31. Smart Communications vs.

Astorga
Facts:
SMART launched an organizational realignment to achieve more efficient operations. This was made known to
the employees on February 27, 1998.6 Part of the reorganization was the outsourcing of the marketing and
sales force. Thus, SMART entered into a joint venture agreement with NTT of Japan, and formed SMART-NTT
Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorga’s division.
To soften the blow of the realignment, SNMI agreed to absorb the CSMG personnel who would be
recommended by SMART. SMART then conducted a performance evaluation of CSMG personnel and those
who garnered the highest ratings were favorably recommended to SNMI. Astorga landed last in the
performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a
supervisory position in the Customer Care Department, but she refused the offer because the position carried
lower salary rank and rate.
Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3, 1998, SMART
issued a memorandum advising Astorga of the termination of her employment on ground of redundancy,
effective April 3, 1998. Astorga received it on March 16, 1998.7
The termination of her employment prompted Astorga to file a Complaint8 for illegal dismissal, non-payment
of salaries and other benefits with prayer for moral and exemplary damages against SMART. 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.
Issue: Whether or not Astorga’s dismissal is valid
Ruling:
Yes. 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.
A careful and assiduous review of the records will yield no other conclusion than that the reorganization
undertaken by SMART is for no purpose other than its declared objective – as a labor and cost savings device.
Indeed, this Court finds no fault in SMART’s decision to outsource the corporate sales market to SNMI in order
to attain greater productivity. . SMART, ensure it can respond quickly, efficiently and flexibly to its customer’s
requirement, abolished CSMG/FSD and shortly thereafter assigned its functions to newly-created SNMI
Multimedia Incorporated, a joint venture company of SMART and NTT of Japan, for the reason that CSMG/FSD
does not have the necessary technical expertise required for the value added services. By transferring the
duties of CSMG/FSD to SNMI, SMART has created a more competent and specialized organization to perform
the work required for corporate accounts. It is also relieved SMART of all administrative costs – management,
time and money-needed in maintaining the CSMG/FSD. The determination to outsource the duties of the
CSMG/FSD to SNMI was, to Our mind, a sound business judgment based on relevant criteria and is therefore a
legitimate exercise of management prerogative.