASAS, EDWIN E.
BEATINGO, SONNY V. BERONDO, CHRISTOPHER D.
BRIONES, MARLON D. BRIONES, JOEL C. BOOC, ENRIQUE
CABALIDA, DIOSCORO R. CAHINOD, ERNESTO P. CAHINOD,
RENANTE S. CAHINOD, RUDERICK R. CALIXTON, RONILO C.
CALVEZ, PANCHO CAÑETE, JUNNY CASTEL, JUDY S.
CELESTE, ROMEO CHUA, DANILO COBRA, ARMANDO C.
DEDOYCO, JOEY R. DELA CRUZ, JOHN D. DELFIN,
RENELITO P. DEON, ARNEL C. DE PEDRO, ORLANDO
DERDER, CLIFFORD A. DESPI, RAMIE A. DESPI, SR., VICTOR
A. DESPI, ROLANDO L. DINGLE, ANTONIO D. DOLORFINO,
LARRY DUMA-OP, NOEL DUMOL, CHITO L. DUNGOG,
RODERICK C. DUQUEZA, ROMMEL ESTREBOR, RIC E.
GALPO, MANSUETO GILLE, MAXIMO L. HILA-US, GERARDO
113
J. JIMENEZ, ROBERTLY Y. HOFILEÑA, ROBERTO
HOFILEÑA, VICENTE INDENCIO, JONATHAN T. INVENTOR,
PETER PAUL T. INVENTOR, JOEBERT G. LAGARTO,
RENATO LAMINA, ALVIN LAS POBRES, ALBERT LAS
POBRES, LEONARD LEMONCHITO, JERRY LIM, JOSE
COLLY S. LUCERO, ROBERTO E. MARTIL, HERNANDO
MATILLANO, VICENTE M. MATILLANO, TANNY C. MENDOZA,
WILLIAM P. NAVARRO, WILSON P. NAVARRO, LEO A.
OLVIDO, ROBERTO G. OTERO, BIENVENIDO C.
PAROCHILIN, REYNALDO C. PAROCHILIN, RICKY
PALANOG, BERNIE O. PILLO, ALBERTO O. PILLO, JOE-
MARIE S. PUGNA, EDWIN G. RIBON, RAUL A. RUBIO, HENRY
S. SAMILLANO, EDGAR SANTIAGO, ROLAND B.
SANTILLANA, ROLDAN V. SAYAM, JOSEPH S. SAYSON,
RENE SUARNABA, ELMAR TABLIGAN, JERRY D. TALITE,
OSCAR TALITE, WINIFREDO TALITE, CAMILO N.
TEMPOROSA, JOSE TEMPOROSA, RANDY TINGALA,
TRISTAN A. TINGSON, ROGELIO TOMESA, DIONISE A.
TORMIS, ADELINO C. UNTAL, FELIX T. UNTAL, RONILO E.
VISTA, JOAN C. VIYO and JOSE JOFER C. VIYO and the
COURT OF APPEALS, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner San Miguel Corporation (SMC), represented by its
Assistant Vice President and Visayas Area Manager for
Aquaculture Operations Leopoldo S. Titular, and Sunflower Multi-
Purpose Cooperative (Sunflower), represented by the Chairman
of its Board of Directors Roy G. Asong, entered into a one-year
Contract of Services1 commencing on January 1, 1993, to be
renewed on a month to month basis until terminated by either
party. The pertinent provisions of the contract read:
1. The cooperative agrees and undertakes to perform
and/or provide for the company, on a non-exclusive
basis for a period of one year the following services for
the Bacolod Shrimp Processing Plant:
A. Messengerial/Janitorial
B. Shrimp Harvesting/Receiving
C. Sanitation/Washing/Cold Storage2
2. To carry out the undertaking specified in the
immediately preceding paragraph, the cooperative shall
employ the necessary personnel and provide adequate
equipment, materials, tools and apparatus, to efficiently,
fully and speedily accomplish the work and services
undertaken by the cooperative. xxx
3. In consideration of the above undertaking the
company expressly agrees to pay the cooperative the
following rates per activity:
A. Messengerial/Janitorial Monthly Fixed
Service Charge of: Nineteen Thousand Five
Hundred Pesos Only (P19,500.00)
B. Harvesting/Shrimp Receiving. – Piece rate of
P0.34/kg. Or P100.00 minimum per
person/activity whichever is higher, with
provisions as follows:
P25.00 Fixed Fee per person
Additional meal allowance P15.00 every meal
time in case harvest duration exceeds one
meal.
This will be pre-set every harvest based on
harvest plan approved by the Senior Buyer.
C. Sanitation/Washing and Cold Storage
P125.00/person for 3 shifts.
One-half of the payment for all services
rendered shall be payable on the fifteenth and
the other half, on the end of each month. The
cooperative shall pay taxes, fees, dues and
other impositions that shall become due as a
result of this contract.
The cooperative shall have the entire charge,
control and supervision of the work and
services herein agreed upon. xxx
4. There is no employer-employee relationship between
the company and the cooperative, or the cooperative and
any of its members, or the company and any members of
the cooperative. The cooperative is an association of
self-employed members, an independent contractor, and
an entrepreneur. It is subject to the control and direction
of the company only as to the result to be accomplished
by the work or services herein specified, and not as to
the work herein contracted. The cooperative and its
members recognize that it is taking a business risk in
accepting a fixed service fee to provide the services
contracted for and its realization of profit or loss from its
undertaking, in relation to all its other undertakings, will
depend on how efficiently it deploys and fields its
members and how they perform the work and manage its
operations.
5. The cooperative shall, whenever possible, maintain
and keep under its control the premises where the work
under this contract shall be performed.
6. The cooperative shall have exclusive discretion in the
selection, engagement and discharge of its member-
workers or otherwise in the direction and control thereof.
The determination of the wages, salaries and
compensation of the member-workers of the cooperative
shall be within its full control. It is further understood that
the cooperative is an independent contractor, and as
such, the cooperative agrees to comply with all the
requirements of all pertinent laws and ordinances, rules
and regulations. Although it is understood and agreed
between the parties hereto that the cooperative, in the
performance of its obligations, is subject to the control or
direction of the company merely as a (sic) result to be
accomplished by the work or services herein specified,
and not as to the means and methods of accomplishing
such result, the cooperative hereby warrants that it will
perform such work or services in such manner as will be
consistent with the achievement of the result herein
contracted for.
xxx
8. The cooperative undertakes to pay the wages or
salaries of its member-workers, as well as all benefits,
premiums and protection in accordance with the
provisions of the labor code, cooperative code and other
applicable laws and decrees and the rules and
regulations promulgated by competent authorities,
assuming all responsibility therefor.
114
 The cooperative further undertakes to submit to the
company within the first ten (10) days of every month, a
statement made, signed and sworn to by its duly
authorized representative before a notary public or other
officer authorized by law to administer oaths, to the effect
that the cooperative has paid all wages or salaries due to
its employees or personnel for services rendered by
them during the month immediately preceding, including
overtime, if any, and that such payments were all in
accordance with the requirements of law.
xxx
12. Unless sooner terminated for the reasons stated in
paragraph 9 this contract shall be for a period of one (1)
year commencing on January 1, 1993. Thereafter, this
Contract will be deemed renewed on a month-to-month
basis until terminated by either party by sending a written
notice to the other at least thirty (30) days prior to the
intended date of termination.
xxx3 (Underscoring supplied)
Pursuant to the contract, Sunflower engaged private respondents
to, as they did, render services at SMC’s Bacolod Shrimp
Processing Plant at Sta. Fe, Bacolod City. The contract was
deemed renewed by the parties every month after its expiration
on January 1, 1994 and private respondents continued to perform
their tasks until September 11, 1995.
In July 1995, private respondents filed a complaint before the
NLRC, Regional Arbitration Branch No. VI, Bacolod City, praying
to be declared as regular employees of SMC, with claims for
recovery of all benefits and privileges enjoyed by SMC rank and
file employees.
Private respondents subsequently filed on September 25, 1995 an
Amended Complaint4 to include illegal dismissal as additional
cause of action following SMC’s closure of its Bacolod Shrimp
Processing Plant on September 15, 19955 which resulted in the
termination of their services.
SMC filed a Motion for Leave to File Attached Third Party
Complaint6 dated November 27, 1995 to implead Sunflower as
Third Party Defendant which was, by Order7 of December 11,
1995, granted by Labor Arbiter Ray Alan T. Drilon.
In the meantime, on September 30, 1996, SMC filed before the
Regional Office at Iloilo City of the Department of Labor and
Employment (DOLE) a Notice of Closure8 of its aquaculture
operations effective on even date, citing serious business losses.
By Decision of September 23, 1997, Labor Arbiter Drilon
dismissed private respondents’ complaint for lack of merit,
ratiocinating as follows:
We sustain the stand of the respondent SMC that it could properly
exercise its management prerogative to contract out the
preparation and processing aspects of its aquaculture operations.
Judicial notice has already been taken regarding the general
practice adopted in government and private institutions and
industries of hiring independent contractors to perform special
services. xxx
xxx
Indeed, the law allows job contracting. Job contracting is
permissible under the Labor Code under specific conditions and
we do not see how this activity could not be legally undertaken by
an independent service cooperative like the third-party respondent
herein.
There is no basis to the demand for regularization simply on the
theory that complainants performed activities which are necessary
and desirable in the business of respondent. It has been held
that the definition of regular employees as those who perform
activities which are necessary and desirable for the business of
the employer is not always determinative because any agreement
may provide for one (1) party to render services for and in behalf
of another for a consideration even without being hired as an
employee.
The charge of the complainants that third-party respondent is a
mere labor-only contractor is a sweeping generalization and
completely unsubstantiated. xxx In the absence of clear and
convincing evidence showing that third-party respondent acted
merely as a labor only contractor, we are firmly convinced of the
legitimacy and the integrity of its service contract with respondent
SMC.
In the same vein, the closure of the Bacolod Shrimp Processing
Plant was a management decision purely dictated by economic
factors which was (sic) mainly serious business losses. The law
recognizes the right of the employer to close his business or
cease his operations for bonafide reasons, as much as it
recognizes the right of the employer to terminate the employment
of any employee due to closure or cessation of business
operations, unless the closing is for the purpose of circumventing
the provisions of the law on security of tenure. The decision of
respondent SMC to close its Bacolod Shrimp Processing Plant,
due to serious business losses which has (sic) clearly been
established, is a management prerogative which could hardly be
interfered with.
xxx The closure did affect the regular employees and workers of
the Bacolod Processing Plant, who were accordingly terminated
following the legal requisites prescribed by law. The closure,
however, in so far as the complainants are concerned, resulted in
the termination of SMC’s service contract with their
cooperative xxx9(Underscoring supplied)
Private respondents appealed to the NLRC.
By Decision of December 29, 1998, the NLRC dismissed the
appeal for lack of merit, it finding that third party respondent
Sunflower was an independent contractor in light of its
observation that "[i]n all the activities of private respondents, they
were under the actual direction, control and supervision of third
party respondent Sunflower, as well as the payment of wages,
and power of dismissal."10
Private respondents’ Motion for Reconsideration11 having been
denied by the NLRC for lack of merit by Resolution of September
10, 1999, they filed a petition for certiorari 12 before the Court of
Appeals (CA).
Before the CA, SMC filed a Motion to Dismiss13 private
respondents’ petition for non-compliance with the Rules on Civil
Procedure and failure to show grave abuse of discretion on the
part of the NLRC.
SMC subsequently filed its Comment14 to the petition on March
30, 2000.
By Decision of February 7, 2001, the appellate court reversed the
NLRC decision and accordingly found for private respondents,
disposing as follows:
WHEREFORE, the petition is GRANTED. Accordingly, judgment
is hereby RENDERED: (1) REVERSING and SETTING ASIDE
115
both the 29 December 1998 decision and 10 September 1999
resolution of the National Labor Relations Commission (NLRC),
Fourth Division, Cebu City in NLRC Case No. V-0361-97 as well
as the 23 September 1997 decision of the labor arbiter in RAB
Case No. 06-07-10316-95; (2) ORDERING the respondent, San
Miguel Corporation, to GRANT petitioners: (a) separation pay in
accordance with the computation given to the regular SMC
employees working at its Bacolod Shrimp Processing Plant with
full backwages, inclusive of allowances and other benefits or their
monetary equivalent, from 11 September 1995, the time their
actual compensation was withheld from them, up to the time of
the finality of this decision; (b) differentials pays (sic) effective as
of and from the time petitioners acquired regular employment
status pursuant to the disquisition mentioned above, and all such
other and further benefits as provided by applicable collective
bargaining agreement(s) or other relations, or by law, beginning
such time up to their termination from employment on 11
September 1995; and ORDERING private respondent SMC to
PAY unto the petitioners attorney’s fees equivalent to ten (10%)
percent of the total award.
No pronouncement as to costs.
SO ORDERED.15 (Underscoring supplied)
Justifying its reversal of the findings of the labor arbiter and the
NLRC, the appellate court reasoned:
Although the terms of the non-exclusive contract of service
between SMC and [Sunflower] showed a clear intent to abstain
from establishing an employer-employee relationship between
SMC and [Sunflower] or the latter’s members, the extent to which
the parties successfully realized this intent in the light of the
applicable law is the controlling factor in determining the real and
actual relationship between or among the parties.
xxx
With respect to the power to control petitioners’ conduct, it
appears that petitioners were under the direct control and
supervision of SMC supervisors both as to the manner they
performed their functions and as to the end results thereof. It was
only after petitioners lodged a complaint to have their status
declared as regular employees of SMC that certain members of
[Sunflower] began to countersign petitioners’ daily time records to
make it appear that they (petitioners) were under the control and
supervision of [Sunflower] team leaders (rollo, pp. 523-527). xxx
Even without these instances indicative of control by SMC over
the petitioners, it is safe to assume that SMC would never have
allowed the petitioners to work within its premises, using its own
facilities, equipment and tools, alongside SMC employees
discharging similar or identical activities unless it exercised a
substantial degree of control and supervision over the
petitioners not only as to the manner they performed their
functions but also as to the end results of such functions.
xxx
xxx it becomes apparent that [Sunflower] and the petitioners do
not qualify as independent contractors. [Sunflower] and the
petitioners did not have substantial capital or investment in the
form of tools, equipment, implements, work premises, et cetera
necessary to actually perform the service under their own
account, responsibility, and method. The only "work premises"
maintained by [Sunflower] was a small office within the confines of
a small "carinderia" or refreshment parlor owned by the mother of
its chair, Roy Asong; the only equipment it owned was a
typewriter (rollo, pp. 525-525) and, the only assets it provided
SMC were the bare bodies of its members, the petitioners
herein (rollo, p. 523).
In addition, as shown earlier, petitioners, who worked inside the
premises of SMC, were under the control and supervision of SMC
both as to the manner and method in discharging their functions
and as to the results thereof.
Besides, it should be taken into account that the activities
undertaken by the petitioners as cleaners, janitors, messengers
and shrimp harvesters, packers and handlers were directly related
to the aquaculture business of SMC(See Guarin vs. NLRC, 198
SCRA 267, 273). This is confirmed by the renewal of the service
contract from January 1993 to September 1995, a period of close
to three (3) years.
Moreover, the petitioners here numbering ninety seven (97), by
itself, is a considerable workforce and raises the suspicion that
the non-exclusive service contract between SMC and [Sunflower]
was "designed to evade the obligations inherent in an employer-
employee relationship" (See Rhone-Poulenc Agrochemicals
Philippines, Inc. vs. NLRC, 217 SCRA 249, 259).
Equally suspicious is the fact that the notary public who
signed the by-laws of [Sunflower] and its [Sunflower]
retained counsel are both partners of the local counsel of
SMC (rollo, p. 9).
xxx
With these observations, no other logical conclusion can be
reached except that [Sunflower] acted as an agent of SMC,
facilitating the manpower requirements of the latter, the real
employer of the petitioners. We simply cannot allow these two
entities through the convenience of a non-exclusive service
contract to stipulate on the existence of employer-employee
relation. Such existence is a question of law which cannot be
made the subject of agreement to the detriment of the petitioners
(Tabas vs. California Manufacturing, Inc., 169 SCRA 497, 500).
xxx
There being a finding of "labor-only" contracting, liability must be
shouldered either by SMC or [Sunflower] or shared by both
(See Tabas vs. California Manufacturing, Inc., supra, p. 502).
SMC however should be held solely liablefor
[Sunflower] became non-existent with the closure of the
aquaculture business of SMC.
Furthermore, since the closure of the aquaculture operations of
SMC appears to be valid, reinstatement is no longer feasible.
Consistent with the pronouncement in Bustamante, et al., vs.
NLRC, G.R. No. 111651, 28 November 1996, petitioners are thus
entitled to separation pay (in the computation similar to those
given to regular SMC employees at its Bacolod Shrimp
Processing Plant) "with full backwages, inclusive of allowances
and other benefits or their monetary equivalent, from the time their
actual compensation was withheld from them" up to the time of
the finality of this decision. This is without prejudice to differentials
pays (sic) effective as of and from the time petitioners acquired
regular employment status pursuant to the discussion mentioned
above, and all such other and further benefits as provided by
applicable collective bargaining agreement(s) or other relations, or
by law, beginning such time up to their termination from
employment on 11 September 1995.16 (Emphasis and
underscoring supplied)
SMC’s Motion for Reconsideration17 having been denied for lack
of merit by Resolution of July 11, 2001, it comes before this Court
via the present petition for review on certiorari assigning to the CA
the following errors:
116
 I requirements completely disregarded.21 It does not, however,
THE COURT OF APPEALS GRAVELY ERRED IN GIVING DUE
COURSE AND GRANTING RESPONDENTS’ PATENTLY
DEFECTIVE PETITION FOR CERTIORARI. IN DOING SO, THE
COURT OF APPEALS DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS.
II
THE COURT OF APPEALS GRAVELY ERRED IN
RECOGNIZING ALL THE RESPONDENTS AS
COMPLAINANTS IN THE CASE BEFORE THE LABOR
ARBITER. IN DOING SO, THE COURT OF APPEALS DECIDED
THIS CASE IN A MANNER NOT IN ACCORD WITH LAW OR
WITH THE APPLICABLE DECISIONS OF THE SUPREME
COURT.
III
THE COURT OF APPEALS GRAVELY ERRED IN FINDING
THAT RESPONDENTS ARE EMPLOYEES OF SMC.
IV
THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDNG
(sic) THAT RESPONDENTS ARE NOT ENTITLED TO ANY
RELIEF. THE CLOSURE OF THE BACOLOD SHRIMP
PROCESSING PLANT WAS DUE TO SERIOUS BUSINESS
LOSSES.18 (Underscoring supplied)
SMC bewails the failure of the appellate court to outrightly dismiss
the petition for certiorari as only three out of the ninety seven
named petitioners signed the verification and certification against
forum-shopping.
While the general rule is that the certificate of non-forum shopping
must be signed by all the plaintiffs or petitioners in a case and the
signature of only one of them is insufficient,19 this Court has
stressed that the rules on forum shopping, which were designed
to promote and facilitate the orderly administration of justice,
should not be interpreted with such absolute literalness as to
subvert its own ultimate and legitimate objective.20 Strict
compliance with the provisions regarding the certificate of non-
forum shopping merely underscores its mandatory nature in that
the certification cannot be altogether dispensed with or its
thereby interdict substantial compliance with its provisions under
justifiable circumstances.22
Thus in the recent case of HLC Construction and Development
Corporation v. Emily Homes Subdivision Homeowners
Association,23 this Court held:
Respondents (who were plaintiffs in the trial court) filed the
complaint against petitioners as a group, represented by their
homeowners’ association president who was likewise one of the
plaintiffs, Mr. Samaon M. Buat. Respondents raised one cause of
action which was the breach of contractual obligations and
payment of damages. They shared a common interest in the
subject matter of the case, being the aggrieved residents of the
poorly constructed and developed Emily Homes Subdivision. Due
to the collective nature of the case, there was no doubt that Mr.
Samaon M. Buat could validly sign the certificate of non-forum
shopping in behalf of all his co-plaintiffs. In cases therefore where
it is highly impractical to require all the plaintiffs to sign the
certificate of non-forum shopping, it is sufficient, in order not to
defeat the ends of justice, for one of the plaintiffs, acting as
representative, to sign the certificate provided that xxx
the plaintiffs share a common interest in the subject matter of
the case or filed the case as a "collective," raising only one
common cause of action or defense.24 (Emphasis and
underscoring supplied)
Given the collective nature of the petition filed before the appellate
court by herein private respondents, raising one common cause of
action against SMC, the execution by private respondents
Winifredo Talite, Renelito Deon and Jose Temporosa in behalf of
all the other private respondents of the certificate of non-forum
shopping constitutes substantial compliance with the
Rules.25 That the three indeed represented their co-petitioners
before the appellate court is, as it correctly found, "subsequently
proven to be true as shown by the signatures of the majority of the
petitioners appearing in their memorandum filed before Us."26
Additionally, the merits of the substantive aspects of the case may
also be deemed as "special circumstance" or "compelling reason"
to take cognizance of a petition although the certification against
forum shopping was not executed and signed by all of the
petitioners.27
SMC goes on to argue that the petition filed before the CA is
fatally defective as it was not accompanied by "copies of all
pleadings and documents relevant and pertinent thereto" in
contravention of Section 1, Rule 65 of the Rules of Court.28
This Court is not persuaded. The records show that private
respondents appended the following documents to their petition
before the appellate court: the September 23, 1997 Decision of
the Labor Arbiter,29 their Notice of Appeal with Appeal
Memorandum dated October 16, 1997 filed before the
NLRC,30 the December 29, 1998 NLRC D E C I S I O
N,31 their Motion for Reconsideration dated March 26, 1999 filed
with the NLRC32 and the September 10, 1999 NLRC Resolution.33
It bears stressing at any rate that it is the appellate court which
ultimately determines if the supporting documents are sufficient to
make out a prima facie case.34 It discerns whether on the basis of
what have been submitted it could already judiciously determine
the merits of the petition.35 In the case at bar, the CA found that
the petition was adequately supported by relevant and pertinent
documents.
At all events, this Court has allowed a liberal construction of the
rule on the accomplishment of a certificate of non-forum shopping
in the following cases: (1) where a rigid application will result in
manifest failure or miscarriage of justice; (2) where the interest of
substantial justice will be served; (3) where the resolution of the
motion is addressed solely to the sound and judicious discretion
of the court; and (4) where the injustice to the adverse party is not
commensurate with the degree of his thoughtlessness in not
complying with the procedure prescribed.36
Rules of procedure should indeed be viewed as mere tools
designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to
frustrate rather than promote substantial justice, must always be
eschewed.37
SMC further argues that the appellate court exceeded its
jurisdiction in reversing the decisions of the labor arbiter and the
NLRC as "findings of facts of quasi-judicial bodies like the NLRC
are accorded great respect and finality," and that this principle
acquires greater weight and application in the case at bar as the
labor arbiter and the NLRC have the same factual findings.
The general rule, no doubt, is that findings of facts of an
administrative agency which has acquired expertise in the
particular field of its endeavor are accorded great weight on
appeal.38 The rule is not absolute and admits of certain well-
117
recognized exceptions, however. Thus, when the findings of fact
of the labor arbiter and the NLRC are not supported by substantial
evidence or their judgment was based on a misapprehension of
facts, the appellate court may make an independent evaluation of
the facts of the case.39
SMC further faults the appellate court in giving due course to
private respondents’ petition despite the fact that the complaint
filed before the labor arbiter was signed and verified only by
private respondent Winifredo Talite; that private respondents’
position paper40 was verified by only six41 out of the ninety seven
complainants; and that their Joint-Affidavit42 was executed only by
twelve43 of the complainants.
Specifically with respect to the Joint-Affidavit of private
respondents, SMC asserts that it should not have been
considered by the appellate court in establishing the claims of
those who did not sign the same, citing this Court’s ruling
in Southern Cotabato Development and Construction, Inc. v.
NLRC.44
SMC’s position does not lie.
A perusal of the complaint shows that the ninety seven
complainants were being represented by their counsel of choice.
Thus the first sentence of their complaint alleges: "xxx
complainants, by counsel and unto this Honorable Office
respectfully state xxx." And the complaint was signed by Atty.
Jose Max S. Ortiz as "counsel for the complainants." Following
Section 6, Rule III of the 1990 Rules of Procedure of the NLRC,
now Section 7, Rule III of the 1999 NLRC Rules, Atty. Ortiz is
presumed to be properly authorized by private respondents in
filing the complaint.
That the verification wherein it is manifested that private
respondent Talite was one of the complainants and was causing
the preparation of the complaint "with the authority of my co-
complainants" indubitably shows that Talite was representing the
rest of his co-complainants in signing the verification in
accordance with Section 7, Rule III of the 1990 NLRC Rules, now
Section 8, Rule 3 of the 1999 NLRC Rules, which states:
Section 7. Authority to bind party. – Attorneys and other
representatives of parties shall have authority to bind their clients
in all matters of procedure; but they cannot, without a special
power of attorney or express consent, enter into a compromise
agreement with the opposing party in full or partial discharge of a
client’s claim. (Underscoring supplied)
As regards private respondents’ position paper which bore the
signatures of only six of them, appended to it was an
Authority/Confirmation of Authority45 signed by the ninety one
others conferring authority to their counsel "to file RAB Case No.
06-07-10316-95, entitled Winifredo Talite et al. v. San Miguel
Corporation presently pending before the sala of Labor Arbiter
Ray Alan Drilon at the NLRC Regional Arbitration Branch No. VI
in Bacolod City" and appointing him as their retained counsel to
represent them in the said case.
That there has been substantial compliance with the requirement
on verification of position papers under Section 3, Rule V of the
1990 NLRC Rules of Procedure46 is not difficult to appreciate in
light of the provision of Section 7, Rule V of the 1990 NLRC
Rules, now Section 9, Rule V of the 1999 NLRC Rules which
reads:
Section 7. Nature of Proceedings. – The proceedings before a
Labor Arbiter shall be non-litigious in nature. Subject to the
requirements of due process, the technicalities of law and
procedure and the rules obtaining in the courts of law shall not
strictly apply thereto. The Labor Arbiter may avail himself of all
reasonable means to ascertain the facts of the controversy
speedily, including ocular inspection and examination of well-
informed persons. (underscoring supplied)
As regards private respondents’ Joint-Affidavit which is being
assailed in view of the failure of some complainants to affix their
signatures thereon, this Court quotes with approval the appellate
court’s ratiocinations:
A perusal of the Southern Cotabato Development Case would
reveal that movant did not quote the whole text of paragraph 5 on
page 865 of 280 SCRA. The whole paragraph reads:
"Clearly then, as to those who opted to move for the dismissal of
their complaints, or did not submit their affidavits nor appear
during trial and in whose favor no other independent evidence
was adduced, no award for back wages could have been validly
and properly made for want of factual basis. There is no showing
at all that any of the affidavits of the thirty-four (34) complainants
were offered as evidence for those who did not submit their
affidavits, or that such affidavits had any bearing at all on the
rights and interest of the latter. In the same vein, private
respondent’s position paper was not of any help to these
delinquent complainants.
The implication is that as long as the affidavits of the
complainants were offered as evidence for those who did not
submit theirs, or the affidavits were material and relevant to
the rights and interest of the latter, such affidavits may be
sufficient to establish the claims of those who did not give
their affidavits.
Here, a reading of the joint affidavit signed by twelve (12) of the
ninety-seven (97) complainants (petitioners herein) would readily
reveal that the affidavit was offered as evidence not only for the
signatories therein but for all of the complainants. (These ninety-
seven (97) individuals were previously identified during the
mandatory conference as the only complainants in the
proceedings before the labor arbiter) Moreover, the affidavit
touched on the common interest of all of the complainants as it
supported their claim of the existence of an employer-employee
relationship between them and respondent SMC. Thus, the said
affidavit was enough to prove the claims of the rest of the
complainants.47 (Emphasis supplied, underscoring in the original)
In any event, SMC is reminded that the rules of evidence
prevailing in courts of law or equity do not control proceedings
before the Labor Arbiter. So Article 221 of the Labor Code
enjoins:
ART. 221. Technical rules not binding and prior resort to
amicable settlement. – In any proceeding before the
Commission or any of the Labor Arbiters, the rules of evidence
prevailing in courts of law or equity shall not be controlling and it is
the spirit and intention of this Code that the Commission and its
members and the Labor Arbiters shall use every and all
reasonable means to ascertain the facts in each case speedily
and objectively and without regard to technicalities of law or
procedure, all in the interest of due process. xxx
As such, their application may be relaxed to serve the demands of
substantial justice.48
On the merits, the petition just the same fails.
SMC insists that private respondents are the employees of
Sunflower, an independent contractor. On the other hand, private
respondents assert that Sunflower is a labor-only contractor.
118
Article 106 of the Labor Code provides:
ART. 106. Contractor or subcontracting. – Whenever an
employer enters into a contract with another person for the
performance of the former’s work, the employees of the contractor
and of the latter’s subcontractor, if any shall be paid in
accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the
wages of his employees in accordance with this Code, the
employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work
performed under the contract, in the same manner and extent that
he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or
prohibit the contracting out of labor to protect the rights of workers
established under the Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting
and job contracting as well as differentiations within these types of
contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent
any violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying
workers to an employer does not have substantial capital or
investment in the form of tools, equipment, machineries, work
premises, among others, and the workers recruited and placed by
such person are performing activities which are directly related to
the principal business of such employer. In such cases, the
person or intermediary shall be considered merely as an agent of
the employer who shall be responsible to the workers in the same
manner and extent as if the latter were directly employed by him.
Rule VIII-A, Book III of the Omnibus Rules Implementing the
Labor Code, as amended by Department Order No. 18,
distinguishes between legitimate and labor-only contracting:
Section 3. Trilateral Relationship in Contracting
Arrangements. In legitimate contracting, there exists a trilateral
relationship under which there is a contract for a specific job, work
or service between the principal and the contractor or
subcontractor, and a contract of employment between the
contractor or subcontractor and its workers. Hence, there are
three parties involved in these arrangements, the principal which
decides to farm out a job or service to a contractor or
subcontractor, the contractor or subcontractor which has the
capacity to independently undertake the performance of the job,
work or service, and the contractual workers engaged by the
contractor or subcontractor to accomplish the job, work or service.
Section 5. Prohibition against labor-only contracting. Labor-
only contracting Sis hereby declared prohibited. For this purpose,
labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places
workers to perform a job, work or service for a principal, and any
of the following elements are present:
i) The contractor or subcontractor does not have
substantial capital or investment which relates to the job,
work or service to be performed and the employees
recruited, supplied or placed by such contractor or
subcontractor are performing activities which are directly
related to the main business of the principal, or
ii) The contractor does not exercise the right to control
over the performance of the work of the contractual
employee.
The foregoing provisions shall be without prejudice to the
application of Article 248 (c) of the Labor Code, as amended.
"Substantial capital or investment" refers to capital stocks and
subscribed capitalization in the case of corporations, tools,
equipment, implements, machineries and work premises, actually
and directly used by the contractor or subcontractor in the
performance or completion of the job, work or service contracted
out.
The "right to control" shall refer to the right reserved to the person
for whom the services of the contractual workers are performed,
to determine not only the end to be achieved, but also the manner
and means to be used in reaching that end.
The test to determine the existence of independent contractorship
is whether one claiming to be an independent contractor has
contracted to do the work according to his own methods and
without being subject to the control of the employer, except
only as to the results of the work.49
In legitimate labor contracting, the law creates an employer-
employee relationship for a limited purpose, i.e., to ensure that the
employees are paid their wages. The principal employer becomes
jointly and severally liable with the job contractor, only for the
payment of the employees’ wages whenever the contractor fails to
pay the same. Other than that, the principal employer is not
responsible for any claim made by the employees.50
In labor-only contracting, the statute creates an employer-
employee relationship for a comprehensive purpose: to prevent a
circumvention of labor laws. The contractor is considered merely
an agent of the principal employer and the latter is responsible to
the employees of the labor-only contractor as if such employees
had been directly employed by the principal employer. 51
The Contract of Services between SMC and Sunflower shows that
the parties clearly disavowed the existence of an employer-
employee relationship between SMC and private
respondents. The language of a contract is not, however,
determinative of the parties’ relationship; rather it is the totality of
the facts and surrounding circumstances of the case.52 A party
cannot dictate, by the mere expedient of a unilateral declaration in
a contract, the character of its business, i.e., whether as labor-
only contractor or job contractor, it being crucial that its character
be measured in terms of and determined by the criteria set by
statute.53
SMC argues that Sunflower could not have been issued a
certificate of registration as a cooperative if it had no substantial
capital.54
While indeed Sunflower was issued Certificate of Registration No.
IL0-87555 on February 10, 1992 by the Cooperative Development
Authority, this merely shows that it had at least ₱2,000.00 in paid-
up share capital as mandated by Section 5 of Article 1456 of
Republic Act No. 6938, otherwise known as the Cooperative
Code, which amount cannot be considered substantial
capitalization.
What appears is that Sunflower does not have substantial
capitalization or investment in the form of tools, equipment,
machineries, work premises and other materials to qualify it as an
independent contractor.
On the other hand, it is gathered that the lot, building, machineries
and all other working tools utilized by private respondents in
carrying out their tasks were owned and provided by SMC.
Consider the following uncontroverted allegations of private
respondents in the Joint Affidavit:
119
[Sunflower], during the existence of its service contract with
respondent SMC, did not own a single machinery, equipment, or
working tool used in the processing plant. Everything was owned
and provided by respondent SMC. The lot, the building, and
working facilities are owned by respondent SMC. The machineries
and equipments (sic) like washer machine, oven or cooking
machine, sizer machine, freezer, storage, and chilling tanks, push
carts, hydrolic (sic) jack, tables, and chairs were all owned by
respondent SMC. All the boxes, trays, molding pan used in the
processing are also owned by respondent SMC. The gloves and
boots used by the complainants were also owned by respondent
SMC. Even the mops, electric floor cleaners, brush, hoose (sic),
soaps, floor waxes, chlorine, liquid stain removers, lysol and the
like used by the complainants assigned as cleaners were all
owned and provided by respondent SMC.
Simply stated, third-party respondent did not own even a small
capital in the form of tools, machineries, or facilities used in said
prawn processing
xxx
The alleged office of [Sunflower] is found within the confines of a
small "carinderia" or "refreshment" (sic) owned by the mother of
the Cooperative Chairman Roy Asong.
xxx In said . . . office, the only equipment used and owned by
[Sunflower] was a typewriter. 57
And from the job description provided by SMC itself, the work
assigned to private respondents was directly relatedto the
aquaculture operations of SMC. Undoubtedly, the nature of the
work performed by private respondents in shrimp harvesting,
receiving and packing formed an integral part of the shrimp
processing operations of SMC. As for janitorial and messengerial
services, that they are considered directly related to the principal
business of the employer58 has been jurisprudentially recognized.
Furthermore, Sunflower did not carry on an independent business
or undertake the performance of its service contract according to
its own manner and method, free from the control and supervision
of its principal, SMC, its apparent role having been merely to
recruit persons to work for SMC.
Thus, it is gathered from the evidence adduced by private
respondents before the labor arbiter that their daily time records
were signed by SMC supervisors Ike Puentebella, Joemel Haro,
Joemari Raca, Erwin Tumonong, Edison Arguello, and Stephen
Palabrica, which fact shows that SMC exercised the power of
control and supervision over its employees.59 And control of the
premises in which private respondents worked was by SMC.
These tend to disprove the independence of the contractor. 60
More. Private respondents had been working in the aqua
processing plant inside the SMC compound alongside regular
SMC shrimp processing workers performing identical jobs under
the same SMC supervisors.61 This circumstance is another
indicium of the existence of a labor-only contractorship.62
And as private respondents alleged in their Joint Affidavit which
did not escape the observation of the CA, no showing to the
contrary having been proffered by SMC, Sunflower did not cater
to clients other than SMC,63 and with the closure of SMC’s
Bacolod Shrimp Processing Plant, Sunflower likewise ceased to
exist. This Court’s ruling in San Miguel Corporation v. MAERC
Integrated Services, Inc.64 is thus instructive.
xxx Nor do we believe MAERC to have an independent business.
Not only was it set up to specifically meet the pressing needs of
SMC which was then having labor problems in its segregation
division, none of its workers was also ever assigned to any other
establishment, thus convincing us that it was created solely to
service the needs of SMC. Naturally, with the severance of
relationship between MAERC and SMC followed MAERC’s
cessation of operations, the loss of jobs for the whole MAERC
workforce and the resulting actions instituted by the
workers.65(Underscoring supplied)
All the foregoing considerations affirm by more than substantial
evidence the existence of an employer-employee relationship
between SMC and private respondents.
Since private respondents who were engaged in shrimp
processing performed tasks usually necessary or desirable in the
aquaculture business of SMC, they should be deemed regular
employees of the latter66 and as such are entitled to all the
benefits and rights appurtenant to regular employment. 67 They
should thus be awarded differential pay corresponding to the
difference between the wages and benefits given them and those
accorded SMC’s other regular employees.1awphi1.zw+
Respecting the private respondents who were tasked with
janitorial and messengerial duties, this Court quotes with approval
the appellate court’s ruling thereon:
Those performing janitorial and messengerial services
however acquired regular status only after rendering one-year
service pursuant to Article 280 of the Labor Code. Although
janitorial and messengerial services are considered directly
related to the aquaculture business of SMC, they are deemed
unnecessary in the conduct of its principal business; hence, the
distinction (See Coca Cola Bottlers Phils., Inc. v. NLRC, 307
SCRA 131, 136-137 and Philippine Bank of Communications v.
NLRC, supra, p. 359).68
The law of course provides for two kinds of regular employees,
namely: (1) those who are engaged to perform activities which are
usually necessary or desirable in the usual business or trade of
the employer; and (2) those who have rendered at least one year
of service, whether continuous or broken, with respect to the
activity in which they are employed.69
As for those of private respondents who were engaged in janitorial
and messengerial tasks, they fall under the second category and
are thus entitled to differential pay and benefits extended to other
SMC regular employees from the day immediately following their
first year of service.70
Regarding the closure of SMC’s aquaculture operations and the
consequent termination of private respondents, Article 283 of the
Labor Code provides:
ART. 283. Closure of establishment and reduction of
personnel. – The employer may also terminate the employment
of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or to at least one-half
(1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year. (Underscoring supplied)
120
In the case at bar, a particular department under the SMC group
of companies was closed allegedly due to serious business
reverses. This constitutes retrenchment by, and not closure of, the
enterprise or the company itself as SMC has not totally ceased
operations but is still very much an on-going and highly viable
business concern.71
Retrenchment is a management prerogative consistently
recognized and affirmed by this Court. It is, however, subject to
faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence.72
For retrenchment to be considered valid the following substantial
requirements must be met: (a) the losses expected should be
substantial and not merely de minimis in extent; (b) the substantial
losses apprehended must be reasonably imminent such as can
be perceived objectively and in good faith by the employer; (c) the
retrenchment must be reasonably necessary and likely to
effectively prevent the expected losses; and (d) the alleged
losses, if already incurred, and the expected imminent losses
sought to be forestalled, must be proved by sufficient and
convincing evidence.73
In the discharge of these requirements, it is the employer who has
the onus, being in the nature of an affirmative defense. 74
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.75
In the case at bar, company losses were duly established by
financial documents audited by Joaquin Cunanan & Co. showing
that the aquaculture operations of SMC’s Agribusiness Division
accumulated losses amounting to ₱145,848,172.00 in 1992
resulting in the closure of its Calatrava Aquaculture Center in
Negros Occidental, ₱11,393,071.00 in 1993 and ₱80,325,608.00
in 1994 which led to the closure of its San Fernando Shrimp
Processing Plant in Pampanga and the Bacolod Shrimp
Processing Plant in 1995.
SMC has thus proven substantial business reverses justifying
retrenchment of its employees.
For termination due to retrenchment to be valid, however, the law
requires that written notices of the intended retrenchment be
served by the employer on the worker and on the DOLE at least
one (1) month before the actual date of the retrenchment,76 in
order to give employees some time to prepare for the eventual
loss of their jobs, as well as to give DOLE the opportunity to
ascertain the verity of the alleged cause of termination.77
Private respondents, however, were merely verbally informed on
September 10, 1995 by SMC Prawn Manager Ponciano Capay
that effective the following day or on September 11, 1995, they
were no longer to report for work as SMC would be closing its
operations.78
Where the dismissal is based on an authorized cause under
Article 283 of the Labor Code but the employer failed to comply
with the notice requirement, the sanction should be stiff as the
dismissal process was initiated by the employer’s exercise of his
management prerogative, as opposed to a dismissal based on a
just cause under Article 282 with the same procedural infirmity
where the sanction to be imposed upon the employer should be
tempered as the dismissal process was, in effect, initiated by an
act imputable to the employee.79
In light of the factual circumstances of the case at bar, this Court
awards ₱50,000.00 to each private respondent as nominal
damages.
The grant of separation pay as an incidence of termination of
employment due to retrenchment to prevent losses is a statutory
obligation on the part of the employer and a demandable right on
the part of the employee. Private respondents should thus be
awarded separation pay equivalent to at least one (1) month pay
or to at least one-half month pay for every year of service,
whichever is higher, as mandated by Article 283 of the Labor
Code or the separation pay awarded by SMC to other regular
SMC employees that were terminated as a result of the
retrenchment, depending on which is most beneficial to private
respondents.
Considering that private respondents were not illegally dismissed,
however, no backwages need be awarded. It is well settled that
backwages may be granted only when there is a finding of illegal
dismissal.80 The appellate court thus erred in awarding
backwages to private respondents upon the authority
of Bustamante v. NLRC,81 what was involved in that case being
one of illegal dismissal.
With respect to attorney’s fees, in actions for recovery of wages or
where an employee was forced to litigate and thus incurred
expenses to protect his rights and interests,82 a maximum of ten
percent (10%) of the total monetary award83 by way of attorney’s
fees is justifiable under Article 111 of the Labor Code,84 Section 8,
Rule VIII, Book III of its Implementing Rules,85 and paragraph 7,
Article 2208 of the Civil Code.86 Although an express finding of
facts and law is still necessary to prove the merit of the award,
there need not be any showing that the employer acted
maliciously or in bad faith when it withheld the wages. There need
only be a showing that the lawful wages were not paid
accordingly, as in this case.87
Absent any evidence showing that Sunflower has been dissolved
in accordance with law, pursuant to Rule VIII-A, Section 1988 of
the Omnibus Rules Implementing the Labor Code, Sunflower is
held solidarily liable with SMC for all the rightful claims of private
respondents.
WHEREFORE, the petition is DENIED. The assailed Decision
dated February 7, 2001 and Resolution dated July 11, 2001 of the
Court of Appeals are AFFIRMED with MODIFICATION.
Petitioner San Miguel Corporation and Sunflower Multi-Purpose
Cooperative are hereby ORDERED to jointly and severally pay
each private respondent differential pay from the time they
became regular employees up to the date of their termination;
separation pay equivalent to at least one (1) month pay or to at
least one-half month pay for every year of service, whichever is
higher, as mandated by Article 283 of the Labor Code or the
separation pay awarded by SMC to other regular SMC employees
that were terminated as a result of the retrenchment, depending
on which is most beneficial to private respondents; and ten
percent (10%) attorney’s fees based on the herein modified
award.
Petitioner San Miguel Corporation is further ORDERED to pay
each private respondent the amount of ₱50,000.00, representing
nominal damages for non-compliance with statutory due process.
The award of backwages is DELETED.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and
Garcia, JJ., concur.
121
G.R. No. 82249 February 7, 1991
WILTSHIRE FILE CO., INC., petitioner,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION and
VICENTE T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.
FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of
petitioner Wiltshire File Co., Inc. ("Wiltshire") from 16 March 1981
up to 18 June 1985. As such, he received a monthly salary of
P14,375.00 excluding commissions from sales which averaged
P5,000.00 a month. He also enjoyed vacation leave with pay
equivalent to P7,187,50 per year, as well as hospitalization
privileges to the extent of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a
business and pleasure trip abroad, he was informed by the
President of petitioner Wiltshire that his services were being
terminated. Private respondent maintains that he tried to get an
explanation from management of his dismissal but to no avail. On
18 June 1985, when private respondent again tried to speak with
the President of Wiltshire, the company's security guard handed
him a letter which formally informed him that his services were
being terminated upon the ground of redundancy.
Private respondent filed, on 21 October 1985, a complaint before
the Labor Arbiter for illegal dismissal alleging that his position
could not possibly be redundant because nobody (save himself) in
the company was then performing the same duties. Private
respondent further contended that retrenching him could not
prevent further losses because it was in fact through his
remarkable performance as Sales Manager that the Company
had an unprecedented increase in domestic market share the
preceding year. For that accomplishment, he continued, he was
promoted to Marketing Manager and was authorized by the
President to hire four (4) Sales Executives five (5) months prior to
his termination.
In its answer, petitioner company alleged that the termination of
respondent's services was a cost-cutting measure: that in
December 1984, the company had experienced an unusually low
volume of orders: and that it was in fact forced to rotate its
employees in order to save the company. Despite the rotation of
employees, petitioner alleged; it continued to experience financial
losses and private respondent's position, Sales Manager of the
company, became redundant.
On 2 December 1986, during the proceedings before the Labor
Arbiter, petitioner, in a letter1 addressed to the Regional Director
of the then Ministry of Labor and Employment, notified that official
that effective 2 January 1987, petitioner would close its doors
permanently due to substantial business losses.
In a decision dated 11 March 1987, the Labor Arbiter declared the
termination of private respondent's services illegal and ordered
petitioner to pay private respondent backwages in the amount of
P299,000.00, unpaid salaries in the amount of P22,352.11,
accumulated sick and vacation leaves in the amount of
P12,543.91, hospitalization benefit package in the amount of
P10,000.00, unpaid commission in the amount of P57,500,00,
moral damages in the amount of P100,000.00 and attorney's fees
in the amount of P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations
Commission ("NLRC") affirmed in toto on 9 February 1988 the
decision of the Labor Arbiter. The NLRC held that:
The termination letter clearly spelled out that the main
reason in terminating the services of complainant
is REDUNDANT and not retrenchment.
The supposed duplication of work of herein complainant
and Mr. Deliva, the Vice-President is absent that would
justify redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the
effective date of private respondent's termination was 18 July
1985, although it was only 18 June 1985 that he received the
letter of termination, and concluded that he was not given any
opportunity to explain his position on the matter. The NLRC held
that the termination was attended by malice and bad faith on the
part of petitioner, considering the manner of private respondent
was ordered by the President to pack up and remove his personal
belongings from the office. Private respondent was said to have
been embarrassed before his immediate family and other
acquaintance due to his inability to explain the reasons behind the
termination of his services.
In this Petition for Certiorari, it is submitted that private
respondent's dismissal was justified and not illegal. Petitioner
maintains that it had been incurring business losses beginning
1984 and that it was compelled to reduce the size of its personnel
force. Petitioner also contends that redundancy as a cause for
termination does not necessarily mean duplication of work but a
"situation where the services of an employee are in excess of
what is demanded by the needs of an undertaking . . ."
Having reviewed the record of this case, the Court has satisfied
itself that indeed petitioner had serious financial difficulties before,
during and after the termination of the services of private
respondent. For one thing, the audited financial statements of the
petitioner for its fiscal year ending on 31 July 1985 prepared by a
firm of independent auditors, showed a net loss in the amount of
P4,431,321.00 and a total deficit or capital impairment at the end
of year of P6,776,493.00.2
In the preceding fiscal year (1983-1984), while the company
showed a net after tax income of P843,506.00, it actually suffered
a deficit or capital impairment of P2,345,172.00. Most importantly,
petitioner Wiltshire finally closed its doors and terminated all
operations in the Philippines on January 1987, barely two (2)
years after the termination of private respondent's employment.
We consider that finally shutting down business operations
constitutes strong confirmatory evidence of petitioner's previous
financial distress. The Court finds it very difficult to suppose that
petitioner Wiltshire would take the final and irrevocable step of
closing down its operations in the Philippines simply for the sole
purpose of easing out a particular officer or employee, such as the
private respondent.
Turning to the legality of the termination of private respondent's
employment, we find merit in petitioner's basic argument. We are
unable to sustain public respondent NLRC's holding that private
respondent's dismissal was not justified by redundancy and hence
illegal. In the first place, we note that while the letter informing
private respondent of the termination of his services used the
word "redundant", that letter also referred to the company having
"incur[red] financial losses which [in] fact has compelled [it] to
resort to retrenchment to prevent further losses".3
Thus, what the letter was in effect saying was that because of
financial losses, retrenchment was necessary, which
122
retrenchment in turn resulted in the redundancy of private
respondent's position.
In the second place, we do not believe that redundancy in an
employer's personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same
position that private respondent held prior to the termination of his
services, does not show that his position had not become
redundant. Indeed, in any well-organized business enterprise, it
would be surprising to find duplication of work and two (2) or more
people doing the work of one person. We believe that
redundancy, for purposes of our Labor Code, exists where the
services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the
enterprise.4
The employer has no legal obligation to keep in its payroll more
employees than are necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of
the contraction of its volume of sales and in order to cut down its
operating expenses, effected some changes in its organization by
abolishing some positions and thereby effecting a reduction of its
personnel. Thus, the position of Sales Manager was abolished
and the duties previously discharged by the Sales Manager
simply added to the duties of the General Manager, to whom the
Sales Manager used to report.
It is of no legal moment that the financial troubles of the company
were not of private respondent's making. Private respondent
cannot insist on the retention of his position upon the ground that
he had not contributed to the financial problems of Wiltshire. The
characterization of private respondent's services as no longer
necessary or sustainable, and therefore properly terminable, was
an exercise of business judgment on the part of petitioner
company. The wisdom or soundness of such characterization or
decision was not subject to discretionary review on the part of the
Labor Arbiter nor of the NLRC so long, of course, as violation of
law or merely arbitrary and malicious action is not shown. It
should also be noted that the position held by private respondent,
Sales Manager, was clearly managerial in character. In D.M.
Consunji, Inc. v. National Labor Relations Commission,5 the Court
held:
An employer has a much wider discretion in terminating
the employment relationship of managerial personnel as
compared to rank and file employees. However, such
prerogative of management to dismiss or lay off an
employee must be made without abuse of discretion, for
what is at stake is not only the private respondent's
position but also his means of livelihood . . . .6
The determination of the continuing necessity of a particular
officer or position in a business corporation is management's
prerogative, and the courts will not interfere with the exercise of
such so long as no abuse of discretion or merely arbitrary or
malicious action on the part of management is shown.7
On the issue of moral damages, petitioner assails the finding of
the NLRC that the dismissal was done in bad faith. Petitioner
argues that it had complied with the one-month notice required by
law; that there was no need for private respondent to be heard in
his own defense considering that the termination of his services
was for a statutory or authorized cause; and that whatever
humiliation might have been suffered by private respondent arose
from a lawful cause and hence could not be the basis of an award
of moral damages.
Termination of an employee's services because of retrenchment
to prevent further losses or redundancy, is governed by Article
283 of the Labor Code which provides as follows:
Art. 283. Closure of establishment and reduction of
personnel. –– The employer may also terminate the
employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination
due to the installation of labor saving devices or
redundancy, the worker affected thereby shall be entitled
to a separation pay equivalent to at least his one (1)
month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closures or cessation
of operations of establishment or undertaking not due to
serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay
or at least one-half (1/2) month pay for every of service,
whichever is higher. A fraction of at least six (6) months
shall be considered one (1) whole year.
Termination of services for any of the above described causes
should be distinguished from termination of employment by
reason of some blameworthy act or omission on the part of the
employee, in which case the applicable provision is Article 282 of
the Labor Code which provides as follows:
Art. 282. Termination by employer. –– An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his
employer or representative in connection with
his work;
(b) Gross and habitual neglect by the employee
of his duties;
(c) Fraud or willful breach by the employee of
the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of a crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
Sections 2 and 5 of Rule XIV entitled "Termination of
Employment:" of the "Rules to Implement the Labor Code" read
as follows:
Sec. 2. Notice of dismissal. –– Any employer who seeks
to dismiss a worker shall furnish him a written notice
stating the particular acts or omission constituting the
grounds for his dismissal. In cases of abandonment of
work, the notice shall be served at the worker's last
known address.
xxx xxx xxx
123
 Sec. 5. Answer and hearing. –– The worker may
answer the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the
assistance of his representative if he so desires.
(emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the
notice to specify "the particular acts or omissions constituting the
ground for his dismissal", a requirement which is obviously
applicable where the ground for dismissal is the commission of
some act or omission falling within Article 282 of the Labor Code.
Again, Section 5 gives the employee the right to answer and to
defend himself against "the allegations stated against him in the
notice of dismissal". It is such allegations by the employer and any
counter-allegations that the employee may wish to make that
need to be heard before dismissal is effected. Thus, Section 5
may be seen to envisage charges against an employee
constituting one or more of the just causes for dismissal listed in
Article 282 of the Labor Code. Where, as in the instant case, the
ground for dismissal or termination of services does not relate to a
blameworthy act or omission on the part of the employee, there
appears to us no need for an investigation and hearing to be
conducted by the employer who does not, to begin with, allege
any malfeasance or non-feasance on the part of the employee. In
such case, there are no allegations which the employee should
refute and defend himself from. Thus, to require petitioner
Wiltshire to hold a hearing, at which private respondent would
have had the right to be present, on the business and financial
circumstances compelling retrenchment and resulting in
redundancy, would be to impose upon the employer an
unnecessary and inutile hearing as a condition for legality of
termination.
This is not to say that the employee may not contest the reality or
good faith character of the retrenchment or redundancy asserted
as grounds for termination of services. The appropriate forum for
such controversion would, however, be the Department of Labor
and Employment and not an investigation or hearing to be held by
the employer itself. It is precisely for this reason that an employer
seeking to terminate services of an employee or employees
because of "closure of establishment and reduction of personnel",
is legally required to give a written notice not only to the employee
but also to the Department of Labor and Employment at least one
month before effectivity date of the termination. In the instant
case, private respondent did controvert before the appropriate
labor authorities the grounds for termination of services set out in
petitioner's letter to him dated 17 June 1985.
We hold, therefore, that the NLRC's finding that private
respondent had not been accorded due process, is bereft of
factual and legal bases. The award of moral damages that rests
on such ground must accordingly fall.
While private respondent may well have suffered personal
embarrassment by reason of termination of his services, such fact
alone cannot justify the award of moral damages. Moral damages
are simply a species of damages awarded to compensate one for
injuries brought about by a wrongful act.8 As discussed above, the
termination of private respondent's services was not a wrongful
act. There is in this case no clear and convincing evidence of
record showing that the termination of private respondent's
services, while due to an authorized or statutory cause, had been
carried out in an arbitrary, capricious and malicious manner, with
evident personal ill-will. Embarrassment, even humiliation, that is
not proximately caused by a wrongful act does not constitute a
basis for an award of moral damages.
Private respondent is, of course, entitled to separation pay and
other benefits under Act 283 of the Labor Code and petitioner's
letter dated 17 June 1985.
ACCORDINGLY, the Court Resolved to GRANT due course to
the Petition for Certiorari. The Resolutions of the National Labor
Relations Commission dated 9 February 1988 and 7 March 1988
are hereby SET ASIDE and NULLIFIED. The Temporary
Restraining Order issued by this Court on 21 March 1988 is
hereby made PERMANENT. No pronouncement as to costs.
SO ORDERED.
Fernan, C.J., Gutierrez, Jr., Bidin and Davide, Jr., JJ., concur.
G.R. No. 147002. April 15, 2005
PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION and
DELIA OFICIAL, Petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, AGNES
BAYAO and MILDRED CASTILLO, Respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari under Rule 45 of the 1997
Revised Rules of Civil Procedure from the Decision1 of the Court
of Appeals (CA) in CA-G.R. SP No. 57551, affirming the decision
of the National Labor Relations Commission (NLRC), and the
Resolution dated February 2, 2001 denying the motion for
reconsideration thereof.
The antecedents are as follows:
Agnes Bayao and Mildred Castillo were hired by the Philippine
Telegraph & Telephone Corporation (PT&T) in November 1991
and August 1995, respectively, both as account executives
stationed in Baguio City.
Both Bayao and Castillo received a Memorandum2 dated May 21,
1998 coming from Ma. Elenita V. Del Rosario, Vice-President of
the Commercial Operations Group (COG) of PT&T, inviting them
to consider a two to three-month assignment to the provinces of
Rizal and Laguna in view of PT&T’s expansion in the aforesaid
area. Bayao and Castillo refused the offer, on the ground that the
transfer would entail additional expense on their part and there
were no clear guidelines and procedures for its implementation.
Meanwhile, the expansion project of PT&T failed to materialize
due to lack of capital. PT&T realized that it needed to undertake
measures against losses to prevent the company from going
bankrupt, particularly by reducing its workforce from 2,500 to 900
employees. Pursuant thereto, it implemented a Voluntary Staff
Reduction Program (VSRP) which was availed of by 478
employees. Failing to attain its target, PT&T implemented an
extended VSRP, but still not enough employees availed of the
program.
PT&T decided to implement a temporary retrenchment of some
employees dubbed as Temporary Staff Reduction Program
(TSRP) lasting for not more than five and a half (5½) months, to
commence from September 1, 1998 to February 15, 1999.
Pursuant to the program, affected employees would receive
financial assistance equivalent to 15 days salary and a loan
equivalent to two months salary chargeable to the account of the
employee concerned.
Bayao and Castillo received a Letter3 from Del Rosario, dated
August 21, 1998, informing them that the cumulative net losses of
124
PT&T for the last four years had reached ₱293.4 million and that
they were among the employees affected by the TSRP.
When Bayao and Castillo reported for work on September 2,
1998, they were informed that the position of account executive
no longer existed; in its stead, the positions of Service Account
Representatives (SAR) and Service Account Specialists (SAS)
were created per COG Bulletin Order No. 98-014 effective August
21, 1998, and had already been filled up. The said COG Bulletin
Order No. 98-014 reads:
As part of the Organization Streamlining of the OM Efficiency
Moves Program: For a more Responsive and Responsible
Organization Structure. COG announces the new Service
Account Representatives (SAR), and Service Account
Specialists (SAS). This will collapse and replace the Account
Executive positions outside of NCR, effective immediately.
Account Executive functions and positions in NCR will be
retained.
In view of new responsibilities entrusted to the COG, such as full-
blown account management functions which includes collections
for agencies, Dials Plus and Data subscribers, as well as PT&T
COG’s new role as PWI’s distributor of pager products and
services, the need to re-define positions and responsibilities is
imperative.
Please see attached for the list of SARs and SASs and their areas
of coverage.
Responsibilities
The SAR and SAS positions, are created based on the
responsibilities and criteria below, and will replace and enhance
former AE positions in the provinces:
1. SAR – Responsible for account management and collection
from agencies, DIALS Plus and data subscribers; assists SAS
from time to time with PWI documentation and other activities
* Maintains monthly minimum of ₱80,000 (net of agency
commission) and 10 equivalent accounts, where a Metro agency
or Dials Plus subscriber = 1 account, while a MTPCO account
(due to distance) = 2 accounts.
* The SAR reports directly to the District or Zone head in his/her
area.
*Note: In Cebu which has several data subscribers, collector/s
under Credit and Collection will be maintained.
2. SAS – Responsible for contracting agencies, payphone site
location, Dials Plus subscribers and management of Direct Sales
agents (DSA) which will comprise the sales force of PWI pagers
and other services.4
That same day, September 2, 1998, Bayao and Castillo promptly
filed a complaint for illegal dismissal with the NLRC, Regional
Arbitration Branch, Cordillera Administrative Region, against
PT&T and Delia Oficial in her capacity as manager for Baguio
City.
In the interim, Del Rosario sent a Letter dated October 26, 1998 to
both Bayao and Castillo in this language:
In our previous written communications, you have been informed
that you are a part of the Temporary Staff Reduction Program
(TSRP) being implemented by management for a period of five
and a half (5½) months in order to help ease the severe financial
problems of the company.
You are well aware that the certified bargaining representative of
the rank-and-file employees, PT&T Progressive Workers Union-
NAFLU-KMU (the Union) in the Notice of Strike filed before the
National Conciliation and Mediation Board (NCMB), raised as one
of the grounds thereof the TSRP implemented by management.
The notice of strike culminated in the signing of an agreement
between the management and the Union wherein it was agreed
among others that the eighty (80) employees who would not be
recalled will be paid the following:
… damages;
"2. The grant of financial assistance equivalent to one and one
half month inclusive of the one half month pay previously offered
by management to the 80 employees who will be separated;
"3. The payment of separation pay for every year of service to the
80 employees to be identified by the union, and shall be paid
under the same terms and conditions as provided under the
extended VSRP."
While you are not part of the bargaining unit, management is
extending to you the same separation package under S.O. No.
98-15 and NCMB Agreement between management and the
union dated 30 September 1998, provided we receive a formal
letter from you applying for the Staff Reduction Program package.
Please submit said letter on or before 15 November 1998.
Payments shall be released only upon receipt of said letter.
Your separation from the company is effective on 31 August 1998.
(Please see attached guidelines for details.)
It really pains us to separate you from the company but it is a
necessary measure we have to take to ensure the survival of the
company.5
On March 31, 1999, Labor Arbiter Monroe C. Tabingan rendered
a Decision in favor of Bayao and Castillo, the dispositive portion of
which reads:
WHEREFORE, premises all duly considered, it is hereby found
that the Complainants were constructively dismissed. In view
thereof, the Respondent is hereby ordered to:
1. Reinstate the said complainants to their former position without
loss of seniority rights and benefits;
2. Pay their full backwages from the time of their dismissal to their
actual reinstatement, or on payroll, with legal rate of interest
thereon until the same shall have been fully paid, computed as of
even date at SIXTY THOUSAND NINE HUNDRED PESOS
(₱60,900.00) each;
3. Pay to each of the complainant the amount of TWENTY
THOUSAND PESOS (₱20,000.00) as and by way of exemplary
4. Pay to each of the complainant the amount of SIX THOUSAND
PESOS (₱6,000.00) as and by way of indemnity for failure of the
respondent to observe due process; and,
5. Pay an attorney’s fee equivalent to 10% of the total monetary
award.
125
SO ORDERED.6
PT&T and Oficial interposed their appeal to the NLRC. On
October 12, 1999, the NLRC issued its Resolution7dismissing the
appeal and affirmed the decision of the Labor Arbiter, deleting,
however, the award of legal interest, exemplary damages,
indemnity and attorney’s fees for lack of merit. PT&T and Oficial
filed a motion for partial reconsideration, but the same was
denied.8 The matter was elevated to the CA by way of a petition
for certiorari.
On July 31, 2000, the CA issued its Decision9 dismissing the
petition and affirmed the findings of the NLRC. The CA declared
that there was no valid ground for retrenchment, considering that
when Bayao and Castillo returned, their positions were already
filled up; at the same time, PT&T did not inform its employees and
the Department of Labor and Employment (DOLE) of the
scheduled retrenchment at least one month before its
implementation. A motion for reconsideration was filed, but the
same was denied by the CA.10
Hence this petition.
PT&T and Delia Oficial, now as petitioners, raise the following as
errors:
A. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED IN NOT REVIEWING THE CORRUPTED
FINDINGS OF THE NLRC AND THE LABOR ARBITER
DECLARING HEREIN PRIVATE RESPONDENTS TO HAVE
BEEN ACTUALLY, EFFECTIVELY AND CONSTRUCTIVELY
DISMISSED.
B. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED IN NOT REVIEWING THE DEBASED
FINDINGS OF THE NLRC AND THE LABOR ARBITER
DECLARING THE RETRENCHMENT PROGRAM ILLEGAL.
C. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED IN CONCLUDING THAT THE THIRTY (30)
DAYS NOTICE TO THE DEPARTMENT OF LABOR AND
EMPLOYMENT AND TO THE EMPLOYEES AFFECTED IS
ALSO REQUIRED EVEN IN A CASE OF TEMPORARY
RETRENCHMENT.
D. WHETHER OR NOT THE HONORABLE COURT OF
APPEALS ERRED IN NOT DELETING THE AWARD FOR
BACKWAGES DESPITE ITS CLEAR PRONOUNCEMENT THAT
RESPONDENTS WERE NOT ABLE TO PROVE BAD FAITH ON
THE PART OF PETITIONERS IN DISMISSING THEM FROM
THE SERVICE.11
The threshold issue to be resolved in the present recourse is
whether or not the retrenchment program implemented by
petitioner PT&T is valid.
Retrenchment has been defined as the termination of employment
initiated by the employer through no fault of the employees and
without prejudice to the latter, resorted by management during
periods of business recession, industrial depression, or seasonal
fluctuations, or during lulls occasioned by lack of orders, shortage
of materials, conversion of the plant for a new production program
or the introduction of new methods or more efficient machinery, or
of automation.12 It is a management prerogative resorted to by an
employer to avoid or minimize business losses which is
consistently recognized by the Court.13
Article 283 of the Labor Code lays down the conditions for its
exercise, to wit:
Art. 283. Closure of establishment and reduction of personnel. ―
The employer may also terminate the employment of any
employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least one (1) month pay or to at least his one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay
shall be equivalent to one (1) month pay or to at least one-half
(1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
From the foregoing, in order that retrenchment due to serious
business losses may be validly exercised, the following requisites
must concur: (a) necessity of the retrenchment to prevent losses,
and proof of such losses; (b) written notice to the employees and
to the DOLE at least one (1) month prior to the intended date of
retrenchment; and (c) payment of separation pay equivalent to
one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.14
Under the first requisite, it is imperative and incumbent on the part
of the employer to sufficiently and convincingly establish business
reverses of the kind or in the amount that would justify
retrenchment.15 To justify retrenchment, the employer must prove
serious business losses, as not all business losses suffered by an
employer would justify retrenchment under the aforesaid Article
283.16 The loss referred to in the said provision cannot be of just
any kind or amount, otherwise, a company could easily feign
excuses to suit its whims and prejudices or to rid itself of
unwanted employees.17 As consistently held by this Court, to
guard against abuse, any claim of actual or potential business
losses must satisfy the following established standards, to wit; (a)
the losses incurred are substantial and not de minimis; (b) the
losses are actual or reasonably imminent; (c) the retrenchment is
reasonably necessary and is likely to be effective in preventing
the expected losses; and (d) the alleged losses, if already
incurred, or the expected imminent losses sought to be forestalled
are proven by sufficient and convincing evidence.18
The Court has previously ruled that financial statements audited
by independent external auditors constitute the normal method of
proof of the profit and loss performance of a company. 19
In this case, to prove that the company incurred losses, the
petitioners presented its audited financial statements for the
corporate fiscal years 1996 to 199820 and emphasized that, in the
October 20, 1998 Audit Report prepared by SGV & Co., the
auditing firm declared that petitioner PT&T incurred a substantial
loss of about ₱558 million for the fiscal year ending June 30,
1998, resulting to a total deficit of about ₱574 million as of the
same date; and that petitioner PT&T even negotiated with its
creditors for the suspension of payments of its outstanding
balances until the completion of an acceptable restructuring
plan.21
Based on the financial statements submitted, petitioner PT&T
suffered a net loss of ₱40,780,017 in 199522 and ₱85,423,641 in
1996, posted a net income of ₱1,491,532 in 1997, and again
suffered a net loss of ₱557,892,627 in 1998.23 The foregoing
126
clearly indicates that the petitioner PT&T sufficiently complied with
its burden to prove that it incurred substantial losses as to warrant
the exercise of the extreme measure of retrenchment to prevent
the company from totally going under.
While an employer may have a valid ground for implementing a
retrenchment program, it is not excused from complying with the
required written notice served both to the employee concerned
and the DOLE at least one month prior to the intended date of
retrenchment.24 The purpose of this requirement is not only to give
employees some time to prepare for the eventual loss of their jobs
and their corresponding income, look for other employment and
ease the impact of the loss of their jobs25 but also to give the
DOLE the opportunity to ascertain the verity of the alleged cause
of termination.26
In the case at bar, the memorandum of Del Rosario, the vice-
president of the COG, to respondents Bayao and Castillo
informing the latter that they were included in the TSRP to be
implemented effective September 1, 1998 was dated August 21,
1998. The said memorandum was received by Castillo on August
24, 1998 and Bayao on August 26, 1998.27 The respondents had
barely two weeks’ notice of the intended retrenchment program.
Clearly then, the one-month notice rule was not complied with. At
the same time, the petitioners never showed that any notice of the
retrenchment was sent to the DOLE.
The petitioners insist that the one-month notice requirement does
not apply in this situation, as the retrenchment involved was
merely temporary and not permanent. They aver that this has
been recognized by this Court, and quote Sebuguero v. NLRC28 in
this manner:
Article 283 speaks of a permanent retrenchment as opposed to a
temporary lay-off as is the case here. There is no specific
provision of law which treats of a temporary retrenchment or
lay-off and provides for the requisites in effecting it or a
period or duration therefor.29
The petitioners’ adherence to the above pronouncement of the
Court is misplaced. The particular issue involved in the said
decision was the duration of the period of temporary lay-off, and
not the compliance with the one month notice requirement.
Reading the entire paragraph of the quoted portion of the decision
would readily show what it was referring to, thus:
This provision, however, speaks of a permanent retrenchment as
opposed to a temporary lay-off as is the case here. There is no
specific provision of law which treats of a temporary retrenchment
or lay-off and provides for the requisites in effecting it or a period
or duration therefor. These employees cannot forever be
temporarily laid-off. To remedy this situation or fill the hiatus,
Article 286 may be applied but only by analogy to set a specific
period that employees may remain temporarily laid-off or in
floating status. Six months is the period set by law that the
operation of a business or undertaking may be suspended
thereby suspending the employment of the employees concerned.
The temporary lay-off wherein the employees likewise cease to
work should also not last longer than six months. After six months,
the employees should either be recalled to work or permanently
retrenched following the requirements of the law, and that failing
to comply with this would be tantamount to dismissing the
employees and the employer would thus be liable for such
dismissal.30
Nowhere can it be found in Sebuguero that the one month notice
may be dispensed with. On the contrary, the Court, speaking
through now Chief Justice Hilario G. Davide, Jr., emphasized the
mandatory nature of the said notice, to wit:
The requirement of notice to both the employees concerned and
the Department of Labor and Employment (DOLE) is mandatory
and must be written and given at least one month before the
intended date of retrenchment. In this case, it is undisputed that
the petitioners were given notice of the temporary lay-off. There
is, however, no evidence that any written notice to permanently
retrench them was given at least one month prior to the date of
the intended retrenchment. The NLRC found that GTI conveyed to
the petitioners the impossibility of recalling them due to the
continued unavailability of work. But what the law requires is
a written notice to the employees concerned and that requirement
is mandatory. The notice must also be given at least one month in
advance of the intended date of retrenchment to enable the
employees to look for other means of employment and therefore
to ease the impact of the loss of their jobs and the corresponding
income. That they were already on temporary lay-off at the time
notice should have been given to them is not an excuse to forego
the one-month written notice because by this time, their lay-off is
to become permanent and they were definitely losing their
employment.31
The Court further emphasized therein that –
There is also nothing in the records to prove that a written notice
was ever given to the DOLE as required by law. GTI's position
paper, offer of exhibits, Comment to the Petition, and
Memorandum in this case do not mention of any such written
notice. The law requires two notices ― one to the employee/s
concerned and another to the DOLE ― not just one. The notice to
the DOLE is essential because the right to retrench is not an
absolute prerogative of an employer but is subject to the
requirement of law that retrenchment be done to prevent losses.
The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by facts. 32
Interestingly enough, the evidence on record indicates that
respondents Bayao and Castillo were not merely temporarily laid-
off. The October 26, 1998 Letter of Del Rosario addressed to the
respondents clearly stated that the latter were to be considered
separated from the company effective August 31, 1998 and that
they were each being extended a separation package.33 In the
said letter, Del Rosario even showed signs of consoling the
respondents stating that: "It really pains us to separate you from
the company but it is a necessary measure we have to take to
ensure the survival of the company."34
It must be stressed, however, that compliance with the one-month
notice rule is mandatory regardless of whether the retrenchment
is temporary or permanent. This is so because Article 283 itself
does not speak of temporary or permanent retrenchment; hence,
there is no need to qualify the term. Ubi lex non distinguit nec nos
distinguere debemus (when the law does not distinguish, we must
not distinguish).
However, the employer’s failure to comply with the one month
notice requirement prior to retrenchment does not render the
termination illegal; it merely renders the same defective, entitling
the dismissed employee to payment of indemnity in the form of
nominal damages.35 Based on prevailing jurisprudence, the
amount of indemnity is pegged at ₱30,000.00.36
Finally, since petitioner PT&T was able to establish that it incurred
serious business losses, justifying the retrenchment, the final
requisite is the payment of separation pay. Pursuant to Section
283 of the Labor Code, as amended, the retrenchment having
been effected due to serious business losses, respondents Bayao
and Castillo are each entitled to one month pay or to at least one-
half month pay for every year of service, whichever is higher. A
fraction of at least six months shall be considered one whole year.
127
IN LIGHT OF ALL THE FOREGOING, the petition is partially For the resolution of the Court are three consolidated petitions for
granted. The Decision of the Court of Appeals in CA-G.R. SP No. review on certiorari under Rule 45 of the Rules of Court. G.R. No.
57551 is MODIFIED. The petitioners are ORDERED, jointly and 148132 assails the February 28, 2000 Decision1 and the May 7,
severally, to pay to respondents Agnes Bayao and Mildred 2001 Resolution2 of the Court of Appeals (CA) in CA-G.R. SP. No.
Castillo (a) an amount equivalent to one-half (1/2) month of their 53831. G.R. Nos. 151079 and 151372 question the June 11, 2001
respective pay for every year of service, with the understanding Decision3 and the December 18, 2001 Resolution4 in CA-G.R. SP.
that a fraction of at least six (6) months shall be considered one No. 57065.
(1) whole year, as separation pay; and (b) ₱30,000.00 by way of
nominal damages. No costs. Regina M. Astorga (Astorga) was employed by respondent Smart
Communications, Incorporated (SMART) on May 8, 1997 as
SO ORDERED. District Sales Manager of the Corporate Sales Marketing Group/
Fixed Services Division (CSMG/FSD). She was receiving a
Puno, (Chairman), Tinga, and Chico-Nazario, JJ., concur. monthly salary of P33,650.00. As District Sales Manager, Astorga
enjoyed additional benefits, namely, annual performance incentive
equivalent to 30% of her annual gross salary, a group life and
Austria-Martinez, J., no part. hospitalization insurance coverage, and a car plan in the amount
of P455,000.00.5
G.R. No. 148132 January 28, 2008
In February 1998, SMART launched an organizational
SMART COMMUNICATIONS, INC., petitioner, realignment to achieve more efficient operations. This was made
vs. known to the employees on February 27, 1998.6 Part of the
REGINA M. ASTORGA, respondent. reorganization was the outsourcing of the marketing and sales
force. Thus, SMART entered into a joint venture agreement with
x---------------------------------------------------x NTT of Japan, and formed SMART-NTT Multimedia, Incorporated
(SNMI). Since SNMI was formed to do the sales and marketing
work, SMART abolished the CSMG/FSD, Astorga’s division.
G.R. No. 151079 January 28, 2008
To soften the blow of the realignment, SNMI agreed to absorb the
SMART COMMUNICATIONS, INC., petitioner, CSMG personnel who would be recommended by SMART.
vs. SMART then conducted a performance evaluation of CSMG
REGINA M. ASTORGA, respondent. personnel and those who garnered the highest ratings were
favorably recommended to SNMI. Astorga landed last in the
x---------------------------------------------------x performance evaluation, thus, she was not recommended by
SMART. SMART, nonetheless, offered her a supervisory position
G.R. No. 151372 January 28, 2008 in the Customer Care Department, but she refused the offer
because the position carried lower salary rank and rate.
REGINA M. ASTORGA, petitioner,
Despite the abolition of the CSMG/FSD, Astorga continued
vs.
reporting for work. But on March 3, 1998, SMART issued a
SMART COMMUNICATIONS, INC. and ANN MARGARET V.
memorandum advising Astorga of the termination of her
SANTIAGO, respondents.
employment on ground of redundancy, effective April 3, 1998.
Astorga received it on March 16, 1998.7
DECISION
The termination of her employment prompted Astorga to file a
NACHURA, J.: Complaint8 for illegal dismissal, non-payment of salaries and other
benefits with prayer for moral and exemplary damages against
SMART and Ann Margaret V. Santiago (Santiago). She claimed
that abolishing CSMG and, consequently, terminating her
employment was illegal for it violated her right to security of
tenure. She also posited that it was illegal for an employer, like
SMART, to contract out services which will displace the
employees, especially if the contractor is an in-house agency.9
SMART responded that there was valid termination. It argued that
Astorga was dismissed by reason of redundancy, which is an
authorized cause for termination of employment, and the
dismissal was effected in accordance with the requirements of the
Labor Code. The redundancy of Astorga’s position was the result
of the abolition of CSMG and the creation of a specialized and
more technically equipped SNMI, which is a valid and legitimate
exercise of management prerogative.10
In the meantime, on May 18, 1998, SMART sent a letter to
Astorga demanding that she pay the current market value of the
Honda Civic Sedan which was given to her under the company’s
car plan program, or to surrender the same to the company for
proper disposition.11 Astorga, however, failed and refused to do
either, thus prompting SMART to file a suit for replevin with the
Regional Trial Court of Makati (RTC) on August 10, 1998. The
case was docketed as Civil Case No. 98-1936 and was raffled to
Branch 57.12
Astorga moved to dismiss the complaint on grounds of (i) lack of
jurisdiction; (ii) failure to state a cause of action; (iii) litis
pendentia; and (iv) forum-shopping. Astorga posited that the
regular courts have no jurisdiction over the complaint because the
subject thereof pertains to a benefit arising from an employment
contract; hence, jurisdiction over the same is vested in the labor
tribunal and not in regular courts.13
Pending resolution of Astorga’s motion to dismiss
the replevin case, the Labor Arbiter rendered a Decision14 dated
August 20, 1998, declaring Astorga’s dismissal from employment
illegal. While recognizing SMART’s right to abolish any of its
departments, the Labor Arbiter held that such right should be
exercised in good faith and for causes beyond its control. The
Arbiter found the abolition of CSMG done neither in good faith nor
for causes beyond the control of SMART, but a ploy to terminate
Astorga’s employment. The Arbiter also ruled that contracting out
the functions performed by Astorga to an in-house agency like
SNMI was illegal, citing Section 7(e), Rule VIII-A of the Rules
Implementing the Labor Code.
Accordingly, the Labor Arbiter ordered:
128
 WHEREFORE, judgment is hereby rendered declaring
the dismissal of [Astorga] to be illegal and unjust.
[SMART and Santiago] are hereby ordered to:
1. Reinstate [Astorga] to [her] former position or to a
substantially equivalent position, without loss of seniority
rights and other privileges, with full backwages, inclusive
of allowances and other benefits from the time of [her]
dismissal to the date of reinstatement, which computed
as of this date, are as follows:
(a) Astorga
BACKWAGES; (P33,650.00 x 4 months)
UNPAID SALARIES (February 15, 1998-April 3, 1998
February 15-28, 1998
March 1-31, [1998]
April 1-3, 1998
CAR MAINTENANCE ALLOWANCE
(P2,000.00 x 4)
FUEL ALLOWANCE
(300 liters/mo. x 4 mos. at P12.04/liter)
xxxx
3. Jointly and severally pay moral damages in the
amount of P500,000.00 x x x and exemplary damages in
the amount of P300,000.00. x x x
4. Jointly and severally pay 10% of the amount due as
attorney’s fees.
SO ORDERED.15
Subsequently, on March 29, 1999, the RTC issued an
Order16 denying Astorga’s motion to dismiss the replevin case. In
so ruling, the RTC ratiocinated that:
Assessing the [submission] of the parties, the Court finds
no merit in the motion to dismiss.
As correctly pointed out, this case is to enforce a right of
possession over a company car assigned to the
defendant under a car plan privilege arrangement. The
car is registered in the name of the plaintiff. Recovery
thereof via replevin suit is allowed by Rule 60 of the 1997
Rules of Civil Procedure, which is undoubtedly within the
jurisdiction of the Regional Trial Court.
In the Complaint, plaintiff claims to be the owner of the
company car and despite demand, defendant refused to
return said car. This is clearly sufficient statement of
plaintiff’s cause of action.
= P134,600.00
Neither is there forum shopping. The element of litis
penden[t]ia does not appear to exist because the
judgment in the labor dispute will not constitute res
= P 16,823.00
judicata to bar the filing of this case.
= P 33,650.00
WHEREFORE,
= P 3,882.69 the Motion to Dismiss is hereby denied
for lack of merit.
= P 8,000.00
SO ORDERED.17
= P 14,457.83
Astorga filed a motion for reconsideration, but the RTC denied it
onTOTAL
June 18,= P211,415.52
1999.18
Astorga elevated the denial of her motion via certiorari to the CA,
which, in its February 28, 2000 Decision,19reversed the RTC
ruling. Granting the petition and, consequently, dismissing
the replevin case, the CA held that the case is intertwined with
Astorga’s complaint for illegal dismissal; thus, it is the labor
tribunal that has rightful jurisdiction over the complaint. SMART’s
motion for reconsideration having been denied,20 it elevated the
case to this Court, now docketed as G.R. No. 148132.
Meanwhile, SMART also appealed the unfavorable ruling of the
Labor Arbiter in the illegal dismissal case to the National Labor
Relations Commission (NLRC). In its September 27, 1999
Decision,21 the NLRC sustained Astorga’s dismissal. Reversing
the Labor Arbiter, the NLRC declared the abolition of CSMG and
the creation of SNMI to do the sales and marketing services for
SMART a valid organizational action. It overruled the Labor
Arbiter’s ruling that SNMI is an in-house agency, holding that it
lacked legal basis. It also declared that contracting,
subcontracting and streamlining of operations for the purpose of
increasing efficiency are allowed under the law. The NLRC further
found erroneous the Labor Arbiter’s disquisition that redundancy
to be valid must be impelled by economic reasons, and upheld the
redundancy measures undertaken by SMART.
The NLRC disposed, thus:
WHEREFORE, the Decision of the Labor Arbiter is
hereby reversed and set aside. [Astorga] is further
ordered to immediately return the company vehicle
assigned to her. [Smart and Santiago] are hereby
ordered to pay the final wages of [Astorga] after [she]
had submitted the required supporting papers therefor.
SO ORDERED.22
Astorga filed a motion for reconsideration, but the NLRC denied it
on December 21, 1999.23
Astorga then went to the CA via certiorari. On June 11, 2001, the
CA rendered a Decision24 affirming with modification the
resolutions of the NLRC. In gist, the CA agreed with the NLRC
that the reorganization undertaken by SMART resulting in the
abolition of CSMG was a legitimate exercise of management
prerogative. It rejected Astorga’s posturing that her non-
absorption into SNMI was tainted with bad faith. However, the CA
found that SMART failed to comply with the mandatory one-month
notice prior to the intended termination. Accordingly, the CA
imposed a penalty equivalent to Astorga’s one-month salary for
this non-compliance. The CA also set aside the NLRC’s order for
the return of the company vehicle holding that this issue is not
essentially a labor concern, but is civil in nature, and thus, within
the competence of the regular court to decide. It added that the
matter had not been fully ventilated before the NLRC, but in the
regular court.
Astorga filed a motion for reconsideration, while SMART sought
partial reconsideration, of the Decision. On December 18, 2001,
the CA resolved the motions, viz.:
WHEREFORE, [Astorga’s] motion for reconsideration is
hereby PARTIALLY GRANTED. [Smart] is hereby
ordered to pay [Astorga] her backwages from 15
February 1998 to 06 November 1998. [Smart’s] motion
for reconsideration is outrightly DENIED.
SO ORDERED.25
129
Astorga and SMART came to us with their respective petitions for
review assailing the CA ruling, docketed as G.R Nos. 151079 and
151372. On February 27, 2002, this Court ordered the
consolidation of these petitions with G.R. No. 148132.26
In her Memorandum, Astorga argues:
I ASTORGA AND THE DEPARTMENT OF LABOR AND
THE COURT OF APPEALS ERRED IN UPHOLDING
THE VALIDITY OF ASTORGA’S DISMISSAL DESPITE
THE FACT THAT HER DISMISSAL WAS EFFECTED IN
CLEAR VIOLATION OF THE CONSTITUTIONAL RIGHT
TO SECURITY OF TENURE, CONSIDERING THAT
THERE WAS NO GENUINE GROUND FOR HER
DISMISSAL.
II
SMART’S REFUSAL TO REINSTATE ASTORGA
DURING THE PENDENCY OF THE APPEAL AS
REQUIRED BY ARTICLE 223 OF THE LABOR CODE,
ENTITLES ASTORGA TO HER SALARIES DURING
THE PENDENCY OF THE APPEAL.
III
THE COURT OF APPEALS WAS CORRECT IN
HOLDING THAT THE REGIONAL TRIAL COURT HAS
NO JURISDICTION OVER THE COMPLAINT FOR
RECOVERY OF A CAR WHICH ASTORGA ACQUIRED
AS PART OF HER EMPLOYEE (sic) BENEFIT.27
On the other hand, Smart in its Memoranda raises the following
issues:
I V
WHETHER THE HONORABLE COURT OF APPEALS
HAS DECIDED A QUESTION OF SUBSTANCE IN A
WAY PROBABLY NOT IN ACCORD WITH LAW OR
WITH APPLICABLE DECISION OF THE HONORABLE
SUPREME COURT AND HAS SO FAR DEPARTED
FROM THE ACCEPTED AND USUAL COURSE OF
JUDICIAL PROCEEDINGS AS TO CALL FOR AN
EXERCISE OF THE POWER OF SUPERVISION WHEN
IT RULED THAT SMART DID NOT COMPLY WITH THE
NOTICE REQUIREMENTS PRIOR TO TERMINATING
ASTORGA ON THE GROUND OF REDUNDANCY.
II
WHETHER THE NOTICES GIVEN BY SMART TO
EMPLOYMENT ARE SUBSTANTIAL COMPLIANCE
WITH THE NOTICE REQUIREMENTS BEFORE
TERMINATION.
III
WHETHER THE RULE ENUNCIATED IN SERRANO
VS. NATIONAL LABOR RELATIONS COMMISSION
FINDS APPLICATION IN THE CASE AT BAR
CONSIDERING THAT IN THE SERRANO CASE
THERE WAS ABSOLUTELY NO NOTICE AT ALL.28
IV
WHETHER THE HONORABLE COURT OF APPEALS
HAS DECIDED A QUESTION OF SUBSTANCE IN A
WAY PROBABLY NOT IN ACCORD WITH LAW OR
WITH APPLICABLE DECISION[S] OF THE
HONORABLE SUPREME COURT AND HAS SO FAR
DEPARTED FROM THE ACCEPTED AND USUAL
COURSE OF JUDICIAL PROCEEDINGS AS TO CALL
FOR AN EXERCISE OF THE POWER OF
SUPERVISION WHEN IT RULED THAT THE
REGIONAL TRIAL COURT DOES NOT HAVE
JURISDICTION OVER THE COMPLAINT FOR
REPLEVIN FILED BY SMART TO RECOVER ITS OWN
COMPANY VEHICLE FROM A FORMER EMPLOYEE
WHO WAS LEGALLY DISMISSED.
WHETHER THE HONORABLE COURT OF APPEALS
HAS FAILED TO APPRECIATE THAT THE SUBJECT
OF THE REPLEVIN CASE IS NOT THE
ENFORCEMENT OF A CAR PLAN PRIVILEGE BUT
SIMPLY THE RECOVERY OF A COMPANY CAR.
VI
WHETHER THE HONORABLE COURT OF APPEALS
HAS FAILED TO APPRECIATE THAT ASTORGA CAN
NO LONGER BE CONSIDERED AS AN EMPLOYEE OF
SMART UNDER THE LABOR CODE.29
The Court shall first deal with the propriety of dismissing the
replevin case filed with the RTC of Makati City allegedly for lack of
jurisdiction, which is the issue raised in G.R. No. 148132.
Replevin is an action whereby the owner or person entitled to
repossession of goods or chattels may recover those goods or
chattels from one who has wrongfully distrained or taken, or who
wrongfully detains such goods or chattels. It is designed to permit
one having right to possession to recover property in specie from
one who has wrongfully taken or detained the property. 30 The
term may refer either to the action itself, for the recovery of
personalty, or to the provisional remedy traditionally associated
with it, by which possession of the property may be obtained by
the plaintiff and retained during the pendency of the action. 31
That the action commenced by SMART against Astorga in the
RTC of Makati City was one for replevin hardly admits of doubt.
In reversing the RTC ruling and consequently dismissing the case
for lack of jurisdiction, the CA made the following disquisition, viz.:
[I]t is plain to see that the vehicle was issued to [Astorga]
by [Smart] as part of the employment package. We doubt
that [SMART] would extend [to Astorga] the same car
plan privilege were it not for her employment as district
sales manager of the company. Furthermore, there is no
civil contract for a loan between [Astorga] and [Smart].
Consequently, We find that the car plan privilege is a
benefit arising out of employer-employee relationship.
Thus, the claim for such falls squarely within the original
and exclusive jurisdiction of the labor arbiters and the
NLRC.32
We do not agree. Contrary to the CA’s ratiocination, the RTC
rightfully assumed jurisdiction over the suit and acted well within
its discretion in denying Astorga’s motion to dismiss. SMART’s
demand for payment of the market value of the car or, in the
alternative, the surrender of the car, is not a labor, but a civil,
dispute. It involves the relationship of debtor and creditor rather
than employee-employer relations.33 As such, the dispute falls
within the jurisdiction of the regular courts.
130
In Basaya, Jr. v. Militante,34 this Court, in upholding the
jurisdiction of the RTC over the replevin suit, explained:
Replevin is a possessory action, the gist of which is the
right of possession in the plaintiff. The primary relief
sought therein is the return of the property in specie
wrongfully detained by another person. It is an ordinary
statutory proceeding to adjudicate rights to the title or
possession of personal property. The question of
whether or not a party has the right of possession over
the property involved and if so, whether or not the
adverse party has wrongfully taken and detained said
property as to require its return to plaintiff, is outside the
pale of competence of a labor tribunal and beyond the
field of specialization of Labor Arbiters.
xxxx
The labor dispute involved is not intertwined with the
issue in the Replevin Case. The respective issues raised
in each forum can be resolved independently on the
other. In fact in 18 November 1986, the NLRC in the
case before it had issued an Injunctive Writ enjoining the
petitioners from blocking the free ingress and egress to
the Vessel and ordering the petitioners to disembark and
vacate. That aspect of the controversy is properly settled
under the Labor Code. So also with petitioners’ right to
picket. But the determination of the question of who has
the better right to take possession of the Vessel and
whether petitioners can deprive the Charterer, as the
legal possessor of the Vessel, of that right to possess in
addressed to the competence of Civil Courts.
In thus ruling, this Court is not sanctioning split
jurisdiction but defining avenues of jurisdiction as laid
down by pertinent laws.
The CA, therefore, committed reversible error when it overturned
the RTC ruling and ordered the dismissal of the replevin case for
lack of jurisdiction.
Having resolved that issue, we proceed to rule on the validity of
Astorga’s dismissal.
Astorga was terminated due to redundancy, which is one of the
authorized causes for the dismissal of an employee. The nature of
redundancy as an authorized cause for dismissal is explained in
the leading case of Wiltshire File Co., Inc. v. National Labor
Relations Commission,35 viz:
x x x redundancy in an employer’s personnel force
necessarily or even ordinarily refers to duplication of
work. That no other person was holding the same
position that private respondent held prior to termination
of his services does not show that his position had not
become redundant. Indeed, in any well organized
business enterprise, it would be surprising to find
duplication of work and two (2) or more people doing the
work of one person. We believe that redundancy, for
purposes of the Labor Code, exists where the services of
an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is
superfluous, and superfluity of a position or positions
may be the outcome of a number of factors, such as
overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity
previously manufactured or undertaken by the
enterprise.
The characterization of an employee’s services as superfluous or
no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The
wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation
of law or arbitrary or malicious action is not shown.36
Astorga claims that the termination of her employment was illegal
and tainted with bad faith. She asserts that the reorganization was
done in order to get rid of her. But except for her barefaced
allegation, no convincing evidence was offered to prove it. This
Court finds it extremely difficult to believe that SMART would
enter into a joint venture agreement with NTT, form SNMI and
abolish CSMG/FSD simply for the sole purpose of easing out a
particular employee, such as Astorga. Moreover, Astorga never
denied that SMART offered her a supervisory position in the
Customer Care Department, but she refused the offer because
the position carried a lower salary rank and rate. If indeed SMART
simply wanted to get rid of her, it would not have offered her a
position in any department in the enterprise.
Astorga also states that the justification advanced by SMART is
not true because there was no compelling economic reason for
redundancy. But contrary to her claim, an employer is not
precluded from adopting a new policy conducive to a more
economical and effective management even if it is not
experiencing economic reverses. Neither does the law require
that the employer should suffer financial losses before he can
terminate the services of the employee on the ground of
redundancy. 37
We agree with the CA that the organizational realignment
introduced by SMART, which culminated in the abolition of
CSMG/FSD and termination of Astorga’s employment was an
honest effort to make SMART’s sales and marketing departments
more efficient and competitive. As the CA had taken pains to
elucidate:
x x x a careful and assiduous review of the records will
yield no other conclusion than that the reorganization
undertaken by SMART is for no purpose other than its
declared objective – as a labor and cost savings device.
Indeed, this Court finds no fault in SMART’s decision to
outsource the corporate sales market to SNMI in order to
attain greater productivity. [Astorga] belonged to the
Sales Marketing Group under the Fixed Services
Division (CSMG/FSD), a distinct sales force of SMART in
charge of selling SMART’s telecommunications services
to the corporate market. SMART, to ensure it can
respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly
thereafter assigned its functions to newly-created SNMI
Multimedia Incorporated, a joint venture company of
SMART and NTT of Japan, for the reason that
CSMG/FSD does not have the necessary technical
expertise required for the value added services. By
transferring the duties of CSMG/FSD to SNMI, SMART
has created a more competent and specialized
organization to perform the work required for corporate
accounts. It is also relieved SMART of all administrative
costs – management, time and money-needed in
maintaining the CSMG/FSD. The determination to
outsource the duties of the CSMG/FSD to SNMI was, to
Our mind, a sound business judgment based on relevant
criteria and is therefore a legitimate exercise of
management prerogative.
Indeed, out of our concern for those lesser circumstanced in life,
this Court has inclined towards the worker and upheld his cause
in most of his conflicts with his employer. This favored treatment
is consonant with the social justice policy of the Constitution. But
while tilting the scales of justice in favor of workers, the
fundamental law also guarantees the right of the employer to
131
reasonable returns for his investment.38 In this light, we must
acknowledge the prerogative of the employer to adopt such
measures as will promote greater efficiency, reduce overhead
costs and enhance prospects of economic gains, albeit always
within the framework of existing laws. Accordingly, we sustain the
reorganization and redundancy program undertaken by SMART.
However, as aptly found by the CA, SMART failed to comply with
the mandated one (1) month notice prior to termination. The
record is clear that Astorga received the notice of termination only
on March 16, 199839 or less than a month prior to its effectivity on
April 3, 1998. Likewise, the Department of Labor and Employment
was notified of the redundancy program only on March 6, 1998. 40
Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of
personnel. — The employer may also terminate the
employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof x x x.
SMART’s assertion that Astorga cannot complain of lack of notice
because the organizational realignment was made known to all
the employees as early as February 1998 fails to persuade.
Astorga’s actual knowledge of the reorganization cannot replace
the formal and written notice required by the law. In the written
notice, the employees are informed of the specific date of the
termination, at least a month prior to the effectivity of such
termination, to give them sufficient time to find other suitable
employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding
Astorga’s knowledge of the reorganization, she remained
uncertain about the status of her employment until SMART gave
her formal notice of termination. But such notice was received by
Astorga barely two (2) weeks before the effective date of
termination, a period very much shorter than that required by law.
Be that as it may, this procedural infirmity would not render the
termination of Astorga’s employment illegal. The validity of
termination can exist independently of the procedural infirmity of
the dismissal.41 In DAP Corporation v. CA,42 we found the
dismissal of the employees therein valid and for authorized cause
even if the employer failed to comply with the notice requirement
under Article 283 of the Labor Code. This Court upheld the
dismissal, but held the employer liable for non-compliance with
the procedural requirements.
The CA, therefore, committed no reversible error in sustaining
Astorga’s dismissal and at the same time, awarding indemnity for
violation of Astorga's statutory rights.
However, we find the need to modify, by increasing, the indemnity
awarded by the CA to Astorga, as a sanction on SMART for non-
compliance with the one-month mandatory notice requirement, in
light of our ruling in Jaka Food Processing Corporation v.
Pacot,43 viz.:
[I]f the dismissal is based on a just cause under Article
282 but the employer failed to comply with the notice
requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was,
in effect, initiated by an act imputable to the employee,
and (2) if the dismissal is based on an authorized cause
under Article 283 but the employer failed to comply with
the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by
the employer’s exercise of his management prerogative.
We deem it proper to increase the amount of the penalty on
SMART to P50,000.00.
As provided in Article 283 of the Labor Code, Astorga is, likewise,
entitled to separation pay equivalent to at least one (1) month
salary or to at least one (1) month’s pay for every year of service,
whichever is higher. The records show that Astorga’s length of
service is less than a year. She is, therefore, also entitled to
separation pay equivalent to one (1) month pay.
Finally, we note that Astorga claimed non-payment of wages from
February 15, 1998. This assertion was never rebutted by SMART
in the proceedings a quo. No proof of payment was presented by
SMART to disprove the allegation. It is settled that in labor cases,
the burden of proving payment of monetary claims rests on the
employer.44 SMART failed to discharge the onus probandi.
Accordingly, it must be held liable for Astorga’s salary from
February 15, 1998 until the effective date of her termination, on
April 3, 1998.
However, the award of backwages to Astorga by the CA should
be deleted for lack of basis. Backwages is a relief given to an
illegally dismissed employee. Thus, before backwages may be
granted, there must be a finding of unjust or illegal dismissal from
work.45 The Labor Arbiter ruled that Astorga was illegally
dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s
ruling and categorically declared Astorga’s dismissal valid. This
ruling was affirmed by the CA in its assailed Decision. Since
Astorga’s dismissal is for an authorized cause, she is not entitled
to backwages. The CA’s award of backwages is totally
inconsistent with its finding of valid dismissal.
WHEREFORE, the petition of SMART docketed as G.R. No.
148132 is GRANTED. The February 28, 2000 Decision and the
May 7, 2001 Resolution of the Court of Appeals in CA-G.R. SP.
No. 53831 are SET ASIDE. The Regional Trial Court of Makati
City, Branch 57 is DIRECTED to proceed with the trial of Civil
Case No. 98-1936 and render its Decision with reasonable
dispatch.
On the other hand, the petitions of SMART and Astorga docketed
as G.R. Nos. 151079 and 151372 are DENIED. The June 11,
2001 Decision and the December 18, 2001 Resolution in CA-G.R.
SP. No. 57065, are AFFIRMED with MODIFICATION. Astorga is
declared validly dismissed. However, SMART is ordered to pay
Astorga P50,000.00 as indemnity for its non-compliance with
procedural due process, her separation pay equivalent to one (1)
month pay, and her salary from February 15, 1998 until the
effective date of her termination on April 3, 1998. The award of
backwages is DELETED for lack of basis.
SO ORDERED.
G.R. No. 117040 January 27, 2000
RUBEN SERRANO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN
DEPARTMENT STORE, respondents.
MENDOZA, J.:
This is a Petition seeking review of the resolutions, dated March
30, 1994 and August 26, 1994, of the National Labor Relations
Commission (NLRC) which reversed the decision of the Labor
Arbiter and dismissed petitioner Ruben Serrano's complaint for
132
illegal dismissal and denied his motion for reconsideration. The
facts are as follows:
Petitioner was hired by private respondent Isetann Department
Store as a security checker to apprehend shoplifters and prevent
pilferage of merchandise.1 Initially hired on October 4, 1984 on
contractual basis, petitioner eventually became a regular
employee on April 4, 1985. In 1988, he became head of the
Security Checkers Section of private respondent.2
Sometime in 1991, as a cost-cutting measure, private respondent
decided to phase out its entire security section and engage the
services of an independent security agency. For this reason, it
wrote petitioner the following memorandum:3
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Seranno,
In view of the retrenchment program of the
company, we hereby reiterate our verbal notice
to you of your termination as Security Section
Head effective October 11, 1991.
Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a
complaint on December 3, 1991 for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of
wages, and nonpayment of salary and overtime pay.4
The parties were required to submit their position papers,
on the basis of which the Labor Arbiter defined the
issues as follows:5
Whether or not there is a valid ground for the dismissal
of the complainant.
Whether or not complainant is entitled to his monetary
claims for underpayment of wages, nonpayment of
salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor
practice.
Thereafter, the case was heard. On April 30, 1993, the Labor
Arbiter rendered a decision finding petitioner to have been illegally
dismissed. He ruled that private respondent failed to establish that
it had retrenched its security section to prevent or minimize losses
to its business; that private respondent failed to accord due
process to petitioner; that private respondent failed to use
reasonable standards in selecting employees whose employment
would be terminated; that private respondent had not shown that
petitioner and other employees in the security section were so
inefficient so as to justify their replacement by a security agency,
or that "cost-saving devices [such as] secret video cameras (to
monitor and prevent shoplifting) and secret code tags on the
merchandise" could not have been employed; instead, the day
after petitioner's dismissal, private respondent employed a safety
and security supervisor with duties and functions similar to those
of petitioner.1âwphi1.nêt
Accordingly, the Labor Arbiter ordered:6
WHEREFORE, above premises considered, judgment is hereby
decreed:
(a) Finding the dismissal of the complainant to be illegal
and concomitantly, Respondent is ordered to pay
complainant full backwages without qualification or
deduction in the amount of P74,740.00 from the time of
his dismissal until reinstatement. (computed till
promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited
to (3) three years;
(b) Ordering the Respondent to immediately reinstate the
complainant to his former position as security section
head or to a reasonably equivalent supervisorial position
in charges of security without loss of seniority rights,
privileges and benefits. This order is immediately
executory even pending appeal;
(c) Ordering the Respondent to pay complainant unpaid
wages in the amount of P2,020.73 and proportionate
13th month pay in the amount of P3,198.30;
(d) Ordering the Respondent to pay complainant the
amount of P7,995.91, representing 10% attorney's fees
based on the total judgment award of P79,959.12.
All other claims of the complainant whether monetary or
otherwise is hereby dismissed for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution
of March 30, 1994; reversed the decision of the Labor Arbiter and
ordered petitioner to be given separation pay equivalent to one
month pay for every year of service, unpaid salary, and
proportionate 13th month pay. Petitioner filed a motion for
reconsideration, but his motion was denied.
The NLRC held that the phase-out of private respondent's security
section and the hiring of an independent security agency
constituted an exercise by private respondent of "[a] legitimate
business decision whose wisdom we do not intend to inquire into
and for which we cannot substitute our judgment"; that the
distinction made by the Labor Arbiter between "retrenchment" and
the employment of cost-saving devices" under Art. 283 of the
Labor Code was insignificant because the company official who
wrote the dismissal letter apparently used the term "retrenchment"
in its "plain and ordinary sense: to layoff or remove from one's job,
regardless of the reason therefor"; 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
respondent's part was of no moment because the position had
long been in existence and was separate from petitioner's position
as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY
AGENCY BY THE PRIVATE RESPONDENT TO
REPLACE ITS CURRENT SECURITY SECTION A
VALID GROUND FOR THE DISMISSAL OF THE
EMPLOYEES CLASSED UNDER THE LATTER?7
133
Petitioner contends that abolition of private respondent's Security
Checkers Section and the employment of an independent security
agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.
Petitioner Laid Off for Cause
Petitioner's contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. — The
employer may also terminate the employment of any employee
due to the installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of
operations of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the, workers and the Department of
Labor and Employment at least one (1) month before the intended
date thereof. In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected thereby shall
be entitled to a separation pay equivalent to at least one (1)
month pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of
establishment or undertaking not due to serious business losses
or financial reverses, the separation pay shall be equivalent to at
least one (1) month pay or at least one-half (1/2) month pay for
every year of service, whichever is higher. A fraction of at least six
(6) months shall be considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,8 this
Court upheld the termination of employment of three mechanics in
a transportation company and their replacement by a company
rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as
part of the company's cost-saving program, the services
rendered by the mechanics became redundant and
superfluous, and therefore properly terminable. The
company merely exercised its business judgment or
management prerogative. And in the absence of any
proof that the management abused its discretion or acted
in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.9
In Asian Alcohol Corporation v. National Labor Relations
Commission,10 the Court likewise upheld the termination of
employment of water pump tenders and their replacement by
independent contractors. It ruled that an employer's good faith in
implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent
contractor to replace the services of the terminated employees to
promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a
company] cannot be denied the faculty of promoting efficiency
and attaining economy by a study of what units are essential for
its operation. To it belongs the ultimate determination of whether
services should be performed by its personnel or contracted to
outside agencies . . . [While there] should be mutual consultation,
eventually deference is to be paid to what management
decides."11Consequently, absent proof that management acted in
a malicious or arbitrary manner, the Court will not interfere with
the exercise of judgment by an employer.12
In the case at bar, we have only the bare assertion of petitioner
that, in abolishing the security section, private respondent's real
purpose was to avoid payment to the security checkers of the
wage increases provided in the collective bargaining agreement
approved in 1990.13 Such an assertion is not sufficient basis for
concluding that the termination of petitioner's employment was not
a bona fide decision of management to obtain reasonable return
from its investment, which is a right guaranteed to employers
under the Constitution.14 Indeed, that the phase-out of the security
section constituted a "legitimate business decision" is a factual
finding of an administrative agency which must be accorded
respect and even finality by this Court since nothing can be found
in the record which fairly detracts from such finding.15
Accordingly, we hold that the termination of petitioner's 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.
Sanctions for Violations of the Notice Requirement
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. On the same day, his services
were terminated. He was thus denied his right to be given written
notice before the termination of his employment, and the question
is the appropriate sanction for the violation of petitioner's right.
To be sure, this is not the first time this question has arisen.
In Subuguero v. NLRC,16 workers in a garment factory were
temporarily laid off due to the cancellation of orders and a
garment embargo. The Labor Arbiter found that the workers had
been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand,
found that this was a case of retrenchment due to business losses
and ordered the payment of separation pay without backwages.
This Court sustained the NLRC's finding. However, as the
company did not comply with the 30-day written notice in Art. 283
of the Labor Code, the Court ordered the employer to pay the
workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving
dismissals which, although based on any of the just causes under
Art. 282,17 were effected without notice and hearing to the
employee as required by the implementing rules.18 As this Court
said: "It is now settled that where the dismissal of one employee is
in fact for a just and valid cause and is so proven to be but he is
not accorded his right to due process, i.e., he was not furnished
the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of, or for failure to observe,
due process."19
The rule reversed a long standing policy theretofore followed that
even though the dismissal is based on a just cause or the
termination of employment is for an authorized cause, the
dismissal or termination is illegal if effected without notice to the
employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.20 In announcing the change, this Court said:21
The Court holds that the policy of ordering the
reinstatement to the service of an employee without loss
of seniority and the payment of his wages during the
period of his separation until his actual reinstatement but
not exceeding three (3) years without qualification or
deduction, when it appears he was not afforded due
process, although his dismissal was found to be for just
and authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment, should be re-
examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an
employee who has been shown to be guilty of the
charges that warranted his dismissal from employment.
Indeed, it will demoralize the rank and file if the
undeserving, if not undesirable, remains in the service.
134
 xxx xxx xxx
However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his
right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of
an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of
the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct
an investigation as required by law before dismissing
petitioner from employment. Considering the
circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The
measure of this award depends on the facts of each
case and the gravity of the omission committed by the
employer.
The fines imposed for violations of the notice requirement have
varied from P1,000.0022 to P2,000.0023 to P5,000.0024 to
P10,000.00.25
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate
sanctions for violations of the notice experience during the last
decade or so with the Wenphil doctrine. The number of cases
involving dismissals without the requisite notice to the employee,
although effected for just or authorized causes, suggest that the
imposition of fine for violation of the notice requirement has not
been effective in deterring violations of the notice requirement.
Justice Panganiban finds the monetary sanctions "too
insignificant, too niggardly, and sometimes even too late." On the
other hand, Justice Puno says there has in effect been fostered a
policy of "dismiss now; pay later" which moneyed employers find
more convenient to comply with than the requirement to serve a
30-day written notice (in the case of termination of employment for
an authorized cause under Arts. 283-284) or to give notice and
hearing (in the case of dismissals for just causes under Art. 282).
For this reason, they regard any dismissal or layoff without the
requisite notice to be null and void even though there are just or
authorized cause for such dismissal or layoff. Consequently, in
their view, the employee concerned should be reinstated and paid
backwages.
Validity of Petitioner's Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and
Panganiban, that we should rethink the sanction of fine for an
employer's disregard of the notice requirement. We do not agree,
however, that disregard of this requirement by an employer
renders the dismissal or termination of employment null and void.
Such a stance is actually a reversion to the discredited pre-
Wenphil rule of ordering an employee to be reinstated and paid
backwages when it is shown that he has not been given notice
and hearing although his dismissal or layoff is later found to be for
a just or authorized cause. Such rule was abandoned in Wenphil
because it is really unjust to require an employer to keep in his
service one who is guilty, for example, of an attempt on the life of
the employer or the latter's family, or when the employer is
precisely retrenching in order to prevent losses.
The need is for a rule which, while recognizing the employee's
right to notice before he is dismissed or laid off, at the same time
acknowledges the right of the employer to dismiss for any of the
just causes enumerated in Art. 282 or to terminate employment
for any of the authorized causes mentioned in Arts. 283-284. If the
Wenphil rule imposing a fine on an employer who is found to have
dismissed an employee for cause without prior notice is deemed
ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void if
there are just or valid grounds for such dismissal or if the
termination is for an authorized cause. That would be to uphold
the right of the employee but deny the right of the employer to
dismiss for cause. Rather, 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.
For the same reason, if an employee is laid off for any of the
causes in Arts. 283-284, i.e., installation of a labor-saving device,
but the employer did not give him and the DOLE a 30-day written
notice of termination in advance, then the termination of his
employment should be considered ineffectual and he should be
paid backwages. However, the termination of his employment
should not be considered void but he should simply be paid
separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employer's failure to comply with the
notice requirement constitutes a denial of the employee's right to
due process. Prescinding from this premise, he quotes the
statement of Chief Justice Concepcion Vda. de Cuaycong v. Vda.
de Sengbengco26 that "acts of Congress, as well as of the
Executive, can deny due process only under the pain of nullity,
and judicial proceedings suffering from the same flaw are subject
to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an
employee without notice and hearing, even if for a just cause, as
provided in Art. 282, or for an authorized cause, as provided in
Arts. 283-284, is a nullity. Hence, even if just or authorized cause
exist, the employee should be reinstated with full back pay. On
the other hand, Justice Panganiban quotes from the statement
in People v. Bocar27 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."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer,
however, to the denial of due process by the State, which is not
the case here. There are three reasons why, on the other hand,
violation by the employer of the notice requirement cannot be
considered a denial of due process resulting in the nullity of the
employee's dismissal or layoff.
The first is that the Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of employment
under the Labor Code. This is plain from the text of Art. III, §1 of
the Constitution, viz.: "No person shall be deprived of life, liberty,
or property without due process of law. . . ." The reason is simple:
Only the State has authority to take the life, liberty, or property of
the individual. The purpose of the Due Process Clause is to
ensure that the exercise of this power is consistent with what are
considered civilized methods.
The second reason is that notice and hearing are required under
the Due Process Clause before the power of organized society
are brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the
employee is not faced with an aspect of the adversary system.
The purpose for requiring a 30-day written notice before an
employee is laid off is not to afford him an opportunity to be heard
on any charge against him, for there is none. The purpose rather
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.
Even in cases of dismissal under Art. 282, the purpose for the
requirement of notice and hearing is not to comply with Due
Process Clause of the Constitution. The time for notice and
135
hearing is at the trial stage. Then that is the time we speak of
notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement
before he dismisses an employee does not foreclose the right of
the latter to question the legality of his dismissal. As Art. 277(b)
provides, "Any decision taken by the employer shall be without
prejudice to the right of the worker to contest the validity or legality
of his dismissal by filing a complaint with the regional branch of
the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code
is an aspect of due process is to overlook the fact that Art. 283
had its origin in Art. 302 of the Spanish Code of Commerce of
1882 which gave either party to the employer-employee
relationship the right to terminate their relationship by giving
notice to the other one month in advance. In lieu of notice, an
employee could be laid off by paying him a mesada equivalent to
his salary for one month.28 This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But
on June 12, 1954, R.A. No. 1052, otherwise known as the
Termination Pay Law, was enacted reviving the mesada. On June
21, 1957, the law was amended by R.A. No. 1787 providing for
the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.29
The Termination Pay Law was held not to be a substantive law
but a regulatory measure, the purpose of which was to give the
employer the opportunity to find a replacement or substitute, and
the employee the equal opportunity to look for another job or
source of employment. Where the termination of employment was
for a just cause, no notice was required to be given to the,
employee.30 It was only on September 4, 1981 that notice was
required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by
the then Minister of Labor and Employment to implement B.P. Blg.
130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the
amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It
cannot be that the former regime denied due process to the
employee. Otherwise, there should now likewise be a rule that, in
case an employee leaves his job without cause and without prior
notice to his employer, his act should be void instead of simply
making him liable for damages.
The third reason why the notice requirement under Art. 283 can
not be considered a requirement of the Due Process Clause is
that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282 (i.e.,
serious misconduct or willful disobedience by the employee of the
lawful orders of the employer, gross and habitual neglect of
duties, fraud or willful breach of trust of the employer, commission
of crime against the employer or the latter's immediate family or
duly authorized representatives, or other analogous cases).
Justice Puno disputes this. He says that "statistics in the DOLE
will prove that many cases have been won by employees before
the grievance committees manned by impartial judges of the
company." The grievance machinery is, however, different
because it is established by agreement of the employer and the
employees and composed of representatives from both sides.
That is why, in Batangas Laguna Tayabas Bus Co. ·v. Court of
Appeals,31 which Justice Puno cites, it was held that "Since the
right of [an employee] to his labor is in itself a property and that
the labor agreement between him and [his employer] is the law
between the parties, his summary and arbitrary dismissal
amounted to deprivation of his property without due process of
law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance
machinery. Accordingly in Montemayor v. Araneta University
Foundation,32 although a professor was dismissed without a
hearing by his university, his dismissal for having made
homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process.
Some are simply part of a procedure to be followed before a right
granted to a party can be exercised. Others are simply an
application of the Justinian precept, embodied in the Civil
Code,33 to act with justice, give everyone his due, and observe
honesty and good faith toward one's fellowmen. Such is the notice
requirement in Arts. 282-283. The consequence of the failure
either of the employer or the employee to live up to this precept is
to make him liable in damages, not to render his act (dismissal or
resignation, as the case may be) void. The measure of damages
is the amount of wages the employee should have received were
it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor
Code, the employer's 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. It is
similar to the failure to observe the provisions of Art. 1592, in
relation to Art. 1191, of the Civil Code34 in rescinding a contract for
the sale of immovable property. Under these provisions, while the
power of a party to rescind a contract is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an
action in court or giving notice of rescission by means of a notarial
demand.35 Consequently, a notice of rescission given in the letter
of an attorney has no legal effect, and the vendee can make
payment even after the due date since no valid notice of
rescission has been given.36
Indeed, under the Labor Code, only the absence of a just cause
for the termination of employment can make the dismissal of an
employee illegal. This is clear from Art. 279 which provides:
Security of Tenure. — In cases of regular employment,
the employer shall not terminate the services of an
employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissedfrom
work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement.37
Thus, only if the termination of employment is not for any of the
causes provided by law is it illegal and, therefore, the employee
should be reinstated and paid backwages. To contend, as
Justices Puno and Panganiban do, that even if the termination is
for a just or authorized cause the employee concerned should be
reinstated and paid backwages would be to amend Art. 279 by
adding another ground for considering a dismissal illegal. What is
more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for
damages.38 This disparity in legal treatment, which would result
from the adoption of the theory of the minority cannot simply be
explained by invoking resident Ramon Magsaysay's motto that
"he who has less in life should have more in law." That would be a
misapplication of this noble phrase originally from Professor
Thomas Reed Powell of the Harvard Law School.
136
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in
support of his view that an illegal dismissal results not only from
want of legal cause but also from the failure to observe "due
process." The Pepsi-Cola case actually involved a dismissal for
an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not
because there was a denial of due process, but because the
dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the
dismissal with illegality" was merely a dictum thrown in as
additional grounds for holding the dismissal to be illegal.
Given the nature of the violation, therefore, the appropriate
sanction for the failure to give notice is the payment of backwages
for the period when the employee is considered not to have been
effectively dismissed or his employment terminated. The sanction
is not the payment alone of nominal damages as Justice Vitug
contends.
Unjust Results of Considering Dismissals/Layoffs Without Prior
Notice As Illegal
The refusal to look beyond the validity of the initial action taken by
the employer to terminate employment either for an authorized or
just cause can result in an injustice to the employer. For not giving
notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the
life of the employer, an employer will be forced to keep in his
employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social
economic force."40 But so does it declare that it "recognizes the
indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment." 41 The
Constitution bids the State to "afford full protection to labor."42 But
it is equally true that "the law, in protecting the right's of the
laborer, authorizes neither oppression nor self-destruction of the
employer."43And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his interest to
do so.
In sum, we hold that if in proceedings for reinstatement under Art.
283, it is shown that the termination of employment was due to an
authorized cause, then the employee concerned should not be
ordered reinstated even though there is failure to comply with the
30-day notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283, to wit:
In case of termination due to the installation of labor-
saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one month
for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six months shall be considered one (1) whole
year.
If the employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either case,
whether he is reinstated or only granted separation pay, he should
be paid full backwages if he has been laid off without written
notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause under Art.
282, if it is shown that the employee was dismissed for any of the
just causes mentioned in said Art. 282, then, in accordance with
that article, he should not be reinstated. However, he must be
paid backwages from the time his employment was terminated
until it is determined that the termination of employment is for a
just cause because the failure to hear him before he is dismissed
renders the termination of his employment without legal effect.
WHEREFORE, the petition is GRANTED and 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.
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo,
Buena, Gonzaga-Reyes and De Leon, Jr., JJ.,concur.
Bellosillo J., Please see Separate Opinion.
Puno, J., Please see Dissenting Opinion.
Vitug, J., Please see Separate opinion.
Panganiban J., Please see Separate Opinion.
Ynares-Santiago, J., I join the dissenting opinion of J. Puno.
Separate Opinions
BELLOSILLO, J., separate opinion;
We point out at the outset that this Petition for Review which was
filed before the promulgation of St. Martin Funeral Home v.
National Labor Relations Commission,1 is not the proper means
by which NLRC decisions are appealed to this Court. Before St.
Martin Funeral Home, it was only through a Petition
for Certiorari under Rule 65 that NLRC decisions could be
reviewed and nullified by us on the ground of lack of jurisdiction or
grave abuse of discretion amounting to lack or excess of
jurisdiction. After St. Martin Funeral Home, petitions like the one
at bar are initially filed in the Court of Appeals for proper
adjudication.
In the interest of justice, however, and in order to write finis to the
instant case which has already dragged on for so long, we shall
treat the petition pro hac vice as one for certiorari under Rule 65
although it is captioned Petition for Review on Certiorari; after all,
it was filed within the reglementary period for the filing of a petition
for certiorari under Rule 65.
Briefly, on 4 April 1985 private respondent Isetann Department
Store, Inc. (ISETANN), employed petitioner Ruben Serrano as
Security Checker until his appointment as Security Section Head.
On October 1991 ISETANN through its Human Resource Division
Manager Teresita A. Villanueva sent Serrano a memorandum
terminating his employment effective immediately "in view of the
retrenchment program of the company," and directing him to
secure clearance from their office.2
137
Petitioner Serrano filed with the NLRC Adjudication Office a
complaint for illegal dismissal and underpayment of wages
against ISETANN. Efforts at amicable settlement proved futile.
Ms. Cristina Ramos, Personnel Administration Manager of
ISETANN, testified that the security checkers and their section
head were retrenched due to the installation of a labor saving
device, i.e., the hiring of an independent security agency.
Finding the dismissal to be illegal, the Labor Arbiter ordered the
immediate reinstatement of Serrano to his former or to an
equivalent position plus payment of back wages, unpaid wages,
13th month pay and attorney's fees.
On appeal the NLRC reversed the Labor Arbiter and ruled that
ISETANN acted within its prerogative when it phased out its
Security Section and retained the services of an independent
security agency in order to cut costs and economize. Upon denial
of his motion for reconsideration3 Serrano filed the instant petition
imputing grave abuse of discretion on the part of the NLRC.
Art. 282 of the Labor Code enumerates the just causes for the
termination of employment by the employer: (a) serious
misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection
with the employee's work; (b) gross and habitual neglect by the
employee of his duties; (c) fraud or willful breach by the employee
of the trust reposed in him by his employer or his duly authorized
representative; (d) commission of a crime or offense by the
employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and,
(e) other causes analogous to the foregoing.
On the other hand, Arts. 283 and 284 of the same Code
enumerate the so-called authorized causes: (a) installation of
labor saving devices; (b) redundancy: (b) retrenchment to prevent
losses; (d) closure or cessation of the establishment or
undertaking unless the closure or cessation is for the purpose of
circumventing the provisions of the law; and, (e) disease.
The Just causes enumerated under Art. 282 of the Labor Code
are provided by the employee who causes the infraction.
The authorized causes are provided by the employer either
because of outside factors such as the general decline in the
economy or merely part of its long range plan for business
profitability. Corollarily, in termination for a just cause, the
employee is not entitled to separation pay unlike in termination for
an authorized cause. In addition, the basis in computing the
amount of separation pay varies depending on whether the
termination is due to the installation of a labor saving device, or
redundancy, in which case, the employee is entitled to receive
separation pay equivalent to at least one (1) month pay or to at
least one (1) month pay for every year of service. In case the
termination is due to retrenchment in order to prevent losses or in
case of closure or cessation of operation of the establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay is lower, i.e., equivalent to one (1)
month pay or at least one-half month pay for every year of
service, whichever is higher. As may be gleaned from the
foregoing, where the cause of termination is for the financial
advantage or benefit of the employer, the basis in computing for
separation pay is higher compared to termination dictated by
necessity with no appreciable financial advantage to the
employer.
In the instant case, we agree with the NLRC that the dismissal of
petitioner Serrano was for an authorized cause, i.e., redundancy,
which exists where the services of an employee are in excess of
what are reasonably demanded by the actual requirements of the
enterprise. A position is redundant where it is superfluous, and the
superfluity may be the outcome of other factors such as overhiring
of workers, decreased volume of other business, or dropping of a
particular product line or service activity previously manufactured
or undertaken by the enterprise.4
The hiring of an independent security agency is a business
decision properly within the exercise of management prerogative.
As such, this Court is denied the authority to delve into its wisdom
although it is equipped with the power to determine whether the
exercise of such prerogative is in accordance with law.
Consequently, the wisdom or soundness of the management
decision is not subject to the discretionary review of the Labor
Arbiter nor of the NLRC unless there is a violation of law or
arbitrariness in the exercise thereof, in which case, this Court will
step in.5Specifically, we held in International Harvester Macleod,
Inc. v. Intermediate Appellate Court6 that the determination of
whether to maintain or phase out an entire department or section
or to reduce personnel lies with management. The determination
of the need for the phasing out of a department as a labor and
cost saving device because it is no longer economical to retain its
services is a management prerogative.
After having established that the termination of petitioner Ruben
Serrano was for an authorized cause, we now address the issue
of whether proper procedures were observed in his dismissal.
Since the State affords protection to labor under the
Constitution,7 workers enjoy security of tenure and may only be
removed or terminated upon valid reason and through strict
observance of proper procedure.8 Article 279 of the Labor Code
specifically provides —
Art. 279. Security of Tenure. — In cases of regular
employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly
dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed
from the time his compensation was withheld from him
up to the time of his actual reinstatement.
Security of tenure however does not guarantee perpetual
employment. If there exists a just or an authorized cause, the
employer may terminate the services of an employee but subject
always to procedural requirements. The employer cannot be
legally compelled to have in its employ a person whose continued
employment is patently inimical to its interest. The law, while
affording protection to the employee, does not authorize the
oppression or destruction of his employer.9
Subject then to the constitutional right of workers to security of
tenure and to be protected against dismissal except for a just or
authorized cause, and without prejudice to the requirement of
notice under Art. 283 of the Labor Code, the employer shall
furnish the worker whose employment is sought to be terminated
a written notice containing a statement of the cause of termination
and shall afford the latter ample opportunity to be heard and to
defend himself with the assistance of his representative, if he so
desires, in accordance with company rules and regulations
promulgated pursuant to guidelines set by the DOLE.10
As specifically provided in Art. 283 of the Labor Code, the
employer may terminate the employment of any employee due to
redundancy by serving a written notice on the worker and the
DOLE at least one (1) month before the intended date thereof. In
the instant case, ISETANN clearly violated the provisions of Art.
283 on notice.11 It did not send a written notice to DOLE which is
essential because the right to terminate an employee is not an
absolute prerogative. The lack of written notice denied DOLE the
opportunity to determine the validity of the termination.
138
The written notice ISETANN sent to Serrano was dated 11
October 1991 or on the same day the intended termination was to
take effect. This obviously did not comply with the 30-day
mandatory requirement. Although the cause for discharge may be
just or authorized, it is still necessary and obligatory to afford the
employee concerned his basic and more important right to notice.
Serrano was not given the chance to make the needed
adjustments brought about by his termination. Significantly, the
notice is intended to enable the employee not only to prepare
himself for the legal battle to protect his tenure of employment,
which can be long, arduous, expensive and complicated by his
own standards, but also to find other means of employment and
ease the impact of the loss of his job and, necessarily, has
income.
We are of the view that failure to send notice of termination to
Serrano is not tantamount to violation of his constitutional right to
due process but merely constitutes non-compliance with the
provision on notice under Art. 283 of the Labor Code.
The legitimacy of a government is established and its functions
delineated in the Constitution. From the Constitution flows all the
powers of government in the same manner that it sets the limits
for their proper exercise. In particular, the Bill of Rights functions
primarily as a deterrent to any display of arbitrariness on the part
of the government or any of its instrumentalities. It serves as the
general safeguard, as is apparent in its first section which states,
"No person shall be deprived of life, liberty or property without due
process of law, nor shall any person be denied the equal
protection of the laws."12 Specifically, due process is a
requirement for the validity of any governmental action amounting
to deprivation of liberty.13 It is a restraint on state action not only in
terms of what it amounts to but how it is accomplished. Its range
thus covers both the ends sough to be achieved by officialdom as
well as the means for their realization.14
Substantive due process is a weapon that may be utilized to
challenge acts of the legislative body, whether national or local,
and presumably executive orders of the President and
administrative orders and regulations of a rule-making character.
Procedural due process, on the other hand, is available for the
purpose of assailing arbitrariness or unreasonableness in the
administration of the law by executive department or the judicial
branch. Procedural due process likewise may aid those appearing
before Congressional committees if the proceedings are arbitrary
or otherwise unfair.13
Procedural due process demands that governmental acts, more
specifically so in the case of the judiciary, not be affected with
arbitrariness.16 The same disinterestedness required of men on
the bench must characterize the actuations of public officials, not
excluding the President, to satisfy the requirements of procedural
due process.17
In his dissent Mr. Justice Puno states that "the new majority
opinion limiting violations of due process to government action
alone is a throwback to a regime of law long discarded by more
progressive countries." He opines that "today, private due process
is a settled norm in administrative law," citing Schwartz, an
authority in administrative law.
We beg to disagree. A careful reading of Schwartz would reveal
that requirements of procedural due process extended from
governmental to private action only in instances where there is
"sufficient governmental involvement" or "the private action was
so saturated with governmental incidents."
The cardinal primary requirements of due process in
administrative proceedings were highlighted in Ang Tibay v. Court
of Industrial Relations:18 (a) the right to a hearing, which includes
the right to present one's case and submit evidence in support
thereof; (b) the tribunal must consider the evidence presented; (c)
the decision must have something to support itself; (d) the
evidence must be substantial; (e) the decision must be based on
the evidence presented at the hearing, or at least contained in the
record and disclosed to the parties affected; (f) the tribunal or
body or any of its judges must act on its own independent
consideration of the law and facts of the controversy, and not
simply accept the views of a subordinate; (g) the board or body
should, in all controversial questions, render its decision in such
manner that the parties to the proceeding may know the various
issues involved, and the reason for the decision rendered.
Also in Lumiqued v. Exevea19 it was held —
In administrative proceedings, the essence of due
process is simply the opportunity to explain one's side.
One may be heard, not solely by verbal presentation but
also, and perhaps even more creditably as it is more
practicable than oral arguments, through pleadings. An
actual hearing is not always an indispensable aspect of
due process. As long as a party was given the
opportunity to defend his interests in due course, he
cannot be said to have been denied due process of law,
for this opportunity to be heard is the very essence of
due process.
From the foregoing, it is clear that the observance of due process
is demanded in governmental acts. Particularly in administrative
proceedings, due process starts with the tribunal or hearing officer
and not with the employer. In the instant case, what is mandated
of the employer to observe is the 30-day notice requirement.
Hence, non-observance of the notice requirement is not denial of
due process but merely a failure to comply with a legal obligation
for which we strongly recommend, we impose a disturbance
compensation as discussed hereunder.
In the instant case, we categorically declare that Serrano was not
denied his right to due process. Instead, his employer did not
comply with the 30-day notice requirement. However, while
Serrano was not given the required 30-day notice, he was
nevertheless given and, in fact, took advantage of every
opportunity to be heard, first, by the Labor Arbiter, second, by the
NLRC, and third, by no less than this Court. Before the Labor
Arbiter and the NLRC, petitioner had the opportunity to present
his side not only orally but likewise through proper pleadings and
position papers.
It is not correct therefore to say that petitioner was deprived of his
right to due process.
We have consistently upheld in the past as valid although
irregular the dismissal of an employee for a just or authorized
cause but without notice and have imposed a sanction on the
erring employers in the form of damages for their failure to comply
with the notice requirement. We discussed the rationale behind
this ruling in Wenphil Corporation v. NLRC20 thus —
The Court holds that the policy of ordering reinstatement
to the service of an employee without loss of seniority
and the payment of his wages during the period of his
separation until his actual reinstatement but not
exceeding three years without qualification or deduction,
when it appears he was not afforded due process,
although his dismissal was found to be for just and
authorized cause in an appropriate proceeding in the
Ministry of Labor and Employment should be re-
examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an
employee who has been shown to be guilty of the
charges that warranted his dismissal from employment.
139
 Indeed, it will demoralize the rank and file if the
undeserving, if not undesirable, remains in the service . .
. . However, the petitioner must nevertheless be held to
account for failure to extend to private respondent his
right to an investigation before causing his dismissal.
The rule is explicit as above discussed. The dismissal of
an employee must be for just or authorized cause and
after due process. Petitioner committed an infraction of
the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct
an investigation as required by law before dismissing
petitioner from employment. Considering the
circumstances of this case petitioner must indemnify
private respondent the amount of P1,000.00. The
measure of this award depends on the facts of each
case and the gravity of the omission committed by the
employer (emphasis supplied).
In Sebuguero v. National Labor Relations Commission21 Mr.
Justice Davide Jr., now Chief Justice, made this clear
pronouncement —
It is now settled that where the dismissal of an employee
is in fact for a just and valid cause and is so proven to be
but he is not accorded his right to due process, i.e. he
was not furnished the twin requirements of notice and
the opportunity to be heard, the dismissal shall be upheld
but the employer must be sanctioned for non-compliance
with the requirements of or for failure to observe due
process. The sanction, in the nature of indemnification or
penalty, depends on the facts of each case and the
gravity of the omission committed by the employer.
This ruling was later ably amplified by Mr. Justice Puno in Nath v.
National Labor Relations Commission22 where he wrote —
The rules require the employer to furnish the worker
sought to be dismissed with two written notices before
termination of employment can be legally effected: (1)
notice which apprises the employee of the particular acts
or omissions for which his dismissal is sought; and (2)
the subsequent notice which informs the employee of the
employer's decision to dismiss him. In the instant case,
private respondents have failed to furnish petitioner with
the first of the required two (2) notices and to state
plainly the reasons for the dismissal in the termination
letter. Failure to comply with the requirements taints the
dismissal with illegality.
Be that as it may, private respondent can dismiss
petitioner for just cause . . . . We affirm the finding of the
public respondent that there was just cause to dismiss
petitioner, a probationary employee (emphasis supplied).
Also, in Camua v. National Labor Relations Commission23 this
Court through Mr. Justice Mendoza decreed —
In the case at bar, both the Labor Arbiter and the NLRC
found that no written notice of the charges had been
given to petitioner by the respondent company. . . .
Accordingly, in accordance with the well-settled rule,
private respondents should pay petitioner P1,000.00 as
indemnity for violation of his right to due process . . . .
Although an employee validy dismissed for cause he
may nevertheless be given separation pay as a measure
of social justice provided the cause is not serious
misconduct reflecting on his moral character (emphasis
supplied).
Non-observance of this procedural requirement before would
cause the employer to be penalized by way of paying damages to
the employee the amounts of which fluctuated through the years.
Thus, for just cause the indemnity ranged from P1,000.00 to
P10,000.00.24 For authorized cause, as distinguished from just
cause, the award ranged from P2,000.00 to P5,000.00.25
This Court has also sanctioned the ruling that a dismissal for a
just or authorized cause but without observance of the mandatory
30-day notice requirement was valid although considered
irregular. The Court ratiocinated that employers should not be
compelled to keep in their employ undesirable and undeserving
laborers. For the irregularity, i.e., the failure to observe the 30-day
notice of termination, the employer was made to pay a measly
sum ranging from P1,000.00 to P10,000.00.
With regard to the indemnity or penalty, which we prefer seriously
to be referred to as "disturbance compensation," the Court has
awarded varying amounts depending on the circumstances of
each case and the gravity of the commission. We now propose
that the amount of the award be uniform and rational and not
arbitrary. The reason for the proposal or modification is that in
their non-compliance with the 30-day notice requirement the
erring employers, regardless of the peculiar circumstances of
each case, commit the infraction only by the single act of not
giving any notice to their workers. It cannot be gainfully said that
the infraction in one case is heavier than in the other as the non-
observance constitutes one single act. Thus, if the dismissal is
illegal, i.e. there is no just or authorized cause, a disturbance
compensation in the amount of P10,000.00 may be considered
reasonable. If the dismissal is for a just cause but without notice,
a disturbance compensation in the amount P5,000.00 may be
given. In termination for an authorized cause and the notice
requirement was not complied with, we distinguish further: If it is
to save the employer from imminent bankruptcy or business
losses, the disturbance compensation to be given is P5,000.00. If
the authorized cause was intended for the employer to earn more
profits, the amount of disturbance compensation is P10,000.00.
This disturbance compensation, again we strongly recommend,
should be given to the dismissed employee at the first instance,
the moment it is shown that his employer has committed the
infraction — of not complying with the 30-day written notice
requirement — to tide him over during his economic dislocation.
The right of the laborers to be informed of their impending
termination cannot be taken lightly, and the award of any amount
below P5,000.00 may be too anemic to satisfy the fundamental
protection especially accorded to labor and the workingman. In
fact, it is hardly enough to sustain a family of three; more so if the
employee has five or more children, which seems to be the
average size of a Filipino family.
Henceforth, if the dismissal is for a just cause but without
observance of the 30-day notice requirement, the dismissal is
deemed improper and irregular. If later the dismissal is
ascertained to be without just cause, the dismissed employee is
entitled to reinstatement, if this be feasible, otherwise to
separation pay and back wages plus disturbance compensation of
P10,000.00 and moral damages, if warranted. On the other hand,
if the dismissal is ascertained to be with just cause, the dismissed
employee is entitled nevertheless to a disturbance compensation
of P5,000.00 if the legal requirement of the 30-day notice to both
employee and DOLE has not been complied with.
In instances where there is obviously a ground for dismissal, as
when the employee has become violent and his presence would
cause more harm to his co-workers and the security and serenity
of the workplace, the employee may be suspended in the
meantime until he is heard with proper observance of the 30-day
notice requirement. Likewise, if the dismissal is for an authorized
cause but without the required notice, the dismissal is improper
and irregular and the employee should be paid separation pay,
back wages and disturbance compensation of P5,000.00 or
P10,000.00.00 depending on the cause. As already intimated, if
the authorized cause is for the purpose of saving the employer
140
from imminent bankruptcy or business losses, the disturbance
compensation should be P5,000.00; otherwise, if the authorized
cause is for the employer, in the exercise of management
prerogative, to save and earn more profits, the disturbance
compensation should be P10,000.00.
In the instant case, Serrano was given his walking papers only on
the very same day his termination was to take effect. DOLE was
not served any written notice. In other words, there was non-
observance of the 30-day notice requirement to both Serrano and
the DOLE. Serrano was thus terminated for an authorized cause
but was not accorded his right to 30-day notice. Thus, his
dismissal being improper and irregular, he is entitled to separation
pay and back wages the amounts of which to be determined by
the Labor Arbiter, plus P10,000.00 as disturbance compensation
which, from its very nature, must be paid immediately to cushion
the impact of his economic dislocation.
One last note. This Separate Opinion is definitely not advocating a
new concept in imposing the so-called "disturbance
compensation." Since Wenphil Corporation v. NLRC 26 this Court
has already recognized the necessity of imposing a sanction in
the form of indemnity or even damages, when proper, not
specifically provided by any law, upon employers who failed to
comply with the twin-notice requirement. At the very least, what is
being proposed to be adopted here is merely a change in the
terminology used, i.e., from "sanction," "indemnity," "damages" or
"penalty," to "disturbance compensation" as it is believed to be the
more appropriate term to accurately describe the lamentable
situation of our displaced employees.
Indeed, from the time the employee is dismissed from the service
without notice — in this case since 11 October 1991 — to the
termination of his case, assuming it results in his reinstatement, or
his being paid his back wages and separation pay, as the case
may be, how long must he be made to suffer emotionally and bear
his financial burden? Will reinstating him and/or paying his back
wages adequately make up for the entire period that he was
indistress for want of any means of livelihood? Petitioner Serrano
has been deprived of his only source of income — his
employment — for the past eight (8) years or so. Will his
reinstatement and/or the payment of his back wages and
separation pay enable him to pay off his debts incurred in abject
usury — to which he must have succumbed — during his long
period of financial distress? Will it be adequate? Will it be just?
Will it be fair? Thus, do we really and truly render justice to the
workingman by simply awarding him full back wages and
separation pay without regard for the long period during which he
was wallowing in financial difficulty?
FOR ALL THE FOREGOING, the Decision of respondent National
Labor Relations Commission should be MODIFIED. The
termination of petitioner RUBEN SERRANO being based on an
authorized cause should be SUSTAINED AS VALID although
DECLARED IRREGULAR for having been effected without the
mandatory 30-day notice.
ISETANN DEPARTMENT STORE INC. should PAY petitioner
SERRANO back wages and separation pay the amounts of which
to be determined by the Labor Arbiter, plus P10,000.00 as
disturbance compensation which must be paid immediately.
Consequently, except as regards the disturbance compensation,
the case should be REMANDED to the Labor Arbiter for the
immediate computation and payment of the back wages and
separation pay due petitioner.
EXCEPT as herein stated, I concur with the majority.
PUNO, J., dissenting opinion;
The rule of audi alteram partem — hear the other side, is the
essence of procedural due process. That a "party is not to suffer
in person or in purse without an opportunity of being heard" is the
oldest established principle in administrative law.1 Today, the
majority is relies that the all important right of an employee to be
notified before he is dismissed for a just or authorized cause is not
a requirement of due process. This is a blow on the breadbasket
of our lowly employees, a considerable erosion of their
constitutional right to security of tenure, hence this humble
dissenting opinion.
A review of our law on dismissal is in order.
I. DISMISSAL DUE TO JUST CAUSE
The law allowing dismissal of an employee due to a just cause is
provided in Article 282 of the Labor Code:
Art. 282. Termination by employer. — An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience
by the employee of the lawful orders of his
employer or representative in connection with
his work;
(b) Gross and habitual neglect by the employee
of his duties;
(c) Fraud or willful breach by the employee of
the trust reposed in him by his employer or duly
authorized representative;
(d) Commission of the crime or offense by the
employee against the person of his employer or
any immediate member of his family or his duly
authorized representative; and
(e) Other causes analogous to the foregoing.
The long established jurisprudence2 is that to justify dismissal of
an employee for a just cause, he must be given two kinds of
notice by his employer, viz: (1) notice to apprise the employee of
the particular acts or omissions for which the dismissal is sought,
and (2) subsequent notice to inform him of the employer's
decision to dismiss him. Similarly, deeply ingrained is our ruling
that these pre and post notice requirements are not mere
technicalities but are requirements of due process.3
Then came the case of Wenphil Corporation vs. NLRC and
Mallare in 1989.4 It is the majority view that Wenphil reversed the
long standing policy of this Court on dismissal. This is too broad a
reading of Wenphil. A careful statement of the facts of Wenphil
and the ruling of this Court is thus proper.
First, the facts. The private respondent Roberto Mallare is the
assistant head of the backroom department of petitioner Wenphil
Corporation. At about 2:30 pm on May 20, 1985, Mallare had an
altercation with his co-employee, Job Barrameda, about tending
the Salad Bar. He slapped Barrameda's cap, stepped on his foot,
picked up an ice scooper and brandished it against the latter. He
refused to be pacified by another employee who reported the
incident to Delilah Hermosura, assistant manager. Hermosura
summoned Mallare but the latter refused to see the former. It took
a security guard to bring Mallare to Hermosura. Instead of making
an explanation, Mallare shouted profane words against
Hermosura. He declared that their altercation should only be
settled by him and Barrameda.
141
The following morning, Mallare was suspended. In the afternoon,
he was dismissed from the service. He received an official notice
of his dismissal four (4) days later.
Mallare filed with the Labor Arbiter a complaint for illegal
suspension, illegal dismissal and unfair labor practice. No hearing
was conducted in view of the repeated absence of the counsel of
Mallare. The parties submitted their respective position papers.
On December 3, 1986, the Arbiter denied the complaint as he
found Mallare guilty of grave misconduct and insubordination,
which are just causes for dismissal. The Arbiter also ruled that
Mallare was not denied due process. On appeal, the NLRC
reversed. It held that Mallare was denied due process before he
was dismissed. It ordered Mallare's reinstatement and the
payment of his one (1) year backwages.
On certiorari to this Court, we reversed the NLRC and reinstated
the decision of the Arbiter with the modification that petitioner
should pay to Mallare an indemnity of P1,000.00 for dismissing
Mallare without any notice and hearing. We held:
Petitioner insists that private respondent was afforded
due process but he refused to avail of his right to the
same; that when the matter was brought to the labor
arbiter he was able to submit his position paper although
the hearing cannot proceed due to the non-appearance
of his counsel; and that the private respondent is guilty of
serious misconduct in threatening or coercing a co-
employee which is a ground for dismissal under Article
283 of the Labor Code.
The failure of petitioner to give private respondent the
benefit of a hearing before he was dismissed constitutes
an infringement of his constitutional right to due process
of law and equal protection of the laws. The standards of
due process in judicial as well as administrative
proceedings have long been established. In its bare
minimum due process of law simply means giving notice
and opportunity to be heard before judgment is rendered.
The claim of petitioner that a formal investigation was not
necessary because the incident, which gave rise to the
termination of private respondent, was witnessed by his
co-employees and supervisors, is without merit. The
basic requirement of due process is that which hears
before it condemns, which proceeds upon inquiry and
renders judgment only after trial.
However, it is a matter of fact that when the private
respondent filed a complaint against petitioner, he was
afforded the right to an investigation by the labor arbiter.
He presented his position paper as did the petitioner. If
no hearing was had, it was the fault of private
respondent as his counsel failed to appear at the
scheduled hearings. The labor arbiter concluded that the
dismissal of private respondent was for just cause. He
was found guilty of grave misconduct and
insubordination. This is borne by the sworn statements of
witnesses. The Court is bound by this finding of the labor
arbiter.
By the same token, the conclusion of the public
respondent NLRC on appeal that private respondent was
not afforded due process before he was dismissed is
binding on this Court. Indeed, it is well taken and
supported by the records. However, it can not justify a
ruling that private respondent should be reinstated with
back wages as the public respondent NLRC so decreed.
Although belatedly, private respondent was afforded due
process before the labor arbiter wherein the just cause of
his dismissal had been established. With such finding, it
would be arbitrary and unfair to order his reinstatement
with back wages.
Three member of the Court filed concurring and dissenting
opinions. Madam Justice Herrera opined that: (a) Mallare was
dismissed for cause, hence, he is not entitled to reinstatement
and backwages; (b) he was not denied due process; and (c) he
has no right to any indemnity but to separation pay to cushion the
impact of his loss of employment Mr. Justice Padilla took the view
that: (1) Mallare was not entitled to reinstatement and backwages
as he was guilty of grave misconduct and insubordination; (2) he
was denied administrative due process; and (3) for making such
denial, Wenphil should pay "separation pay (instead of indemnity)
in the sum of P1,000.00." Madam Justice Cortes held that: (1)
Mallare was not illegally dismissed; (2) he was not denied due
process; (3) he was not entitled to indemnity; and (4) if P1,000.00
was to be imposed on Wenphil as an administrative sanction, it
should form part of the public fund of the government.
I shall discuss later that Wenphil did not change our ruling that
violation of the pre-dismissal notice requirement is an
infringement of due process.
II. DISMISSAL DUE TO AUTHORIZED CAUSE
The applicable law on dismissal due to authorized cause is Article
283 of the Labor Code which provides:
Art. 283. Closure of establishment and reduction of
personnel. — The employer may also terminate the
employment of any employee due to the installation of
labor serving devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title,
by serving a written notice on the workers and the
[Department] of Labor and Employment at least one (1)
month before the intended date thereof. In case of
termination due to the installation of labor-saving devices
or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one
(1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures
or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service, whichever is higher. A fraction
of at least six (6) months shall be considered one (1)
whole year.
In Sebuguero v. NLRC,5 we held thru our esteemed Chief Justice
Davide that "the requirement of notice to both the employees
concerned and the Department of Labor and Employment (DOLE)
is mandatory and must be written and given at least one month
before the intended date of retrenchment." We explained that the
"notice to the DOLE is essential because the right to retrench is
not an absolute prerogative of an employer but is subject to the
requirement of law that retrenchment be proved to prevent losses.
The DOLE is the agency that will determine whether the planned
retrenchment is justified and adequately supported by
fact."6 Nonetheless, we ruled:
The lack of written notice to the petitioners and to the
DOLE does not, however, make the petitioners'
retrenchment illegal such that they are entitled to the
payment of back wages and separation pay in lieu of
reinstatement as they contend. Their retrenchment, for
not having been effected with the required notices, is
merely defective. In those cases where we found the
retrenchment to be illegal and ordered the employees'
reinstatement and the payment of backwages, the
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 validity of the cruse for retrenchment, that is the
existence of imminent or actual serious or substantial
losses, was not proven. But here, such a cause is
present as found by both the Labor Arbiter and the
NLRC. There is only a violation by GTI of the procedure
prescribed in Article 283 of the Labor Code in effecting
the retrenchment of the petitioners.1âwphi1.nêt
It is now settled that where the dismissal of an employee is in fact
for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for
non-compliance with the requirements of or for failure to observe
due process. The sanction, in the nature of indemnification or
penalty, depends on the facts of each case and the gravity of the
omission committed by the employer and has ranged from
P1,000.00 as in the cases of Wenphil vs. National Labor Relations
Commission, Seahorse Maritime Corp. v.National Labor Relations
Commission, Shoemart, Inc. vs. National Labor Relations
Commission, Rubberworld (Phils.) Inc. vs. National Labor
Relations Commission, Pacific Mills, Inc. vs. Alonzo, and Aurelio
vs. National Labor Relations Commission to P10,000.00 in Reta
vs. National Labor Relations Commission and Alhambra
Industries, Inc. vs. National Labor Relations Commission. More
recently, in Worldwide Papermills, Inc. vs. National Labor
Relations Commission, the sum of P5,000.00 was awarded to the
employee as indemnification for the employer's failure to comply
with the requirements of procedural due process.
Accordingly, we affirm the deletion by the NLRC of the award of
back wages, But because the required notices of the petitioners'
retrenchment were not served upon the petitioners and the DOLE,
GTI must be sanctioned for such failure and thereby required to
indemnify each of the petitioners the sum of P20,000.00 which we
find to be just and reasonable under the circumstances of this
case.
III. RE-EXAMINATION OF THE WENPHIL DOCTRINE:
FROM BAD TO WORSE
The minority of the Court has asked for a re-examination of
Wenphil because as the majority correctly observed, "the number
of cases involving dismissals without the requisite notice to the
employee although effected for just or authorized causes
suggests that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the
notice requirement."
We must immediately set Wenphil in its proper perspective as it is
a very exceptional case. Its doctrine must be limited to its distinct
facts. Its facts therefore ought to be carefully examined again. In
Wenphil, it was clearly established that the employee had a
violent temper, caused trouble during office hours and even defied
his superiors as they tried to pacify him. The employee was
working for a fast food chain that served the public and where
violence has no place. These facts were established only in the
proceedings before the Labor Arbiter after the employee filed a
complaint for illegal dismissal. There were no formal investigation
proceedings before the employer as the employment was
dismissed without any notice by the employer. Given these facts,
we ruled that the pre-dismissal notice requirement was part of due
process; nonetheless, we held that the employee was given due
process as he was heard by the Labor Arbiter; we found that the
proceedings before the Labor Arbiter proved that the employer
was guilty of grave misconduct and insubordination; we concluded
with the rule that it would be highly prejudicial to the interest of the
employer to reinstate the employee, but the employer must
indemnify the employee the amount of P1,000.00 for dismissing
him without notice. We further held that "the measure of this
award depends on the facts or each case and the gravity of the
omission committed by the employer."7
At the outset, I wish to emphasize that Wenphil itself held, and
repeatedly held that "the failure of petitioner to give private
respondent the benefit of a hearing before he was dismissed,
constitutes an infringement of his constitutional right to due
process of law and equal protection of the laws. The standards of
due process of law in judicial as well as administrative
proceedings have long been established. In its bare minimum due
process of law simply means giving notice and opportunity to be
heard before judgment is rendered."8 The Court then satisfied
itself with this bare minimum when it held that the post dismissal
hearing before the Labor Arbiter was enough compliance with
demands of due process and refused to reinstate an eminently
undesirable employee. Heretofore, the Court was far from
satisfied with this bare minimum as it strictly imposed on an
employer compliance with the requirement of pre-dismissal notice,
violation of which resulted in orders of reinstatement of the
dismissed employee. This is the only wrinkle wrought by Wenphil
in our jurisprudence on dismissal. Nonetheless, it should be
stressed that the Court still punished Wenphil's violation of the
pre-dismissal notice requirement as it was ordered to pay an
indemnity of P1,000.00 to the employee. The indemnity was
based on the iterated and reiterated rule that "the dismissal of an
employee must be for just or authorized cause and after due
process."9
Our ten (10) years experience with Wenphil is not a happy one.
Unscrupulous employers have abused the Wenphil ruling. They
have dismissed without notice employees including those who are
not as eminently undesirable as the Wenphil employee. They
dismissed employees without notice as a general rule when it
should be the exception. The purpose of the pre-dismissal notice
requirement was entirely defeated by employers who were just
too willing to pay an indemnity for its violation. The result, as the
majority concedes, is that the indemnity we imposed has not been
effective to prevent unjust dismissals employees. To be sure, this
is even a supreme understatement. The ugly truth is that Wenphil
is the mother of many unjust and unauthorized dismissals of
employees who are too weak to challenge their powerful
employees.
As the Wenphil indemnity doctrine has proved to be highly
inimical to the interest of our employees, I humbly submit a return
to the pre-Wenphil rule where a reasonless violation of the pre-
dismissal notice requirement makes the dismissal of an employee
illegal and results in his reinstatement. In fine, we should strike
down as illegal the dismissal of an employee even if it is for a
justified end if it is done thru unjustified means for we cannot be
disciples of the Machiavellian doctrine of the end justifies the
means. With due respect, the majority decision comes too near
this mischievous doctrine by giving emphasis on the end and not
the means of dismissal of employees. What grates is that the
majority today espouses a doctrine more pernicious than Wenphil
for now it announces that a violation of the pre-dismissal notice
requirement does not even concern due process. The reasons
relied upon by the majority for this new ruling against the job
security of employees cannot inspire assent.
FIRST. I would like to emphasize that one undesirable effect of
Wenphil is to compel employees to seek relief against illegal
dismissals with the DOLE whereas before, a remedy can be
sought before the employer. In shifting this burden, an employee's
uneven fight against his employer has become more uneven.
Now, an illegally dismissed employee often goes to the DOLE
without an exact knowledge of the cause of his dismissal. As a
matter of strategy, some employers today dismiss employees
without notice. They know that it is more advantageous for them
to litigate with an employee who has no knowledge of the cause
of dismissal. The probability is that said employee will fail to prove
the illegality of his dismissal. All that he can prove is that he was
143
dismissed without notice and the penalty for the omission is a
mere fine, a pittance.
The case at bar demonstrates how disastrous Wenphil has been
to our helpless employees. In holding that the petitioner failed to
prove his cause of action, the majority held ". . . we have only the
bare assertion of petitioner that, in abolishing the security section,
private respondent's real purpose was to avoid payment to the
security checkers of the wage increases provided in the collective
bargaining agreement approved in 1990." The bare assertion of
the petitioner is understandable. The notice given to him spoke of
a general ground — retrenchment. No details were given about
the employer's sudden retrenchment program. Indeed, the
employee was dismissed on the day he received the notice in
violation of the 30-day requirement. He was given no time, no
opportunity to ascertain and verify the real cause of his dismissal.
Thus, he filed with the DOLE a complaint for illegal dismissal with
a hazy knowledge of its real cause. Heretofore, it is the employer
whom we blame and penalize if he does not notify his employee
of the cause of his dismissal. Today, the majority puts the blame
on the employee for not knowing why he was dismissed when he
was not given any notice of dismissal. In truth, the suspicion of the
petitioner in the case at bar that he was dismissed to avoid
payment of their wage increases is not without basis. The DOLE
itself found that petitioner has unpaid wages which were ordered
to be paid by the employer. The majority itself affirmed this
finding.
What hurts is that while the majority was strict with the petitioner-
employee, it was not so with the employer ISETANN.
Immediately, it validated the finding of the NLRC that petitioner
was dismissed due to the redundancy of his position. This is
inconsistent with the finding of the Labor Arbiter that the employer
failed to prove retrenchment, the ground it used to dismiss the
petitioner. A perusal of the records will show that Ms. Cristina
Ramos, Personnel Administration Manager of the employer
ISETANN testified on the cause of dismissal of the petitioner. She
declared that petitioner was retrenched due to the installation of a
labor saving device. Allegedly, the labor saving device was the
hiring of an independent security agency, thus:10
xxx xxx xxx
Atty. Perdigon:
You said that your company decided to phase out the
position of security checkers . . .
Ms. Ramos: A: The labor saving device is that the services of a
security agency were contracted to handle the services
Yes Sir. of the security checkers of our company.
Q: And instead hired the services of a security agency? Q: Are you sure of what labor saving means, Madam
witness?
A: Yes, sir.
A: Yes, sir.
xxx xxx xxx
Q: You said you installed a labor saving device, and you
installed a security agency as a labor saving device?
Q: Did you not retrench the position of security
checkers?
A: We hired the services of a security agency.
A: We installed a labor saving device.
Q: So according to you . . . a security agency is a labor
saving device?
Q: So you did not retrench?
Atty. Salonga:
A: No. sir.
Already answered, your Honor.
Q: How about the position of Section Head of Security
Department?
Obviously, Ms. Ramos could not even distinguish between
retrenchment and redundancy. The Labor Arbiter thus ruled that
A: It was abolished in 1991. petitioner's dismissal was illegal. The NLRC, however, reversed.
The majority affirmed the NLRC ruling that ISETANN's phase out
xxx xxx xxx of its security employees is a legitimate business decision, one
that is necessary to obtain reasonable return from its investment.
To use the phrase of the majority, this is a "bare assertion."
Q: Are you aware of the retrenchment program of the
Nothing in the majority decision shows how the return of
company as stated in this letter?
ISETANN's investment has been threatened to justify its so-called
business decision as legitimate.
A: Actually it's not a retrenchment program. It's an
installation of a labor saving device.
SECOND. The majority holds that "the need is for a rule which,
while recognizing the employee's right to notice before he is
Q: So you are telling this Court now that there was no dismissed or laid off, at the same time acknowledges the right of
retrenchment program? the employer to dismiss for any of the just causes enumerated in
Art. 282 or to terminate employment for any of the authorized
A: It was actually an installation of a labor saving causes mentioned in Arts. 283-284. If the Wenphil rule imposing a
device (emphasis supplied). fine on an employer who is found to have dismissed an employee
for cause without prior notice is deemed ineffective in deterring
employer violations of the notice requirement, the remedy is not to
xxx xxx xxx
declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause.
Q: . . . What (is) this labor saving device that you are That would be to uphold the right of the employee but deny the
referring to? right of the employer to dismiss for cause. Rather, the remedy is
to consider the dismissal or termination to be simply ineffectual for
144
failure of the employer to comply with the procedure for dismissal
or termination.
With due respect, I find it most difficult to follow the logic of the
majority. Before Wenphil, we protected employees with the ruling
that dismissals without prior notice are illegal and the illegally
dismissed employee must be reinstated with backwages. Wenphil
diluted that rule when it held that due process is satisfied if the
employee is given the opportunity to be heard by the Labor
Arbiter. It further held that an employee cannot be reinstated if it is
established in the hearing that his dismissal is for a just cause.
The failure of the employer to give a pre-dismissal notice is only to
be penalized by payment of an indemnity. The dilution of the rule
has been abused by unscrupulous employers who then followed
the "dismiss now, pay later" strategy. This evil practice of
employers was what I expected the majority to address in re-
examining the Wenphil doctrine. At the very least, I thought that
the majority would restore the balance of rights between an
employee and an employer by giving back the employee's
mandatory right to notice before dismissal. It is disquieting,
however, that the majority re-arranged this balance of right by
tilting it more in favor of the employer's right to dismiss. Thus,
instead of weakening a bit the right to dismiss of employers, the
majority further strengthens it by insisting that a dismissal without
prior notice is merely "ineffectual" and not illegal.
The stubborn refusal of the majority to appreciate the importance
of pre-dismissal notice is difficult to understand. It is the linchpin of
an employee's right against an illegal dismissal. The notice tells
him the cause of his dismissal. It gives him a better chance to
contest his dismissal in an appropriate proceeding as laid down in
the parties' collective bargaining agreement or the rules of
employment established by the employer, as the case may be. In
addition, it gives to both the employee and employer more cooling
time to settle their differences amicably. In fine, the prior notice
requirement and the hearing before the employer give an
employee a distinct, different and effective first level of remedy to
protect his job. In the event the employee is dismissed, he can still
file a complaint with the DOLE with better knowledge of the cause
of his dismissal, with longer time to prepare his case, and with
greater opportunity to take care of the financial needs of his
family pendente lite. The majority has taken away from employees
this effective remedy. This is not to say that the pre-dismissal
notice requirement equalizes the fight between an employee and
an employer for the fight will remain unequal. This notice
requirement merely gives an employee a fighting chance but that
fighting chance is now gone.
It is equally puzzling why the majority believes that restoring the
employee's right to pre-dismissal notice will negate the right of an
employer to dismiss for cause. The pre-Wenphil rule simply
requires that before the right of the employer to dismiss can be
exercised, he must give prior notice to the employee of its cause.
There is nothing strange nor difficult about this requirement. It is
no burden to an employer. He is bereft of reason not to give the
simple notice. If he fails to give notice, he can only curse himself.
He forfeits his right to dismiss by failing to follow the procedure for
the exercise of his right. Employees in the public sector cannot be
dismissed without prior notice. Equal protection of law demands
similar treatment of employees in the private sector.
THIRD. The case at bar specifically involves Article 283 of the
Labor Code which lays down four (4) authorized causes for
termination of employment.11 These authorized causes are: (1)
installation of labor-saving devices; (2) redundancy; (3)
retrenchment to prevent losses; and (4) closing or cessation of
operation of the establishment or undertaking unless the closing is
for the purpose of circumventing the law. It also provides that prior
to the dismissal of an employee for an authorized cause, the
employer must send two written notices at least one month before
the intended dismissal — one notice to the employee and another
notice to the Department of Labor and Employment (DOLE). We
have ruled that the right to dismiss on authorized causes is not an
absolute prerogative of an employer.12 We explained that the
notice to the DOLE is necessary to enable it to ascertain the truth
of the cause of termination.13 The DOLE is equipped with men and
machines to determine whether the planned closure or cessation
of business or retrenchment or redundancy or installation of labor
saving device is justified by economic facts.14 For this reason too,
we have held that notice to the employee is required to enable
him to contest the factual bases of the management decision or
good faith of the retrenchment or redundancy before the
DOLE.15 In addition, this notice requirement gives an employee a
little time to adjust to his joblessness.16
The majority insists that if an employee is laid off for an authorized
cause under Article 283 in violation of the prior notice
requirement, his dismissal should not be considered void but only
ineffectual. He shall not be reinstated but paid separation pay and
some backwages. I respectfully submit that an employee under
Article 283 has a stronger claim to the right to a pre-dismissal
notice and hearing. To begin with, he is an innocent party for he
has not violated any term or condition of his employment.
Moreover, an employee in an Article 283 situation may lose his
job simply because of his employer's desire for more profit. Thus,
the installation of a labor saving device is an authorized cause to
terminate employment even if its non-installation need not
necessarily result in an over-all loss to an employer possessed by
his possessions. In an Article 283 situation, it is easy to see that
there is a greater need to scrutinize the allegations of the
employer that he is dismissing an employee for an authorized
cause. The acts involved here are unilateral acts of the employer.
Their nature requires that they should be proved by the employer
himself. The need for a labor saving device, the reason for
redundancy, the cause for retrenchment, the necessity for closing
or cessation of business are all within the knowledge of the
employer and the employer alone. They involve a constellation of
economic facts and factors usually beyond the ken of knowledge
of an ordinary employee. Thus, the burden should be on the
employer to establish and justify these authorized causes. Due to
their complexity, the law correctly directs that notice should be
given to the DOLE for it is the DOLE more than the lowly
employee that has the expertise to validate the alleged cause in
an appropriate hearing. In fine, the DOLE provides the equalizer
to the powers of the employer in an Article 283 situation. Without
the equalizing influence of DOLE, the employee can be abused by
his employer.
Further, I venture the view that the employee's right to security of
tenure guaranteed in our Constitution calls for a pre-dismissal
notice and hearing rather than a post facto dismissal hearing. The
need for an employee to be heard before he can be dismissed
cannot be overemphasized. As aforestated, in the case at bar,
petitioner was a regular employee of ISETANN. He had the right
to continue with his employment. The burden to establish that this
right has ceased is with ISETANN, as petitioner's employer. In
fine, ISETANN must be the one to first show that the alleged
authorized cause for dismissing petitioner is real. And on this
factual issue, petitioner must be heard. Before the validity of the
alleged authorized cause is established by ISETANN, the
petitioner cannot be separated from employment. This is the
simple meaning of security of tenure. With due respect, the
majority opinion will reduce this right of our employees to a mere
illusion. It will allow the employer to dismiss an employee for a
cause that is yet to be established. It tells the employee that if he
wants to be heard, he can file a case with the labor arbiter, then
the NLRC, and then this Court. Thus, it unreasonably shifts the
burden to the employee to prove that his dismissal is for an
unauthorized cause.
The pernicious effects of the majority stance are self-evident in
the case at bar. For one, petitioner found himself immediately
jobless and without means to support his family. For another,
petitioner was denied the right to rely on the power of DOLE to
145
inquire whether his dismissal was for a genuine authorized cause.
This is a valuable right for all too often, a lowly employee can only
rely on DOLE's vast powers to check employer abuses on illegal
dismissals. Without DOLE, poor employees are preys to the claws
of powerful employers. Last but not the least, it was the petitioner
who was forced to file a complaint for illegal dismissal. To a
jobless employee, filing a complaint is an unbearable burden due
to its economic cost. He has to hire a lawyer and defray the other
expenses of litigation while already in a state of penury. At this
point, the hapless employee is in a no win position to fight for his
right. To use a local adage, "aanhin pa ang damo kung patay na
ang kabayo."
In the case at bar, the job of the petitioner could have been saved
if DOLE was given notice of his dismissal. The records show that
petitioner worked in ISETANN as security checker for six (6)
years. He served ISETANN faithfully and well. Nonetheless, in a
desire for more profits, and not because of losses, ISETANN
contracted out the security work of the company. There was no
effort whatsoever on the part of ISETANN to accommodate
petitioner in an equivalent position. Yet there was the position of
Safety and Security Supervisor where petitioner fitted like a
perfect T. Despite petitioner's long and loyal service, he was
treated like an outsider, made to apply for the job, and given a
stringent examination which he failed. Petitioner was booted out
and given no chance to contest his dismissal. Neither was the
DOLE given the chance to check whether the dismissal of
petitioner was really for an authorized cause. All these because
ISETANN did not follow the notice and hearing requirement of due
process.
FOURTH. The majority has inflicted a most serious cut on the job
security of employees. The majority did nothing to restore the pre-
Wenphil right of employees but even expanded the right to
dismiss of employer by holding that the pre-dismissal notice
requirement is not even a function of due process. This seismic
shift in our jurisprudence ought not to pass.
The key to the new majority ruling is that the "due process clause
of the Constitution is a limitation on governmental powers. It does
not apply to the exercise of private power such as the termination
of employment under the Labor Code." The main reason alleged
is that "only the State has authority to take the life, liberty, or
property of the individual. The purpose of the Due Process Clause
is to ensure that the exercise of this power is consistent with
settled usage of civilized society."
There can be no room for disagreement on the proposition that
the due process clause found in the Bill of Rights of the
Constitution is a limitation on governmental powers. Nor can there
be any debate that acts of government violative of due process
are null and void. Thus, former Chief Justice Roberto Concepcion
emphasized in Cuaycong v. Senbengco 17 that ". . . acts of
Congress as well as those of the Executive, can deny due
process only under pain of nullity, and judicial proceedings
suffering from the same flaw are subject to the same sanction,
any statutory provision to the contrary notwithstanding." With due
respect to the majority, however, I part ways with the majority in
its new ruling that the due process requirement does not apply to
the exercise of private power. This overly restrictive majority
opinion will sap the due process right of employees of its
remaining utility. Indeed, the new majority opinion limiting
violations of due process to government action alone is a
throwback to a regime of law long discarded by more progressive
countries. Today, private due process is a settled norm in
administrative law. Per Schwartz, a known authority in the
field, viz:18
Private Due Process
As already stressed, procedural due process has proved
of an increasingly encroaching nature. Since Goldberg
v. Kelly, the right to be heard has been extended to an
ever-widening area, covering virtually all aspects of
agency action, including those previously excluded under
the privilege concept. The expansion of due process has
not been limited to the traditional areas of administrative
law. We saw how procedural rights have expanded into
the newer field of social welfare, as well as that of
education. But due process expansion has not been
limited to these fields. The courts have extended
procedural protections to cases involving prisoners and
parolees, as well as the use of established adjudicatory
procedures. Important Supreme Court decisions go
further and invalidate prejudgment wage garnishments
and seizures of property under replevin statutes where
no provision is made for notice and hearing. But the
Court has not gone so far as to lay down an inflexible
rule that due process requires an adversary hearing
when an individual may be deprived of any possessory
interest, however brief the dispossession and however
slight the monetary interest in the property. Due process
is not violated where state law requires, as a
precondition to invoking the state's aid to sequester
property of a defaulting debtor, that the creditor furnish
adequate security and make a specific showing of
probable cause before a judge.
In addition, there has been an extension of procedural
due process requirements from governmental to private
action. In Section 5.16 we saw that Goldberg v. Kelly has
been extended to the eviction of a tenant from a public
housing project. The courts have not limited the right to
be heard to tenants who have governmental agencies as
landlords. Due process requirements also govern acts by
"private" landlords where there is sufficient governmental
involvement in the rented premises. Such an
involvement exists in the case of housing aided by
Federal Housing Administration financing and tax
advantages. A tenant may not be summarily evicted from
a building operated by a "private" corporation where the
corporation enjoyed substantial tax exemption and had
obtained an FHA-insured mortgage, with governmental
subsidies to reduce interest payments. The "private"
corporation was so saturated with governmental
incidents as to be limited in its practices by constitutional
process. Hence, it could not terminate tenancies without
notice and an opportunity to be heard.
But we need nor rely on foreign jurisprudence to repudiate the
new majority ruling that due process restricts government alone
and not private employers like ISETANN. This Court has always
protected employees whenever they are dismissed for an unjust
cause by private employers. We have consistently held that
before dismissing an employee for a just cause, he must be given
notice and hearing by his private employer. In Kingsize
Manufacturing Corporation vs. NLRC,19 this Court, thru Mr. Justice
Mendoza, categorically ruled:
. . . (P)etitioners failure to give notice with warning to the
private respondents before their services were
terminated puts in grave doubt petitioners' claim that
dismissal was for a just cause. Section 2 Rule XIV of the
Rules implementing the Labor Code provides:
An employer who seeks to dismiss a worker
shall furnish him a written notice stating the
particular acts or omission constituting the
ground for dismissal. In case of abandonment
of work, the notice shall be served on the
worker's last known address.
146
 The notice required, . . ., actually consists of two parts to
be separately served on the employee, to wit: (1) notice
to apprise the employee of the particular acts or
omissions for which the dismissal is sought; and (2)
subsequent notice to inform him of the employer's
decision to dismiss him.
This requirement is not a mere technicality but a
requirement of due process to which every employee is
entitled to insure that the employer's prerogative to
dismiss or lay off is not abused or exercised in an
arbitrary manner. This rule is clear and unequivocal . . .
.20
In other words, we have long adopted in our decisions the
doctrine of private due process. This is as it ought to be. The 1987
Constitution guarantees the rights of workers, especially the right
to security of tenure in a separate article — section 3 of Article XIII
entitled Social Justice and Human Rights. Thus, a 20-20 vision of
the Constitution will show that the more specific rights of labor are
not in the Bill of Rights which is historically directed against
government acts alone. Needless to state, the constitutional rights
of labor should be safeguarded against assaults from both
government and private parties. The majority should not reverse
our settled rulings outlawing violations of due process by
employers in just causes cases.
To prop up its new ruling against our employees, the majority
relates the evolution of our law on dismissal starting from Article
302 of the Spanish Code of Commerce, to the New Civil Code of
1950, to R.A. No. 1052 (Termination Pay Law), then to R.A. No.
1787. To complete the picture, let me add that on May 1, 1974,
the Labor Code (PD 442) was signed into law by former President
Marcos. It took effect on May 1, 1974 or six months after its
promulgation. The right of the employer to terminate the
employment was embodied in Articles 283,21 284,22 and
285.23 Batas Pambansa Blg. 130 which was enacted on August
21, 1981 amended Articles 283 and 284, which today are cited as
Arts. 282 and 283 of the Labor Code.24
On March 2, 1989, Republic Act No. 6715 was approved which
amended, among others, Article 277 of the Labor Code.
Presently, Article 277 (b) reads:
Art. 277. Miscellaneous provisions. — (a) . . . .
(b) Subject to the constitutional right of workers
to security of tenure and their right to be
protected against dismissal except for a just or
authorized cause and without prejudice to the
requirement of notice under Article 283 of this
Code, the employer shall furnish the worker
whose employment is sought to be terminated a
written notice containing a statement of the
causes for termination and shall afford the latter
ample opportunity to be heard and to defend
himself with the assistance of his representative
if he so desires in accordance with company
rules and regulations promulgated pursuant to
the guidelines set by the Department of Labor
and Employment. Any decision taken by the
employer shall be without prejudice to the right
of the worker to contest the validity or legality of
his dismissal by filing a complaint with the
regional branch of the National Labor Relations
Commission. The burden of proving that the
termination was for a valid or authorized cause
shall rest on the employer. . . . .
Previous to the amendment, Article 277 (b) read:
Art. 277. Miscellaneous provisions. — (a) . . . .
(b) With or without a collective agreement, no
employer may shut down his establishment or
dismiss or terminate the employment of
employees with at least one year of service
during the last two years, whether such service
is continuous or broken, without prior written
authority issued in accordance with the rules
and regulations as the Secretary may
promulgate.
Rule XIV, Book V of the 1997 Omnibus Rules Implementing the
Labor Code provides:
Termination of Employment
Sec. 1. Security of tenure and due process. — No worker
shall be dismissed except for a just or authorized cause
provided by law and after due process.
Sec. 2. Notice of dismissal. — Any employer who seeks
to dismiss a worker shall furnish him a written notice
stating the particular acts or omissions constituting the
grounds for his dismissal. . . .
xxx xxx xxx
Sec. 5. Answer and hearing. — The worker may answer
the allegations stated against him in the notice of
dismissal within a reasonable period from receipt of such
notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires.
These laws, rules and regulations should be related to our
decisions interpreting them. Let me therefore emphasize our
rulings holding that the pre-dismissal notice requirement is part of
due process. In Batangas Laguna Tayabas Bus Co. vs. Court of
Appeals,25 which was decided under the provisions of RA No.
1052 as amended by RA No. 1787, this Court ruled that "the
failure of the employer to give the [employee] the benefit of a
hearing before he was dismissed constitute an infringement on his
constitutional right to due process of law and not to be denied the
equal protection of the laws. . . . Since the right of [an employee]
to his labor is in itself a property and that the labor agreement
between him and [his employer] is the law between the parties,
his summary and arbitrary dismissal amounted to deprivation of
his property without due process." Since then, we have
consistently held that before dismissing an employee for a just
cause, he must be given notice and hearing by his private
employer as a matter of due process.
I respectfully submit that these rulings are more in accord with the
need to protect the right of employees against illegal dismissals.
Indeed, our laws and our present Constitution are more protective
of the rights and interests of employees than their American
counterpart. For one, to justify private due process, we need not
look for the factors of "sufficient governmental involvement" as
American courts do. Article 1700 of our Civil Code explicitly
provides:
Art. 1700. The relation between capital and labor are not
merely contractual. They are so impressed with public
interest that labor contracts must yield to the common
good. Therefore, such contracts are subject to the
special laws on labor unions, collective bargaining,
147
 strikes and lockouts, closed shop, wages, working
conditions, hours of labor and similar subjects.
Nor do we have to strain on the distinction made by American
courts between property and privilege and follow their ruling that
due process will not apply if what is affected is a mere privilege. It
is our hoary ruling that labor is property within the contemplation
of the due process clause of the Constitution. Thus, in Philippine
Movie Pictures Workers Association vs. Premiere Productions,
Inc.,26 private respondent-employer filed with the Court of
Industrial Relations (CIR) a petition seeking authority to lay off
forty-four of its employees. On the date of the hearing of the
petition, at the request of the counsel of the private respondent,
the judge of the CIR conducted an ocular inspection in the
premises of the employer. He interrogated fifteen laborers. On the
basis of the ocular inspection, the judge concluded that the
petition for lay off was justified. We did not agree and we ruled
that "the right of a person to his labor is deemed to he property
within the meaning of constitutional guarantees. That is his means
of livelihood. He can not be deprived of his labor or work without
due process of law. . . . (T)here are certain cardinal primary rights
which the Court of Industrial Relations must respect in the trial of
every labor case. One of them is the right to a hearing which
includes the right of the party interested to present his own case
and to submit evidence in support thereof."
I wish also to stress that the 1999 Rules and Regulations
implementing the Labor Code categorically characterize this pre-
dismissal notice requirement as a requirement of due process.
Rule XXIII provides:
Sec. 2. Standards of due process: requirements of
notice. — In all cases of termination of employment, the
following standards of due process shall be substantially
observed.
I. For termination of employment based on just causes
as defined in Article 282 of the Code:
(a) A written notice served on the employee
specifying the ground or grounds for
termination, and giving to said employee
reasonable opportunity within which to explain
his side;
(b) A hearing or conference during which the
employee concerned, with the assistance of
counsel if the employee so desires, is given
opportunity to respond to the charge, present
his evidence or rebut the evidence presented
against him; and
(c) A written notice of termination served on the
employee indicating that upon due
consideration of all the circumstance, grounds
have been established to justify his termination.
In case of termination, the foregoing notices shall be
served on the employee's last known address.
II. For termination of employment as based on
authorized causes defined in Article 283 of the Code, the
requirements of due process shall be deemed complied
with upon service of a written notice to the employee and
the appropriate Regional Office of the Department at
least thirty (30) days before the effectivity of the
termination, specifying the ground or grounds for
termination.
The new ruling of the majority is not in consonance with this Rule
XXIII.
If we are really zealous of protecting the rights of labor as called
for by the Constitution, we should guard against every violation of
their rights regardless of whether the government or a private
party is the culprit. Section 3 of Article XIII of the Constitution
requires the State to give full protection to labor. We cannot be
faithful to this duty if we give no protection to labor when the
violator of its rights happens to be private parties like private
employers. A private person does not have a better right than the
government to violate an employee's right to due process. To be
sure, violation of the particular right of employees to security of
tenure comes almost always from their private employers. To
suggest that we take mere geriatric steps when it comes to
protecting the rights of labor from infringement by private parties
is farthest from the intent of the Constitution. We trivialize the right
of the employee if we adopt the rule allowing the employer to
dismiss an employee without any prior hearing and say let him be
heard later on. To a dismissed employee that remedy is too little
and too late. The new majority ruling is doubly to be regretted
because it comes at a time when deregulation and privatization
are buzzwords in the world being globalized. In such a setting, the
new gods will not be governments but non-governmental
corporations. The greater need of the day therefore is protection
from illegal dismissals sans due process by these non-
governmental corporations.
The majority also holds that the "third reason why the notice
requirement under Art. 283 is not a requirement of due process is
that the employer cannot really be expected to be entirely an
impartial judge of his own cause. This is also the case in
termination of employment for a just cause under Art. 282." Again,
with due respect, I beg to disagree. In an Article 283 situation,
dismissal due to an authorized cause, the employer is not called
upon to act as an impartial judge. The employer is given the duty
to serve a written notice on the worker and the DOLE at least one
month before the intended date of lay-off. It is the DOLE, an
impartial agency that will judge whether or not the employee is
being laid off for an authorized caused.27 It is not the employer
who will adjudge whether the alleged authorized cause for
dismissing the employee is fact or fiction. On the other hand, in an
Article 282 situation, dismissal for a just cause, it is also incorrect
to hold that an employer cannot be an impartial judge. Today, the
procedure on discipline and dismissal of employees is usually
defined in the parties' collective bargaining agreement or in its
absence, on the rules and regulations made by the employer
himself. This procedure is carefully designed to be bias free for it
is to the interest of both the employee and the employer that only
a guilty employee is disciplined or dismissed. Hence, where the
charge against an employee is serious, it is standard practice to
include in the investigating committee an employee representative
to assure the integrity of the process. In addition, it is usual
practice to give the aggrieved employee an appellate body to
review an unfavorable decision. Stated otherwise, the
investigators are mandated to act impartially for to do otherwise
can bring havoc less to the employee but more to the employer.
For one, if the integrity of the grievance procedure becomes
suspect, the employees may shun it and instead resort to coercive
measures like picketing and strikes that can financially bleed
employers. For another, a wrong, especially a biased judgment
can always be challenged in the DOLE and the courts and can
result in awards of huge damages against the company. Indeed,
the majority ruling that an employer cannot act as an impartial
judge has no empirical evidence to support itself. Statistics in the
DOLE will prove the many cases won by employees before the
grievance committees manned by impartial judges of the
company.
Next, the majority holds that "the requirement to hear an
employee before he is dismissed should be considered simply as
an application of the Justinian precept, embodied in the Civil
Code, to act with justice, give everyone his due, and observe
148
honesty and good faith toward one's fellowmen." It then rules that
violation of this norm will render the employer liable for damages
but will not render his act of dismissal void. Again, I cannot join
the majority stance. The faultline of this ruling lies in the refusal to
recognize that employer-employee relationship is governed by
special labor laws and not by the Civil Code. The majority has
disregarded the precept that relations between capital and labor
are impressed with public interest. For this reason, we have the
Labor Code that specially regulates the relationship between
employer-employee including dismissals of employees. Thus,
Article 279 of the Labor Code specifically provides that "in cases
of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to instatement without loss of seniority
rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent
computed from the time his compensation was withheld from him
up to the time of his actual reinstatement." This provision of the
Labor Code clearly gives the remedies that an unjustly dismissed
employee deserves. It is not the Civil Code that is the source of
his remedies.
The majority also holds that lack of notice in an Article 283
situation merely makes an employee dismissal "ineffectual" but
not illegal. Again, the ruling is sought to be justified by analogy
and our attention is called to Article 1592, in relation to Article
1191 of the Civil Code. It is contended that "under these
provisions, while the power to rescind is implied in reciprocal
obligations, nonetheless, in cases involving the sale of immovable
property, the vendor cannot rescind the contract even though the
vendee defaults in the payment of the price, except by bringing an
action in court or giving notice of rescission by means of a notarial
demand." The analogy of the majority cannot be allowed both in
law and in logic. The legal relationship of an employer to his
employee is not similar to that of a vendor and a vendee. An
employee suffers from a distinct disadvantage in his relationship
with an employer, hence, the Constitution and our laws give him
extra protection. In contrast, a vendor and a vendee in a sale of
immovable property are at economic par with each other. To
consider an employer-employee relationship as similar to a sale of
commodity is an archaic abomination. An employer-employee
relationship involves the common good and labor cannot be
treated as a mere commodity. As well-stated by former Governor
General Leonard Wood in his inaugural message before the 6th
Philippine Legislature on October 27, 1922, "it is opportune that
we strive to impress upon all the people that labor is neither a
chattel nor a commodity, but human and must be dealt with from
the standpoint of human interests."
Next, the majority holds that under the Labor Code, only the
absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. Quoting Article 279
which provides:
Security of Tenure. — In cases of regular employment,
the employer shall not terminate the services of an
employee except for a just cause or when authorized by
this Title. An employee who is unjustly dismissed from
work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the
time of his actual reinstatement.
it is then rationalized that "to hold that the employer's failure to
give notice before dismissing an employee . . . results in the nullity
of the dismissal would, in effect, be to amend Article 279 by
adding another ground, for considering a dismissal illegal." With
due respect, the majority has misread Article 279. To start with,
the article is entitled "Security of Tenure" and therefore protects
an employee against dismissal not only for an unjust cause but
also for an unauthorized cause. Thus, the phrase "unjustly
dismissed" refers to employees who are dismissed without just
cause and to employees who are laid off without any authorized
cause. As heretofore shown, we have interpreted dismissals
without prior notice as illegal for violating the right to due process
of the employee. These rulings form part of the law of the land
and Congress was aware of them when it enacted the Labor
Code and when its implementing rules and regulations were
promulgated especially the rule ordering employers to follow due
process when dismissing employees. Needless to state, it is
incorrect for the majority to urge that we are in effect amending
Article 279.
In further explication of its ruling, the majority contends "what is
more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he
is leaving the service of the latter, at least one month in advance,
his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for
damages." Article 285(a) states: "An employee may terminate
without just cause the employee-employer relationship by serving
a written notice on the employer at least one (1) month in
advance. The employer upon whom no such notice was served
may hold the employee liable for damages."
In effect, the majority view is that its new ruling puts at par both
the employer and the employee — under Article 285, the failure of
an employee to pre-notify in writing his employer that he is
terminating their relationship does not make his walk-out void;
under its new ruling, the failure of an employer to pre-notify an
employee before his dismissal does not also render the dismissal
void. By this new ruling, the majority in a short stroke has
rewritten the law on dismissal and tampered its pro-employee
philosophy. Undoubtedly, Article 285 favors the employee as it
does not consider void his act of terminating his employment
relationship before giving the required notice. But this favor given
to an employee just like the other favors in the Labor Code and
the Constitution are precisely designed to level the playing field
between the employer and the employee. It cannot be gainsaid
that employees are the special subject of solicitous laws because
they have been and they continue to be exploited by
unscrupulous employers. Their exploitation has resulted in labor
warfare that has broken industrial peace and slowed down
economic progress. In the exercise of their wisdom, the founding
fathers of our 1935, 1973 and 1987 Constitutions as well as the
members our past and present Congresses, have decided to give
more legal protection and better legal treatment to our employees
in their relationship with their employer. Expressive of this policy is
President Magsaysay's call that "he who has less in life should
have more in law." I respectfully submit that the majority cannot
revise our laws nor shun the social justice thrust of our
Constitution in the guise of interpretation especially when its result
is to favor employers and disfavor employees. The majority talks
of high nobility but the highest nobility it to stoop down to reach
the poor.
IV. NO UNJUST RESULTS OF CONSIDERING
DISMISSALS WITHOUT PRIOR NOTICE AS ILLEGAL
The majority further justifies its new ruling by holding:
The refusal to look beyond the validity of the initial action
taken by the employer to terminate employment either
for an authorized or just cause can result in an injustice
to the employer. For not having been given notice and
hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt
against the life of the employer, an employer will be
forced to keep in his employ such guilty employee. This
is unjust.
It is true the Constitution regards labor as "a primary
social economic force." But so does it declare that it
149
 "recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives
to needed investment." The Constitution bids the State to
"afford full protection to labor." But it is equally true that
"the law, in protecting the rights of the laborer, authorizes
neither oppression nor self-destruction of the employer."
And it is oppression to compel the employer to continue
in employment one who is guilty or to force the employer
to remain in operation when it is not economically in his
interest to do so.
With due respect, I cannot understand this total turn around of the
majority on the issue of the unjustness of lack of pre-dismissal
notice to an employee. Heretofore, we have always considered
this lack of notice as unjust to the employee. Even under Article
302 of the Spanish Code of Commerce of 1882 as related by the
majority, an employer who opts to dismiss an employee without
any notice has to pay a mesada equivalent to his salary for one
month because of its unjustness. This policy was modified by our
legislators in favor of a more liberal treatment of labor as our
country came under the influence of the United States whose
major labor laws became the matrix of our own laws like R.A. 875,
otherwise known as the Industrial Peace Act. In accord with these
laws, and as aforediscussed, we laid down the case law that
dismissals without prior notice offend due process. This is the
case law when the Labor Code was enacted on May 1, 1974 and
until now despite its amendments. The 1935 and the 1973
Constitutions did not change this case law. So with the 1987
Constitution which even strengthened the rights of employees,
especially their right to security of tenure. Mr. Justice Laurel in his
usual inimitable prose expressed this shift in social policy in favor
of employees as follows:
It should be observed at the outset that our Constitution
was adopted in the midst of surging unrest and
dissatisfaction resulting from economic and social
distress which was threatening the stability of
governments the world over. Alive to the social and
economic forces at work, the framers of our Constitution
boldly met the problems and difficulties which faced them
and endeavored to crystallize, with more or less fidelity,
the political, social and economic propositions of their
age, and this they did, with the consciousness that the
political and philosophical aphorism of their generation
will, in the language of a great jurist, "be doubted by the
next and perhaps entirely discarded by the third." (Chief
Justice Winslow in Gorgnis v. Falk Co., 147 Wis., 327;
133 N. W., 209). Embodying the spirit of the present
epoch, general provisions were inserted in the
Constitution which are intended to bring about the
needed social and economic equilibrium between
component elements of society through the application of
what may be termed as the justitia communisadvocated
by Grotius and Leibnitz many years ago to be secured
through the counter-balancing of economic and social
forces and employers or landlords, and employees or
tenants, respectively; and by prescribing penalties for the
violation of the orders" and later, Commonwealth Act No.
213, entitled "An Act to define and regulate legitimate
labor organizations."28
This ingrained social philosophy favoring employees has now
been weakened by the new ruling of the majority. For while this
Court has always considered lack of pre-dismissal notice as
unjust to employees, the new ruling of the majority now declares it
is unjust to employers as if employers are the ones exploited by
employees. In truth, there is nothing unjust to employers by
requiring them to give notice to their employees before denying
them their jobs. There is nothing unjust to the duty to give notice
for the duty is a reasonable duty. If the duty is reasonable, then it
is also reasonable to demand its compliance before the right to
dismiss on the part of an employer can be exercised. If it is
reasonable for an employer to comply with the duty, then it can
never be unjust if non-compliance therewith is penalized by
denying said employer his right to dismiss. In fine, if the
employer's right to dismiss an employee is forfeited for his failure
to comply with this simple, reasonable duty to pre-notify his
employee, he has nothing to blame but himself. If the employer is
estopped from litigating the issue of whether or not he is
dismissing his employee for a just or an authorized cause, he
brought the consequence on to himself. The new ruling of the
majority, however, inexplicably considers this consequence as
unjust to the employer and it merely winks at his failure to give
notice.
V. A LAST WORD
The new ruling of the majority erodes the sanctity of the most
important right of an employee, his constitutional right to security
of tenure. This right will never be respected by the employer if we
merely honor the right with a price tag. The policy of "dismiss now
and pay later" favors monied employers and is a mockery of the
right of employees to social justice. There is no way to justify this
pro-employer stance when the 1987 Constitution is undeniably
more pro-employee than our previous fundamental laws. Section
18 of Article II (State Policies) provides that "the State affirms
labor as a primary social economic force. It shall protect the rights
of workers and promote their welfare." Section 1, Article XIII
(Social Justice and Human Rights) calls for the reduction of
economic inequalities. Section 3, Article XIII (Labor) directs the
State to accord full protection to labor and to guaranty security of
tenure. These are constitutional polestars and not mere works of
cosmetology. Our odes to the poor will be meaningless mouthfuls
if we cannot protect the employee's right to due process against
the power of the peso of employers.
To an employee, a job is everything. Its loss involves terrible
repercussions — stoppage of the schooling of children, ejectment
from leased premises, hunger to the family, a life without any
safety net. Indeed, to many employees, dismissal is their lethal
injection. Mere payment of money by way of separation pay and
backwages will not secure food on the mouths of employees who
do not even have the right to choose what they will chew.
I vote to grant the petition.
VITUG, J., separate (concurring and dissenting) opinion;
The lawful severance by an employer of an employer-employee
relationship would require a valid cause. There are, under the
Labor Code, two groups of valid causes, and these are the just
causes under Article 2821 and the authorized causes under Article
2832 and Article 284.3
An employee whose employment is terminated for a just cause is
not entitled to the payment of separation benefits.4Separation pay
would be due, however, when the lay-off is on account of an
authorized cause. The amount of separation pay would depend
on the ground for the termination of employment. A lay-off due to
the installation of a labor saving device, redundancy (Article 283)
or disease (Article 284), entitles the worker to a separation pay
equivalent to "one (1) month pay or at least one (1) month pay for
every year of service, whichever is higher." When the termination
of employment is due to retrenchment to prevent losses, or to
closure or cessation of operations of an establishment or
undertaking not due to serious business losses or financial
reverses, the separation pay is only an equivalent of "one (1)
month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher." In the above instances, a fraction of
at least six (6) months is considered as one (1) whole year.
150
Due process of law, in its broad concept, is a principle in our legal
system that mandates due protection to the basic rights, inherent
or accorded, of every person against harm or transgression
without an intrinsically just and valid law, as well as an opportunity
to be heard before an impartial tribunal, that can warrant such an
impairment. Due process guarantees against arbitrariness and
bears on both substance and procedure. Substantive due process
concerns itself with the law, its essence, and its concomitant
efficacy; procedural due process focuses on the rules that are
established in order to ensure meaningful adjudications
appurtenant thereto.
In this jurisdiction, the right to due process is constitutional and
statutory.
Due process in the context of a termination of employment,
particularly, would be two-fold, i.e., substantive due process which
is complied with when the action of the employer is predicated on
a just cause or an authorized cause, and procedural due process
which is satisfied when the employee has the opportunity to
contest the existence of the ground invoked by the employer in
terminating the contract of employment and to be heard thereon. I
find it difficult to ascribe either a want of wisdom or a lack of legal
basis to the early pronouncements of this Court that sanction the
termination of employment when a just or an authorized cause to
warrant the termination is clearly extant. Regrettably, the Court in
some of those pronouncements has used, less than guarded in
my view, the term "due process" when referring to the notices
prescribed in the Labor Code5 and its implementing rules6 that
could, thereby, albeit unintendedly and without meaning to,
confuse the latter with the notice requirement in adjudicatory
proceedings. It is not seldom when the law puts up various
conditions in the juridical relations of parties; it would not be
accurate to consider, I believe, an infraction thereof to ipso-
facto raise a problem of due process. The mere failure of notice of
the dismissal or lay-off does not foreclose the right of an
employee from disputing the validity, in general, of the termination
of his employment, or the veracity, in particular, of the cause that
has been invoked in order to justify that termination. In assailing
the dismissal or lay-off, an employee is entitled to be heard and to
be given the corresponding due notice of the proceedings. It
would be when this right is withheld without cogent reasons that,
indeed, it can rightly be claimed that the fundamental demands of
procedural due process have been unduly discarded.
I do appreciate the fact that the prescribed notices can have
consequential benefits to an employee who is dismissed or laid
off, as the case may be; its non-observance by an employer,
therefore, can verily entitle the employee to an award of damage
but, to repeat, not to the extent of rendering outrightly illegal that
dismissal or lay-off predicated on valid grounds. I would consider
the indemnification to the employee not a penalty or a fine against
the employer, the levy of either of which would require an
appropriate legislative enactment; rather, I take the grant of
indemnity as justifiable as an award of nominal damages in
accordance with the provisions of Articles 2221-2223 of the Civil
Code, viz:
Art. 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
Art. 2222. The court may award nominal damages in
every obligation arising from any source enumerated in
article 1157, or in every case where any property right
has been invaded.
Art. 2223. The adjudication of nominal damages shall
preclude further contest upon the right involved and all
accessory questions, as between the parties to the suit,
or their respective heirs and assigns.
There is no fixed formula for determining the precise amount of
nominal damages. In fixing the amount of nominal damages to be
awarded, the circumstances of each case should thus be taken
into account, such as, to exemplify, the —
(a) length of service or employment of the dismissed
employee;
(b) his salary or compensation at the time termination of
employment vis-a-vis the capability of the employer to
pay;
(c) question of whether the employer has deliberately
violated the requirements for termination of employment
or has attempted to comply, at least substantially,
therewith; and/or
(d) reasons for the termination of employment.
I might stress the rule that the award of nominal damages is not
for the purpose of indemnification for a loss but for the recognition
and vindication of a right. The degree of recovery therefor can
depend, on the one hand, on the constitution of the right, and,
upon the other hand, on the extent and manner by which that right
is ignored to the prejudice of the holder of that right.
In fine7 —
A. A just cause or an authorized cause and a written
notice of dismissal or lay-off, as the case may be, are
required concurrently but not really equipollent in their
consequence, in terminating an employer-employee
relationship.
B. Where there is neither just cause nor authorized
cause, the reinstatement of the employee and the
payment of back salaries would be proper and should be
decreed. If the dismissal or lay-off is attended by bad
faith or if the employer acted in wanton or oppressive
manner, moral and exemplary damages might also be a
warded. In this respect, the Civil Code provides:
Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if the
court should find that, under the circumstances,
such damages are just due. The same rule
applies to breaches of contract where the
defendant acted fraudulently or in bad faith.
Art. 2232. In contracts and quasi-contracts, the
court may award exemplary damages if the
defendant acted in a wanton, fraudulent,
reckless, oppressive, or malevolent manner
(Civil Code).
Separation pay can substitute for reinstatement if such
reinstatement is not feasible, such as in case of a clearly
strained employer-employee relationship (limited to
managerial positions and contracts of employment
predicated on trust and confidence) or when the work or
position formerly held by the dismissed employee plainly
has since ceased to be available.
C. Where there is just cause or an authorized cause for
the dismissal or lay-off but the required written notices
therefor have not been properly observed by an
151
 employer, it would neither be light and justifiable nor
likely intended by law to order either the reinstatement of
the dismissed or laid-off employee or the payment of
back salaries to him simply for the lack of such notices if,
and so long as, the employee is not deprived of an
opportunity to contest that dismissal or lay-off and to
accordingly be heard thereon. In the termination of
employment for an authorized cause (this cause being
attributable to the employer), the laid-off employee is
statutorily entitled to separation pay, unlike a dismissal
for a just cause (a cause attributable to an employee)
where no separation pay is due. In either case, if an
employer fails to comply with the requirements of notice
in terminating the services of the employee, the
employer must be made to pay, as so hereinabove
expressed, corresponding damages to the employee.
WHEREFORE, I vote to hold (a) that the lay-off in the case at bar
is due to redundancy and that, accordingly, the separation pay to
petitioner should be increased to one month, instead of one-half
month, pay for every year of service, and (b) that petitioner is
entitled to his unpaid wages, proportionate 13th-month pay, and
an indemnity of P10,000.00 in keeping with the nature and
purpose of, as well as the rationale behind, the grant of nominal
damages.
PANGANIBAN, J., separate opinion;
In the case before us, the Court is unanimous in at least two
findings: (1) petitioner's dismissal was due to an authorized
cause, redundancy; and (2) petitioner was notified of his dismissal
only on the very day his employment was terminated. The
contentious issue arising out of these two findings is as follows:
What is the legal effect and the corresponding sanction for the
failure of the employer to give the employee and the Department
of Labor and Employment (DOLE) the 30-day notice of
termination required under Article 283 of the Labor Code?
During the last ten (10) years, the Court has answered the
foregoing question by ruling that the dismissal should be upheld
although the employee should be given "indemnity or damages"
ranging from P1,000 to P10,000 depending on the circumstances.
The present ponencia of Mr. Justice Mendoza holds that "the
termination of his employment should be considered ineffectual
and the [employee] should be paid back wages" from the time of
his dismissal until the Court finds that the dismissal was for a just
cause.
Reexamination of the "Indemnity Only" Rule
I am grateful that the Court has decided to reexamine our ten-year
doctrine on this question and has at least, in the process,
increased the monetary award that should go to the dismissed
employee — from a nominal sum in the concept "indemnity or
damages" to "full back wages." Shortly after my assumption of
office on October 10, 1995, I already questioned this practice of
granting "indemnity only" to employees who were dismissed for
cause but without due process.1 I formally registered reservations
on this rule in my ponencia in MGG Marine Services v.
NLRC2 and gave it full discussion in my Dissents in Better
Buildings v. NLRC3 and in Del Val v. NLRC.4
Without in any way diminishing my appreciation of this
reexamination and of the more financially-generous treatment the
Court has accorded labor, I write to take issue with the legal basis
of my esteemed colleague, Mr. Justice Mendoza, in arriving at his
legal conclusion that "the employer's 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." In short, he believes that (1) the 30-day notice
requirement finds basis only in the Labor Code, and (2) the
sanction for its violation is only "full back wages."
With due respect, I submit the following counter-arguments:
(1) The notice requirement finds basis not only in the
Labor Code but, more important, in the due process
clause of the Constitution.
(2) Consequently, when the employee is dismissed
without due process, the legal effect is an illegal
dismissal and the appropriate sanction is full back wages
plus reinstatement, not merely full back wages. It is
jurisprudentially settled, as I will show presently, that
when procedural due process is violated, the
proceedings — in this case, the dismissal — will be
voided, and the parties will have to be returned to
their status quo ante; that is, the employee will have to
be given back his old job and paid all benefits as if he
were never dismissed.
(3) In any event, contrary to Mr. Justice Mendoza's
premise, even the Labor Code expressly grants the
dismissed employee not only the right to be notified but
also the right to be heard.
In short, when an employee is dismissed without notice and
hearing, the effect is an illegal dismissal and the appropriate
reliefs are reinstatement and full back wages. In ruling that the
dismissal should be upheld, the Court majority has virtually
rendered nugatory the employee's right to due process as
mandated by law and the Constitution. It implicitly allows the
employer to simply ignore such right and to just pay the
employee. While it increases the payment to "full back wages," it
doctrinally denigrates his right to due process to a mere statutory
right to notice.
Let me explain the foregoing by starting with a short background
of our jurisprudence on the right to due process.
Without Due Process, the Proceedings Are Illegal
In the past, this Court has untiringly reiterated that there are two
essential requisites for an employer's valid termination of an
employee's services: (1) a just5 or authorized6 cause and (2) due
process.7 During the last ten years, the Court has been quite firm
in this doctrinal concept, but it has been less than consistent in
declaring the illegality of a dismissal when due process has not
been observed. This is particularly noticeable in the relief granted.
Where there has been no just or authorized cause, the employee
is awarded reinstatement or separation pay, and back wages. 8 If
only the second requisite (due process) has not been fulfilled, the
employee, as earlier stated, is granted indemnity or damages
amounting to a measly P1,000 up to P10,000.9
I respectfully submit that illegal dismissal results not only from the
absence of a legal cause (enumerated in Arts. 282 to 284 of the
Labor Code), but likewise from the failure to observe due process.
Indeed, many are the cases, labor or otherwise, in which acts
violative of due process are unequivocally voided or declared
illegal by the Supreme Court. In Pepsi-Cola Bottling
Co. v. NLRC,10 the Court categorically ruled that the failure of
management to comply with the requirements of due process
made its judgment of dismissal "void and non-existent."
This Court in People v. Bocar 11 emphatically made the following
pronouncement, which has been reiterated in several cases:12
152
 The cardinal precept is that where there is a violation of
basis constitutional rights, courts are ousted of their
jurisdiction. Thus the violation of the State's right to due
process raises a serious jurisdictional issue (Gumabon
vs. Director of the Bureau of Prisons, L-30026, 37 SCRA
420 [Jan. 30, 1971]) which cannot be glossed over or
disregarded at will. Where the denial of the fundamental
right of due process is apparent, a decision rendered in
disregarded of the right is void for lack of jurisdiction
(Aducayen vs. Flores, L-30370, [May 25, 1973] 51 SCRA
78; Shell Co. vs. Enage, L-30111-12, 49 SCRA 416
[Feb. 27, 1973]). Any judgment or decision rendered
notwithstanding such violation may be regarded as a
"lawless thing, which can be treated as an outlaw and
slain at sight, or ignored wherever it exhibits its head"
(Aducayen vs. Flores, supra).
In the earlier case Bacus v. Ople,13 this Court also nullified the
then labor minister's clearance to terminate the employment of
company workers who had supposedly staged an illegal strike.
The reason for this ruling was the denial of sufficient opportunity
for them to present their evidence and prove their case. The Court
explained:14
A mere finding of the illegality of a strike should not be
automatically followed by a wholesale dismissal of the
strikers from their employment. What is more, the finding
of the illegality of the strike by respondent Minister of
Labor and Employment is predicated on the evidence
ascertained through an irregular procedure conducted
under the semblance of summary methods and speedy
disposition of labor disputes involving striking
employees.
While it is true that administrative agencies exercising
quasi-judicial functions are free from the rigidities of
procedure, it is equally well-settled in this jurisdiction that
avoidance of such technicalities of law or procedure in
ascertaining objectively the facts in each case should
not, however, cause a denial of due process. The
relative freedom of the labor arbiter from the rigidities of
procedure cannot be invoked to evade what was clearly
emphasized in the landmark case of Ang Tibay v. Court
of Industrial Relations that all administrative bodies
cannot ignore or disregard the fundamental and essential
requirements of due process.
In the said case, the respondent company was ordered to
reinstate the dismissed workers, pending a hearing "giving them
the opportunity to be heard and present their evidence."
In Philippine National Bank v. Apalisok,15 Primitivo Virtudazo, an
employee of PNB, was served a Memorandum stating the finding
against him of a prima facie case for dishonesty and violation of
bank rules and regulations. He submitted his Answer denying the
charges and explaining his defenses.
Later, two personnel examiners of the bank conducted a fact-
finding investigation. They stressed to him that a formal
investigation would follow, in which he could confront and
examine the witnesses for the bank, as well as present his own.
What followed, however, was a Memorandum notifying him that
he had been found guilty of the charges and that he was being
dismissed. After several futile attempts to secure a copy of the
Decision rendered against him, he instituted against PNB a
Complaint for illegal dismissal and prayed for reinstatement and
damages.
The trial court held that Virtudazo had been deprived of his rights
to be formally investigated and to cross-examine the witnesses.
This Court sustained the trial court, stating resolutely: "The
proceedings having been conducted without according to
Virtudazo the "cardinal primary rights of due process" guaranteed
to every party in an administrative or quasi-judicial proceeding,
said proceedings must be pronounced null and void." 16
Also in Fabella v. Court of Appeals,17 this Court declared the
dismissal of the schoolteachers illegal, because the administrative
body that heard the charges against them had not afforded them
their right to procedural due process. The proceedings were
declared void, and the orders for their dismissal set aside. We
unqualifiedly reinstated the schoolteachers, to whom we awarded
all monetary benefits that had accrued to them during the period
of their unjustified suspension or dismissal.
In People v. San Diego,18 People v. Sola,19 People
v. Dactrdao,20 People v. Calo Jr.21 and People v. Burgos,22 this
Court similarly voided the trial court's grant of bail to the accused
upon a finding that the prosecution had been deprived of
procedural due process.
In People v. Sevilleno,23 the Court noted that the trial judge "hardly
satisfied the requisite searching inquiry" due the accused when he
pleaded guilty to the capital offense he had been charged with.
We thus concluded that "the accused was not properly accorded
his fundamental right to be informed of the precise nature of the
accusation leveled against him." Because of the nonobservance
of "the fundamental requirements of fairness and due process,"
the appealed Decision was annulled and set aside, and the case
was remanded for the proper arraignment and trial of the
accused.
Recently, the Court vacated its earlier Decision24 in People v.
Parazo25 upon realizing that the accused — "a deaf-mute, a
mental retardate, whose mental age [was] only seven (7) years
and nine (9) months, and with low IQ of 60 only" — had not been
ably assisted by a sign language expert during his arraignment
and trial. Citing People v. Crisologo,26 we ruled that the accused
had been deprived of "a full and fair trial and a reasonable
opportunity to defend himself." He had in effect been denied his
fundamental right to due process of law. Hence, we set aside the
trial proceedings and granted the accused a re-arraignment and a
retrial.
Of late, we also set aside a Comelec Resolution disallowing the
use by a candidate of a certain nickname for the purpose of her
election candidacy. The Resolution was issued pursuant to a
letter-petition which was passed upon by the Comelec without
affording the candidate the opportunity to explain her side and to
counter the allegations in said letter-petition. In invalidating the
said Resolution, we again underscored the necessity of the
observance of the twin requirements of notice and hearing before
any decision can be validly rendered in a case. 27
Clearly deducible from our extant jurisprudence is that the denial
of a person's fundamental right to due process amounts to the
illegality of the proceedings against him. Consequently, he is
brought back to his status quo ante, not merely awarded nominal
damages or indemnity.
Our labor force deserves no less. Indeed, the State recognizes it
as its primary social economic force,28 to which it is constitutionally
mandated to afford full protection.29 Yet, refusing to declare the
illegality of dismissals without due process, we have continued to
impose upon the erring employer the simplistic penalty of paying
indemnity only. Hence, I submit that it is time for us to denounce
these dismissals as null and void and to grant our workers these
proper reliefs: (1) the declaration that the termination or dismissal
is illegal and unconstitutional and (2) the reinstatement of the
employee plus full back wages. The present ruling of the Court is
manifestly inconsistent with existing prudence which holds that
proceedings held without notice and hearing are null and void,
153
since they amount to a violation of due process, and therefore
bring back the parties to the status quo ante.
Exception: When Due Process Is Impractical and Futile
I am fully aware that in a long line of cases starting with Wenphil
v. NLRC,30 the Court has held: where there is just cause for the
dismissal of an employee but the employer fails to follow the
requirements of procedural due process, the former is not entitled
to back wages, reinstatement (or separation pay in case
reinstatement is no longer feasible) or other benefits. Instead, the
employee is granted an indemnity (or penalty or damages)
ranging from P1,00031 to as much as P10,000,32 depending on the
circumstances of the case and the gravity of the employer's
omission. Since then, Wenphil has perfunctorily been applied in
most subsequent cases33 involving a violation of due process
(although just cause has been duly proven), without regard for the
peculiar factual milieu of each case. Indemnity or damages has
become an easy substitute for due process.
Be it remembered, however, that the facts in Wenphil clearly
showed the impracticality and the futility of observing the
procedure laid down by law and by the Constitution for terminating
employment. The employee involved therein appeared to have
exhibited a violent temper and caused trouble during office hours.
In an altercation with a co-employee, he "slapped [the latter's]
cap, stepped on his foot and picked up the ice scooper and
brandished it against [him]." When summoned by the assistant
manager, the employee "shouted and uttered profane words"
instead of giving an explanation. He was caught virtually
in flagrante delicto in the presence of many people. Under the
circumstances action was necessary to preserve order and
discipline, as well as to safeguard the customers' confidence in
the employer's business — a fastfood chain catering to the
general public where courtesy is a prized virtue.
However, in most of the succeeding cases, including the present
one before us in which the petitioner was dismissed on the very
day he was served notice, there were ample opportunities for the
employers to observe the requisites of due process. There were
no exigencies that called for immediate response. And yet,
Wenphil was instantly invoked and due process brushed aside.
I believe that the price that the Court has set for the infringement
of the fundamental right to due process is too insignificant, too
niggardly, and sometimes even too late. I believe that imposing a
stiffer sanction is the only way to emphasize to employers the
extreme importance of the right to due process in our democratic
system. Such right is too sacred to be taken for granted or
glossed over in a cavalier fashion. To hold otherwise, as by simply
imposing an indemnity or even "full back wages," is to allow the
rich and powerful to virtually purchase and to thereby stifle a
constitutional right granted to the poor and marginalized.
It may be asked: If the employee is guilty anyway, what difference
would it make if he is fired without due process? By the same
token, it may be asked: If in the end, after due hearing, a criminal
offender is found guilty anyway, what difference would it make if
he is simply penalized immediately without the trouble and the
expense of trial? The absurdity of this argument is too apparent to
deserve further discourse.34
Worker's Right to Notice Is Constitutional, Not Merely Statutory
According to the ponencia of Mr. Justice Mendoza, the "violation
of the notice requirement cannot be considered a denial of due
process resulting in the nullity of the employee's dismissal or lay-
off." He argues that the due process clause of the Constitution
may be used against the government only. Since the Labor Code
does not accord employees the right to a hearing, ergo, he
concludes, they do not have the right to due process.
I disagree. True, as pointed out by Mr. Justice Mendoza,
traditional doctrine holds that constitutional rights may be invoked
only against the State. This is because in the past, only the State
was in a position to violate these rights, including the due process
clause. However, with the advent of liberalization, deregulation
and privatization, the State tended to cede some of its powers to
the "market forces." Hence, corporate behemoths and even
individuals may now be sources of abuses and threats to human
rights and liberties. I believe, therefore, that such traditional
doctrine should be modified to enable the judiciary to cope with
these new paradigms and to continue protecting the people from
new forms of abuses.34 -a
Indeed the employee is entitled to due process not because of the
Labor code, but because of the Constitution. Elementary is the
doctrine that constitutional provisions are deemed written into
every statute, contract or undertaking. Worth noting is that "[o]ne's
employment, profession, trade or calling is a property right within
the protection of the constitutional guaranty of due process of
law."35
In a long line of cases involving judicial, quasi-judicial and
administrative proceedings, some of which I summarized earlier,
the Court has held that the twin requirements of notice and
hearing (or, at the very least, an opportunity to be heard)
constitute the essential elements of due process. In labor
proceedings, both are the conditio sine qua non for a dismissal to
be validly effected.36 The perceptive Justice Irene Cortes has aptly
stated: "One cannot go without the other, for otherwise the
termination would, in the eyes of the law, be illegal."37
Even the Labor Code Grants the Right to a Hearing
Besides, it is really inaccurate to say that the Labor Code grants
"notice alone" to employees being dismissed due to an authorized
cause. Article 277 (b)38 of the said Code explicitly provides that
the termination of employment by the employer is "subject to the
constitutional right of workers to security of tenure[;] . . . without
prejudice to the requirement of notice under Article 283 of this
Code, the employer shall furnish the worker whose employment is
sought to be terminated a written notice containing a statement of
the causes for termination and shall afford the latter ample
opportunity to be heard . . . ." Significantly, the provision requires
the employer "to afford [the employee] ample opportunity to be
heard" when the termination is due to a "just and authorized
cause." I submit that this provision on "ample opportunity to be
heard" applies to dismissals under Articles 282, 283 and 284 of
the Labor Code.
In addition, to say that the termination is "simply ineffectual" for
failure to comply with the 30-day written notice and, at the same
time, to conclude that it has "legal effect" appears to be
contradictory. Ineffectual means "having no legal force." 39 If a
dismissal has no legal force or effect, the consequence should be
the reinstatement of the dismissed employee and the grant of full
back wages thereto, as provided by law — not the latter only.
Limiting the consequence merely to the payment of full back
wages has no legal or statutory basis. No provision in the Labor
Code or any other law authorizes such limitation of sanction,
which Mr. Justice Mendoza advocates.
The majority contends that it is not fair to reinstate the employee,
because the employer should not be forces to accommodate an
unwanted worker. I believe however that it is not the Court that
forces the employer to rehire the worker. By violating the latter's
constitutional right to due process, the former brings this sanction
upon itself. Is it unfair to imprison a criminal? No! By violating the
law, one brings the penal sanction upon oneself. There is nothing
154
unfair or unusual about this inevitable chain of cause and effect,
of crime and punishment, of violation and sanction.
Due Process Begins With Each of Us
To repeat, due process begins with the employer, not with the
labor tribunals. An objective reading of the Bill of Rights clearly
shows that the due process protection is not limited to
government action alone. The Constitution does not say that the
right cannot be claimed against private individuals and entities.
Thus, in PNB v. Apalisok, which I cited earlier, this Court voided
the proceedings conducted by petitioner bank because of its
failure to observe Apalisok's right to due process.
Truly, justice is dispensed not just by the courts and quasi-judicial
bodies like public respondent here. The administration of justice
begins with each of us, in our everyday dealings with one another
and, as in this case, in the employers' affording their employees
the right to be heard. If we, as a people and as individuals, cannot
or will not deign to act with justice and render unto everyone his or
her due in little, everyday things, can we honestly hope and
seriously expect to do so when monumental, life-or-death issues
are at stake? Unless each one is committed to a faithful
observance of day-to-day fundamental rights, our ideal of a just
society can never be approximated, not to say attained.
In the final analysis, what is involved here is not simply the
amount of monetary award, whether insignificant or substantial;
whether termed indemnity, penalty or "full back wages." Neither is
it merely a matter of respect for workers' rights or adequate
protection of labor. The bottom line is really the constitutionally
granted right to due process. And due process is the very
essence of justice itself. Where the rule of law is the bedrock of
our free society, justice is its very lifeblood. Denial of due process
is thus no less than a denial of justice itself.
In Addition to Reinstatement and Back Wages, Damages May Be
Awarded
One last point. Justice Vitug argues in his Separate Opinion that
the nonobservance of the prescribed notices "can verily entitle the
employee to an award of damages but . . . not to the extent of
rendering outrightly illegal that dismissal or lay-off . . . ." I, of
course, disagree with him insofar as he denies the illegality of the
dismissal, because as I already explained, a termination without
due process is unconstitutional and illegal. But I do agree that,
where the employee proves the presence of facts showing liability
for damages (moral, exemplary, etc.) as provided under the Civil
Code, the employee could be entitled to such award in addition to
reinstatement and back wages. For instance, where the illegal
dismissal has caused the employee "physical suffering, mental
anguish, fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation and similar injury" due to
the bad faith of the employer, an award for moral damages would
be proper, in addition to reinstatement and back wages.
Summary
To conclude, I believe that even if there may be a just or an
authorized cause for termination but due process is absent, the
dismissal proceedings must be declared null and void. The
dismissal should still be branded as illegal. Consequently, the
employee must be reinstated and given full back wages.
On the other hand, there is an exception. The employer can
adequately prove that under the peculiar circumstances of the
case, there was no opportunity to comply with due process
requirements; or doing so would have been impractical or gravely
adverse to the employer, as when the employee is caught in
flagrante delicto. Under any of these circumstances, the dismissal
will not be illegal and no award may properly be granted.
Nevertheless, as a measure of compassion, the employee may be
given a nominal sum depending on the circumstances, pursuant
to Article 2221 of the Civil Code.
Depending on the facts of each case, damages as provided under
applicable articles of the Civil Code may additionally be awarded.
WHEREFORE, I vote to GRANT the petition. Ruben Serrano
should be REINSTATED and PAID FULL BACK WAGES from
date of termination until actual reinstatement, plus all benefits he
would have received as if he were never dismissed.
G.R. No. 74841 December 20, 1991
ASSOCIATED LABOR UNIONS-VIMCONTU, THE CEBU OIL
EMPLOYEES ASSOCIATION, represented by its Acting
President, MIGUEL C. ALIVIADO, and THE MOBIL DAVAO/
COTABATO CHAPTER-ALU, represented by its President,
DAVID C. ONDEVILLA, petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (NLRC),
MOBIL OIL PHILIPPINES, INC., JEAN PIERRE BAILLEUX,
CALTEX PHILIPPINES, INC., and MOBIL PHILIPPINES,
INC., respondents.
G.R. No. 75667 December 20, 1991
ASSOCIATED LABOR UNIONS-VIMCONTU, THE CEBU OIL
EMPLOYEES ASSOCIATION-ALU LOCAL 15, represented by
its President, EMILIO S. SUAREZ, and THE MOBIL
DAVAO/COTABATO CHAPTER-ALU, represented by its
President, DAVID C. ONDEVILLA, petitioners,
vs.
MOBIL OIL PHILS., INC., JEAN PIERRE BAILLEUX, CALTEX
PHILIPPINES, INC., and MOBIL PHILIPPINES,
INC., respondents.
Edgemelo C. Rosales for petitioner ALU.
DAVIDE, JR., J:p
These consolidated petitions for certiorari, filed within four (4)
days from each other, seek to annul and set aside the
decision 1 dated 22 January 1986 of the National Labor Relations
Commissions (NLRC) affirming the dismissal by Labor Arbiter
Felipe T. Graduque II of the complaint filed in NLRC Case No.
RAB-VII-0762-83 entitled Associated Labor Unions-VIMCONTU,
et al. versus Mobil Oil Philippines, Inc. et al., promulgated on 6
December 1984.
G.R. No. 74841 was filed by Atty. Felipe Tac-an on 25 July
1986, 2 with the local represented by its acting president, Miguel
Aliviado. G.R. No. 75667 was filed by Atty. Candido C. Caballero
on 28 July 1986. 3 He avers that he is counsel for the petitioner
Unions except for twenty (20) petitions stem from the same facts
and involve identical issues, a single discussion will be devoted to
both.
The antecedent facts are partly summarized by the public
respondent, as follows:
... A collective bargaining agreement was entered into
between the complainants and the respondent Mobil Oil
Philippines, Inc. for a period of three years starting from
April 1, 1982 to March 31, 1985. On August 5, 1983,
155

respondent J.P. Bailiux, President of Mobil Oil
Philippines, Inc. sent letters to the employees, notifying
of (sic) the termination of their services effective August
31, 1983 because of the sale of the respondent firm. On
September 13, 1983, complainant employee accepted
their checks for separation pay and signed quit-claims
under protest and subject to the outcome of this case.
Caltex Philippines, Inc. was impleaded as additional
respondent because of its acquisition of the entire
marketing and distribution assets of Mobil Oil Philippines.
Mobil Philippines, Inc. was also made a respondent in
view of a metropolitan daily newspaper announcement
that Mobil Oil Philippines, Inc. will continue to do
business under the corporate name of Mobil Philippines,
Inc. and that this newly formed company will market
chemicals and special products such as solvents,
process products, waxes and industrial asphalt, fuels
and lubricants for the international marine and aviation
industries.
Complainants charge respondent Mobil Oil Philippines,
Inc. and J.P. Bailiux with unfair labor practice for violating
their collective bargaining agreement which, among
others, states that "this Agreement shall be binding upon
the parties hereto and their successors and assigns, and
may be assigned by the company without the previous
approval of the Union. However, the latter will be notified
of such assignment when it occurs." In this case, the
complainant unions were not notified officially of such
assignment to Caltex Philippines and respondent Mobil
Oil Philippines made announcement in major dailies that
the company shall continue to operate its business. 4
The pleadings of the parties further disclose the following:
What Caltex Phils. purchased was Mobil Petroleum's USA (Mobil
Pet) shareholdings in Mobil Oil Philippines, Inc. (MOPI) for
US$40,000,000.00. Upon consummation of the sale, MOPI filed
an amended articles of incorporation which provided that its
corporate term would cease on 31 December 1983. By 5
September 1983, MOPI actually closed and ceased operations. 5
The complaint for unfair labor practice and breach of contract against Jean Pierre Bailleux was filed
on 8 September 1983 in the NLRC, Ministry of Labor and Employment, Cebu City. This was
amended on 5 October 1983 to implead additional respondents, namely: MOPI, Caltex Phils., Inc.
and Mobil Phils., Inc. and to demand payment for actual, moral and exemplary damages in the
amounts of P2,000,000.00, P3,000,000.00, and P1,000,000.00, respectively, and for attorney's
fees, litigation expenses, and other measures of reliefs and remedies consistent with law and
equity. 6
In due course, Labor Arbiter Felipe T. Garduque II rendered a decision dismissing the complaint on
the basis of the following findings and conclusions:
After a close evaluation of the arguments of both contending parties, it is believed that
the alleged sale by Mobil Petroluem, USA to Caltex, the former being a principal
stockholder of MOPI, was in fact made by MOPI to Caltex, and whatever CBA
entered into by MOPI binds its stockholders. However, Section I of Article XX of the
CBA was not violated by respondent MOPI as the record shows and from the
admission of complainants-union that the latter has (sic) knowledge of the impending
sales and closure of the firm in a series of negotiations/meetings.
Further, it would seem that as between complainants and respondent MOPI, the
situation is one of closure and not redundancy, and therefore, Sec. 3 of Article XI is
not applicable.
Furthermore, since this instant complaint of unfair labor practice takes the nature of a
criminal case, the same must be established by clear and convincing evidence which
complainants failed to do so.
On the issue of whether or not respondents Caltex and MOPI bound (sic) by the
provisions of the CBA, the Commission finds that although Caltex is bound by the
said agreement under Section I thereof, but the rights and interests or benefits that
may have been earned during the remaining term of the CBA have been satisfied by
MOPI when herein complainants accepted their respective checks and executed
quitclaim from and in favor of the firm.
The office took note of the fact although acceptance of payment was under protest,
there have been previous long negotiations/meetings for settlement between herein
parties, and the benefits granted by respondent MOPI, were far above the benefits
provided for by law.
As regards respondent MPI, in addition to the above, there is no concrete evidence to
establish or porve complainant's allegation that MOPI will continue its business. 7
Complainants (petition herein) appealed from the decision to the
NLRC. Finding the arguments raised on appeal to be a repetition
of the grounds presented before the labor arbiter, and opining that
no grave abuse of discretion was committed by labor arbiter
Garduque, the NLRC's first division dismissed the appeal in its
decision of January 22 1986. Their motion for reconsideration filed
on 20 March 1986 8 having been denied for lack of merit on 11
April 1986, 9 these instant petitions were filed on the dates earlier
mentioned.
In G.R. No. 74841, petitioners assail the above decision and
contend that the NLRC committed serious errors of law and grave
abuse of discretion when it ruled to justify the termination that : (a)
petitioners had knowledge of the impending sale to Caltex and
closure of the company in a series of negotiations/meetings by
considering it as a sufficient notice of termination; (b) the situation
was one of closure and not redundancy; (c) the rights and
interests or benefits that may have been earned during the
remaining term of the CBA have been satisfied by MOPI when
complainants accepted their respective checks and executed
quitclaim from and in favor of the firm; (d) the benefits granted by
respondent MOPI were far above the benefits provided by law;
and (e) as regards the liability of Mobil Philippines, Inc., there is
no concrete evidence to establish or prove complainants'
allegation that MOPI will continue its business. As to the issue of
unfair labor practice, they alleged that public respondent
committed serious errors of law and acted with grave abuse of
discretion when it ruled that since the complaint for unfair Labor
practice partakes of the nature of a criminal case, it must be
established by clear and convincing evidence. 10
In G.R. No. 75667, petitioners attribute to the public respondent the commission of the following
errors:
(A) ... grave abuse of discretion amounting to lack of or in excess of jurisdiction in
holding that respondents Mobil Oil Philippines, Inc., Jean Pierre Bailleux, Caltex
Philippines, Inc. and Mobil Philippines, Inc. did not commit an unfair labor practice
acts (sic) resulting from a breach of contract thus giving out actual, moral and
exemplary damages as well as attorney's fees and costs of litigation, ...
156
 (B) ... in the findings and conclusions of law when the respondent commission
instantly dismissed the complaint and appeal for lack of merit, inspite of an utter
disregard of the valid and existing collective bargaining agreement of the herein
petitioners and respondent Mobil Oil Philippines and Jean Pierre Bailleux. 11
On 11 August 1986, We required the respondents in G.R. No.
74841 to comment on the petition, 12 which public respondent
NLRC did through the office of the Solicitor General on 5 March
1987 13 and private respondents on 25 September 1987. 14
On 7 October 1987, We ordered the consolidation of the two (2) petitions, 15
considered
the Solicitor General's comment in G.R. No. 74841 as his
comment in G.R. No. 75667, and required petitioners to reply to
the comment, which they complied with on 1 June 1988. 16
Thereupon, on 23 November 1987, petitioners, thru their representatives Miguel Aliviado and David
Ondevilla, filed a motion to disregard, expunge and/or dismiss the petition filed without authority by
Atty. Candido Caballero and consider only the petition filed by Atty. Felipe Tac-an in G.R. No.
74841. 17
This was followed by a motion to withdrawal appearance
filed by Atty. Caballero on 14 December 1987. 18 Atty. Edgemelo
Rosales replaced Caballero as counsel for petitioners.
On 20 May 1988, this court resolved to give due course to both
petitions and require the parties to file simultaneous
memoranda. 19 On 1 July 1988, public respondent moved that it
be excused from filing a Memorandum and that its Comment
dated 2 March 1987 be considered as its joint memorandum in
the two (2) petitions 20 which this Court granted on 3 August
1988. 21
Petitioners filed their Memorandum on 28 July 1988 22
while private respondents
filed theirs on 12 August 1988. 23
There is no merit in these consolidated petitions.
The issues presently raised have already been passed upon and resolved by this Court in another
almost identical case, Mobil Employees Association, et al. vs. NLRC, et al., 24
a petition
which challenged the decision dated 6 April 1987 of the NLRC
Second Division, upholding a labor arbiter's finding that MOPI was
not guilty of unfair labor practice and illegal dismissal and that the
termination was accused by cessation of MOPI's business
operations in the country. Through Mr. Justice Feliciano, this
Court held in said case that:
xxx xxx xxx
Examination of the CBA provisions entitled "Effectivity"
shows that the written notice to terminate that is required
to be given by either party to the other relates to notice to
terminate the CBA at the end of the original three-year,
period or any subsequent year thereafter, in the absence
of which written notice, the duration of the CBA would be
automatically extended for one (1) year periods. What is
involved in instant Petition is not, however, the
termination of the CBA itself, considering that the sale by
Mobil Pet of its wholly owned subsidiary MOPI to Caltex
Pet took place in 1983, in the middle of original (sic)
period of the CBA's. It appears to the Court that the
applicable provision is Article II, Section 1, quoted above.
Under Article II, Section 1, in cases of termination of
services of employees, the company is required to
comply with the provisions of the Labor Code and its
implementing Rules and Regulations and, "time and
circumtances permitting" and "whenever possible,"
management should enlist the support of the unions in
actions affecting the vital interest of the bargainable (i.e.,
member) employees. It may be well to add that, since
actual notice was given to all of MOPI's employees,
including, of course, the employees who were members
of petitioner unions, such notice may also be regarded
as effectively the notice to the unions contemplated by
the CBA provision on "Effectivity."
Article 284 of the Labor Code as it existed in 1983
provided as follows:
Art. 284. Closure of establishment and reduction of
personnel. — The employer may also terminate the
employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment top
prevent losses or the closing or cessation of operation of
the establishment or undertaking, unless the closing is
for the purpose of circumventing the provisions of this
title by serving a written notice on the workers and the
Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination
due to the installation of labor-saving devices or
redundany, the worker affected thereby shall be entitled
to a separation pay equivalent to least his one (1) month
pay or to at least one (1) month pay for every year of
service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closure or cessation of
operations of establishment or undertaking not due to
serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay
or least one-half (½) month pay for every year of
service, whichever is higher. A fraction of at least six (6)
months shall be considered one (1) whole year.
(Emphasis supplied.)
Under Article 184 above, three (3) requirements may be
seen be established in respect of cessation of business
operations of an employer company not due to business
reverses, namely:
(a) service of a written notice to the employees and to
the MOLE at least one (1) month before the intended
date thereof;
(b) the cessation of or withdrawal from business
operation must be bona fide in character; and
(c) payment to the employees of termination pay
amounting to at least one-half (½) month pay for each
year of service, or one (1) month pay, which is higher.
As noted earlier, MOPI's employee and the MOLE were
notified in writing on 5 August 1983 that the employees'
service would cease on 31 August 1983, but that
employees would nonetheless be paid their salaries and
other benefits until or as of 5 September 1983. We
believe that is more than substantial compliance with the
notice requirements of the Labor Code. In respect of
requirement (c) above relating to payment of termination
pay to the package given by MOPI to all its employees
far exceeded the minimum requirement of one-half (½)
month pay for every year of service laid down in Article
184 of the Labor Code. The very generosity of the
termination pay package thus given to the employees
argues strongly that the cessation of business operations
by MOPI was a bona fide one. It is very difficult for this
Court to believe that MOPI would be dissolved and all its
employees separated with generous separation pay
benefits, for the sole purpose of circumventing the
requirements of MOPI's CBA with petitioner unions.
Indeed, petitioners have not suggested any reason why
MOPI should have undertaken such a fundamental and
non-reversible business reorganization merely to evade
157
 its obligations under the CBA. The establishment of MPI
with the same Directors who had served as such in
MOPI and the hiring of some former MOPI employees for
the purpose of settling and winding up the affairs of
MOPI, does not detract from the bona fide character of
MOPI's dissolution and withdrawal from business. MPI's
residual business consisting of the marketing of
chemicals, aviation and marine fuels as well as exports,
all of which constituted a fraction of the prior business of
MOPI, similarly does not argue against the bona
fide character of the corporate reorganization which here
took place. The net effect of the reorganization was the
liquidation by Mobil Pet of the great bulk of its former
business in the Philippines, the dissolution of the
corporate entity of MOPI and the transfer of its physical
assets and business to some other Philippine entity
owned and controlled by Caltex Pet, presumably Caltex
Philippines, without any impact upon the foreign
exchange reserves of the Philippines.
xxx xxx xxx
We conclude that petitioners have failed to show any
grave abuse of discretion or any act without or in excess
of jurisdiction on the part of the NLRC in rendering its
decision dated 6 April 1987.
xxx xxx xxx
The above decision forecloses any further attempt at reversing
the decision of the public respondnt challenged in these petitions.
The parallels in that case and in these cases are too
overwhelming for this Court to disregard: (a) both cases sprung
from the same sale negotiations between Mobil Pet and Caltex
Pet; (b) in both, MOPI's President, J.P. Bailleux, informed all
employees in a letter dated 5 August 1983 that on 31 August
1983, their employment would cease as a result of MOPI's
withdrawal from business; (c) all employees were paid
compensation up to or until 5 September 1983 and were given
separation pay equivalent to 2.25 months basic salary as of 31
August 1983 for every year of service and their unused vacation
leave for the current year were paid in cash; and (d) in both,
complaints for ULP, based on similarly worded CBAs (particularly
on the notice requirements), were filed with different, branches of
NLRC which promulgated the two decisions appealed from within
six days from each other. The only difference, albeit insignificant,
between the two (2) cases is that in the Mobil Employees
Association case, the collective bargaining agreements (CBA) are
with MOPI-Luzon and MOPI-Iloilo, while in the instant petitions,
the CBAs are with MOPI of Cebu, Cotabato and Davao.
Thus, with this Court's pronouncement in Mobil Employees
Association, et al. vs. NLRC, et al., supra., that what was effected
was cessation of business and that the requirement of due notice
was substantially complied with, the allegations that both MOPI
and Caltex merely intended to evade the provisions of the CBA
cannot be sustained. There was nothing irregular in the closure by
MOPI of its business operation. Caltex may not be said to have
stepped into the picture as an assignee of the CBA because of
the very fact of such closure.
In Sundowner Development Corp. vs. Drilon, 25 We stated the rule
that unless expressly assumed, labor contracts such as are not
enforceable against a transferee of an enterprise, labor contracts
being in personam, thus binding only between the parties. 26 As a
general rule, there is no law requiring a bona fide purchaser of the
assets of an on-going concern to absorb in its employ the
employees of the latter. 27 However, although the purchaser of the
assets or enterprise is not legally bound to absorb in its employ
the employees of the seller of such assets or enterprise, the
parties are reliable to the employees if the transaction between
the parties is colored or clothed with bad faith. 28The sale or
disposition must be motivated by good faith as an element of
exemption from liability. 29
This flows from the well-recognized principle that is within the employer's legitimate sphere of
management control of the business to adopt economic policies or make some changes or
adjustments in their organization or operations that would insure profit to itself or protect the
investment of its stockholders. As in the exercise of such management prerogative, the employer
may merge or consolidate its business with another, or sell or dispose all or substantially all of its
assets and properties which may bring about the dismissal or termination of its employees in the
process. 30
This disposes of the allegation that there was termination
due to redundancy; such could not be the case as all the
employees were terminated as a result of the closure.
Redundancy contemplates a situation where employees are
dismissed because of duplicitous functions.
The foregoing renders unnecessary further discussion on the
other issues raised by petitioners.
WHEREFORE, both Petitions for certiorari are DISMISSED for
lack of merit.
IT IS SO ORDERED.
Gutierrez, Jr., Feliciano, Bidin and Romero, JJ., concur.
G.R. No. 181738 January 30, 2013
GENERAL MILLING CORPORATION, Petitioner,
vs.
VIOLETA L. VIAJAR, Respondent.
DECISION
REYES, J.:
This is a Petition1 for Review on Certiorari under Rule 45 of the
Rules of Court filed by petitioner General Milling Corporation
(GMC), asking the Court to set aside the Decision2 dated
September 21, 2007 and the Resolution3dated January 30, 2008
of the Court of Appeals (CA) in CA-G.R. SP No. 01734; and to
reinstate the Decision4dated October 28, 2005 and
Resolution5 dated January 31, 2006 of the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000416-05.
The antecedent facts are as follows:
GMC is a domestic corporation with principal office in Makati City
and a manufacturing plant in Lapu-Lapu City.
In October 2003, GMC terminated the services of thirteen (13)
employees for redundancy, including herein respondent, Violeta
Viajar (Viajar). GMC alleged that it has been gradually downsizing
its Vismin (Visayas-Mindanao) Operations in Cebu where a
sizeable number of positions became redundant over a period of
time.6
On December 2, 2003, Viajar filed a Complaint7 for Illegal
Dismissal with damages against GMC, its Human Resource
Department (HRD) Manager, Johnny T. Almocera (Almocera),
and Purchasing Manager, Joel Paulino before the Regional
Arbitration Branch (RAB) No. VII, NLRC, Cebu City.
In her Position Paper,8 Viajar alleged that she was employed by
GMC on August 6, 1979 as Invoicing Clerk. Through the years,
the respondent held various positions in the company until she
became Purchasing Staff.
158
On October 30, 2003, Viajar received a Letter-Memorandum
dated October 27, 2003 from GMC, through Almocera, informing
her that her services were no longer needed, effective November
30, 2003 because her position as Purchasing Staff at the
Purchasing Group, Cebu Operations was deemed redundant.
Immediately thereafter, the respondent consulted her immediate
superior at that time, Thaddeus Oyas, who told her that he too
was shocked upon learning about it.9
When Viajar reported for work on October 31, 2003, almost a
month before the effectivity of her severance from the company,
the guard on duty barred her from entering GMC’s premises. She
was also denied access to her office computer and was restricted
from punching her daily time record in the bundy clock.10
On November 7, 2003, Viajar was invited to the HRD Cebu Office
where she was asked to sign certain documents, which turned out
to be an "Application for Retirement and Benefits." The
respondent refused to sign and sought clarification because she
did not apply for retirement and instead asserted that her services
were terminated for alleged redundancy. Almocera told her that
her signature on the Application for Retirement and Benefits was
needed to process her separation pay. The respondent also
claimed that between the period of July 4, 2003 and October 13,
2003, GMC hired fifteen (15) new employees which aroused her
suspicion that her dismissal was not necessary.11 At the time of
her termination, the respondent was receiving the salary rate of
₱19,651.41 per month.12
For its part, the petitioner insisted that Viajar’s dismissal was due
to the redundancy of her position. GMC reasoned out that it was
forced to terminate the services of the respondent because of the
economic setbacks the company was suffering which affected the
company’s profitability, and the continuing rise of its operating and
interest expenditures. Redundancy was part of the petitioner’s
concrete and actual cost reduction measures. GMC also
presented the required "Establishment Termination Report" which
it filed before the Department of Labor and Employment (DOLE)
on October 28, 2003, involving thirteen (13) of its employees,
including Viajar. Subsequently, GMC issued to the respondent
two (2) checks respectively amounting to ₱440,253.02 and
₱21,211.35 as her separation pay.13
On April 18, 2005, the Labor Arbiter (LA) of the NLRC RAB No.
VII, Cebu City, rendered a Decision, the decretal portion of which
reads:
WHEREFORE, foregoing considered, judgment is hereby
rendered declaring that respondents acted in good faith in
terminating the complainant from the service due to redundancy
of works, thus, complainant’s refusal to accept the payment of her
allowed separation pay and other benefits under the law is NOT
JUSTIFIED both in fact and law, and so, therefore complainant’s
case for illegal dismissal against the herein respondents and so
are complainant’s monetary claims are hereby ordered
DISMISSED for lack of merit.
SO ORDERED.14
The LA found that the respondent was properly notified on
October 30, 2003 through a Letter-Memorandum dated October
27, 2003, signed by GMC’s HRD Manager Almocera, that her
position as Purchasing Staff had been declared redundant. It also
found that the petitioner submitted to the DOLE on October 28,
2003 the "Establishment Termination Report." The LA even
faulted the respondent for not questioning the company’s action
before the DOLE Regional Office, Region VII, Cebu City so as to
compel the petitioner to prove that Viajar’s position was indeed
redundant. It ruled that the petitioner complied with the
requirements under Article 283 of the Labor Code, considering
that the nation was then experiencing an economic downturn and
that GMC must adopt measures for its survival.15
Viajar appealed the aforesaid decision to the NLRC. On October
28, 2005, the NLRC promulgated its decision, the dispositive
portion of which reads:
WHEREFORE, premises considered, the Decision of the Labor
Arbiter declaring the validity of complainant’s termination due to
redundancy is hereby AFFIRMED. Respondent General Milling
Corporation is hereby ordered to pay complainant’s separation
pay in the amount of ₱461,464.37.
SO ORDERED.16
The NLRC, however, stated that it did not agree with the LA that
Viajar should be faulted for failing to question the petitioner’s
declaration of redundancy before the DOLE Regional Office,
Region VII, Cebu City. It was not imperative for Viajar to challenge
the validity of her termination due to
redundancy.17 Notwithstanding, the NLRC affirmed the findings of
the LA that Viajar’s dismissal was legal considering that GMC
complied with the requirements provided for under Article 283 of
the Labor Code and existing jurisprudence, particularly citing
Asian Alcohol Corporation v. NLRC.18 The NLRC further stated
that Viajar was aware of GMC’s "reduction mode," as shown in
the GMC Vismin Manpower Complement, as follows:
No. of Employees
Year Manpower Profile Terminated
(Redundancy)
2000 795
2001 782
2002 736 41
2003 721 24
2004 697 16
696 (As of June
2005 0619
2005)
The NLRC stated that the characterization of positions as
redundant is an exercise of the employer’s business judgment
and prerogative. It also ruled that the petitioner did not exercise
this prerogative in bad faith and that the payment of separation
pay in the amount of ₱461,464.37 was in compliance with Article
283 of the Labor Code.20
Respondent Viajar filed a Motion for Reconsideration which was
denied by the NLRC in its Resolution dated January 31, 2006.
Undaunted, Viajar filed a petition for certiorari before the CA. In
the now assailed Decision dated September 21, 2007, the CA
granted the petition, reversing the decision of the NLRC in the
following manner:
WHEREFORE, premises considered, this Petition for Certiorari is
GRANTED. The Decision, dated 28 October 2005, and
Resolution, dated 31 January 2006 respectively, of public
respondent National Labor Relations Commission-Fourth Division,
Cebu City, in NLRC Case No. V-000416-05 (RAB VII-12-2495-03)
are SET ASIDE. A new judgment is entered DECLARING the
dismissal ILLEGAL and ordering respondent to reinstate petitioner
without loss of seniority rights and other privileges with full
backwages inclusive of allowances and other benefits computed
from the time she was dismissed on 30 November 2003 up to the
date of actual reinstatement. Further, moral and exemplary

159
damages, in the amount of Fifty Thousand Pesos ([P]50,000.00)
each; and attorney’s fees equivalent to ten percent (10%) of the
total monetary award, are awarded.
Costs against respondent.
SO ORDERED.21
Aggrieved by the reversal of the NLRC decision, GMC filed a
motion for reconsideration. However, in its Resolution dated
January 30, 2008, the CA denied the same; hence, this petition.
The petitioner raises the following issues, to wit:
I. THE DECISION OF SEPTEMBER 21, 2007 AND THE
RESOLUTION OF JANUARY 30, 2008 OF THE COURT
OF APPEALS ARE CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
II. THE DECISION OF SEPTEMBER 21, 2007 AND THE
RESOLUTION OF JANUARY 30, 2008 OF THE COURT
OF APPEALS VIOLATE THE LAW AND ESTABLISHED
JURISPRUDENCE ON THE OBSERVANCE OF
RESPECT AND FINALITY TO FACTUAL FINDINGS OF
THE NATIONAL LABOR RELATIONS COMMISSION.
III. THE COURT OF APPEALS COMMITTED GRAVE
ABUSE OF DISCRETION IN ITS DECISION OF
SEPTEMBER 21, 2007 AND RESOLUTION OF
JANUARY 30, 2008 AS THE SAME ARE CONTRARY
TO THE EVIDENCE ON RECORD.22
The petition is denied.
The petitioner argues that the factual findings of the NLRC,
affirming that of the LA must be accorded respect and finality as it
is supported by evidence on record. Both the LA and the NLRC
found the petitioner’s evidence sufficient to terminate the
employment of respondent on the ground of redundancy. The
evidence also shows that GMC has complied with the procedural
and substantive requirements for a valid termination. There was,
therefore, no reason for the CA to disturb the factual findings of
the NLRC.23
The rule is that factual findings of quasi-judicial agencies such as
the NLRC are generally accorded not only respect, but at times,
even finality because of the special knowledge and expertise
gained by these agencies from handling matters falling under their
specialized jurisdiction.24 It is also settled that this Court is not a
trier of facts and does not normally embark in the evaluation of
evidence adduced during trial.25 This rule, however, allows for
exceptions. One of these exceptions covers instances when the
findings of fact of the trial court, or of the quasi-judicial agencies
concerned, are conflicting or contradictory with those of the CA.
When there is a variance in the factual findings, it is incumbent
upon the Court to re-examine the facts once again.26
Furthermore, another exception to the general rule is when the
said findings are not supported by substantial evidence or if on
the basis of the available facts, the inference or conclusion arrived
at is manifestly erroneous.27Factual findings of administrative
agencies are not infallible and will be set aside when they fail the
test of arbitrariness.28 In the instant case, the Court agrees with
the CA that the conclusions arrived at by the LA and the NLRC
are manifestly erroneous.
GMC claims that Viajar was validly dismissed on the ground of
redundancy which is one of the authorized causes for termination
of employment. The petitioner asserts that it has observed the
procedure provided by law and that the same was done in good
faith. To justify the respondent’s dismissal, the petitioner
presented: (i) the notification Letter-Memorandum dated October
27, 2003 addressed to the respondent which was received on
October 30, 2003;29 (ii) the "Establishment Termination Report" as
prescribed by the DOLE;30 (iii) the two (2) checks issued in the
respondent’s name amounting to ₱440,253.02 and ₱21,211.35 as
separation pay;31 and (iv) the list of dismissed employees as of
June 6, 2006 to show that GMC was in a "reduction mode." 32 Both
the LA and the NLRC found these sufficient to prove that the
dismissal on the ground of redundancy was done in good faith.
The Court does not agree.
Article 283 of the Labor Code provides that redundancy is one of
the authorized causes for dismissal. It reads:
Article 283. Closure of establishment and reduction of personnel.
– The employer may also terminate the employment of any
employee due to the installment of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of
this Title, by serving a written notice on the worker and the
Ministry of Labor and Employment at least one (1) month before
the intended date thereof. In case of termination due to the
installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to
at least his one (1) month pay or to at least one (1) month pay for
every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due to
serious business losses or reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year.
(Emphasis supplied)
From the above provision, it is imperative that the employer must
comply with the requirements for a valid implementation of the
company’s redundancy program, to wit: (a) the employer must
serve a written notice to the affected employees and the DOLE at
least one (1) month before the intended date of retrenchment; (b)
the employer must pay the employees a separation pay
equivalent to at least one month pay or at least one month pay for
every year of service, whichever is higher; (c) the employer must
abolish the redundant positions in good faith; and (d) the
employer must set fair and reasonable criteria in ascertaining
which positions are redundant and may be abolished.33
In Smart Communications, Inc., v. Astorga,34 the Court held that:
The nature of redundancy as an authorized cause for dismissal is
explained in the leading case of Wiltshire File Co., Inc. v. National
Labor Relations Commission, viz:
"x x x redundancy in an employer’s personnel force necessarily or
even ordinarily refers to duplication of work. That no other person
was holding the same position that private respondent held prior
to termination of his services does not show that his position had
not become redundant. Indeed, in any well organized business
enterprise, it would be surprising to find duplication of work and
two (2) or more people doing the work of one person. We believe
that redundancy, for purposes of the Labor Code, exists where
the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a
number of factors, such as overhiring of workers, decreased
volume of business, or dropping of a particular product line or
service activity previously manufactured or undertaken by the
enterprise."
160
The characterization of an employee’s services as superfluous or
no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The
wisdom and soundness of such characterization or decision is not
subject to discretionary review provided, of course, that a violation
of law or arbitrary or malicious action is not shown.35 (Emphasis
supplied and citations omitted)
While it is true that the "characterization of an employee’s
services as superfluous or no longer necessary and, therefore,
properly terminable, is an exercise of business judgment on the
part of the employer,"36 the exercise of such judgment, however,
must not be in violation of the law, and must not be arbitrary or
malicious. The Court has always stressed that a company cannot
simply declare redundancy without basis. To exhibit its good faith
and that there was a fair and reasonable criteria in ascertaining
redundant positions, a company claiming to be over manned must
produce adequate proof of the same.
We reiterate what was held in Caltex (Phils.), Inc. v. NLRC:37
In Asufrin, Jr. v. San Miguel Corporation, we ruled that it is not
enough for a company to merely declare that it has become
overmanned (sic). It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
In Panlilio v. National Labor Relations Commission, we held that
evidence must be presented to substantiate redundancy such as
but not limited to the new staffing pattern, feasibility
studies/proposal, on the viability of the newly created positions,
job description and the approval by the management of the
restructuring.38 (Emphasis supplied and citations omitted)
In the instant case, the Court agrees with the CA when it held that
the petitioner failed to present substantial proof to support GMC’s
general allegations of redundancy. As shown from the records,
the petitioner simply presented as its evidence of good faith and
compliance with the law the notification letter to respondent
Viajar;39 the "Establishment Termination Report" it submitted to
the DOLE Office;40 the two (2) checks issued in the respondent’s
name amounting to ₱440,253.02 and ₱21,211.35;41 and the list of
terminated employees as of June 6, 2006.42 We agree with the
CA that these are not enough proof for the valid termination of
Viajar’s employment on the ground of redundancy.
The letter-memorandum which contains general allegations is not
enough to convince this Court that Viajar’s termination of
employment due to redundancy was warranted under the
circumstances. There is no showing that GMC made an
evaluation of the existing positions and their effect to the
company. Neither did GMC exert efforts to present tangible proof
that it was experiencing business slow down or over hiring. The
"Establishment Termination Report" it submitted to the DOLE
Office did not account for anything to justify declaring the
positions redundant. The Court notes that the list of terminated
employees presented by GMC was a list taken as of June 6, 2006
or almost three years after the respondent was illegally dismissed
and almost a year after the LA promulgated its decision. While the
petitioner had been harping that it was on a "reduction mode" of
its employees, it has not presented any evidence (such as new
staffing pattern, feasibility studies or proposal, viability of newly
created positions, job description and the approval of the
management of the restructuring,43 audited financial documents
like balance sheets, annual income tax returns and
others)44 which could readily show that the company’s declaration
of redundant positions was justified. Such proofs, if presented,
would suffice to show the good faith on the part of the employer or
that this business prerogative was not whimsically exercised in
terminating respondent’s employment on the ground of
redundancy. Unfortunately, these are wanting in the instant case.
The petitioner only advanced a self-serving general claim that it
was experiencing business reverses and that there was a need to
reduce its manpower complement.
On the other hand, the respondent presented proof that the
petitioner had been hiring new employees while it was firing the
old ones,45 negating the claim of redundancy. It must, however,
be pointed out that in termination cases, like the one before us,
the burden of proving that the dismissal of the employees was for
a valid and authorized cause rests on the employer. It was
incumbent upon the petitioner to show by substantial evidence
that the termination of the employment of the respondent was
validly made and failure to discharge that duty would mean that
the dismissal is not justified and therefore illegal.46
Furthermore, the Court cannot overlook the fact that Viajar was
prohibited from entering the company premises even before the
effectivity date of termination; and was compelled to sign an
"Application for Retirement and Benefits." These acts exhibit the
petitioner’s bad faith since it cannot be denied that the respondent
was still entitled to report for work until November 30, 2003. The
demand for her to sign the "Application for Retirement and
Benefits" also contravenes the fact that she was terminated due to
redundancy. Indeed, there is a difference between voluntary
retirement of an employee and forced termination due to
authorized causes.
In Quevedo v. Benguet Electric Cooperative, Incorporated, 47 this
Court explained the difference between retirement and
termination due to redundancy, to wit:
While termination of employment and retirement from service are
common modes of ending employment, they are mutually
exclusive, with varying juridical bases and resulting benefits.
Retirement from service is contractual (i.e. based on the bilateral
agreement of the employer and employee), while termination of
employment is statutory (i.e. governed by the Labor Code and
other related laws as to its grounds, benefits and procedure). The
benefits resulting from termination vary, depending on the cause.
For retirement, Article 287 of the Labor Code gives leeway to the
parties to stipulate above a floor of benefits.
xxxx
The line between voluntary and involuntary retirement is thin but it
is one which this Court has drawn. Voluntary retirement cuts
employment ties leaving no residual employer liability; involuntary
retirement amounts to a discharge, rendering the employer liable
for termination without cause. The employee’s intent is the focal
point of analysis. In determining such intent, the fairness of the
process governing the retirement decision, the payment of
stipulated benefits, and the absence of badges of intimidation or
coercion are relevant parameters.48 (Emphasis supplied and
citations omitted)
Clearly, the instant case is not about retirement since the term
has its peculiar meaning and is governed by Article 287 of the
Labor Code. Rather, this is a case of termination due to
redundancy under Article 283 of the Labor Code. Thus, the
demand of GMC for the respondent to sign an "Application for
Retirement and Benefits" is really suspect.
Finally, the Court agrees with the CA that the award of moral and
exemplary damages is proper.1âwphi1 The Court has awarded
moral damages in termination cases when bad faith, malice or
fraud attend the employee’s dismissal or where the act oppresses
labor, or where it was done in a manner contrary to morals, good
customs or public policy.49 We quote with favor the findings of the
CA:
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We also award moral and exemplary damages to petitioner. While
it is true that good faith is presumed, the circumstances
surrounding the dismissal of petitioner negate its existence. Moral
damages may be recovered only where the dismissal of the
employee was tainted by bad faith or fraud, or where it constituted
an act oppressive to labor, and done in a manner contrary to
morals, good customs or public policy while exemplary damages
are recoverable only if the dismissal was done in a wanton,
oppressive, or malevolent manner. To reiterate, immediately after
receipt of her termination letter which was effective on 30
November 2003, petitioner was no longer treated as an employee
of respondent as early as the 31st of October 2003; she was
already barred from entering the company premises; she was
deprived access to her office computer; and she was excluded
from the bandy [sic] clock. She was also made to sign documents,
including an "APPLICATION FOR RETIREMENT AND
BENEFITS" in the guise of payment of her separation pay. When
petitioner confronted her immediate superior regarding her
termination, the latter’s shock aggravated her confusion and
suffering. She also learned about the employment of a number of
new employees, several of whom were even employed in her
former department. Petitioner likewise suffered mental torture
brought about by her termination even though its cause was not
clear and substantiated.50(Citations omitted)

WHEREFORE, the petition is DENIED. The Decision dated

September 21, 2007 of the Court of Appeals, as well as its
Resolution dated January 30, 2008 in CA-G.R. SP No. 01734, are
hereby AFFIRMED.

SO ORDERED.

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