G.R. No.

151309             October 15, 2008

BISIG MANGGAGAWA SA TRYCO and/or FRANCISCO SIQUIG, as Union President, JOSELITO LARIÑO,
VIVENCIO B. BARTE, SATURNINO EGERA and SIMPLICIO AYA-AY, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRYCO PHARMA CORPORATION, and/or WILFREDO C.
RIVERA, respondents.

FACTS:
Joselito Lariño, Vivencio Barte, Saturnino Egera and Simplicio Aya-ay are regular employees of Tryco Pharma
Corporation (Tryco) a manufacturer of veterinary medicines, occupying the positions of helper, shipment
helper and factory workers, respectively, assigned to the Production Department.

They are members of Bisig Manggagawa sa Tryco (BMT), the exclusive bargaining representative of the rank-
and-file employees.

Tryco and the petitioners signed separate Memorand[a] of Agreement2 (MOA), providing for a compressed
workweek schedule to be implemented in the company effective May 20, 1996. The MOA was entered into
pursuant to Department of Labor and Employment Department Order (D.O.) No. 21, Series of 1990, Guidelines
on the Implementation of Compressed Workweek.

As provided in the MOA, 8:00 a.m. to 6:12 p.m., from Monday to Friday, shall be considered as the regular
working hours, and no overtime pay shall be due and payable to the employee for work rendered during
those hours.

The MOA specifically stated that the employee waives the right to claim overtime pay for work rendered after
5:00 p.m. until 6:12 p.m. from Monday to Friday considering that the compressed workweek schedule is
adopted in lieu of the regular workweek schedule which also consists of 46 hours. However, should an
employee be permitted or required to work beyond 6:12 p.m., such employee shall be entitled to overtime
pay.

Tryco informed the Bureau of Working Conditions of the Department of Labor and Employment of the
implementation of a compressed workweek in the company.3

In January 1997, BMT and Tryco negotiated for the renewal of their collective bargaining agreement (CBA) but
failed to arrive at a new agreement.

Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of Animal Industry of the
Department of Agriculture reminding it that its production should be conducted in San Rafael, Bulacan, not in
Caloocan City.

Accordingly, Tryco issued a Memorandum 5 dated April 7, 1997 which directed petitioner Aya-ay to report to
the company's plant site in Bulacan. When petitioner Aya-ay refused to obey, Tryco reiterated the order on
April 18, 1997.6 Subsequently, through a Memorandum7 dated May 9, 1997, Tryco also directed petitioners
Egera, Lariño and Barte to report to the company's plant site in Bulacan.

BMT opposed the transfer of its members to San Rafael, Bulacan, contending that it constitutes unfair labor
practice. In protest, BMT declared a strike on May 26, 1997.

In August 1997, petitioners filed their separate complaints 8 for illegal dismissal, underpayment of wages,
nonpayment of overtime pay and service incentive leave, and refusal to bargain against Tryco and its
President, Wilfredo C. Rivera.
CONTENTION OF EMPLOYEES

petitioners alleged that the company acted in bad faith during the CBA negotiations because it sent
representatives without authority to bind the company, and this was the reason why the negotiations failed.
They added that the management transferred petitioners Lariño, Barte, Egera and Aya-ay from Caloocan to
San Rafael, Bulacan to paralyze the union.

They maintain that the letter of the Bureau of Animal Industry is not credible because it is not authenticated; it
is only a ploy, solicited by respondents to give them an excuse to effect a massive transfer of employees. They
point out that the Caloocan City office is still engaged in production activities until now and respondents even
hired new employees to replace them.

They prayed for the company to pay them their salaries from May 26 to 31, 1997, service incentive leave, and
overtime pay, and to implement Wage Order No. 4.

CONTENTION OF TRYCO

In their defense, respondents averred that the petitioners were not dismissed but they refused to comply with
the management's directive for them to report to the company's plant in San Rafael, Bulacan. They denied the
allegation that they negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President and
Legal Counsel as the company's representatives to the CBA negotiations. They claim that the failure to arrive at
an agreement was due to the stubbornness of the union panel.

LABOR ARBITER

On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit. 10 The Labor Arbiter held that the
transfer of the petitioners would not paralyze or render the union ineffective for the following reasons: (1)
complainants are not members of the negotiating panel; and (2) the transfer was made pursuant to the
directive of the Department of Agriculture.

The Labor Arbiter also denied the money claims, ratiocinating that the nonpayment of wages was justified
because the petitioners did not render work from May 26 to 31, 1997; overtime pay is not due because of
the compressed workweek agreement between the union and management; and service incentive leave pay
cannot be claimed by the complainants because they are already enjoying vacation leave with pay for at least
five days. As for the claim of noncompliance with Wage Order No. 4, the Labor Arbiter held that the issue
should be left to the grievance machinery or voluntary arbitrator.

NLRC

NLRC affirmed the Labor Arbiter's Decision, dismissing the case.

CA

the CA dismissed the petition for certiorari and ruled that the transfer order was a management prerogative
not amounting to a constructive dismissal or an unfair labor practice. The CA further sustained the
enforceability of the MOA, particularly the waiver of overtime pay in light of this Court's rulings upholding a
waiver of benefits in exchange of other valuable privileges.

ISSUE:
WON THERE IS ILLEGAL DISMISSAL (NO)
WON PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS (NO)

RULING:
WON THERE IS ILLEGAL DISMISSAL (NO)
Petitioners mainly contend that the transfer orders amount to a constructive dismissal. We do not agree.

We refuse to accept the petitioners' wild and reckless imputation that the Bureau of Animal Industry conspired
with the respondents just to effect the transfer of the petitioners. There is not an iota of proof to support this
outlandish claim. Absent any evidence, the allegation is not only highly irresponsible but is grossly unfair to the
government agency concerned. Even as this Court has given litigants and counsel a relatively wide latitude to
present arguments in support of their cause, we will not tolerate outright misrepresentation or baseless
accusation. Let this be fair warning to counsel for the petitioners.

Furthermore, Tryco's decision to transfer its production activities to San Rafael, Bulacan, regardless of whether
it was made pursuant to the letter of the Bureau of Animal Industry, was within the scope of its inherent right
to control and manage its enterprise effectively. While the law is solicitous of the welfare of employees, it
must also protect the right of an employer to exercise what are clearly management prerogatives. The free will
of management to conduct its own business affairs to achieve its purpose cannot be denied.18

This prerogative extends to the management's right to regulate, according to its own discretion and judgment,
all aspects of employment, including the freedom to transfer and reassign employees according to the
requirements of its business.19 Management's prerogative of transferring and reassigning employees from one
area of operation to another in order to meet the requirements of the business is, therefore, generally not
constitutive of constructive dismissal.20 Thus, the consequent transfer of Tryco's personnel, assigned to the
Production Department was well within the scope of its management prerogative.

WON PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS (NO)

We do not agree with the petitioners' assertion that the MOA is not enforceable as it is contrary to law. The
MOA is enforceable and binding against the petitioners. Where it is shown that the person making the waiver
did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is
credible and reasonable, the transaction must be recognized as a valid and binding undertaking. 27

D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits that the employees will
derive from the adoption of a compressed workweek scheme, thus:

The compressed workweek scheme was originally conceived for establishments wishing to save on energy
costs, promote greater work efficiency and lower the rate of employee absenteeism, among others.

Workers favor the scheme considering that it would mean savings on the increasing cost of transportation
fares for at least one (1) day a week; savings on meal and snack expenses; longer weekends, or an additional
52 off-days a year, that can be devoted to rest, leisure, family responsibilities, studies and other personal
matters, and that it will spare them for at least another day in a week from certain inconveniences that are the
normal incidents of employment, such as commuting to and from the workplace, travel time spent, exposure
to dust and motor vehicle fumes, dressing up for work, etc.

Thus, under this scheme, the generally observed workweek of six (6) days is shortened to five (5) days but
prolonging the working hours from Monday to Friday without the employer being obliged for pay overtime
premium compensation for work performed in excess of eight (8) hours on weekdays, in exchange for the
benefits abovecited that will accrue to the employees.

Notably, the MOA complied with the following conditions set by the DOLE, under D.O. No. 21, to protect the
interest of the employees in the implementation of a compressed workweek scheme:
1. The employees voluntarily agree to work more than eight (8) hours a day the total in a week of which shall
not exceed their normal weekly hours of work prior to adoption of the compressed workweek arrangement;

2. There will not be any diminution whatsoever in the weekly or monthly take-home pay and fringe benefits of
the employees;

3. If an employee is permitted or required to work in excess of his normal weekly hours of work prior to the
adoption of the compressed workweek scheme, all such excess hours shall be considered overtime work and
shall be compensated in accordance with the provisions of the Labor Code or applicable Collective Bargaining
Agreement (CBA);

4. Appropriate waivers with respect to overtime premium pay for work performed in excess of eight (8) hours
a day may be devised by the parties to the agreement.

5. The effectivity and implementation of the new working time arrangement shall be by agreement of the
parties.

PESALA v. NLRC,28  cited by the petitioners, is not applicable to the present case. In that case, an employment
contract provided that the workday consists of 12 hours and the employee will be paid a fixed monthly salary
rate that was above the legal minimum wage. However, unlike the present MOA which specifically states that
the employee waives his right to claim overtime pay for work rendered beyond eight hours, the employment
contract in that case was silent on whether overtime pay was included in the payment of the fixed monthly
salary. This necessitated the interpretation by the Court as to whether the fixed monthly rate provided under
the employment contract included overtime pay. The Court noted that if the employee is paid only the
minimum wage but with overtime pay, the amount is still greater than the fixed monthly rate as provided in
the employment contract. It, therefore, held that overtime pay was not included in the agreed fixed monthly
rate.

Considering that the MOA clearly states that the employee waives the payment of overtime pay in exchange
of a five-day workweek, there is no room for interpretation and its terms should be implemented as they
are written.

G.R. No. 163147               October 10, 2007

LINTON COMMERCIAL CO., INC. and DESIREE ONG, Petitioners,
vs.
ALEX A. HELLERA, FRANCISCO RACASA, DANTE ESCARLAN, DONATO SASA, RODOLFO OLINAR, DANIEL
CUSTODIO, ARTURO POLLO, ROBERT OPELIÑA, B. PILAPIL, WINIFREG BLANDO, JUANITO GUILLERMO,
DONATO BONETE, ISAGANI YAP, CESAR RAGONON, BENEDICTO ILAGAN, REXTE SOLANOY, RODOLFO LIM,
ERNESTO ALCANTARA, DANTE DUMAPE, FELIPE CAGOCO, JR., JOSE NARCE, NELIO CANTIGA, QUIRINO C.
ADA, MANUEL BANZON, JOEL F. ADA, SATPARAM ELMER, ROMEO BALAIS, CLAUDIO S. MORALES, DANILO
NORLE, LEONCIO RACASA, NOEL LEONCIO RACASA, NOEL ACEDILLA, ELPIDIO E. VERGABINIA, JR., CONRADO
CAGOCO, ROY BORAGOY, EDUARDO GULTIA, REYNALDO SANTOS, LINO VALENCIA, ROY DURANO, LEO
VALENCIA, ROBERTO BLANDO, JAYOMA A., NOMER ALTAREJOS, RAMON OLINAR III, SATURNINO C. EBAYA,
FERNANDO R. REBUCAS, NICANOR L. DE CASTRO, EDUARDO GONZALES, ISAGANI GONZALES, THOMAS
ANDRAB, JR., MINIETO DURANO, ERNESTO VALLENTE, NONITO I. DULA, NESTOR M. BONETE, JOSE
SALONOY, ALBERTO LAGMAN, ROLANDO TORRES, ROLANDO TOLDO, ROLINDO CUALQUIERA, ARMANDO
LIMA, FELIX D. DUMARE, ALFREDO SELAPIO, MARTIN V. VILLACAMPA, JR., CARLITO PABLE, DANTE
ESCARLAN, M. DURANO, RAMON ROSO, LORETA RAFAEL, and ELEZAR MELLEJOR, Respondents.

FACTS:
Linton is a domestic corporation engaged in the business of importation, wholesale, retail and fabrication of
steel and its by-products.3  On 17 December 1997, Linton issued a memorandum 5 addressed to its employees
informing them of the company’s decision to suspend its operations from 18 December 1997 to 5 January
1998 due to the currency crisis that affected its business operations.

Linton submitted an establishment termination report6 to the Department of Labor and Employment (DOLE)
regarding the temporary closure of the establishment covering the said period. The company’s operation was
to resume on 6 January 1998.

On 7 January 1997,7 Linton issued another memorandum8 informing them that effective 12 January 1998, it
would implement a new compressed workweek of three (3) days on a rotation basis. In other words, each
worker would be working on a rotation basis for three working days only instead for six days a week. On the
same day, Linton submitted an establishment termination report9 concerning the rotation of its workers.
Linton proceeded with the implementation of the new policy without waiting for its approval by DOLE.

Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of workdays with the
Arbitration Branch of the NLRC on 17 July 1998.

CONTENTION OF THE EMPLOYEES

The workers pointed out that Linton implemented the reduction of work hours without observing Article 283
of the Labor Code, which required submission of notice thereof to DOLE one month prior to the
implementation of reduction of personnel, since Linton filed only the establishment termination report
enacting the compressed workweek on the very date of its implementation.10

CONTENTION OF LINTON

Petitioners, on the other hand, contended that the devaluation of the peso created a negative impact in
international trade and affected their business because a majority of their raw materials were imported. They
claimed that their business suffered a net loss of ₱3,569,706.57 primarily due to currency devaluation and the
slump in the market. Consequently, Linton decided to reduce the working days of its employees to three (3)
days on a rotation basis as a cost-cutting measure. Further, petitioners alleged that the compressed
workweek was actually implemented on 12 January 1998 and not on 7 January 1998, and that Article 283 was
not applicable to the instant case.

LABOR ARBITER
On 28 January 2000, the Labor Arbiter rendered a Decision13 finding petitioners guilty of illegal reduction of
work hours and directing them to pay each of the workers their three (3) days/week’s worth of work
compensation from 12 January 1998 to 13 July 1998.

NLRC
The NLRC reversed the decision of the Labor Arbiter. The NLRC held that an employer has the prerogative to
control all aspects of employment in its business organization, including the supervision of workers, work
regulation, lay-off of workers, dismissal and recall of workers. The NLRC took judicial notice of the Asian
currency crisis in 1997 and 1998 thus finding Linton’s decision to implement a compressed workweek as a valid
exercise of management prerogative. Moreover, the NLRC ruled that Article 283 of the Labor Code, which
requires an employer to submit a written notice to DOLE one (1) month prior to the closure or reduction of
personnel, is not applicable to the instant case because no closure was undertaken and no reduction of
employees was implemented by Linton.

CA
The Court of Appeals REVERSED the NLRC RULING.

Court of Appeals ruled that the employees were constructively dismissed because the short period of time
between the submission of the establishment termination report informing DOLE of its intention to observe a
compressed workweek and the actual implementation thereat was a manifestation of Linton’s intention to
eventually retrench the employees. It found that Linton had failed to observe the substantive and procedural
requirements of a valid dismissal or retrenchment to avoid or minimize business losses since it had failed to
present adequate, credible and persuasive evidence that it was indeed suffering, or would imminently
suffer, from drastic business losses. Linton’s financial statements for 1997-1998 showed no indication of
financial losses, and the alleged loss of ₱3,645,422.00 in 1997 was considered insubstantial considering its
total asset of ₱1,065,948,601.00.Hence, the appellate court considered Linton’s losses as de minimis.24

Lastly, the appellate court found Linton to have failed to adopt a more sensible means of cutting the costs of
its operations in less drastic measures not grossly unfavorable to labor. Hence, Linton failed to establish
enough factual basis to justify the necessity of a reduced workweek.25

ISSUE:
The main issue in this labor dispute is whether or not there was an illegal reduction of work when Linton
implemented a compressed workweek by reducing from six to three the number of working days with the
employees working on a rotation basis.

RULING:
The compressed workweek arrangement was unjustified and illegal. petitioners committed illegal reduction of
work hours.

In Philippine Graphic Arts, Inc. v. NLRC,40 the Court upheld for the validity of the reduction of working hours,
taking into consideration the following:

the arrangement was temporary, it was a more humane solution instead of a retrenchment of personnel ,
there was notice and consultations with the workers and supervisors, a consensus were reached on how to
deal with deteriorating economic conditions and it was sufficiently proven that the company was suffering
from losses.

The Bureau of Working Conditions of the DOLE, moreover, released a bulletin 41 providing for in determining
when an employer can validly reduce the regular number of working days. The said bulletin states that a
reduction of the number of regular working days is valid where the arrangement is resorted to by the
employer to prevent serious losses due to causes beyond his control, such as when there is a substantial slump
in the demand for his goods or services or when there is lack of raw materials.

Although the bulletin stands more as a set of directory guidelines than a binding set of implementing rules, it
has one main consideration, consistent with the ruling in Philippine Graphic Arts Inc., in determining the
validity of reduction of working hours—that the company was suffering from losses.

The Court of Appeals for its part held that Linton failed to present adequate, credible and persuasive evidence
to show that it was in dire straits and indeed suffering, or would imminently suffer, from drastic business
losses. It did not find the reduction of work hours justifiable, considering that the alleged loss of ₱3,645,422.00
in 1997 is insubstantial compared to Linton’s total asset of ₱1,065,948,601.76.44

A close examination of petitioners’ financial reports for 1997-1998 shows that, while the company suffered a
loss of ₱3,645,422.00 in 1997, it retained a considerable amount of earnings 45 and operating income.46 Clearly
then, while Linton suffered from losses for that year, there remained enough earnings to sufficiently sustain its
operations.

Certainly, management has the prerogative to come up with measures to ensure profitability or loss
minimization. However, such privilege is not absolute. Management prerogative must be exercised in good
faith and with due regard to the rights of labor. 48

All taken into account, the compressed workweek arrangement was unjustified and illegal.1âwphi1 Thus,
petitioners committed illegal reduction of work hours.