Professional Documents
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Labor F13
Labor F13
Affected
Authorized Causes for Termination was its eight-man reserve pool which was composed of former
Solidbank employees who acted as relievers whenever temporary
(a) Redundancy and Installation of Labor Saving Devices vacancies occurred in the Regions branches.
WON the redundancy program was proper and if the employer is So respondent Astorga filed a complaint for illegal dismissal, non-
required to present evidence of financial losses before employees payment of salaries and other benefits with prayer for moral and
may be terminated on the ground of redundancy? exemplary damages against SMART and Ann Margaret V. Santiago
HELD (Santiago).
The totality of the actions of Coats Manila Bay Inc., shows that the RESPONDENT ASTORGA: Claims that the termination of her
redundancy program was fair, well-thought of, and made in good employment was illegal for it violated her right to security of tenure
faith. There were proper planning and implementation of the and tainted with bad faith. She asserts that the reorganization was
program. Labor Union Group consultation, notices and memos were done in order to get rid of her.
properly executed prior to the effectivity of the program. The proper
monetary benefits were given to all affected employees. She also posited that it was illegal for an employer, like SMART, to
contract out services which will displace the employees, especially if
The redundancy exists where the services of an employee are in the contractor is an in-house agency.
excess of what is reasonably demanded by the actual requirements of
the enterprise, a position is redundant where it is superfluous, and SMART: It argued that Astorga was dismissed by reason of
superfluity of a position or positions may be the outcome of a redundancy, which is an authorized cause for termination of
number of factors, such as over hiring of workers, decreased volume employment, and the dismissal was effected in accordance with the
of business, or dropping of a particular product line or service requirements of the Labor Code. The termination was valid and a
activity previously manufactured or undertaken by the enterprise. legitimate exercise of management prerogative. The redundancy
That no other person was holding the same position prior to the of Astorga’s position was the result of the abolition of CSMG and the
termination of one's services, does not show that his position had not creation of a specialized and more technically equipped SNMI.
become redundant. Indeed, in any well-organized business enterprise,
it would be surprising to find duplication of work and two (2) or LA: Favored Astorga. Illegally terminated (reinstate with full
more people doing the work of one person. Just like installation of bwages and other benefits).
labor-saving devices, the ground of redundancy does not require
the exhibition of proof of losses or imminent losses. In fact, of all NLRC: Favored SMART. The abolition of CSMG and the creation
the statutory grounds provided in Article 283 of the Labor Code, of SNMI to do the sales and marketing services for SMART is a
it is only retrenchment which requires proof of losses or possible valid organizational action. The contracting, subcontracting and
streamlining of operations for the purpose of increasing efficiency SC: Untenable. An employer is not precluded from adopting a new
are allowed under the law. policy conducive to a more economical and effective management
even if it is not experiencing economic reverses. Neither does the law
CA: Affirming with modification the resolutions of the NLRC. The require that the employer should suffer financial losses before he can
reorganization undertaken by SMART resulting in the abolition of terminate the services of the employee on the ground of redundancy.
CSMG was a legitimate exercise of management prerogative. It
rejected Astorga’s posturing that her non-absorption into SNMI was WHY SC RULED THAT SUCH REORG REALIGNMENT WAS A
tainted with bad faith. However, the CA found that SMART failed to VALID EXERCISE OF MGT PREROGATIVE
comply with the mandatory one-month notice prior to the intended
termination. Accordingly, the CA imposed a penalty equivalent to The reorganization undertaken by SMART is for no purpose other
Astorga’s one-month salary for this non-compliance. than its declared objective – as a labor and cost savings device.
Indeed, this Court finds no fault in SMART’s decision to outsource
ISSUE: the corporate sales market to SNMI in order to attain greater
productivity. [Astorga] belonged to the Sales Marketing Group
WON respondent Astorga was validly dismissed due to redundancy under the Fixed Services Division (CSMG/FSD), a distinct sales
as a result of SMART’s organizational realignment pursuant to a JV force of SMART in charge of selling SMART’s telecommunications
agreement. services to the corporate market. SMART, to ensure it can respond
quickly, efficiently and flexibly to its customer’s requirement,
HELD:
abolished CSMG/FSD and shortly thereafter assigned its functions to
YES, she was validly dismissed. The organizational realignment newly-created SNMI Multimedia Incorporated, a joint venture
introduced by SMART, which culminated in the abolition of company of SMART and NTT of Japan, for the reason that
CSMG/FSD and termination of Astorga’s employment was an CSMG/FSD does not have the necessary technical expertise
honest effort to make SMART’s sales and marketing required for the value added services. By transferring the duties of
departments more efficient and competitive and the determination CSMG/FSD to SNMI, SMART has created a more competent and
to outsource the duties performed by Astorga’s division to the JV specialized organization to perform the work required for
agreement was a sound business judgment based on relevant criteria corporate accounts. It is also relieved SMART of all administrative
and is therefore a legitimate exercise of management prerogative. costs – management, time and money-needed in maintaining the
CSMG/FSD. The determination to outsource the duties of the
The nature of redundancy as an authorized cause for dismissal is CSMG/FSD to SNMI was, to Our mind, a sound business judgment
explained in the leading case of Wiltshire File Co., Inc. v. National based on relevant criteria and is therefore a legitimate exercise of
Labor Relations Commission, viz: management prerogative.
x x x redundancy in an employer’s personnel force necessarily or SMART’S petition was granted but ordered to pay P50,000.00 as
even ordinarily refers to duplication of work. That no other person imdemnity for non-compliance with the 1-month notice requirement,
was holding the same position that private respondent held prior to separation pay of 1 month pay and her salary from Feb 15, 1998 to
termination of his services does not show that his position had not April 3, 1998. No award of backwages.
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
OTHER NOTES:
redundancy, for purposes of the Labor Code, exists where the
services of an employee are in excess of what is reasonably SMART FAILED TO COMPLY WITH THE MANDATED 1 MONTH
demanded by the actual requirements of the enterprise. NOTICE
Succinctly put, a position is redundant where it is superfluous,
and superfluity of a position or positions may be the outcome of a The record is clear that Astorga received the notice of termination
number of factors, such as overhiring of workers, decreased only on March 16, 1998 or less than a month prior to its effectivity
volume of business, or dropping of a particular product line or on April 3, 1998. Likewise, the Department of Labor and
service activity previously manufactured or undertaken by the Employment was notified of the redundancy program only on March
enterprise. 6, 1998.
The characterization of an employee’s services as superfluous or Article 283 of the Labor Code clearly provides:
no longer necessary and, therefore, properly terminable, is an
exercise of business judgment on the part of the employer. The Art. 283. Closure of establishment and reduction of personnel. —
wisdom and soundness of such characterization or decision is not The employer may also terminate the employment of any employee
subject to discretionary review provided, of course, that a due to the installation of labor saving devices, redundancy,
violation of law or arbitrary or malicious action is not shown. retrenchment to prevent losses or the closing or cessation of
operation of the establishment or undertaking unless the closing is for
Here, Astorga claims that the termination of her employment was the purpose of circumventing the provisions of this Title, by serving
illegal and tainted with bad faith. She asserts that the reorganization a written notice on the workers and the Ministry of Labor and
was done in order to get rid of her. But except for her barefaced Employment at least one (1) month before the intended date thereof x
allegation, no convincing evidence was offered to prove it. This x x.
Court finds it extremely difficult to believe that SMART would enter
into a joint venture agreement with NTT, form SNMI and abolish WHY THE WRITTEN NOTICE IS IMPORTANT?
CSMG/FSD simply for the sole purpose of easing out a particular
In the written notice, the employees are informed of the specific date
employee, such as Astorga. Moreover, Astorga never denied that
of the termination, at least a month prior to the effectivity of such
SMART offered her a supervisory position in the Customer Care
termination, to give them sufficient time to find other suitable
Department, but she refused the offer because the position carried a
lower salary rank and rate. If indeed SMART simply wanted to get employment or to make whatever arrangements are needed to
cushion the impact of termination. In this case, notwithstanding
rid of her, it would not have offered her a position in any department
Astorga’s knowledge of the reorganization, she remained uncertain
in the enterprise.
about the status of her employment until SMART gave her formal
ASTORGA CLAIMS THERE WAS NO COMPELLING ECONOMIC notice of termination. But such notice was received by Astorga
REASON FOR REDUNDANCY barely two (2) weeks before the effective date of termination, a
period very much shorter than that required by law. But still, this
procedural infirmity would not render the termination of
Astorga’s employment illegal. It is well-settled that if the dismissal other complainants who were all offered severance pay. 22 accepted
is based on a just cause under Article 282 but the employer failed to the separation pay. The petitioners herein did not.
comply with the notice requirement, the sanction to be imposed upon LA: Valid layoff but GTI is liable for constructive dismissal; Layoff
him should be tempered because the dismissal process was, in effect, should be not more than 6 months, if not recalled and there’ still
initiated by an act imputable to the employee, and (2) if the valid ground to layoff, extend the period and inform the employees
dismissal is based on an authorized cause under Article 283 but but if not possible, company should employ retrenchment and pay
the employer failed to comply with the notice requirement, the the employees separation pay
sanction should be stiffer because the dismissal process was
initiated by the employer’s exercise of his management NLRC: Affirmed LA but disagreed with backwages in view of
prerogative. So, SC increased the amount of penalty of P50,000.00. constructive dismissal; No constructive dismissal as since there’s
Astorga is also entitled to separation pay equivalent to at least one (1) lack of work, it necessarily follows that retrenchment did take place
month salary or to at least one (1) month’s pay for every year of and not dismissal.
service, whichever is higher. The records show that Astorga’s length Petitioners’ contention: NLRC erred in ruling that there was a valid
of service is less than a year. She is, therefore, also entitled to and legal reduction of business and in sustaining the theory of
separation pay equivalent to one (1) month pay. redundancy in justifying the dismissal of the petitioners
ON THE REPLEVIN CASE FILED BY SMART VS. ASTORGA ISSUE: WON petitioner’s contention, that NLRC erred in ruling
valid redundancy, is correct?
SMART sent a letter to Astorga demanding that she pay the current Ruling: sNO.
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 The petitioners' first contention is based on a wrong premise or on a
company for proper disposition. Astorga, however, failed and refused miscomprehension of the statement of the NLRC. What the NLRC
to do either, thus prompting SMART to file a suit for replevin with sustained and affirmed is not redundancy, but retrenchment as a
the RTC. ground for termination of employment. They are not
synonymous but distinct and separate grounds under Article 283
Astorga moved to dismiss and argued that the regular courts have no of the Labor Code.
jurisdiction over the complaint because the subject thereof pertains to Redundancy exists where the services of an employee are in
a benefit arising from an employment contract; hence, jurisdiction excess of what is reasonably demanded by the actual
over the same is vested in the labor tribunal and not in regular courts. requirements of the enterprise. A position is redundant where it
SC ruled that the RTC rightfully assumed jurisdiction over the suit is superfluous, and superfluity of a position or positions may be
and acted well within its discretion in denying Astorga’s motion to the outcome of a number of factors, such as overhiring of
dismiss. SMART’s demand for payment of the market value of the workers, decreased volume of business, or dropping of a
car or, in the alternative, the surrender of the car, is not a labor, but a particular product line or service activity previously
civil, dispute. It involves the relationship of debtor and creditor rather manufactured or undertaken by the enterprise.
than employee-employer relations. As such, the dispute falls within Retrenchment, on the other hand, is used interchangeably with the
the jurisdiction of the regular courts. term "lay-off." It is the termination of employment initiated by the
employer through no fault of the employee's and without prejudice to
Replevin is a possessory action, the gist of which is the right of the latter, resorted to by management during periods of business
possession in the plaintiff. The primary relief sought therein is the recession, industrial depression, or seasonal fluctuations, or during
return of the property in specie wrongfully detained by another lulls occasioned by lack of orders, shortage of materials, conversion
person. It is an ordinary statutory proceeding to adjudicate rights to of the plant for a new production program or the introduction of new
the title or possession of personal property. The question of whether methods or more efficient machinery, or of automation. It is an act of
or not a party has the right of possession over the property involved the employer of dismissing employees because of losses in the
and if so, whether or not the adverse party has wrongfully taken and operation of a business, lack of work, and considerable reduction on
detained said property as to require its return to plaintiff, is outside the volume of his business.
the pale of competence of a labor tribunal and beyond the field of
specialization of Labor Arbiters. Article 283 of the Labor Code which covers retrenchment speaks of a
permanent retrenchment as opposed to a temporary lay-off as is the
case here.
(4) Fe Sebuguero vs. National Labor Relations Commission, There is no specific provision of law which treats of a temporary
G.R. 115394, 27 September 1995. 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,
FACTS: Petitioners were among the 38 regular employees of GTI Article 286 may be applied but only by analogy to set a specific
Sportswear Corporation, a corporation engaged in the manufacture period that employees may remain temporarily laid-off or in floating
and export of ready-to-wear garments, who were given "temporary status. Six months is the period set by law that the operation of a
lay-off" notices (on 22 January 1991) due to alleged lack of work business or undertaking may be suspended thereby suspending the
and heavy losses caused by the cancellation of orders from employment of the employees concerned. The temporary lay-off
abroad and by the garments embargo of 1990. wherein the employees likewise cease to work should also not last
Believing that their "temporary lay-off" was a ploy to dismiss them, longer than six months. After six months, the employees should
resorted to because of their union activities and was in violation of either be recalled to work or permanently retrenched following the
their right to security of tenure since there was no valid ground requirements of the law, and that failing to comply with this would
therefor, the employees filed complaints for illegal dismissal, unfair be tantamount to dismissing the employees and the employer would
labor practice, underpayment of wages, and non-payment of overtime thus be liable for such dismissal.
pay and 13th month pay.
Retrenchment is valid but defective for lack of written notice
GTI’s contention: It was its prerogative to lay-off its employees
temporarily for a period not exceeding six months to prevent losses 3 basic requisites for a valid retrenchment:
due to lack of work or job orders from abroad, and that the lay-off (1) the retrenchment is necessary to prevent losses and such
affected both union and non-union members. The failure to recall the losses are proven;
38 laid-off employees after the lapse of six months was because of
(2) written notice to the employees and to the Department of
the subsequent cancellations of job orders made by its foreign
Labor and Employment at least one month prior to the
principals, a fact which was communicated to the petitioners and the
intended date of retrenchment; and
(3) payment of separation pay equivalent to one month pay or On October 30, 2003, Viajar received a Letter-Memorandum
at least 1/2 month pay for every year of service, whichever is informing her that her services were no longer needed, effective
higher. November 30, 2003 because her position as Purchasing Staff was
First requisite: present; Both the Labor Arbiter and the NLRC found deemed redundant.
that the private respondent was suffering and would continue to When Viajar reported for work the next day, almost a month before
suffer serious losses, thereby justifying the retrenchment of some of the effectivity of her severance from the company, the guard on duty
its employees, including the petitioners. No claim was made by any barred her from entering GMC’s premises.
of the parties that such a finding was not supported by substantial Viajar was invited to the HRD Cebu Office where she was asked to
evidence. Furthermore, the petitioners did not appeal the finding of sign certain documents, which turned out to be an "Application for
the Labor Arbiter that their temporary lay-off to prevent losses was Retirement and Benefits." The respondent refused to sign and sought
amply justified. They cannot now question this finding that there is a clarification because she did not apply for retirement and instead
valid ground to lay-off or retrench them. asserted that her services were terminated for alleged redundancy.
Second requisite: not complied; Petitioners were given notice of the Almocera told her that her signature on the Application for
temporary lay-off but no written notice was given when there was Retirement and Benefits was needed to process her separation pay.
permanent retrenchment. Although GTI conveyed to the petitioners The respondent also claimed that between the period of July 4, 2003
the impossibility of recalling them due to the continued and October 13, 2003, GMC hired fifteen (15) new employees which
unavailability of work, the law requires a written notice to the aroused her suspicion that her dismissal was not necessary.
employees concerned and that requirement is mandatory. The notice GMC reasoned out that it was forced to terminate the services of the
must also be given at least one month in advance of the intended date respondent because of the economic setbacks the company was
of retrenchment to enable the employees to look for other means of suffering which affected the company’s profitability, and the
employment and therefore to ease the impact of the loss of their jobs continuing rise of its operating and interest expenditures.
and the corresponding income. Redundancy was part of the petitioner’s concrete and actual cost
There is also nothing in the records to prove that a written notice was reduction measures. GMC also presented the required "Establishment
ever given to the DOLE as required by law. The notice to the DOLE Termination Report" which it filed before the Department of Labor
is essential because the right to retrench is not an absolute and Employment (DOLE) on October 28, 2003, involving thirteen
prerogative of an employer but is subject to the requirement of law (13) of its employees, including Viajar.
that retrenchment be done to prevent losses. The DOLE is the agency The Labor Arbiter DISMISSED the complaint of Viajar for lack of
that will determine whether the planned retrenchment is justified and merit.
adequately supported by facts.
NLRC affirmed. The NLRC further stated that Viajar was aware of
3rd requisite: With respect to the payment of separation pay, the GMC’s "reduction mode," as shown in the GMC Vismin Manpower
NLRC found that GTI offered to give the petitioners their separation Complement, as follows:
pay but that the latter rejected such offer which was accepted only by
22 out of the 38 original complainants in this case. As to when this
offer was made was not, however, proven. No. of Employees
Year Manpower Profile
Terminated (Redundancy)
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 2000 795
having been effected with the required notices, is merely defective.
Dispositive portion: WHEREFORE, the instant petition is partially
GRANTED and the challenged decision of public respondent 2001 782
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 2002 736 41
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 2003 721 24
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 2004 697 16
indemnification for its failure to observe due process in effecting the
retrenchment.
2005 696 (As of June 2005) 06
Private respondent Amacio was among the ten (10) mechanics who
manned the machine shop at the plant site. At their current
production level, the new management found that it was more cost
efficient to maintain only nine (9) mechanics. In choosing whom to
separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient
among them. It was private respondent Amacio who appeared the
least efficient because of his poor health condition.
Not one of the private respondents refuted the foregoing facts. They
only contend that the new management should have followed the
policy of "first in, last out" in choosing which positions to declare as
redundant or whom to retrench to prevent further business losses. No
law mandates such a policy
Issue: whether or not the nature and extent of the financial o there is no question that the rules imposed by law
circumstances and the methods used to resolve fiscal difficulties and jurisprudence to sustain retrenchment have
warranted the illegal and unceremonious dismissal of around 1,400 been amply satisfied by PAL. The only issue at
flight attendants, stewards, and cabin crew? hand is whether or not the retrenchment can be
upheld for complying with rules set forth in the
Held: Motion for reconsideration of PAL is denied. collective bargaining agreement.
· The Court has treated the instant case for what it truly is—an illegal o In implementing retrenchment, the law does
retrenchment, one that was prematurely done and whimsically not require an employer to look back into far
carried out reaches of time to check every good deed
performed by every employee. This would not
· This is about a “bad faith” retrenchment—one which neither only be highly impractical, but manifestly absurd
complied with the legal prerequisites therefor nor observed the as well. In evaluating job efficiency, it is enough
provisions of the PAL-FASAP CBA thereon; one which was not for an employer to fix a determinate time frame
employed as a last resort and which did not have any fair and within which to base its evaluation. It can be six
reasonable criteria to serve as basis for selecting who would be months, one year, two years, three years or ten
retrenched; one which was capriciously and whimsically years. It can in fact be any period of time, subject
implemented; one which was illegally made. to management’s sound discretion.
Labor Arbiter rendered a Decision dismissing the complaint for lack **Issue regarding Waivers, Releases and Quitclaims
of merit. As a rule, deeds of release and quitclaim cannot bar employees from
NLRC sustained the LA decision. demanding benefits to which they are legally entitled or from
contesting the legality of their dismissal. The acceptance of those
Citing the Court’s decision in the Philcea case, the CA applied the benefits would not amount to estoppel. To excuse respondents from
doctrine of stare decisis, in view of the similar factual circumstances complying with the terms of their waivers, they must locate their case
of the cases. CA ordered that respondents be reinstated with full within any of three narrow grounds: (1) the employer used fraud or
backwages less the amounts they received as separation pay. deceit in obtaining the waivers; (2) the consideration the employer
ISSUES: WON there was a valid retrenchment (No) paid is incredible and unreasonable; or (3) the terms of the waiver are
WON CA is correct in applying stare decisis (Yes) contrary to law, public order, public policy, morals, or good customs
or prejudicial to a third person with a right recognized by law.46 The
RULING: instant case falls under the first situation.
Stare Decisis
WHEREFORE, premises considered, the petition is hereby
Under the doctrine of stare decisis, when a court has laid down a DENIED. The Court of Appeals Decision dated July 7, 2009 and
principle of law as applicable to a certain state of facts, it will adhere Resolution dated February 26, 2010 in CA-G.R. SP No. 105236 are
to that principle and apply it to all future cases in which the facts are AFFIRMED.
substantially the same, even though the parties may be different.
This case and the Philcea case involve the same period which is
March to April 2004; the issuance of Memorandum to employees
informing them of the implementation of the cost reduction program;
the implementation of the voluntary retirement program and
retrenchment program, except that this case involves different
employees; the execution of deeds of release, waiver, and quitclaim,
and the acceptance of separation pay by the affected employees.
In the Philcea case, the Court discussed the requisites of both
retrenchment and redundancy as authorized causes of termination
and that petitioners failed to substantiate them. In ascertaining the
bases of the termination of employees, it took into consideration
petitioners’ claim of business losses; the purchase of machinery and
equipment after the termination, the declaration of cash dividends to
stockholders, the hiring of 100 new employees after the
retrenchment, and the authorization of full blast overtime work for
six hours daily. These, said the Court, are inconsistent with
petitioners’ claim that there was a slump in the demand for its
products. The Court’s pronouncement in the Philcea case, to wit:
Respondents failed to adduce clear and convincing evidence to prove
the confluence of the essential requisites for a valid retrenchment of
its employees.
In contrast, in this case, the retrenchment effected by PCMC is
invalid due to a substantive defect, non-compliance with the
substantial requirements to effect a valid retrenchment; it necessarily
follows that the termination of the employment of petitioner Union's
members on such ground is, likewise, illegal.
The respondents here were similarly situated as the union members
in the Philcea case, and considering that the questioned dismissal
from the service was based on the same grounds under the same
circumstances, there is no need to relitigate the issues presented
herein.