20. Cabaobas et al., vs. Pepsi Cola, G.R. No.

176908, March 25, 2015

FACTS:
Respondent Pepsi-Cola Products Philippines, Inc. (Pepsi) is a domestic
corporation engaged in manufacturing, bottling and distributing of soft drink
products which operates all over the country. In this case, the facts center
on the Tanauan Plant in Tanauan, Leyte.

In 1999, Pepsi’s Tanauan plant incurred business losses amounting to

29,167,390 pesos. As a result, the company implemented a company-wide
retrenchment program and retrenched 47 employees in its Tanauan plant.

In 2000, the petitioners, who were permanent and regular employees of

the Tanuan plant, were included in the retrenchment program which led to
the filing of complaints for illegal dismissal before the National Labor
Relations Commission (NLRC) in Tacloban City.

Petitioners alleged that Pepsi was not facing any financial losses as they
had regularized four employees and hired replacements for the 47 dismissed
employees and such retrenchment program was designed to prevent their
union from becoming the certified bargaining agent of Pepsi’s rank and file
employees.

On the other hand, the Pepsi contends that the retrenchment program
was a valid exercise of management prerogative and that they submitted
audited financial statements to prove that the company was suffering losses.

In December 2000, the Labor Arbiter rendered a decision finding the

dismissal of the petitioner illegal and ordered that they be reinstated to their
former positions. Pepsi appealed the decision to the NLRC of Tacloban City
which led to the dismissal of the complaints for illegal dismissal and declared
that the retrenchment program was valid.

Unsatisfied, petitioner filed a petition for certiorari before the CA but the
petition was denied and the decision of the NLRC was upheld. Hence,
petitioners filed a review on certiorari assailing the decision of the CA.

ISSUE:
Whether or not the dismissal pursuant to Pepsi’ retrenchment program
was legal

RULING:
 Yes. By the principle of stare decisis, citing the case of Pepsi-Cola
Products Philippines, Inc. v. Molon, the Supreme Court held that essentially,
the prerogative of an employer to retrench its employees must be exercised
only as a last resort, considering that it will lead to the loss of the
employees' livelihood. It is justified only when all other less drastic means
have been tried and found insufficient or inadequate. However, the the
employer must prove the requirements for a valid retrenchment by clear and
convincing evidence so as to avoid abuses by employers feigning losses.
These requirements are:

 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;

 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; D

 IThat the employer pays the retrenched employees

separation pay equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service,
whichever is higher;

 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

 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 the case at bar, Pepsi had validly complied with the requirements in its
implementation of the retrenchment program. Records show that Pepsi
complied with the requirements of substantial loss and sent notice to both
DOLE and the workers to be retrenched. The dismissed workers were also
paid separation pay. Also, Pepsi’s retrenchment program was implemented
in other plants such as Bacolod, Iloilo, Davao, General Santos and
Zamboanga, showing that general applicability of the program. Moreover,
Pepsi’s management exerted efforts to initiate sit-downs to review the
criteria on the selection on retrenchment. Therefore, as all the requisites for a
valid retrenchment are present, the Court finds Pepsi's retrenchment program and the
consequent dismissal of respondents in accordance with the law.

Hence, the petition was denied and the decision of the CA was affirmed.