Authorized Causes for Termination
vacancies occurred in the Regions branches.
(a) Redundancy and Installation of Labor Saving Devices
(1)  Lenn Morales vs. Metropolitan Bank and Trust, G.R. No.
182475, 21 November 2012.
FACTS:  various Branch Heads. In view of the absence of redeployment
Lenn Morales was hired by Solidbank as Teller with a grade 4
rank. Solidbank merged with respondent Metropolitan Bank & Trust
Company (Metrobank ) wherein respondent 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.
Morales was subsequently promoted to the position of Customer
Service Representative (CSR), with a job grade 6 rank. However,
Petitioner was subsequently informed by the management that he
was covered by the banks Special Separation Program (SSP) and
that, in accordance therewith, his employment was going to be
terminated on the ground of redundancy.
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.
Metrobank 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 banks 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. On
November 10, 2003, Morales signed a release waiver and quitclaim
signifying acceptance of his termination and was paid his monetary
entitlements.  of P158,496.95 which Morales had acknowledged to have received
Morales filed a complaint for illegal dismissal, payment of separation
pay, backwages, moral and exemplary damages and attorneys fees
alleging that, despite being an organic member of the Rizal Avenue
Branch, he was assigned to Metrobanks 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 and that he
was 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.
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-vis the massive computerization and automation of its operating
systems, targeted the reduction of its existing workforce by 10% by
the end of 2003. 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
Metrobank further asserted that the volume of the Regions
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
opportunities for him, Metrobank 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 managements 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. 
Ruling of the LA: rendered a decision finding Morales termination
from service illegal on the ground that his promotion in April 2003
contradicted Metrobanks 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 attorneys 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
by way of separation benefits. 
NLRC RULING: NLRC reversed and set aside the Decision 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 latters 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 employees
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.
CA Ruling: Upheld the validity of Morales termination from
employment, the CA discounted the grave abuse of discretion
imputed against the NLRC for ruling that Metrobanks 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 banks Ormoc Branch, the CA also ruled that
said employee could not be considered as Morales replacement.
Finding that Metrobank complied with the notice requirement under
Article 283 of the Labor Code, the CA ultimately sustained the
validity of the Release, Waiver and Quitclaim executed by Morales.
Issue: W/N the termination on the grounds of redundancy of Morales
is valid (YES)
Ruling: Petition is denied.  from the fact that his promotion rendered his position less cost-
Ratio:
One of the authorized causes for the dismissal of an employee, is
redundancy.  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
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.
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.
For the implementation of a redundancy program to be valid,
however, the employer must comply with the following
requisites:  Given Morales previous record of not reporting for work for one
(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 ascertaining what positions are to
be declared redundant and accordingly abolished.
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.
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.
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;  were both employed by petitioner as Clerk Analysts in the Industrial
(b) efficiency; and  Engineering Department were also members of Anglo-KMU
(c) seniority  Monthly Union (Union).
…among 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.  filed with the Department of Labor and Employment its
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
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 Metrobanks 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 banks interest. Despite being advised
against being absent from work on Mondays and Fridays in view of
the expected volume of transactions on said days, 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.
whole week without prior leave of absence while assigned as
reliever in its Borongan, Samar Branch, 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 employees services are no longer necessary or
sustainable and, therefore, properly terminable for being
redundant is an exercise of business judgment of the employer.
"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," 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. 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 NLRCs 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, said notice requirement is also designed to allow the
DOLE to ascertain the verity of the cause for the termination.
(2)  Coats Manila Bay vs. Purita Ortega, G.R. 172628, 13
February 2009.
FACTS: Petitioner, COATS MANILA BAY INC a corporation in
the country which is primarily engaged in the business of thread
production. Purita M. Ortega and Marina A. Montero (respondents)
 
The petitioner issued a memorandum announcing that a redundancy
plan would be implemented. It was stated that the redundancy
program was necessary to prevent further losses. Petitioner assured
its employees that implementing a redundancy program rather than a
retrenchment program would result in better benefits to those
dismissed. As a result of this redundancy program, 135 employees
were terminated, including respondents. On 10 May 2000, petitioner
Establishment Termination Report, indicating that it was terminating
135 of its employees, including respondents, on the ground of
redundancy. The respondents received their respective separation
payments and thereafter executed release waivers and quitclaims in
favor of petitioner. In the meantime, 11 of the terminated employees
were rehired by petitioner to different positions but with lower
salaries and afterwhich respondents filed a complaint for illegal
dismissal, backwages, reinstatement, vacation/sick leave, 13th month
pay, moral and exemplary damages, attorney’s fees, litigation
expenses and CBA benefits with the NLRC against petitioner and/or
its Chief Executive Officer Arsenio N. Tanco (Tanco). 
Respondents asserted that despite their dismissal due to redundancy,
their functions were assigned to other workers. They also claimed
that they were constrained to sign the quitclaims and release waivers
due to their pressing need for the separation pay. They further alleged
that as a result of their termination they had suffered humiliation,
wounded feelings, mental anguish and thus prayed for exemplary and
morals damages well as attorney’s fees.
Petitioner and Tanco claimed that they had the management
prerogative to implement a redundancy program as per Article 283 of
the Labor Code. They aver that both respondents were notified that
they would be subject to redundancy and that they never objected
thereto as shown by the execution of their respective
waivers/quitclaims.
The Labor Arbiter rendered a decision declaring illegal respondents’
dismissal and directing petitioner to reinstate respondents to their
former positions.  Nevertheless, SMART will absorb some of its CSMG personnel
The petitioner appealed the decision of the Labor Arbiter to the
NLRC which was reversed the decision of the Labor Arbiter and held
that the dismissal was valid due to redundancy. Respondents moved
for reconsideration but this was denied by the NLRC. Undaunted,
respondents filed a petition for certiorari with the Court of Appeals.
The Court of Appeals granted their petition, reversed the decision of
the NLRC and reinstated the decision of the Labor Arbiter.  termination of her employment on ground of redundancy,
ISSUES
WON the redundancy program was proper and if the employer is
required to present evidence of financial losses before employees
may be terminated on the ground of redundancy?
HELD
The totality of the actions of Coats Manila Bay Inc., shows that the
redundancy program was fair, well-thought of, and made in good
faith. There were proper planning and implementation of the
program. Labor Union Group consultation, notices and memos were
properly executed prior to the effectivity of the program. The proper
monetary benefits were given to all affected employees.
The 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 over hiring of workers, decreased volume
of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.
That no other person was holding the same position prior to the
termination of one's 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. Just like installation of
labor-saving devices, the ground of redundancy does not require
the exhibition of proof of losses or imminent losses. In fact, of all
the statutory grounds provided in Article 283 of the Labor Code,
it is only retrenchment which requires proof of losses or possible
losses as justification for termination of employment. The
redundancy program was carried out with the full consent and
participation of the duly recognized labor union and knew the
standard used in determination who will be included in the
redundancy. The Court also held that it is important for a company to
have fair and reasonable criteria in implementing its redundancy
program, such as but not limited to, (a) preferred status, (b)
efficiency and (c) seniority. The court was satisfied that petitioner
employed reasonable criteria in choosing which positions to declare
redundant.
(3)  Smart Communications vs. Regina Astorga, G.R. 148132, 28
January 2008.
FACTS:
Respondent Regina M. Astorga (Astorga) was employed by
respondent SMART on May 8, 1997 as District Sales Manager of
the Corporate Sales Marketing Group/ Fixed Services Division
(CSMG/FSD) with a monthly salary of P33,650.00. She also
enjoyed additional benefits, namely, annual performance incentive
equivalent to 30% of her annual gross salary, a group life and
hospitalization insurance coverage, and a car plan in the amount of
P455,000.00. 
In February 1998, SMART launched an organizational realignment
to achieve more efficient operations. This was made known to the
employees on February 27, 1998. Said reorganization involved the
outsourcing of the marketing and sales force wherein SMART
entered into a joint venture agreement with NTT of Japan, and
formed SMART-NTT Multimedia, Incorporated (SNMI). The JV
agreement will result to the abolition of Astorga’s CSMG/FSD
division.
based on performance evaluation (if high ratings – favorably
recommended to SNMI). Although respondent Astorga landed last in
the performance evaluation, she was still offered a supervisory
position in the Customer Care Department, but she refused the offer
because the position carried lower salary rank and rate.
On March 3, 1998, SMART issued a memo advising Astorga of the
effective April 3, 1998. Astorga received it on March 16, 1998.
So respondent Astorga filed a complaint 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). 
RESPONDENT ASTORGA: Claims that the termination of her
employment was illegal for it violated her right to security of tenure
and tainted with bad faith. She asserts that the reorganization was
done in order to get rid of her.
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. 
SMART: 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 termination was valid and a
legitimate exercise of management prerogative. 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. 
LA: Favored Astorga. Illegally terminated (reinstate with full
bwages and other benefits). 
NLRC: Favored SMART. The abolition of CSMG and the creation
of SNMI to do the sales and marketing services for SMART is a
valid organizational action. The contracting, subcontracting and
streamlining of operations for the purpose of increasing efficiency
are allowed under the law.
CA: Affirming with modification the resolutions of the NLRC. 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.  than its declared objective – as a labor and cost savings device.
ISSUE:
WON respondent Astorga was validly dismissed due to redundancy
as a result of SMART’s organizational realignment pursuant to a JV
agreement.
HELD:
YES, she was validly dismissed. 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 and the determination
to outsource the duties performed by Astorga’s division to the JV
agreement was a sound business judgment based on relevant criteria
and is therefore a legitimate exercise of management prerogative.  costs – management, time and money-needed in maintaining the
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.
Here, 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 CLAIMS THERE WAS NO COMPELLING ECONOMIC
REASON FOR REDUNDANCY  barely two (2) weeks before the effective date of termination, a
SC: Untenable. 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.  him should be tempered because the dismissal process was, in effect,
WHY SC RULED THAT SUCH REORG REALIGNMENT WAS A
VALID EXERCISE OF MGT PREROGATIVE
The reorganization undertaken by SMART is for no purpose other
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
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.
SMART’S petition was granted but ordered to pay P50,000.00 as
imdemnity for non-compliance with the 1-month notice requirement,
separation pay of 1 month pay and her salary from Feb 15, 1998 to
April 3, 1998. No award of backwages.
________________________________________________
OTHER NOTES:
SMART FAILED TO COMPLY WITH THE MANDATED 1 MONTH
NOTICE
The record is clear that Astorga received the notice of termination
only on March 16, 1998 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.
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.
WHY THE WRITTEN NOTICE IS IMPORTANT?
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
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
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
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. So, SC increased the amount of penalty of P50,000.00.
Astorga is also 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.
ON THE REPLEVIN CASE FILED BY SMART VS. ASTORGA
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. Astorga, however, failed and refused
to do either, thus prompting SMART to file a suit for replevin with
the RTC.  synonymous but distinct and separate grounds under Article 283
Astorga moved to dismiss and argued 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.
SC ruled that 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. As such, the dispute falls within
the jurisdiction of the regular courts.
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.
(4)  Fe Sebuguero vs. National Labor Relations Commission,
G.R. 115394, 27 September 1995.
FACTS: Petitioners were among the 38 regular employees of GTI
Sportswear Corporation, a corporation engaged in the manufacture
and export of ready-to-wear garments, who were given "temporary
lay-off" notices (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 employees filed complaints for illegal dismissal, unfair
labor practice, underpayment of wages, and non-payment of overtime
pay and 13th month pay. 
GTI’s contention: 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. The failure to recall the
38 laid-off employees after the lapse of six months was 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. 22 accepted
the separation pay. The petitioners herein did not.
LA: Valid layoff but GTI is liable for constructive dismissal; Layoff
should be not more than 6 months, if not recalled and there’ still
valid ground to layoff, extend the period and inform the employees
but if not possible, company should employ retrenchment and pay
the employees separation pay
NLRC: Affirmed LA but disagreed with backwages in view of
constructive dismissal; No constructive dismissal as since there’s
lack of work, it necessarily follows that retrenchment did take place
and not dismissal.
Petitioners’ contention: NLRC erred in ruling that there was a valid
and legal reduction of business and in sustaining the theory of
redundancy in justifying the dismissal of the petitioners
ISSUE: WON petitioner’s contention, that NLRC erred in ruling
valid redundancy, is correct?
Ruling: sNO.
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
of the Labor Code. 
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. 
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. 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. 
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. 
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.
Retrenchment is valid but defective for lack of written notice
3 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.
First requisite: present; 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. 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 clarification because she did not apply for retirement and instead
amply justified. They cannot now question this finding that there is a asserted that her services were terminated for alleged redundancy.
valid ground to lay-off or retrench them. Almocera told her that her signature on the Application for
Second requisite: not complied; Petitioners were given notice of the Retirement and Benefits was needed to process her separation pay.
temporary lay-off but no written notice was given when there was The respondent also claimed that between the period of July 4, 2003
permanent retrenchment. Although GTI conveyed to the petitioners and October 13, 2003, GMC hired fifteen (15) new employees which
the impossibility of recalling them due to the continued aroused her suspicion that her dismissal was not necessary. 
unavailability of work, the law requires a written notice to the GMC reasoned out that it was forced to terminate the services of the
employees concerned and that requirement is mandatory. The notice respondent because of the economic setbacks the company was
must also be given at least one month in advance of the intended date suffering which affected the company’s profitability, and the
of retrenchment to enable the employees to look for other means of continuing rise of its operating and interest expenditures.
employment and therefore to ease the impact of the loss of their jobs Redundancy was part of the petitioner’s concrete and actual cost
and the corresponding income. reduction measures. GMC also presented the required "Establishment
There is also nothing in the records to prove that a written notice was Termination Report" which it filed before the Department of Labor
ever given to the DOLE as required by law. The notice to the DOLE and Employment (DOLE) on October 28, 2003, involving thirteen
is essential because the right to retrench is not an absolute (13) of its employees, including Viajar.
prerogative of an employer but is subject to the requirement of law The Labor Arbiter DISMISSED the complaint of Viajar for lack of
that retrenchment be done to prevent losses. The DOLE is the agency merit.
that will determine whether the planned retrenchment is justified and NLRC affirmed. The NLRC further stated that Viajar was aware of
adequately supported by facts.  GMC’s "reduction mode," as shown in the GMC Vismin Manpower
3rd requisite: With respect to the payment of separation pay, the Complement, as follows:
NLRC found that GTI offered to give the petitioners their separation
pay but that the latter rejected such offer which was accepted only by No. of Employees
Year Manpower Profile
22 out of the 38 original complainants in this case. As to when this Terminated (Redundancy)
offer was made was not, however, proven. 
200
The lack of written notice to the petitioners and to the DOLE does 795
0
not, however, make the petitioners' retrenchment illegal such that
they are entitled to the payment of back wages and separation pay in
200
lieu of reinstatement as they contend. Their retrenchment, for not 782
1
having been effected with the required notices, is merely defective. 
Dispositive portion: WHEREFORE, the instant petition is partially 200
GRANTED and the challenged decision of public respondent 736 41
2
National Labor Relations Commission in NLRC NCR CA Case No.
004673-93 is modified by reversing and setting aside its deletion of 200
721 24
the awards in the Labor Arbiter's decision of proportionate 13th 3
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 200
697 16
for every year of service shall be computed from the dates of the 4
commencement of the petitioners' respective employment until the
end of their six-month temporary lay-off which is 22 July 1991. In 200
696 (As of June 2005) 06
addition, private respondent G.T.I. Sportswear Corporation is 5
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.  The CA reversed the decision of the NLRC.
Aggrieved by the reversal of the NLRC decision, GMC filed a
motion for reconsideration. 
(5)  General Milling vs. Violeta Viajar, G.R. No. 181738, 30
January 2013. Issue:
Whether or nor the dismissal of respondent, Viajar, on the ground of
 Facts: redundancy is legal.

GMC is a domestic corporation with a manufacturing plant in Lapu-

Lapu City.
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.
Viajar filed a Complaint for Illegal Dismissal.
On October 30, 2003, Viajar received a Letter-Memorandum
informing her that her services were no longer needed, effective
November 30, 2003 because her position as Purchasing Staff was
deemed redundant.
When Viajar reported for work the next day, almost a month before
the effectivity of her severance from the company, the guard on duty
barred her from entering GMC’s premises.
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
Held:
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.
In the instant case, the Court agrees with the CA that the conclusions
arrived at by the LA and the NLRC are manifestly erroneous.
The petitioner asserts that it has observed the procedure provided by
law and that the same 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.
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.
In Smart Communications, Inc., v. Astorga, 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. 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 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.
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;
the "Establishment Termination Report" it submitted to the DOLE
Office; the two (2) checks issued in the respondent’s name
amounting to ₱440,253.02 and ₱21,211.35; and the list of terminated
employees as of June 6, 2006. 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, audited financial documents like
balance sheets, annual income tax returns and others) which could
readily show that the company’s declaration of redundant positions
was justified. 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,
negating the claim of redundancy.
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.
Additional notes:
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. 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, this Court
explained the difference between retirement and termination due to
redundancy, to wit:
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.
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.
(6)  Panlilio v NLRC, GR No. 117459, 17 October 1997
Facts:
Petitioner Moises B. Panlilio was recruited by private respondent
Findstaff Placement Services (FPS) for employment in the
Sheraton Hotel in Oman as Recreational Manager in October
1991. The contract was for a period of two years with a monthly
compensation of one thousand one hundred dollars ($1,100.00).
Petitioner's good fortune, however, did not last long, for in March
1992 his services were terminated on the ground that his position
had become redundant.
He then filed a complaint for illegal dismissal before the
Adjudication Office of the Philippine Overseas Employment
Administration (POEA) which was docketed as POEA Case No. (L)
92-03-551.  imaginary preposition unsupported by concrete evidence. 7
The POEA rendered a decision dated April 21, 1993 ruling
that petitioner was illegally dismissed on the premise that the
alleged redundancy of his position was not adequately
proven.
FPS filed an appeal before the National Labor Relations
Commission.
 In its decision dated April 19, 1994, despite newly submitted
affidavits from the officers of the Director of Personnel and
Training Division of Sheraton Hotel by FPS substantiating the
redundancy of petitioner's position, the NLRC affirmed the
POEA's decision and dismissed the appeal for lack of merit.
Undaunted by another setback, FFS filed a motion for
reconsideration. To petitioner's surprise and dismay, the NLRC
reversed itself and rendered a new decision upholding the
validity of his dismissal on ground of redundancy. 
Issue: WON the dismissal is valid on the ground of redundancy
Ruling:
WHEREFORE, the instant petition is GRANTED. The challenged
resolution is SET ASIDE and the decision of the Philippine Overseas
Employment Agency is hereby REINSTATED. Costs against private
respondent.
SO ORDERED.
Ratio:
Petitioner claims that the NLRC gravely abused its discretion when it
reversed its original ruling on the basis of the affidavits which it had
earlier ruled out as self-serving and of no evidentiary value.
After a careful study of the relevant facts, we are constrained to
reverse the findings of the NLRC.
In the case at bar, FPS failed to present substantial evidence to
justify the dismissal of petitioner on the ground of redundancy.
The affidavits and documents it submitted are entitled to little
weight, for it does not prove the superfluity of petitioner's position.
In fact, these documents do not even present the necessary
factors which would confirm that a position is indeed redundant,
such as overhiring of workers, decreased volume of business or
dropping of a product line or service activity.  reasonable mind might accept as adequate to justify a conclusion.
On this matter, we agree with the observation and conclusion of the
POEA which we quote, to wit:
Not a single evidence was submitted to bolster their contention.
It is not enough for respondent to allege that complainant's
position became redundant and that there was restructuring of
the staff at the Health Club of the Oman Sheraton Hotel.
Respondents should have presented evidence to support this
contention, 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.  employees out of a total workforce of three hundred sixty (360)
This view was bolstered by the NLRC in its original decision
wherein it held.
The affidavits just recently submitted merely touched on the
issue of discrimination denying it ever existed or that
complainant was its victim. Apart from being self-serving as
having been issued by present employees of respondent Oman
Sheraton Hotel to whom their loyalty are (sic) expected to lie,
we simply cannot give much weight to it in the light of our
inability and that of the complainant to confront them with the
documents they purportedly signed under oath. More so, even
granting arguendo that no discrimination transpired still, the fact
remains that the restructuring and redundancy that became the
basis of complainant's severance from employment remains an
In its resolution granting FPS's motion for reconsideration, however,
the NLRC made a sudden turnaround and, relying on the same
evidence, ruled that redundancy of petitioner's position was
adequately proven, necessitating the reversal of its original
decision. We cannot accommodate the new stance of the NLRC.
In overturning its earlier decision, the NLRC reasoned out that since
it could have summoned one of the affiants to amplify his statement,
it erred in ruling that said affidavits were self-serving and of little
value.
This argument fails to impress us. Undoubtedly, said documents
still do not sufficiently explain the reason why petitioner's
position had become redundant, but only elucidated the fact that
he was not a victim of any discrimination in effecting the
termination.
We have held that it is important for a company to have fair and
reasonable criteria in implementing its redundancy program,
such as but not limited to, (a) preferred status, (b) efficiency and
(c) seniority. 8 Unfortunately for FPS, such appraisal was not
done in the instant case.
Petitioner alleges that the NLRC erred in considering these affidavits
which were introduced for the first time on appeal. We rule that the
NLRC acted correctly when it admitted the affidavits submitted by
FPS on appeal, for it cannot be disputed that technical rules of
evidence are not binding in labor cases. 9 Labor officials should use
every reasonable means to ascertain the facts in each case speedily
and objectively, without regard to technicalities of law or procedure,
all in the interest of due process. 10
In line with the Court's liberal stance regarding procedural
deficiencies in labor cases, we have held that even if the evidence
was not submitted at the earliest possible opportunity, the fact that it
was duly introduced on appeal to the NLRC is enough basis for its
eventual admission. 11
The admissibility of the affidavits notwithstanding, we cannot affirm
the decision of the NLRC especially when its findings of fact on
which the conclusion was based are not supported by substantial
evidence, 12 that is, the amount of relevant evidence which a
 
(7)  Asian Alcohol Company v NLRC, GR No. 131108, 25 March
1999
 FACTS:
 Parsons family, who originally owned the controlling stocks in
Asian Alcohol, were driven by mounting business losses to sell
their majority rights to Prior Holdings, Inc.
 Prior Holdings took over its management and operation.
 Prior Holding implemented are organizational plan and other
cost-saving measures. Some one hundred seventeen (117)
were separated. Seventy two (72) of them occupied redundant
positions that were abolished.
 The six (6) private respondents are among those union
members 5 whose positions were abolished due to redundancy.
 The six (6) private respondents filed with the NLRC Regional
Arbitration Branch VI, Bacolod City, complaints for illegal
dismissal with a prayer for reinstatement.
 They claimed that they were singled out for separation by
reason of their active participation in the union. They also
asseverated that Asian Alcohol was not bankrupt as it has
engaged in an aggressive scheme of contractual hiring.
LA- Dismissed the complaint.  The dismissal of the respondents on
the ground of redundancy/retrenchment is valid or legal. The fact that
the Asian Alcohol incurred losses in its business  operations was not
seriously challenged by the complainants. The facts of business
losses incurred in its business operations prior to the implementation
of the retrenchment program was sufficiently supported by
documents indicating a deficit of 26, 117,889
NLRC - Revered. Illegal dismissal. The positions of the respondents
were not redundant because casuals replaced them. The company
was not in the state of reverses at the time of retrenchment.
ISSUE:
WON there is redundancy thus making the dismissal of private
respondents legal. (YES.)
HELD:
The right of management to dismiss workers during periods of
business recession and to install labor saving devices to prevent
losses is governed by Art. 283 of the labor Code, as amended. It
provides, 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 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 case 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 at least one-half (1/2), month pay
for every year of service, whichever is higher. A fraction of at least
six (6) month shall be considered one (1) whole year. [emphasis
ours]
Under the foregoing provision, retrenchment and redundancy are just
causes for the employer to terminate the services of workers to
preserve the viability of the business. In exercising its right, however,
management must faithfully comply with the substantive and
procedural requirements laid down law and jurisprudence.  Rudy Javier, Jr. and Eriberto Songaling, Jr., were younger, being
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 be speak 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.
In the instant case, private respondents never contested the veracity
of the audited financial documents proffered by Asian Alcohol
before the Executive Labor Arbiter. Neither did they object to their
admissibility. They show that petitioner has accumulated losses
amounting to P306,764,349.00 and showing nary a sign of abating in
the near future. The allegation of union busting is bereft of proof.
Union and non-union members were treated alike. The records show
that the positions of fifty one (51) other non-union members were
abolished due to business losses.
Irrefutable was the fact that losses have bled Asian Alcohol
incessantly over a span of several years. They were incurred under
the management of the Parsons family and continued to be suffered
under the new management of Prior Holdings. Ultimately, it is Prior
Holdings that will absorb all the losses, including those incurred
under the former owners of the company. The law gives the new
management every right to undertake measures to save the company
from bankruptcy.
What may technically be considered as redundancy may verily be
considered as retrenchment measures. Their positions had to be
declared redundant to cut losses.
Redundancy exists when the service capability of the work force is in
excess of what is reasonably needed to meet the demands on the
enterprise. A 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 a service activity
priorly undertaken by the business.
For the implementation of a redundancy program to be valid, the
employer must comply with the following requisites: (1) written
notice served on both the employees and the Department of Labor
and Employment 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.
In the case at bar, private respondents Carias, Martinez and Sendon
were water pump tenders. They tended the water wells of Asian
Alcohol located in Ubay, Pulupanban, Negros Occidental. However,
Asian Alcohol did not own the land where the wells stood. It only
leased them.
In 1992, the lease contract, which also provided for a right of way
leading to the site of the wells, was terminated. Also, the water from
the wells had become salty due to extensive prawn farming nearby
and could no longer be used by Asian Alcohol for its purpose. The
wells had to be closed and needless to say, the services of Carias,
Martinez and Sendon had to be terminated on the twin grounds of
redundancy and retrenchment.
Private respondent Verayo was the briquetting plant operator in
charge of the coal-fired boiler. Private respondent Tormo was one of
the three briquetting helpers. To enhance production efficiency, the
new management team shifted to the use of bunker fuel by about
seventy percent (70%) to fire its boiler. The shift meant substantial
fuel cost savings. In the process, however, the need for a briquetting
plant operator ceased as the services of only two (2) helpers were all
that was necessary to attend to the much lesser amount of coal
required to run the boiler. Thus, the position of private respondent
Verayo had to be abolished. Of the three (3) briquetting helpers,
Tormo was the oldest, being already 41 years old. The other two,
only 28 and 35, respectively. Age, with the physical strength that
comes with it, was particularly taken into consideration by the
management team in deciding whom to separate. Hence, it was
private respondent Tormo who was separated from service. The
management choice rested on a rational basis.
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
The characterization of positions as redundant is an exercise of
business judgment on the part of the employers.
In VIEW WHEREOF, the petition is GRANTED. The Decision of
the National Labor Relations Commission dated May 30, 1997 and
its Resolution dated September 25, 1997 are ANNULLED AND SET
ASIDE. The Decision of the Executive Labor Arbiter dated January
10, 1996 in RAB Case No. 06-12-10893-92 is ORDERED
REINSTATED. The complainants for illegal dismissal filed by
private respondents against Asian Alcohol Corporation are hereby
ORDERED DISMISSED FOR LACK OF MERIT. No costs.
(b) Retrenchment
(1)  Lambert Pawnbrokers vs. Helen Binamira, G.R. No. 170464,
12 July 2010
FACTS:
Petitioner Lambert Lim (Lim) is a Malaysian national operating
various businesses in Cebu and Bohol one of which is Lambert
Pawnbrokers and Jewelry Corporation. Lim is married to Rhodora
Binamira, daughter of Atty. Boler Binamira, Sr., (Atty. Binamira),
who is also the counsel and father-in-law of respondent Helen
Binamira (Helen). Lambert Pawnbrokers and Jewelry Corporation -
Tagbilaran Branch hired Helen as an appraiser in July 1995 and
designated her as Vault Custodian in 1996.
On September 14, 1998, Helen received a letter from Lim
terminating her employment effective that same day. Lim cited
business losses necessitating retrenchment as the reason for the
termination.
Helen thus filed a case for illegal dismissal against petitioners
docketed as NLRC RAB-VII CASE NO. 01-0003-99-B. In her
Position Paper Helen alleged that she was dismissed without cause
and the benefit of due process. She claimed that she was a mere
casualty of the war of attrition between Lim and the Binamira family.
Moreover, she claimed that there was no proof that the company was
suffering from business losses.
The losses must be supported by sufficient and convincing evidence.
The normal method of discharging this is by the submission of
financial statements duly audited by independent external auditors. In
this case, however, the Statement of Income and Expenses 23cralaw
for the year 1997-1998 submitted by the petitioners was prepared
only on January 12, 1999. Thus, it is highly improbable that the
management already knew on September 14, 1998, the date of
Helen's retrenchment, that they would be incurring substantial losses.
At any rate, we perused over the financial statements submitted by
petitioners and we find no evidence at all that the company was
suffering from business losses.
A mere decline in gross income cannot in any manner be considered
as serious business losses. It should be substantial, sustained and real.
To make matters worse, there was also no showing that petitioners
adopted other cost-saving measures before resorting to retrenchment.
They also did not use any fair and reasonable criteria in ascertaining
who would be retrenched. Finally, no written notices were served on
the employee and the DOLE prior to the implementation of the
retrenchment. 
(2)  San Miguel Corporation v NLRC, GR No. 107693, 23 July
1998. 
FACTS:

In their Position Paper, petitioners asserted that they had no choice The case arose from a complaint filed by the following employees of
but to retrench respondent due to economic reverses. The corporation the San Miguel Corporation Bacolod Beer Region:
suffered a marked decline in profits as well as substantial and
persistent increase in losses. In its Statement of Income and Employe Position Yrs in Ag Total Termination
Expenses, its gross income for 1998 dropped from P1million to e Servic e Pay and Other
P665,000.00. e Benefits
P75,225.00 as
LA- not illegally dismissed but was validly retrenched retirement pay,
P5,935.00 as financial
NLRC- reversed and set aside decision of the LA Regional
Edmundo 41 assistance,
Sales 15
Torres, Jr yo P29,817.56 as unused
Manager
vacation and sick
CA- there was no retrenchment leaves and P1,462.68
as 13th month pay
P93,353.32 as
ISSUE: retirement pay,
Head of P8,900.00 as financial
Whether or not there is a valid dismissal based on retrenchment Manuel Warehous 48 assistance,
22
G. Chu e yo P24,853.23 as unused
HELD: Operations vacation and sick
leaves and P1,219.15
No. as 13th month pay
P93,450.01 as
There was no valid dismissal based on retrenchment. Retrenchment
retirement pay,
is the termination of employment initiated by the employer through
Trade and P10,465.00 as
no fault of and without prejudice to the employees. It is resorted to
Gabriel I. Customers 59 financial assistance,
during periods of business recession, industrial depression, seasonal 26
Adad Relation yo P21,166.69 as unused
fluctuations, or during lulls occasioned by lack of orders, shortage of
Employee vacation and sick
materials, conversion of the plant to a new production program, or
leaves and P1,038.31
automation.
as 13th month pay
To effect a valid retrenchment, the following elements must be District P68,828.32 as
present: (1) the retrenchment is reasonably necessary and likely to Sales retirement pay,
prevent business losses which, if already incurred, are not merely de Supervisor P8,100.00 as financial
George
minimis, but substantial, serious and real, or only if expected, are s 45 assistance,
D. Teddy 20
reasonably imminent as perceived objectively and in good faith by yo P18,036.74 as unused
Jr.
the employer; (2) the employer serves written notice both to the vacation and leaves
employee/s concerned and the DOLE at least one month before the and P987,68 as 13th
intended date of retrenchment; (3) the employer pays the retrenched month pay
employee separation pay in an amount prescribed by the Code; (4) Manuel 14 39 P47,954.16 as
the employer exercises its prerogative to retrench in good faith; and Castellan yo retirement pay,
(5) the employer uses fair and reasonable criteria in ascertaining who o P5,635.00 as financial
would be retrenched or retained. assistance,
 P15,507.18 as unused
vacation and sick
leaves and P987.28 as
13th month pay
Alleging, among others that:
 On March 14, 1984, San Miguel Corporation informed
them that effective at the close of the business hours on
April 15, 1984, it will exercise its option to retire them
from the service (when none of them has reached yet the
compulsory retirement age of 60 years old and none of
them had bad record); that they will no longer be allowed
to work from March 14, but they will still receive
compensation up to April 15
 Such retirement violated their tenurial security of
employment, especially since the prerogative was solely
premised on its retirement and death benefit plan
 Their signatures/conformance were involuntarily secured
by the company (1. when Teddy Jr. Attempted to leave the
office because he refused to affix his conformity, the
Personnel Director of the Beer and Packaging Division, Mr
Antonio Labirua, blocked said door and threatened him
that whether they like it or not, the company has already
decided to retire them from work; 2. Manuel Chu did not
sign any document but was still retired by the corporation)
 They were discriminated upon by the respondent
corporation in the payment of their separation pay (1. they
were paid one month basic salary for every year of service
when other retired employees were paid 150% of their
basic monthly salary; 2. Complainants were not granted the
benefit of the wage increase for supervisory employees,
made effective January 1984)
 Their receipt of payment does not bar them from contesting
the illegality of their dismissal or separation from the
service
San Miguel Corporation:
 The complainant’s collective and paramount concern was
to seek further termination benefits after they had applied
to be retrenched, received corresponding benefits and
executed their respective release and receipt of payment
 The complainants/employees (except Chu) applied for
voluntary retrenchment under the respondent company's
retrenchment program, which applications were all
favourably acted upon by the corporation
 That on the same day, respondent corporation informed
complainant Manuel Chu in a letter . . . that it is exercising
its option to retire him from the service effective the close
of business hours on April 15, 1984 pursuant to the
company's retirement and death benefit plan
 That on March 17, 1984, the complainants requested
through a telegram for cash conversion of their respective
unused sick leave and a 20% increase of basic pay for the
purpose of inclusion in the computation of their separation
pay and other benefits, for which, out of benevolence and
for humanitarian reasons, the Corporation approved a
financial assistance of P400.00 per year of service for each
complainant;
 Thereafter, all the complainants were paid termination pay
and other benefits including financial assistance (see table
above)
 On April 16, 1984, each complainant voluntarily executed
a Release and Receipt . . . acknowledging receipt of the
aforestated amounts and irrevocably and unconditionally
released respondent San Miguel Corporation from any
claim or demand
 On July 25, 1984, complainants wrote the respondent
corporation's chairman of the board pleading for additional
separation benefits . . . contending that supervisors were
awarded pay increases retroactive January 1, 1984.
 On August 29, 1984, the company thru its Vice-President
and Division Manager, Jose B. Lugay clarified in a letter . .
. that the pay increases were granted on selective basis with
merit and performance as the criteria and that all the
complainants were already extended financial assistance
 Complainant Chu is bound by the 1978 Retirement and
Death Benefit Plan which was later amended reducing the
period of service to 15 years
 Respondents further aver that complainants were correctly
and completely paid their separation benefits; that
complainants received twice than what is provided for by
the Labor Code of the Philippines, Article 284 thereof; that
complainant Manuel Chu was retired under the optional
retirement clause of the plan and for which he was paid one
(1) month's salary for every year of service; that in the case
of the four (4) other complainants, they applied under the
retrenchment program of the company and they were also
paid one (1) month's pay for every year of service
Labor Arbiter: complainants were not illegally dismissed; they
voluntarily retired from the service
NLRC: Other complainants have been validly retired. Respondent
San Miguel Corporation is hereby ordered to immediately reinstate
complainants Manuel C. Castillano (sic) and Edmundo Y. Torres, Jr.
to have their former or equivalent positions without loss of seniority
rights and to pay complainants (their back salaries, deducting the
retirement pay they received)
ISSUE-RULING: WON Castillano and Torres, Jr were validly
retired/retrenched (NO)
RATIO:
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. 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 (illusion of choice; situation
where you seem to have a choice but there is really only one thing to
do). 6 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 still wanted to work for petitioner.
The mere absence of actual physical force to compel private
respondents to ink an application for retirement did not make their
retirement voluntary. Confronted with the danger of being jobless,
unable to provide their families even with the basic needs or
necessities of life, the private respondents had no choice but to sign
the documents proffered to them. But, neither their receipt of
separation pay nor their negotiating for more monetary benefits,
estopped private respondents from questioning and challenging the
legality of the nature or cause of their separation from the service
(Mercury Drug v CIR: Employer and 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... His, then, in a case
of adherence, not of choice.)
What is more, there is ample showing that the private respondents
were morally and psychologically hoodwinked to sign the said
documents for their termination of employment with petitioner from
the fact that four of the five employees were asked to give their
conformity to leave the service of petitioner before four high-ranking
officials of petitioner.
The pivot of inquiry here is whether or not the retirement of private
respondents was really voluntary. In De leon vs. NLRC, 8 the Court
succinctly ruled that: " . . . [I]f the intention to retire is not clearly
established or if the retirement is involuntary, it is to be treated as
a discharge." Consequently, even assuming arguendo that respondent
NLRC erred in adjudging the retirement of private respondents as
involuntary, the attendant circumstances under scrutiny indicate that
their (private respondents) intention to retire was not clearly
established. Petitioner claims that the private respondents voluntarily
applied for optional retirement; yet, when their application papers for
retirement were supposedly approved, the same four (4) high-ranking
officials of petitioner decided to talk to the complainants individually
and when the complainants signed retirement papers, petitioner
admitted in its petition 9 that they (complainants) were reluctant to
sign the same. These actuations and pretensions of petitioner's top
officials are repugnant to human behavior and experience. If
complainants did freely apply for optional retirement, announcing the
approval thereof would have been a welcome news for complainants,
so that there would have been no need for petitioner to inform the
complainants individually and privately, a time consuming approach.
Then too, petitioner averred that the private respondents signed their
applications for voluntary retirement on March 14, 1984, the day
after the documents were sent to them, indicating private respondents
had the opportunity to reflect on the matter. But records show that it
was on the same day the documents for voluntary retirement were
given to private respondents, when they signed the same in the
presence of petitioner's four (4) high-ranking officials. What was sent
on March 13, 1984 to private respondents was a telex informing them
that Mr. Antonio Labirua and company were to arrive on the
following day to confer with them. The one-on-one conversation
actually took place on March 14, 1994, when the applications for
retirement were forced on the private respondents.
Furthermore, the case of complainant Manuel J. Chu, who refused to
sign the application for voluntary retirement but was nevertheless
discharged from the service pursuant to the Retirement and Death
Benefit Plan of the company, illustrated beyond cavil petitioner's
determination to separate complainants from the service. 
Neither do we discern any tenability in petitioner's contention that
the private respondents only complained that they were illegally
dismissed when they were not able to get a positive response to their
request for additional benefits as complaint for illegal dismissal was
lodged even before the Corporation sent its communication clarifying
the applicability of the retroactive pay increase.
All things studiedly considered, we are therefore of the opinion, and
so find, that the dismissal of the herein private respondents was
involuntary and therefore illegal.
As regards the second assigned error, petitioner theorizes that the
receipts and release papers executed by the private respondents were
indicative of a voluntary retirement. But private respondents could
not receive the amounts to which they were entitled if they did not
execute such documents.
Verily, considering their individual circumstances, it is hard to
believe that the private respondents would voluntarily retire (because
of their age and loss of secure position when there is scarcity of
employment opportunities).
Under its last assigned error, petitioner maintains that the provision
in the Collective Bargaining Agreement (CBA) reducing the retirable
period of service from 20 to 15 years is applicable to private
respondents. Said provision is not applicable to them, it appearing
that the CBA referred to was inked by petitioner and the union of
regular daily personnel in the Bacolod Beer Region, the Congress of
Independent Organizations (CIO-ALU), San Miguel Chapter, Unit II,
and Daily Paid Personnel, Bacolod Beer Region. The private
respondents who occupied supervisory positions, were expressly
excluded from the coverage of said CBA pursuant to its Article I.
As can be gleaned from the petition itself, not only were private
respondents supervisory employees, they were also with the sales
force. Mr. Edmundo Torres, Jr. was a Regional Sales Manager while
Mr. Castellano was a District Sales Supervisor of petitioner.
(3)  FASAP v PAL, 559 SCRA 252 (2008)
FACTS: Petitioner FASAP is the duly certified collective bargaining
representative of PAL flight attendants and stewards, or collectively
known as PAL cabin crew personnel. Respondent PAL is a domestic
corporation organized and existing under the laws of the Republic of
the Philippines, operating as a common carrier transporting
passengers and cargo through aircraft.
On June 15, 1998, PAL retrenched 5,000 of its employees,
including more than 1,400 of its cabin crew personnel, to take effect
on July 15, 1998. PAL adopted the retrenchment scheme allegedly to
cut costs and mitigate huge financial losses as a result of a
downturn in the airline industry brought about by the Asian
financial crisis. During said period, PAL claims to have incurred
P90 billion in liabilities, while its assets stood at P85 billion. 3
In implementing the retrenchment scheme, PAL adopted its so-called
"Plan 14" whereby PAL’s fleet of aircraft would be reduced from
54 to 14, thus requiring the services of only 654 cabin crew
personnel.4 PAL admits that the retrenchment is wholly premised
upon such reduction in fleet, 5 and to "the strike staged by PAL pilots
since this action also translated into a reduction of flights." 6
PALclaims that the scheme resulted in "savings x x x amounting to
approximately P24 million per month – savings that would greatly
alleviate PAL’s financial crisis."7
Prior to the full implementation of the assailed retrenchment
program, FASAP and PAL conducted a series of consultations and
meetings and explored all possibilities of cushioning the impact of
the impending reduction in cabin crew personnel. However, the
parties failed to agree on how the scheme would be implemented.
Thus PAL unilaterally resolved to utilize the criteria set forth in
Section 112 of the PAL-FASAP Collective Bargaining Agreement 8
(CBA) in retrenching cabin crew personnel: that is, that
retrenchment shall be based on the individual employee’s
efficiency rating and seniority.
PAL determined the cabin crew personnel efficiency ratings through
an evaluation of the individual cabin crew member’s overall
performance for the year 1997 alone.9 Their respective performance
during previous years, i.e., the whole duration of service with PAL of
each cabin crew personnel, was not considered. The factors taken
into account on whether the cabin crew member would be
retrenched, demoted or retained were: 1) the existence of excess
sick leaves; 2) the crew member’s being physically overweight; 3)
seniority; and 4) previous suspensions or warnings imposed.10
While consultations between FASAP and PAL were ongoing, the
latter began implementing its retrenchment program by initially
terminating the services of 140 probationary cabin attendants only to
rehire them in April 1998. Moreover, their employment was made
permanent and regular.11
On July 15, 1998, however, PAL carried out the retrenchment of its
more than 1,400 cabin crew personnel.
Meanwhile, in June 1998, PAL was placed under corporate
rehabilitation and a rehabilitation plan was approved per SEC Order.
On September 23, 1998, PAL ceased its operations and sent notices
of termination to its employees. Two days later, PAL employees,
through the Philippine Airlines Employees Association (PALEA)
board, sought the intervention of then President Joseph E. Estrada.
PALEA offered a 10-year moratorium on strikes and similar actions
and a waiver of some of the economic benefits in the existing CBA.
Lucio Tan, however, rejected this counter-offer. 14
On October 7, 1998, PAL resumed domestic operations and, soon
after, international flights as well.16
Meanwhile, in November 1998, or five months after the June 15,
1998 mass dismissal of its cabin crew personnel, PAL began
recalling to service those it had previously retrenched. Thus, in
November 199817 and up to March 1999,18 several of those
retrenched were called back to service. To date, PAL claims to have
recalled 820 of the retrenched cabin crew personnel. 19 FASAP,
however, claims that only 80 were recalled as of January 2001.20
In December 1998, PAL submitted a "stand-alone" rehabilitation
plan to the SEC by which it undertook a recovery on its own while
keeping its options open for the entry of a strategic partner in the
future. Accordingly, it submitted an amended rehabilitation plan to
the SEC with a proposed revised business and financial restructuring
plan, which required the infusion of US$200 million in new equity
into the airline.
On May 17, 1999, the SEC approved the proposed "Amended and
Restated Rehabilitation Plan" of PAL and appointed a permanent
rehabilitation receiver for the latter and issued an Order confirming
its approval.  On October 4, 2007, PAL officially exited receivership.
On June 22, 1998, FASAP filed a Complaint 24 against PAL and
Patria T. Chiong25 (Chiong) for unfair labor practice, illegal
retrenchment with claims for reinstatement and payment of
salaries, allowances and backwages of affected FASAP members,
actual, moral and exemplary damages with a prayer to enjoin the
retrenchment program then being implemented. Instead of a
position paper, respondents filed a Motion to Dismiss and/or
Consolidation with NCMB Case No. NS 12-514-97 pending with the
Office of the Secretary of the DOLE and/or Suspension and
Referral of Claims to the interim rehabilitation proceedings
(motion to dismiss).26
LA declared that Philippine Airlines, Inc., illegally retrenched 1,400
cabin attendants including flight pursers for effecting the
retrenchment program in a despotic and whimsical manner.  dismissal;46 that legitimate business reasons exist to justify
NLRC set aside LA’s decision, dismissed the consolidated cases for
lack of merit, and quashed the writ of execution.  FIRST ELEMENT: That retrenchment is reasonably necessary and
Court of Appeals denied petitioner’s appeal and MR.
ISSUE: W/N PAL’s retrenchment scheme was justified.
HELD: No, the scheme was not justified, hence, PAL is guilty of
illegal dismissal. The SC ordered PAL to reinstate the cabin crew
personnel who were covered by the retrenchment and demotion
scheme of June 15, 1998 made effective on July 15, 1998, without
loss of seniority rights and other privileges, and to pay them full
backwages, inclusive of allowances and other monetary benefits
computed from the time of their separation up to the time of their
actual reinstatement, provided that with respect to those who had
received their respective separation pay, the amounts of payments
shall be deducted from their backwages. Where reinstatement is no
longer feasible because the positions previously held no longer exist,
respondent Corporation shall pay backwages plus, in lieu of
reinstatement, separation pay equal to one (1) month pay for every
year of service;
Under Article 283 of the Labor Code, retrenchment or reduction of
employees is authorized. 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.40 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. 41
However, there must be faithful compliance with substantive and
procedural requirements of the law and jurisprudence, for
retrenchment strikes at the very heart of the worker’s employment,
the lifeblood upon which he and his family owe their survival.
Retrenchment is only a measure of last resort, when other less
drastic means have been tried and found to be inadequate.42
The burden clearly falls upon the employer to prove economic or
business losses with sufficient supporting evidence. Its failure to
prove these reverses or losses necessarily means that the employee’s
dismissal was not justified. 43 Any claim of actual or potential
business losses must satisfy certain established standards, all of
which must concur, before any reduction of personnel becomes
legal.44 These are:
(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
one-half (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.45
In view of the facts and the issues raised, the resolution of the instant
petition hinges on a determination of the existence of the first, fourth
and the fifth elements set forth above, as well as compliance
therewith by PAL, taking to mind that the burden of proof in
retrenchment cases lies with the employer in showing valid cause for
retrenchment.47
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.
The employer’s prerogative to lay-off employees is subject to certain
limitations.
The law speaks of serious business losses or financial reverses.
Sliding incomes or decreasing gross revenues are not necessarily
losses, much less serious business losses within the meaning of the
law. The fact that an employer may have sustained a net loss, such
loss, per se, absent any other evidence on its impact on the business,
nor on expected losses that would have been incurred had operations
been continued, may not amount to serious business losses
mentioned in the law. The employer must show that its losses
increased through a period of time and that the condition of the
company will not likely improve in the near future, 49 or that it
expected no abatement of its losses in the coming years. 50 Put simply,
not every loss incurred or expected to be incurred by a company will
justify retrenchment.51
The employer must also exhaust all other means to avoid further
losses without retrenching its employees.52 Retrenchment is a
means of last resort; it is justified only when all other less drastic
means have been tried and found insufficient.53 
 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 is readily
apparent: any less exacting standard of proof would render too easy
the abuse of this ground for termination of services of employees;
scheming employers might be merely feigning business losses or
reverses in order to ease out employees.56
In establishing a unilateral claim of actual or potential losses,
financial statements audited by independent external auditors
constitute the normal method of proof of profit and loss
performance of a company; otherwise, they may be assailed as self-
serving.58 The audited financial statements should be presented
before the LA who is in the position to evaluate evidence. They may
not be submitted belatedly with the CA, because the admission of
evidence is outside the sphere of the appellate court’s certiorari
jurisdiction. Neither can this Court.
In the instant case, PAL failed to substantiate its claim of actual
and imminent substantial losses which would justify the
retrenchment of more than 1,400 of its cabin crew personnel.
Although the Philippine economy was gravely affected by the Asian
financial crisis, however, it cannot be assumed that it has likewise
brought PAL to the brink of bankruptcy. Likewise, the fact that PAL
underwent corporate rehabilitation does not automatically justify the
retrenchment of its cabin crew personnel.
Records show that PAL was not even aware of its actual financial
position when it implemented its retrenchment program. It initially
decided to cut its fleet size to only 14 ("Plan 14") and based on said
plan, it retrenched more than 1,400 of its cabin crew personnel. Later
on, however, it abandoned its "Plan 14" and decided to retain 22
units of aircraft ("Plan 22"). Unfortunately, it has retrenched more
than what was necessary.  recalling employees was made. The truth, however, is that it was
This only proves that PAL was not aware of the true state of its
finances at the time it implemented the assailed massive
retrenchment scheme. It embarked on the mass dismissal without
first undertaking a well-considered study on the proposed
retrenchment scheme. This view is underscored by the fact that
previously, PAL terminated the services of 140 probationary cabin
attendants, but rehired them almost immediately and even converted
their employment into permanent and regular, even as a massive
retrenchment was already looming in the horizon.
To prove that PAL was financially distressed, it could have
submitted its audited financial statements but it failed to present the
same with the Labor Arbiter. Instead, it narrated a litany of woes
without offering any evidence to show that they translated into
specific and substantial losses that would necessitate retrenchment.,
thus:
The only manifestation of PAL’s attempt at exhausting other possible
measures besides retrenchment was when it conducted negotiations
and consultations with FASAP which, however, ended nowhere.
None of the plans and suggestions taken up during the meetings was
implemented. Also, the claim that PAL saved P24 million monthly
due to the implementation of the retrenchment program does not
prove anything; it has not been shown to what extent or degree such
savings benefited PAL, vis-à-vis its total expenditures or its overall
financial position. Likewise, its claim that its liabilities reached P90
billion, while its assets amounted to P85 billion only – or a debt to
asset ratio of more than 1:1 – may not readily be believed,
considering that it did not submit its audited financial statements. All
these allegations are self-serving evidence.
Interestingly, PAL submitted its audited financial statements only
when the case was the subject of certiorari proceedings in the Court
of Appeals by attaching in its Comment 76 a copy of its consolidated
audited financial statements for the years 2002, 2003 and 2004. 77
However, these are not the financial statements that would have
shown PAL’s alleged precarious position at the time it implemented
the massive retrenchment scheme in 1998. PAL should have
submitted its financial statements for the years 1997 up to 1999;
and not for the years 2002 up to 2004 because these financial
statements cover a period markedly distant to the years in question,
which make them irrelevant and unacceptable.
The foregoing principle holds true with respect to PAL’s claim that
the only issue is the manner by which its retrenchment scheme
was carried out because the validity of the scheme has been
settled in its favor.83 Respondents might have confused the right to
retrench with its actual retrenchment program, treating them as one
and the same. The first, no doubt, is a valid prerogative of
management; it is a right that exists for all employers. As to the
second, it is always subject to scrutiny in regard to faithful
compliance with substantive and procedural requirements which the
law and jurisprudence have laid down. The right of an employer to
dismiss an employee differs from and should not be confused with
the manner in which such right is exercised.84
FOURTH ELEMENT: 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.
Concededly, retrenchment to prevent losses is an authorized cause
for terminating employment and the decision whether to resort to
such move or not is a management prerogative. However, the right of
an employer to dismiss an employee differs from and should not be
confused with the manner in which such right is exercised. It must
not be oppressive and abusive since it affects one's person and
property.85
When PAL implemented Plan 22, instead of Plan 14, which was
what it had originally made known to its employees, it could not be
said that it acted in a manner compatible with good faith. It offered
no satisfactory explanation why it abandoned Plan 14; instead, it
justified its actions of subsequently recalling to duty retrenched
employees by making it appear that it was a show of good faith; that
it was due to its good corporate nature that the decision to consider
unfair for PAL to have made such a move; it was capricious and
arbitrary, considering that several thousand employees who had long
been working for PAL had lost their jobs, only to be recalled but
assigned to lower positions (i.e., demoted), and, worse, some as new
hires, without due regard for their long years of service with the
airline.
The irregularity of PAL’s implementation of Plan 14 becomes more
apparent when it rehired 140 probationary cabin attendants whose
services it had previously terminated, and yet proceeded to terminate
the services of its permanent cabin crew personnel.
In sum, we find that PAL had implemented its retrenchment
program in an arbitrary manner and with evident bad faith,
which prejudiced the tenurial rights of the cabin crew personnel.
FIFTH ELEMENT: 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.
In selecting employees 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. 90
This Court has repeatedly enjoined employers to adopt and observe
fair and reasonable standards to effect retrenchment. This is of
paramount importance because an employer’s retrenchment program
could be easily justified considering the subjective nature of this
requirement. The adoption and implementation of unfair and
unreasonable criteria could not easily be detected especially in the
retrenchment of large numbers of employees, and in this aspect,
abuse is a very distinct and real possibility. This is where labor
tribunals should exercise more diligence; this aspect is where they
should concentrate when placed in a position of having to judge an
employer’s retrenchment program.
Indeed, the NLRC made a detailed listing of the retrenchment
scheme based on the ICCD Masterank and Seniority 1997 Ratings. It
found the following:
1. Number of employees retrenched due to inverse seniority
rule and other reasons -- 454
2. Number of employees retrenched due to excess sick leaves
-- 299
3. Number of employees who were retrenched due to excess
sick leave and other reasons -- 61
4. Number of employees who were retrenched due to other
reasons -- 107
5. Number of employees who were demoted -- 552
Total -- 1,473.94
 Prominent from the above data is the retrenchment of cabin crew -   full backwages, inclusive of allowances and other monetary benefits
personnel due to "other reasons" which, however, are not specifically computed from the time of their separation up to the time of their
stated and shown to be for a valid cause. This is not allowed
because it has no basis in fact and in law.
Moreover, in assessing the overall performance of each cabin crew
personnel, PAL only considered the year 1997. This makes the
evaluation of each cabin attendant’s efficiency rating capricious and -       FASAP never assailed the economic basis for the retrenchment, but
prejudicial to PAL employees covered by it. By discarding the cabin
crew personnel’s previous years of service and taking into
consideration only one year’s worth of job performance for
evaluation, PAL virtually did away with the concept of seniority, -       PAL argues the ff:
loyalty and past efficiency, and treated all cabin attendants as if
they were on equal footing, with no one more senior than the
other.
In sum, PAL’s retrenchment program is illegal because it was
based on wrongful premise (Plan 14, which in reality turned out to
be Plan 22, resulting in retrenchment of more cabin attendants than
was necessary) and in a set of criteria or rating variables that is
unfair and unreasonable when implemented. It failed to take into
account each cabin attendant’s respective service record, thereby
disregarding seniority and loyalty in the evaluation of overall
employee performance.
OTHER ISSUES:
Anent the claim of unfair labor practices committed against
petitioner, we find the same to be without basis.  of PAL’s entire European, Australian, and
Also, we fail to see any specific instance of union busting,
oppression or harassment and similar acts of FASAP’s officers. The
fact that majority of FASAP’s officers were either retrenched or
demoted does not prove restraint or coercion in their right to
organize. Instead, we see a simple retrenchment scheme gone wrong
for failure to abide by the stringent rules prescribed by law, and a
failure to discharge the employer’s burden of proof in such cases.
Quitclaims executed as a result of PAL’s illegal retrenchment
program are likewise annulled and set aside because they were not
voluntarily entered into by the retrenched employees; their consent
was obtained by fraud or mistake, as volition was clouded by a
retrenchment program that was, at its inception, made without basis.  time.
As to PAL’s recall and rehire process (of retrenched cabin crew
employees), the same is likewise defective. Considering the illegality -   Series of events that happened;
of the retrenchment, it follows that the subsequent recall and rehire
process is likewise invalid and without effect.
A corporate officer is not personally liable for the money claims of
discharged corporate employees unless he acted with evident malice
97
and bad faith in terminating their employment. We do not see how
respondent Patria Chiong may be held personally liable together with
PAL, it appearing that she was merely acting in accordance with
what her duties required under the circumstances. Being an Assistant
Vice President for Cabin Services of PAL, she takes direct orders
from superiors, or those who are charged with the formulation of the
policies to be implemented.
With respect to moral damages, we have time and again held that as a
general rule, a corporation cannot suffer nor be entitled to moral
damages. A corporation, being an artificial person and having
existence only in legal contemplation, has no feelings, no emotions,
no senses; therefore, it cannot experience physical suffering and
mental anguish. Mental suffering can be experienced only by one
having a nervous system and it flows from real ills, sorrows, and
griefs of life – all of which cannot be suffered by an artificial,
98
juridical person. The Labor Arbiter’s award of moral damages was
therefore improper.
(4)  FASAP v PAL, GR No. 178083 (2009)
Facts:
-       Previous decision: FINDING respondent Philippine Airlines, Inc.
GUILTY of illegal dismissal, cabin crew for reinstatement.
actual reinstatement, provided that with respect to those who had
received their respective separation pay, the amounts of payments
shall be deducted from their backwages etc.
only the allegedly discriminatory and baseless manner by which it
was carried out
o that it suffered from financial distress which
justified the retrenchment of more than 1,400 of
its flight attendants
o Presented proof of its claimed losses
o asserts further that the Court should have accorded
the SEC’s findings as regards its financial
condition respect and finality, considering that
said findings were based on the financial
statements and other documents
o from the confluence of simultaneous unfortunate
events that occurred during the time, like
successive strikes, peso depreciation and the
Asian currency crisis, there was a serious drop in
passenger traffic which necessitated the closure
Middle East operations and numerous Asian
stations, as well as some of its domestic stations.
Consequently, its 27 international routes were
reduced to only 7, and its 37 domestic routes to
just 17.
o The initial plan was, indeed, to reduce PAL’s fleet
from 54 planes to 14. With a smaller fleet, PAL
necessarily had to reduce manpower accordingly,
and this was the basis for the retrenchment. The
retrenchment was done on the basis of the
conditions and circumstances existing at that
o Corp rehabilitation of PAL
o Strike by rank and file employees of PALEA
o Admin order by Pres Estrada creating Inter-Agency
Task Force to aid PAL and its employees in
solving the problem.
o PAL submitted an offer to the Task Force of a plan
to transfer shares of stocks to its employees with
a request to suspend existing Collective
Bargaining Agreements, which was later rejected
by the employees.
o September 23, 1998, PAL ceased operations.
o , PAL partially resumed domestic operations on
October 7, 1998 believing that the mutually
beneficial terms of the suspension agreement
could possibly redeem PAL. Later, it partially
resumed its operations internationally
o With these supervening events, PAL decided to
implement Plan 22 upon reevaluation and
optimistic future projection for its operations.
The decision to abandon Plan 14 was not done
with precipitate haste.
-   The decision to later abandon Plan 14 was a business judgment that
PAL made in good faith upon the advice of foreign airline industry
experts and in light of the supervening circumstances
-   PAL claims that;
o Did not act in bad faith simply because it later on
decided to recall or rehire the employees it
initially retrenched
o The decision to recall/rehire was a logical
consequence of PAL’s decision to increase its
fleet from 14 to 22 planes, which as discussed
earlier, was a business judgment exercised in
good faith by PAL after a series of significant
events.
o PAL did not even have any legal obligation to rehire
the employees who have already been paid their
separation pay and who have executed valid
quitclaims. PAL, instead of being accused of bad
faith for rehiring these employees, should in fact
be commended. That the retrenched employees
were given priority in hiring is certainly not bad
faith. Noteworthy is the fact that PAL never
hired NEW employees until November 2000 or
more than 2 years after the 1998 retrenchment
o the legality of the retrenchment could not be made -   FASAP:
to depend on the fact that PAL recalled/rehired
some of the employees after five months without
taking into account the supervening events. At
the exact time of retrenchment, PAL was not in a
position to know with certainty that it could
actually recover from the precarious financial
problem it was facing and, if so, when out of the
1,423 FASAP members who were retrenched,
496 were eventually recalled or reinstated
o 321 FASAP members were rehired (those who
received separation pay and voluntarily rejoined
PAL as new employees).
o The FASAP members who were rehired as new
employees were those who already received their
separation pay because of the retrenchment but
voluntarily accepted PAL’s offer for them to be
rehired when Plan 22 was implemented. It cannot
be said that they were prejudiced by the rehire
process, as they already “cashed in” on their
tenure when they accepted the separation pay.
o Meanwhile, around 591 FASAP members opted not
to return anymore after receiving their full
separation pay
o FASAP directly and actively participated in the
recall process, and even suggested the names of
its members for prospective recall.
o PAL followed the provisions of the CBA and as a
result, some of the recalled employees were
assigned to lower positions, because there were
not enough positions for all of them to be
restored to their previous posts.
o 140 probationary cabin attendants who were fired
and subsequently rehired were part of an earlier
retrenchment process in February and March
1998, a component of PAL’s “less drastic cost
cutting measures” then being implemented
fairness and reasonableness with respect to the
criteria used in selecting those whose services
should be retained or terminated
o That it merely used the criteria stipulated in its CBA
with FASAP
§   efficiency rating and inverse seniority
o PAL wants the court to consider;
§   Performance Evaluation Form of each
and every cabin crew personnel’s
Grooming and Appearance Handbook
are fair and reasonable since they are
inherent requirements (based on 1997
performance evaluation) – must score
85% or higher.
o PAL begs the Court to recognize this downsizing of
aircraft as a valid exercise of its management
prerogative to close its business operations, and
not merely to reduce personnel. not merely a
reduction of personnel for the purpose of cutting
on costs of operations, but as a closure of its
business, a cessation of business operations to
prevent further financial drain
o is clear from the record that when PAL suffered
serious business losses, retrenchment was not the
only option, obviously because the objective was
to cut down on operating expenses as a whole,
and not merely in terms of salaries and wages,
which is the only purpose of a retrenchment. 
o Specifically, mention is made that there is nothing in
its then existing CBA with PAL which mandates
that a single year—1997—should be used as the
gauge or measure for determining the flight
attendants’ performance for purposes of
retrenchment.
o prior negotiations with PAL (on the possible
implementation of cost-cutting measures,
employee rotation plans, triple and quadruple
room sharing arrangements, allocation of
vacation leaves without pay, etc.) is proof of that
recognition, but that ultimately, it was incumbent
upon PAL to have shown that it undertook a
retrenchment scheme that was in proportion to
and commensurate with the financial distress it
was experiencing at the time.
o points to the lack of prior resort to cost-cutting
measures, the rehiring of probationary
employees, prior assurances by PAL that
retrenchment was no longer necessary, and lack
of fair and reasonable criteria in selecting the
employees to retrench.
§   in Article III, Section 7(A) of its CBA
which provides:
·         The Association (FASAP)
hereby acknowledges that the
management of the Company
(PAL) and the direction of its
employees; x x x; and the
lay-off and re-employment of
employees in connection
with increases or decreases in
the work force are the
exclusive rights and
functions of management
provided only that the
Company act in accordance
with applicable laws and the
provisions of this Agreement
o suggest that the basic criterion for effecting the
retrenchment scheme should have been seniority
Last-In-First-Out (LIFO) Rule must always be
strictly observed
o PAL did not provide reasons for retrenching the
more than 1,400 flight attendants
§   Ratings, which allegedly took into
account the subjective factors such as
appearance and good grooming, which
supposedly require the written
 conformity of its members if they were
to be considered at all, in accordance
with Section 124, Article XXVI of the
CBA
Issue: whether or not the nature and extent of the financial
circumstances and the methods used to resolve fiscal difficulties
warranted the illegal and unceremonious dismissal of around 1,400
flight attendants, stewards, and cabin crew?
 Held:  Motion for reconsideration of PAL is denied.
·         The Court has treated the instant case for what it truly is—an illegal
retrenchment, one that was prematurely done and whimsically
carried out
·         This is about a “bad faith” retrenchment—one which neither
complied with the legal prerequisites therefor nor observed the
provisions of the PAL-FASAP CBA thereon; one which was not
employed as a last resort and which did not have any fair and
reasonable criteria to serve as basis for selecting who would be
retrenched; one which was capriciously and whimsically
implemented; one which was illegally made.
 
(Maya farms ruling)
·         It is not disputed that the LIFO rule applies to termination of
employment in the line of work. 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.
o why there was no violation of the LIFO rule:
§   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 employee is the determining
factor, such that the employee who has
a longer period of employment will be
retained.
§   several positions were affected by the
special involuntary redundancy
program
·         In other words, retrenchment was merely a necessary and natural
consequence of PAL’s earlier decision to downsize its fleet of
aircrafts. There is thus simply no basis to say that PAL implemented
retrenchment in the first instance.
·         On the use of efficiency ratings:
o There is nothing unreasonable.
§   First, while an employee may rack up
hundreds of awards and
commendations and hundreds of hours
of leave credits, it does not necessarily
follow that the same employee,
although admittedly of exceptional
caliber, cannot be terminated if just or
authorized cause subsequently exists
o there is no question that the rules imposed by law
and jurisprudence to sustain retrenchment have
been amply satisfied by PAL. The only issue at
hand is whether or not the retrenchment can be
upheld for complying with rules set forth in the
collective bargaining agreement.
 o In implementing retrenchment, the law does
not require an employer to look back into far
reaches of time to check every good deed
performed by every employee. This would not
only be highly impractical, but manifestly absurd
as well. In evaluating job efficiency, it is enough
for an employer to fix a determinate time frame
within which to base its evaluation. It can be six
months, one year, two years, three years or ten
years. It can in fact be any period of time, subject
to management’s sound discretion.
o But to be fair and reasonable, the application of the
period must be uniform and consistent. It cannot
be one year for employee A, two years for
employee B and three years for employee C.
o The year 1997 was chosen by PAL as it was the
most logical period being the year immediately
preceding the retrenchment. All relevant records
for the year 1997, such as attendance and
performance evaluation, were complete and
accurate. Certainly, the year 1997 was not
selected for the purpose of discriminating against
any employee, but with the sole objective of
retaining the more efficient among the
employees.
o CBA provisions does not even mandate seniority as
a criterion.
§   Section 23 simply defines seniority and
states that seniority may be given
“preferential consideration” whenever
PAL exercises its right to promote to a
higher paying position or lay-off of
cabin attendants
o Mass strike of pilots à no flights à no need for
attendants
§   Owing to this pilots’ strike, PAL was
brought to the brink of disaster and
emergency that it needed to align the
number of cabin attendants with the
number of airplanes that were flying
§   After the pilots went on strike, PAL was
left with only 68 pilots who chose to
remain, but with 2,039 cabin
attendants. Faced with this
disproportionate ratio of pilots to cabin
attendants, PAL immediately decided
to terminate the services of more than
1,400 cabin attendants via the
retrenchment scheme in question. At
the same time, the reduction in fleet—
which until that time remained a mere
proposal—had to be immediately
implemented, and cost-cutting
measures were simply out of the
question
§   Strike was also temporary à There was
no reason to drastically implement a
permanent retrenchment scheme in
response to a temporary strike, which
could have ended at any time, or
 remedied promptly, if management
acted with alacrity. Juxtaposed with its
failure to implement the required cost-
cutting measures, the retrenchment
scheme was a knee-jerk solution to a
temporary problem that beset PAL at
the time.
o Guidelines for retrenchment:
(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 one-half (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 uses 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.
·         In the absence of one element, the retrenchment scheme becomes
an irregular exercise of management prerogative. The employer’s
obligation to exhaust all other means to avoid further losses without
retrenching its employees is a component of the first element as
enumerated above. 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 have been tried and found wanting.
 *** In the instant case, PAL admitted that since the pilots’ strike
allegedly created a situation of extreme urgency, it no longer
implemented cost-cutting measures and proceeded directly to
retrench. This being so, it clearly did not abide by all the
requirements under Article 283 of the Labor Code. At the time it was
implemented, the retrenchment scheme under scrutiny was not
triggered directly by any financial difficulty PAL was experiencing
at the time, nor borne of an actual implementation of its proposed
downsizing of aircraft. It was brought about by—and resorted to as
an immediate reaction to—a pilots’ strike which, in strict point of
law and as herein earlier discussed, may not be considered as a valid
reason to retrench, nor may it be used to excuse PAL for its non-
observance of the requirements of the law on retrenchment under the
Labor Code.
·         Assuming that PAL was indeed suffering financial losses, the
requisite proof therefor was not presented before the NLRC which
was the proper forum. More importantly, the manner of the
retrenchment was not in accordance with the procedure required by
law. Hence, the retrenchment of the flight attendants amounted to
illegal dismissal. Consequently, the flight attendants affected are
entitled to the reliefs provided by law, which include backwages and
reinstatement or separation pay, as the case may be
·         Case must be remanded to the LA for further computation of the
actual liability of PAL per employee.
 ·         For the guidance of the Labor Arbiter as well as the parties,
this Court lays down the following yardsticks in the computation of
the final amount of liability, in order to avoid any protracted and
heated debates which can again lead to further delays in the final
resolution of this case and the full realization by the retrenched flight
attendants of the amounts necessary to compensate and indemnify
them for the wrongful retrenchment.
1. Flight attendants who have been re-employed without loss of
seniority rights shall be paid backwages but only up to the time of
their actual reinstatement.
2. Flight attendants who have been re-employed as new hires shall be
restored their seniority and other preferential rights. However, their
backwages shall be computed only up to the date of actual re-hiring.
3. Flight attendants who have reached their compulsory age of
retirement shall receive backwages up to the date of their retirement
only. The same is true as regards the heirs of those who have passed
away. 
4. Flight attendants who have not been re-employed by PAL,
including those who executed quitclaims and received separation pay
or financial assistance, shall be reinstated without loss of seniority
rights and paid full backwages. However, the amounts they already
received should be deducted from whatever amounts are finally
adjudged to them individually.
(6)  Philippine Carpet Manufacturing Corporation, et al. v.
Ignacio B. Tagyamon, et al., G.R. No. 191475, Dec 11, 2013 
FACTS:
Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a
corporation registered in the Philippines engaged in the business of
manufacturing wool and yarn carpets and rugs.4 Respondents were its
regular and permanent employees, but were affected by petitioner’s
retrenchment and voluntary retirement programs.
Tagyamon,5 Luna,6 Badayos,7 Dela Cruz,8 and Comandao9 received a
uniformly worded Memorandum of dismissal, to wit:
This is to inform you that in view of a slump in the market demand
for our products due to the un-competitiveness of our price, the
company is constrained to reduce the number of its workforce. The
long-term effects of September 11 and the war in the Middle East
have greatly affected the viability of our business and we are left
with no recourse but to reorganize and downsize our organizational
structure.
We wish to inform you that we are implementing a retrenchment
program in accordance with Article 283 of the Labor Code of the
Philippines, as amended, and its implementing rules and regulations.
In this connection, we regret to advise you that you are one of those
affected by the said exercise, and your employment shall be
terminated effective at the close of working hours on April 15, 2004.
Accordingly, you shall be paid your separation pay as mandated by
law. You will no longer be required to report for work during the 30-
day notice period in order to give you more time to look for
alternative employment. However, you will be paid the salary
corresponding to the said period. We shall process your clearance
and other documents and you may claim the payables due you on
March 31, 2004.
As to Marcos, Ilao, and Nemis, they claimed that they were
dismissed effective March 31, 2004, together with fifteen (15) other
employees on the ground of lack of market/slump in demand. 
Respondents filed separate complaints for illegal dismissal against
PCMC. 
Respondents’ contention: PCMC did not, in fact, suffer losses shown
by its acts prior to and subsequent to their termination. 14 They also
insisted that their acceptance of separation pay and signing of
quitclaim is not a bar to the pursuit of illegal dismissal case. 
PCMC’s contention: PCMC, for its part, defended its decision to
terminate the services of respondents being a necessary management
prerogative. It pointed out that as an employer, it had no obligation to An action for reinstatement by reason of illegal dismissal is one
keep in its employ more workers than are necessary for the operation based on an injury to the complainants’ rights which should be
of his business. Thus, there was an authorized cause for dismissal; brought within four years from the time of their dismissal pursuant to
that respondents belatedly filed their complaint as they allowed Article 114633 of the Civil Code. Respondents’ complaint filed
almost three years to pass making the principle of laches applicable; almost 3 years after their alleged illegal dismissal was still well
that respondents accepted their separation pay and voluntarily within the prescriptive period. Laches cannot, therefore, be invoked
executed deeds of release, waiver and quitclaim, PCMC invoked the yet. 
principle of estoppel  **Issue regarding Waivers, Releases and Quitclaims
Labor Arbiter rendered a Decision dismissing the complaint for lack As a rule, deeds of release and quitclaim cannot bar employees from
of merit. demanding benefits to which they are legally entitled or from
NLRC sustained the LA decision. 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
paid is incredible and unreasonable; or (3) the terms of the waiver are
ISSUES: WON there was a valid retrenchment (No) contrary to law, public order, public policy, morals, or good customs
  WON CA is correct in applying stare decisis (Yes) 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
DENIED. The Court of Appeals Decision dated July 7, 2009 and
Under the doctrine of stare decisis, when a court has laid down a
Resolution dated February 26, 2010 in CA-G.R. SP No. 105236 are
principle of law as applicable to a certain state of facts, it will adhere
AFFIRMED.
to that principle and apply it to all future cases in which the facts are
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. 
With respect to respondents Marcos, Nemis and Ilao, although they
applied for voluntary retirement, the same was not accepted by
petitioner. Instead, it issued notice of termination dated March 6,
2004 to these same employees.42 And while it is true that petitioner
paid them separation pay, the payment was in the nature of
separation and not retirement pay. In other words, payment was made
because of the implementation of the retrenchment program and not
because of retirement. As their application for availing of the
company’s voluntary retirement program was based on the wrong
premise, the intent to retire was not clearly established, or rather that
the retirement is involuntary. 
**Issue regarding Laches