f2C - LABOR RELATIONS kept idle for long or merely laid to total waste.
AUTHORIZED CAUSES (Batch 5)
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1.AGUSTILO v. CA
G.R No. 142875
SEPTEMBER 07, 2001
FACTS: ​Petitioner Edgar Agustilo was initially hired by San
Miguel Corporation (SMC) as a temporary employee on July 1,
1979 but was thereafter made permanent and designated as a
safety clerk after three (3) months of employment. On May 1,
1982, he was transferred to the Engineering Department as an
administrative secretary. However, his position was
subsequently abolished and was thus transferred to the
company’s Plant Director’s Office-Quality Improvement Team
(PDO-QIT.)
On February 7, 1992, Agustilo was informed that 583
employees, including him, would be retrenched due to the
modernization program of the company. On April 8, 1992, he
was given his separation pay and he likewise signed a
quitclaim agreement with the company.
Despite the foregoing, petitioner Agustilo filed a complaint
against SMC for unfair labor practice, illegal dismissal,
payment of separation pay, attorney’s fees and damages
against SMC. He alleged that his termination was by reason pf
union activities and that SMC in reality did not carry on its
alleged program of modernization; that as a matter of fact, after
three (3) years since his separation from employment, the
equipment and machineries installed have not yet been
operational.
SMC contends that it has embarked into a “Modernization
Program” — bringing new technology in beer processing with
high-tech machineries which consequently resulted in the
reduction of manning requirement. Hence, the reduction of the
584 personnel which included petitioner.
The Labor Arbiter dismissed petitioner’s complaint for lack of
merit. On appeal, the NLRC reversed the decision. The CA
reversed the NLRC ruling and reinstated that of the Labor
Arbiter. Hence, this petition for review on certiorari.
ISSUE: ​Whether or not petitioner was illegally dismissed
RULING: ​No, there was no illegal dismissal. Complainant’s
termination was justified because of the installation of
labor-saving devices and machineries pursuant to SMC’s
reorganizational and expansion program. This is allowed by
Article 283 of the Labor Code. Likewise, the procedural
requirements thereunder were adhered to by SMC.
It is worthy to note that SMC, before coming with this decision,
has exerted all efforts to find suitable placements for the
affected employees within the company. However, no positions
are available, considering all other units are also undergoing
streamlining of their organizations. Hence, SMC had to resort
to declaring them redundant.
With regard to the non-operational equipment that complainant
mentioned: Although SMC had not fully accomplished the
projected physical changes, nevertheless, changes were
undertaken and were substantial enough to justify SMC’s act,
especially considering the huge funding of P2.6 billion
involved. Its non-operational status is temporary. It is of the
Court’s belief that these machineries and equipment will not be
Finally, the quitclaim that complainant signed stands valid and
is binding upon him. While quitclaims and releases are
generally held contrary to public policy, there are nevertheless
voluntary agreements which represent reasonable settlements
and are considered binding on parties such as this “receipt and
release” involved in this case. This must be so considering that
complainant is not an illiterate person who needs special
protection. He is an instructor in Political Science in an
university and was at that time a law student. Thus, he
fully-understood the quitclaim he signed and voluntarily bound
himself to such.
2. ARABIT v. JARDINE
APRIL 21, 2014
FACTS: ​Petitioners were former regular employees of
respondent Jardine Pacific Finance, Inc. (Jardine). Petitioners
were also officers and members of MB Finance Employees
Association-FFW Chapter (The Union), a legitimate labor union
and the sole exclusive bargaining agent of the employees of
Jardine.
On the claim of financial losses, Jardine decided to reorganize
and implement a redundancy program among its employees
which includes herein petitioners. Jardine thereafter hired
contractual employees to undertake the functions these
employees used to perform.
Thus, petitioners filed a complaint against Jardine for illegal
dismissal and unfair labor practice. They allege that their
dismissal was tainted with bad faith as their positions were not
superfluous; that if their positions had really been redundant,
Jardine should have not hired contractual workers to replace
them.
Jardine argued that the company had been incurring serious
business losses from 1996-1998. For instance, for the year
1998, it incurred a loss of P95 million. Because of this, it had to
lay-off some of its employees and eliminate positions that were
in excess of what its business required. According to Jardine,
no bad faith took place in the hiring of the contractual
employees because such was a valid exercise of its
management prerogative.
ISSUE: ​Whether or not petitioners were illegally dismissed
RULING: ​Yes, petitioners were illegally dismissed. Their
termination from service was arbitrary and done in bad faith.
Although the acts of Jardine (the redundancy program and the
subsequent hiring of contractual employees) is an exercise of
management prerogative, it should not however be performed
in violation of any law and that it is not tainted by any arbitrary
or malicious motive on the part of the employer.
In this case, Jardine did not employ clear criteria when it
decided to terminate the employment of petitioners. Jardine
never bothered to explain why among all of the existing
positions in its organization, petitioner’s posts are the ones
which have already become redundant and terminable.
Finally, it is illogical for Jardine to terminate the petitioner’s
employment and replace them with contractual employees.
The replacement effectively belies Jardine’s claim that the
petitioner’s positions were abolished due to superfluity.
3. SANTOS v. CA
JULY 5, 2001
FACTS: ​Pepsi Cola Products Phils., Inc. (PEPSI) is a
corporation engaged in the production, distribution and sale of
beverages. Petitioners Ismael Santos and Alfredo Arce were
employed by PEPSI as Complimentary Distribution Specialists
(CDS), while Hilario Pastrana was employed as Route
Manager.
On December 26 1994, PEPSI informed its employees that
due to poor performance of its Metro Manila Sales Operations,
it would restructure and streamline certain physical and sales
distribution systems to improve its warehousing efficiency. As a
result, certain positions, including that of petitioners’, were
declared redundant and abolished. Consequently, petitioners’
employment were terminated.
On January 15, 1995, petitioners left their posts, accepted their
separation pays and executed releases and quitclaims.
However, petitioners subsequently learned that PEPSI created
new positions called Account Development Managers (ADM)
with substantially the same duties and responsibilities as the
CDS, their previous position. Thus, they filed a complaint for
illegal dismissal.
Petitioners contend that the creation of the new position belies
PEPSI’s claim of redundancy; that the qualifications for both
the CDS and ADM position were similar.
PEPSI on the other hand maintained that the termination due
to redundancy is a management prerogative which was done
in good faith; that a close perusal of the job descriptions
between CDS and ADM positions would show that the two (2)
were very different in terms of nature, functions, qualifications
and responsibilities.
ISSUE:​ Whether or not petitioners were illegally dismissed
RULING: ​No, they were not illegally dismissed. The
redundancy program instituted by PEPSI was undertaken in
good faith. The fact that PEPSI’s Metro Manila Sales
Operations were not meeting its sales targets was duly
established, and on the fact that new positions were
subsequently created, it is evident that PEPSI wanted to
restructure its organization in order to include more complex
positions that would either absorb or render completely
unnecessary the positions it had previously declared
redundant.
Further, the new position created (ADM) was very much
different from the abolished position of CDS, to which the
petitioners previously belonged. CDS are field personnel who
drive assigned vehicles, deliver stocks, sell and collect
payments for softdrinks while ADMs are tasked to ensure that
the stocks are displayed in the best possible locations in the
dealer’s store in keeping with the promotional thrust of PEPSI.
Thus, being a valid exercise of management prerogative, the
same must respected and is well beyond the discretionary
review allowed by law.
4. OCEAN EAST AGENCY v. LOPEZ
FACTS: ​Petitioner Ocean East is a manning agency engaged
in the recruitment and deployment of Filipino seamen for
overseas principals. Petitioner Carmen is the President and
General Manager of this agency. Petitioner Capt. Skinitis is a
representative of one of its foreign principals, European
Navigation Greece (ENG).
Respondent Lopez was employed as Documentation Officer
(1988) assigned to Ocean East’s Operations Department. Prior
to his employment, Ocean East had already engaged the
services of one Grace Reynolds as a Documentation Clerk.
Sometime in 1996, it hired one Corazon Hing also as
documentation clerk. The Documentation Clerks and Officer
were tasked to perform the following functions: prepare the
line-up of request crew by various principals in close
coordination with the Port Captain; assist in attending to
various operational expenses and disbursements; coordinate
closely with deserving former crew members for pooling and/or
immediate employment, if so required; and supervise the
preparation of the crew documents, such as travel documents
and clearances.
Ocean East served notice to Lopez that effective thirty (30)
days later, his services will be terminated on the ground of
redundancy, as his position as Documentation Officer is but a
duplication of those occupied by its two (2) other personnel
who were also exercising similar duties and functions.
Lopez filed an Amended Complaint for illegal dismissal,
alleging that Capt. Skinitis falsely accused him of making
money from the crew to be deployed abroad, maligned his
physical handicap as a polio victim, and ordered his removal
from the job. The ​LA dismissed the complaint for lack of merit.
The ​NLRC also dismissed the appeal for lack of merit. It
found that no malice or ill-will was shown to have been
committed by Ocean East in the exercise of its managerial
prerogatives, which included whom to separate and what
positions to abolish; and that what took place was a reduction
of personnel due to redundancy, and not retrenchment. The
CA granted the petition and ruled that he was illegally
dismissed. However, since the same was on the ground of
redundancy, reinstatement would no longer serve any purpose.
ISSUE: WON RESPONDENT IS ILLEGALLY DISMISSED
RULING: Yes. Redundancy exists when the service
capability of the workforce is in excess of what is
reasonably needed to meet the demands of the enterprise.
A ​redundant position is one rendered superfluous by any
number of factors, such as over hiring of workers, decreased
volume of business, dropping of a particular product line
previously manufactured by the company, or phasing-out of a
service activity previously undertaken by the business. Under
these factors, the employer has no legal obligation to keep in
its payroll more employees than are necessary for the
operation of its business. Even if a business is doing well, an
employer can still validly dismiss an employee from the service
due to redundancy if that employee's position has already
become in excess of what the employer's enterprise requires.
For the implementation of a redundancy program to be valid,
the employer must comply with these requisites​: (1) written
notice served on both the employee 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. ​The Court finds that
petitioners failed to establish compliance with the first,
third and fourth requisites for a valid implementation of a
redundancy program, thereby making Ocean East liable
for illegal dismissal.
It is undisputed that Ocean East failed to comply with the
first requisite of service of a written notice of termination
to the DOLE. They cited the ​International Hardware case to
justify the omission but the court said that what was
invoked—that the acknowledgment by the employee of the
existence of a valid cause of the termination of his
employment—is a mere obiter.
Citing Lopez’s acceptance of a considerable sum as
separation pay and his certificate of service without protest as
clearly indicative of consent to his dismissal, which effectively
released them from their obligations, ​petitioners argue that
the notice to the DOLE may already be dispensed with
since there was no more useful purpose for it, and he was
already compensated as required by law. ​Petitioners'
argument is untenable.​ There is no indication that Lopez
executed a waiver and quitclaim which estops him from
questioning the validity of his dismissal. Besides, the CA is
correct in pointing out that Lopez had no choice but to accept
the separation pay because he was a family man with five (5)
children to support and Ocean East's letter clearly stated that
he was being terminated due to redundancy.
To dispense with such notice would not only disregard a clear
labor law provision that affords protection to an employee, but
also defeats its very purpose which is to give the DOLE the
opportunity to ascertain the veracity of the alleged authorized
cause of termination. In fact, the Court has considered as a
fatal error the employer's failure to give a written notice to the
DOLE as required under Article 283 of the Labor Code.
As to the third and fourth requisite, ​petitioners were able to
establish through Ocean East's Quality Procedures Manual
that Lopez' position as a Documentation Officer was redundant
because its duties and functions were similar to those of the
Documentation Clerks in its operations department. ​However,
they failed to prove by substantial evidence their
observance of the fair and reasonable criteria of seniority
and efficiency in ascertaining the redundancy of the
position of Documentation Officer, as well as good faith
on their part in abolishing such position. ​The presence of
such criteria used by the employer shows good faith on its part
and is evidence that the implementation of redundancy was
painstakingly done by the employer in order to properly justify
the termination from the service of its employees. Conversely,
the absence of criteria in the selection of an employee to be
dismissed and the erroneous implementation of the criterion
selected, both render invalid the redundancy because both
have the ultimate effect of illegally dismissing an employee. To
dispel any suspicion of bad faith on the part of the employer, it
must present adequate proof of the redundancy, as well as the
criteria in the selection of the employees affected. The
following evidence may be proffered to substantiate
redundancy, to wit: 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.
In this case, the petitioners were unable to justify why it was
more efficient to terminate Lopez rather than its two other
Documentation Clerks, Reynolds and Hing. Also, while
Reynolds was supposedly retained for being more senior than
Lopez, petitioners were silent on why they chose to retain Hing
who was hired in 1996, instead of Lopez who was hired about
eight (8) years earlier in 1988.
For petitioners' failure to prove that Ocean East served the
DOLE a written notice of termination as required under Article
283 of the Labor Code, and to show that it was in good faith in
implementing a redundancy program, and that it adopted a fair
and reasonable criteria in ascertaining what positions are to be
declared redundant, the CA correctly found the company
liable for illegal dismissal.
5. AMA COMPUTER COLLEGE (ACC) v. GARCIA and
BALLA
FACTS: ​Garcia was hired by ACC as a janitress on 1988. On
1989, her employment status was changed to probationary
Library Aide. She became a regular employee on 1990. Balla
was hired as a Social Worker on 1996. She later became a
Guidance Assistant, and on 1997, became a regular employee.
On March 2000, Cruz, the HR Director of ACC, informed the
two and 52 other employees that they will be terminated by
virtue of the prevailing economic condition of the country and
as part of the austerity program of the company, management
came up with a manpower review of the AMA Group of
Companies in order to streamline its operation and the growth
of the organization. Garcia and Balla filed a complaint for illegal
dismissal with the ​LA, which ruled that they were illegally
dismissed. The ​NLRC affirmed the LA’s decision. ​The ​CA
affirmed the decision of the NLRC.
ISSUE: WON REDUNDANCY AND RETRENCHMENT IS A
VALID BASIS IN TERMINATING THE SERVICES OF THE
RESPONDENTS
RULING: NO. 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 reasonably 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 service activity priorly undertaken
by the business. Among the requisites of a valid redundancy
program are: (1) the good faith of the employer in abolishing
the redundant position; and (2) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and
accordingly abolished.
In the case at bar, ACC attempted to establish its streamlining
program by presenting its new table of organization. ACC also
submitted a certification by its Human Resources Supervisor,
Ma. Jazmin Reginaldo, that the functions and duties of many
rank and file employees, including the positions of Garcia and
Balla as Library Aide and Guidance Assistant, respectively, are
now being performed by the supervisory employees. ​These,
however, do not satisfy the requirement of substantial
evidence that a reasonable mind might accept as adequate
to support a conclusion. As they are, they are grossly
inadequate and mainly self-serving. More compelling
evidence would have been a comparison of the old and new
staffing patterns, a description of the abolished and newly
created positions, and proof of the set business targets and
failure to attain the same which necessitated the reorganization
or streamlining.
To further justify its dismissal of Garcia and Balla, ACC
presented several memoranda to prove that Garcia and Balla
had been remiss in the performance of their duties, as well as
perennially tardy and absent. Other than being self-serving,
said memoranda are irrelevant to prove redundancy of the
positions held by Garcia and Balla. ​Redundancy arises
because there is no more need for the employee's position
in relation to the whole business organization, and not
because the employee unsatisfactorily performed the
duties and responsibilities required by his position.
They also filed to give notice to the DOLE of the said
streamlining program, which could have afforded the labor
department the opportunity to look into and verify whether
there is truth as to ACC's claim that a decline in its student
population resulted in excess manpower in the college.
Compliance with the required notices would have also
established that ACC pursued its streamlining program in good
faith.
Granting that ACC was able to substantiate the need for
streamlining its organization, ​it still failed to implement the
same using fair and reasonable criteria for choosing
which employees to dismiss. Among the accepted criteria in
implementing a redundancy are: (a) less preferred status, e.g.,
temporary employee; (b) efficiency; and (c) seniority. There is
no showing that ACC applied any of these criteria in
determining that, among its employees, Garcia and Balla
should be dismissed, thus, making their dismissal arbitrary and
illegal.
Retrenchment, on the other hand, is the termination of
employment effected by management during periods of
business recession, industrial depression, seasonal
fluctuations, lack of work or considerable reduction in the
volume of the employer's business. Resorted to by an
employer to avoid or minimize business losses, it is a
management prerogative consistently recognized by this Court.
There are three basic requisites for a valid retrenchment to
exist, (a) the retrenchment is necessary to prevent losses and
such losses are proven; (b) written notice to the employees
and to the DOLE at least one (1) month prior to the intended
date of retrenchment; and (c) payment of 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.
To justify retrenchment, the employer must prove serious
business losses. Indeed, not all business losses suffered by
the employer would justify retrenchment under Article 283 of
the Labor Code. For this to be valid, the Court has held these
necessary conditions for justification: (1) the losses incurred
are substantial and not ​de minimis​; (2) the losses are actual or
reasonably imminent; (3) the retrenchment is reasonably
necessary and is likely to be effective in preventing the
expected losses; and (d) the alleged losses, if already incurred,
or the expected imminent losses sought to be forestalled, are
proven by sufficient and convincing evidence. ​ACC miserably
failed to prove any of the foregoing.
In the case at bar, ACC claimed that the retrenchment of
Garcia and Balla was justified due to the financial difficulties
experienced by the college that it was made effective in all of
its campuses and for all departments; and appropriate notices
were given to Garcia and Balla. ​But other than its bare
allegations, ACC failed to present any supporting
evidence. Not only was ACC unable to prove its losses, it
also failed to present proof that it served the necessary
notice to the DOLE one month before the purported
retrenchment of Garcia and Balla.
In sum, the Court finds no basis for disturbing the
consistent findings of the Labor Arbiter, the NLRC and the
Court of Appeals that ACC was not able to discharge the
burden of proving that its dismissal of Garcia and Balla
was valid.
6. ANDRADA v. NLRC
FACTS: ​Petitioners Ruben Andrada, Jovencio Poblete,
Filamer Alfonso, Harvey Cayetano, Vicente Mantala, Jr.,
Bernaldo delos Santos, and Joven Pabustan were hired on
various dates from 1995 up to 1997 and worked as architects,
draftsmen, operators, engineers, and surveyors in the Subic
Legend Resorts and Casino, Inc. (Legend) Project
Development Division on various projects. Hwa Puay,
Flordeliza Maria Reyes Rayel, and other corporate officers are
impleaded in this case in their official capacities as officers of
Legend.
On 1998, Legend sent notice to the DOLE of its intention to
retrench and terminate 34 of its employees, which include the
petitioners herein, in the Project Development Division. This
retrenchment would be on a last-in-first-out basis on the
strength of the updated status report of such division. Legend,
then, sent the 34 employees their respective notices of
retrenchment. It offered the employees three options: (1)
temporary retrenchment not exceeding 6 month, with
possibility of permanent retrenchment if re-assignment cannot
be made; (2) permanent retrenchment and payment of
separation pay; and (3) immediate retrenchment and payment
of separation pay and other benefits and one month’s salary in
lieu of notice to allow them to look for other employment
opportunities.
They were given one week to choose their option, with #2 as
default in case they did not select any. The choice is also not a
waiver of the right to question the validity of their retrenchment.
Curiously, on the same day, the Labor and Employment Center
of the Subic Metropolitan Authority advertised that Legend
International Resorts was in need of employees for positions
similar to those vacated by the petitioners. Petitioners were
permanently retrenched. They signed quitclaims but reserved
their right to sue Legend. 14/34 retrenched employees filed
cases of illegal dismissal. The ​LA said that they were
illegally dismissed​. The ​NLRC reversed the LA​, saying that
the LA failed to consider the numerous documents pointing out
that Legend was indeed suffering from actual losses, and that
there was redundancy in the work of retrenched employees.
The ​CA held that the retrenched employees were validly
dismissed, ​but only due to redundancy and not retrenchment.
ISSUE: WON THE COMPLAINANTS WERE ILLEGALLY
DISMISSED
RULING: YES. ​Under the Labor Code, retrenchment and
redundancy are authorized causes for separation from service.
However, to protect labor, dismissals due to retrenchment or
redundancy are subject to strict requirements under Article 283
of the Labor Code.
Retrenchment is an exercise of management's prerogative to
terminate the employment of its employees 'en masse, to
either minimize or prevent losses, or when the company is
about to close or cease operations for causes not due to
business losses. The Court has laid down standards that a
company must meet to justify retrenchment to prevent abuse
by employers:
1. The losses expected should be substantial and
not merely ​de minimis in extent. If the loss purportedly
sought to be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character, the bona fide
nature of retrenchment would appear to be seriously in
question.
2. The substantial loss apprehended must be
reasonably imminent, as ​such imminence can be perceived
objectively and in good faith by the employer. ​There
should, in other words, be a certain degree of urgency for the
retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or
otherwise laid-off.
3. 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 quantum of proof is readily
apparent: any less exacting standard of proof would render too
easy the abuse of this ground for termination of services of
employees.
The Court also laid down the requirements for retrenchment,
which is as follows:
1. It is undertaken to prevent ​losses​, which 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. The ​employer serves written notice both to the
employees and the DOLE at least one month prior to the
intended date of retrenchment;
3. The employer pays the retrenched employees
separation pay equivalent to one month pay or at least -
month pay for every year of service, whichever is higher.
The Court later added the requirements that the employer
must use fair and reasonable criteria in ascertaining who
would be dismissed and retained among the employees
and that the retrenchment must be undertaken in good
faith​. Except for the written notice to the affected employees
and the DOLE, non-compliance with any of these requirements
renders the retrenchment illegal.
In the present case, Legend glaringly failed to show its
financial condition prior to and at the time it enforced its
retrenchment program. It failed to submit audited financial
statements regarding its alleged financial losses. Though
Legend complied with the notice requirements and the
payment of separation benefits to the retrenched employees,
its failure to establish the basis for the retrenchment of its
employees constrains us to declare the retrenchment illegal.
There was also failure by Legend to establish redundancy.
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.
Thus, simply put, redundancy exists when the number of
employees is in excess of what is reasonably necessary to
operate the business. The declaration of redundant positions is
a management prerogative. The determination that the
employee's services are no longer necessary or sustainable
and therefore properly terminable is an exercise of business
judgment by the employer.
The pieces of evidence submitted by Legend are mere
allegations and conclusions not supported by other evidence.
Legend did not even bother to illustrate or explain in detail how
and why it considered petitioners' positions superfluous or
unnecessary. The CA puts too much weight on petitioners'
failure to refute Legend's allegations contained in the
document it submitted. However, it must be remembered that
the employer bears the burden of proving the cause or causes
for termination. Its failure to do so would necessarily lead to a
judgment of illegal dismissal.
Thus, in the same way, we held that the basis for
retrenchment was not established by substantial
evidence, we also rule that Legend failed to establish by
the same quantum of proof the fact of redundancy; hence,
petitioners' termination from employment was illegal.
7. SORIANO, JR. v. NLRC
FACTS: ​In 1980, petitioner and certain individuals namely
Sergio Benjamin (Benjamin), Maximino Gonzales (Gonzales),
and Noel Apostol (Apostol) were employed by the respondent
as Switchman Helpers in its Tondo Exchange Office (TEO).
After participating in several trainings and seminars, petitioner,
Benjamin, and Gonzales were promoted as Switchmen.
Apostol, on the other hand, was elevated to the position of
Frameman. One of their duties as Switchmen and Frameman
was the manual operation and maintenance of the Electronic
Mechanical Device (EMD) of the TEO. In 1995, respondent
PLDT implemented a company-wide redundancy program due
to technological changes, collapsing or merging of functions,
process improvements and automation of functions, among
others.
Subsequently PLDT gave separate letters to petitioner and the
aforementioned individuals informing them that their respective
positions were deemed redundant due to the above-cited
reasons and thus they will be terminated. They asked for a
transfer of positions, however, all positions were already
filled-up. They then filed a complaint for illegal dismissal
against the respondent. The ​LA dismissed the complaint,
while the NLRC affirmed the LA. The CA dismissed the
same.
ISSUE: WON THEY WERE ILLEGALLY DISMISSED.
RULING: NO. ​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 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, decrease in volume of business, or
dropping a particular product line or service activity previously
manufactured or undertaken by the enterprise.
It is clear that the foregoing documentary evidence constituted
substantial evidence to support the findings of Labor Arbiter
and the NLRC that petitioner’s employment was terminated by
respondent PLDT due to a valid or legal redundancy program
since substantial evidence merely refers to that amount of
evidence which a reasonable mind might accept as adequate
to support a conclusion.
As earlier discussed, the ruling of the NLRC was premised on
substantial evidence comprising of documentary proofs
submitted by the respondent PLDT showing compliance with
the requirements of law for terminating petitioner’s employment
due to redundancy. This obviously negates any capriciousness
or arbitrariness in the exercise of judgment of the NLRC.
Even though petitioner claims that at the time he was
dismissed from work, there were 163 vacant positions for
which he was qualified and that he timely applied for transfer to
these positions, it is evident from the functions of a switchman
as cited in the case that respondent PLDT’s utilization of high
technology equipment in its operation such as computers and
digital switches necessarily resulted in the reduction of the
demand for the services of a Switchman since computers and
digital switches can aptly perform the function of several
Switchmen. Indubitably, the position of Switchman has become
redundant.
The fact that respondent PLDT hired contractual employees
after implementing its redundancy program does not
necessarily negate the existence of redundancy. As amply
stated by the respondent PLDT, such hiring was intended
solely for winding up operations using the old system. The
Court cannot interfere in the wisdom and soundness of the
respondent PLDT’s decision as to who among the Switchmen
should be retained or discharged or who should be transferred
to vacant positions, as long as such was made in good faith
and not for the purpose of curbing the rights of an employee.
8. SERRANO v. NLRC
FACTS: ​Ruben Serrano was hired by Isetann Dept. Store as a
security checker. In 1991, as a cost-cutting measure, Isetann
decided to phase out the entire security section and engage
the services of an independent security agency. Isetann sent a
memo to Serrano on Oct. 11, 1991, reiterating their verbal
notice of termination effective on the same day. Serrano filed a
complaint on December 3, 1991 for illegal dismissal, among
others. The ​LA held that Serrano was illegally dismissed
because Isetann failed to establish that the cause of
retrenchment is to minimize losses. The ​NLRC reversed​,
holding that the phase-out of private respondent’s security
section and the hiring of an independent security agency
constituted an exercise by the respondent of a legitimate
business decisions whose wisdom the court does not intent to
inquire into.
ISSUE: WON THE ABOLITION OF THE SECURITY
SECTION AND THE EMPLOYMENT OF AN INDEPENDENT
SECURITY AGENCY ARE AUTHORIZED CAUSES FOR
DISMISSAL UNDER THE LABOR CODE
RULING: YES. ​Absent proof that management acted in a
malicious or arbitrary manner, the Court will not interfere with
the employer’s exercise of judgment. Furthermore, that the
phase-out constituted a legitimate business decision is a
factual finding of the NLRC.
Earlier developments with regard to these kinds of cases show
that given the facts of this case, the dismissal should be illegal.
The dawn of ​Wenphil Corp. v NLRC created a shift in the
sense that the court said that it would be highly prejudicial to
the employer’s interests to reinstate an employee who has
been shown to be guilty of the charges that warranted his
dismissal, and that if an employee will be dismissed, the same
should be for a just and authorized cause and after due
process.
Now, the dismissal shall be upheld but the employer must be
sanctioned for non-compliance with the requirements of, or for
failure to observe due process.
The dissenting justices, however, present a necessity to
re-examine the ​Wenphil Doctrine. The number of cases
involving dismissals without the requisite notice to the
employee, although effected for just or authorized causes,
suggest that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the
notice requirement. Justice Panganiban finds the monetary
sanctions "too insignificant, too niggardly, and sometimes even
too late." On the other hand, Justice Puno says there has in
effect been fostered a policy of "dismiss now; pay later" which
moneyed employers find more convenient to comply with than
the requirement to serve a 30-day written notice (in the case of
termination of employment for an authorized cause under Arts.
283-284) or to give notice and hearing (in the case of
dismissals for just causes under Art. 282). They regard any
dismissal or layoff without the requisite notice to be null and
void even though there are just or authorized cause for such
dismissal or layoff. Consequently, in their view, the employee
concerned should be reinstated and paid backwages.
The Courts agree with regard to the necessity of rethinking the
sanction of fine for an employer’s disregard of the notice
requirement, but not as to the rendering of the dismissal as null
and void.
If the ​Wenphil rule imposing a fine on an employer who is
found to have dismissed an employee for cause without prior
notice is deemed ineffective in deterring employer violations of
the notice requirement, the remedy is not to declare the
dismissal void if there are just or valid grounds for such
dismissal or if the termination is for an authorized cause. That
would be to uphold the right of the employee but deny the right
of the employer to dismiss for cause. Rather, the remedy is to
order the payment to the employee of full backwages from the
time of his dismissal until the court finds that the dismissal was
for a just cause. But, otherwise, his dismissal must be upheld
and he should not be reinstated. This is because his dismissal
is ineffectual.
For the same reason, if an employee is laid off for any of the
causes in Arts. 283-284, i.e., installation of a labor-saving
device, but the employer did not give him and the DOLE a
30-day written notice of termination in advance, then the
termination of his employment should be considered ineffectual
and he should be paid backwages. However, the termination of
his employment should not be considered void but he should
simply be paid separation pay as provided in Art. 283 in
addition to backwages.
A violation by the employer of the notice requirement cannot
be considered a denial of due process resulting in the nullity of
the employee’s dismissal or layoff. There are three reasons:
1. The Due Process Clause of the Constitution is a
limitation on governmental powers. It does not apply to the
exercise of private power, such as the termination of
employment under the Labor Code.
2. Notice and hearing are required under the Due
Process Clause before the power of organized society are
brought to bear upon the individual. This is obviously not the
case of termination of employment under Art. 283. Here the
employee is not faced with an aspect of the adversary system.
The purpose for requiring a 30-day written notice before an
employee is laid off is not to afford him an opportunity to be
heard on any charge against him, for there is none. The
purpose rather is to give him time to prepare for the eventual
loss of his job and the DOLE an opportunity to determine
whether economic causes do exist justifying the termination of
his employment.
3. The third reason why the notice requirement under
Art. 283 cannot be considered a requirement of the Due
Process Clause is that the employer cannot really be expected
to be entirely an impartial judge of his own cause.
Justice Puno disputes this. He says that "statistics in the DOLE
will prove that many cases have been won by employees
before the grievance committees manned by impartial judges
of the company." The grievance machinery is, however,
different because it is established by agreement of the
employer and the employees and composed of representatives
from both sides.
Not all notice requirements are requirements of due process.
Some are simply part of a procedure to be followed before a
right granted to a party can be exercised. Others are simply an
application of the Justinian precept, embodied in the Civil
Code, to act with justice, give everyone his due, and observe
honesty and good faith toward one's fellowmen. Such is the
notice requirement in Arts. 282-283. The consequence of the
failure either of the employer or the employee to live up to this
precept is to make him liable in damages, not to render his act
(dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee
should have received were it not for the termination of his
employment without prior notice. If warranted, nominal and
moral damages may also be awarded.
Thus, the Court held that with respect to Art. 283 of the Labor
Code, the employer's failure to comply with the notice
requirement does not constitute a denial of due process but a
mere failure to observe a procedure for the termination of
employment which makes the termination of employment
merely ineffectual.
Under the Labor Code, only the absence of a just cause for the
termination of employment can make the dismissal of an
employee illegal. Thus, only if the termination of employment is
not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid
backwages. To contend, as Justices Puno and Panganiban do,
that even if the termination is for a just or authorized cause the
employee concerned should be reinstated and paid backwages
would be to amend Art. 279 by adding another ground for
considering a dismissal illegal. What is more, it would ignore
the fact that under Art. 285, if it is the employee who fails to
give a written notice to the employer that he is leaving the
service of the latter, at least one month in advance, his failure
to comply with the legal requirement does not result in making
his resignation void but only in making him liable for damages.
In sum, we hold that if in proceedings for reinstatement
under Art. 283, it is shown that the termination of
employment was due to an authorized cause, then the
employee concerned should not be ordered reinstated
even though there is failure to comply with the 30-day
notice requirement. Instead, he must be granted
separation pay in accordance with Art. 283. If the
employee's separation is without cause, instead of being
given separation pay, he should be reinstated. In either
case, whether he is reinstated or only granted separation
pay, he should be paid full backwages if he has been laid
off without written notice at least 30 days in advance.
On the other hand, with respect to dismissals for cause
under Art. 282, if it is shown that the employee was
dismissed for any of the just causes mentioned in said
Art. 282, then, in accordance with that article, he should
not be reinstated. However, he must be paid backwages
from the time his employment was terminated until it is
determined that the termination of employment is for a
just cause because the failure to hear him before he is
dismissed renders the termination of his employment
without legal effect.
9. HOTEL ENTERPRISES OF THE PHILS. v.
SAMASAH-NUWHRAIN
FACTS: ​Respondent Union is the certified collective
bargaining agent of the rank-and-file employees of Hyatt
Regency Manila, a hotel owned by petitioner Hotel Enterprises
of the Philippines, Inc. (HEPI).ςHEPI’s business suffered a
slump aggravated by the events of 9/11 in the United States.
The hotel suffered a gross operating loss amounting to roughly
16-million pesos, a staggering decline compared to its
48-million pesos operating profit.
Meanwhile, on August 31, 2001, the Union filed a
notice of strike due to a bargaining deadlock before the
National Conciliation Mediation Board (NCMB). In the course
of the proceedings, HEPI submitted its economic proposals for
the rank-and-file employees covering the years 2001, 2002,
and 2003. It included manning and staffing standards for the
248 regular rank-and-file employees. The Union accepted the
economic proposals. Hence, a new collective bargaining
agreement (CBA) was signed, adopting the manning standards
for the 248 rank-and-file employees.
Petitioner decided to implement a downsizing scheme
after studying the operating costs of its different divisions to
determine the areas where it could obtain significant savings. It
found that the hotel could save on costs if certain jobs, such as
engineering services, messengerial/courier services, janitorial
and laundry services, and operation of the employees'
cafeteria, which by their nature were contractable pursuant to
existing laws and jurisprudence, were abolished and
contracted out to independent job contractors. After evaluating
the hotel's manning guide, the following positions were
identified as redundant or in excess of what was required for
the hotel's actual operation given the prevailing poor business
condition, viz.: a) housekeeping attendant-linen; b) tailor; c)
room attendant; d) messenger/mail clerk; and e) telephone
technician. The effect was to be a reduction of the hotel's
rank-and file employees from the agreed number of 248 down
to just 150.
The Union opposed the downsizing plan because no
substantial evidence was shown to prove that the hotel was
incurring heavy financial losses, and for being violative of the
CBA, more specifically the manning/staffing standards agreed
upon by both parties. In a financial analysis made by the Union
based on Hyatt’s financial statements, it noted that the Hotel
posted a positive profit margin from the year 1998 to 2001.
Moreover, figures comprising the Hotel’s unappropriated
retained earnings showed a consistent increase from 1998 to
2001.
Issue: ​Whether or not petitioner’s downsizing scheme is valid.
Ruling: ​Yes. ​In the case at bar, petitioner justifies the
downsizing scheme on the ground of serious business losses it
suffered in 2001. Some positions had to be declared redundant
to cut losses. In this context, what may technically be
considered as redundancy may verily be considered as a
retrenchment measure. To substantiate its claim, petitioner
presented a financial report covering the years 2000 and 2001
submitted by the SGV & Co., an independent external auditing
firm. From an impressive gross operating profit of
P48,608,612.00 in 2000, it nose-dived to negative
P16,137,217.00 the following year. This was the same financial
report submitted to the SEC and later on examined by
respondent Union's auditor. The only difference is that, in
respondent's analysis, Hyatt Regency Manila was still earning
because its net income from hotel operations in 2001 was
P12,230,248.00. However, if provisions for hotel rehabilitation
as well as replacement of and additions to the hotel's
furnishings and equipments are included, which respondent
Union failed to consider, the result is indeed a staggering
deficit of more than P16 million. The hotel was already
operating not only on a slump in income, but on a huge deficit
as well. In short, while the hotel did earn, its earnings were not
enough to cover its expenses and other liabilities; hence, the
deficit. With the local and international economic conditions
equally unstable, belt-tightening measures logically had to be
implemented to forestall eventual cessation of business.
For a valid retrenchment, the following requisites must
be complied with: (1) the retrenchment is necessary to prevent
losses and such losses are proven; (2) written notice to the
employees and to the DOLE 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 one-half month
pay for every year of service, whichever is higher.
In case of redundancy, the employer must prove that:
(1) a written notice was served on both the employees and the
DOLE at least one month prior to the intended date of
retrenchment; (2) separation pay equivalent to at least one
month pay or at least one month pay for every year of service,
whichever is higher, has been paid; (3) good faith in abolishing
the redundant positions; and (4) adoption of fair and
reasonable criteria in ascertaining which positions are to be
declared redundant and accordingly abolished.
This Court will not hesitate to strike down a
company's redundancy program structured to downsize
its personnel, solely for the purpose of weakening the
union leadership. Our labor laws only allow retrenchment
or downsizing as a valid exercise of management
prerogative if all other else fail. But in this case, petitioner
did implement various cost-saving measures and even
transferred some of its employees to other viable
positions just to avoid the premature termination of
employment of its affected workers. It was when the same
proved insufficient and the amount of loss became certain
that petitioner had to resort to drastic measures to stave
off P9,981,267.00 in losses, and be able to survive.
10. PHILS. AIRLINES v. ISAGANI DAWAL
FACTS: ​On September 1, 2000, PAL severed the employment
of Isagani Dawal (Dawal), Lorna Concepcion (Concepcion),
and Bonifacio Sinobago (Sinobago). Dawal served as Chief
Storekeeper, Concepcion as Master Avionics Mechanic A, and
Sinobago as Aircraft Master "A" Mechanic. Until their dismissal
from work, they were regular rank-and-file employees of PAL
and members of the Phils. Airlines Employees’
Association(PALEA).
When PAL was privatized in 1993, the new owners acquired
PAL's alleged aging fleet and overly manned workforce. PAL
sought to expand its business through a five-year re-fleeting
program. In 1997, the Asian Financial Crisis devalued the
peso against the dollar. PAL claims that this strained its
financial resources. It counts its losses to P750 million in
December 1997 alone. In addition, the Airline Pilots
Association of the Philippines staged a three-week strike on
June 5, 1998. PAL claims that this caused the "further
deterioration of the company's financial condition". PAL
implemented a massive retrenchment program on June 15,
1998.
Under the PAL-PALEA CBA, "in case PAL deems it
necessary to reorganize its corporate structure for the viability
of its operations by forming joint ventures and ​spin-offs,​ PAL
shall do so only after proper consultation with PALEA ​within 45
days before implementation of said reorganization”. No
consultation meeting was held within 45 days. To make up for
this, PAL issued primers to "address questions regarding the
spin-off.” The primers stated that the spin-off aimed to reduce
PAL's costs, improve its performance and efficiency, and
pre-pay its creditors, among others. PAL also allegedly
conducted ​ugnayan sessions with its employees to inform
them of the spin-off.
Under the spin-off program, the following PAL
employees were to be "retrenched" from work: those from the
Maintenance and Engineering Department, and those from
Logistics and Purchasing, Financial Services, and Information
Services Departments doing purely maintenance and
engineering-related tasks, whose work would be absorbed by
Lufthansa. In light of the spin-off of PAL's Maintenance and
Engineering Department and the scheduled start of operations
of Lufthansa, all affected employees were relieved from their
positions. Dawal filed a complaint for illegal dismissal.
ISSUE: ​Whether or not the termination of employment is
justified by an authorized cause.
RULING: No. ​PAL admitted that the dismissal is not based on
retrenchment. The ground PAL actually invoked is redundancy.
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 ... 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.
Redundancy requires good faith in abolishing the
redundant position. To establish good faith, the company must
provide substantial proof that it is overmanned. This is absent
here.
When PAL spun off the engineering and maintenance facilities,
it also created a ​new engineering department called the
Technical Services Department.​179 Moreover, after it fired the
affected employees, PAL offered to rehire the same retrenched
personnel as new employees. The dismissal of the employees
who were later on offered reemployment as new employees of
PAL appears to be merely a ​clever ruse to deprive [Dawal, et
al.], as well as the other employees similarly situated, of the
privileges and benefits to which they are already entitled to by
reason of the length of services they have rendered to PAL.
Even if they base their cause on retrenchment, it
would not lie. Labor Code provides that retrenchment must not
only be "reasonably necessary" to avert serious business
losses; it must also be made in good faith and without ill
motive. Here, PAL has not shown proof that retrenchment was
indeed the remedy of last resort, and that it sought for
retrenchment only after it had pursued all viable options to no
avail. Likewise, PAL has "failed to explain how the rehiring of
the affected employees in the spin-off could possibly alleviate
PAL's financial difficulty." The retrenchment was not done in
good faith, rather, it was induced by ill motive. PAL's job offer is
unmistakably for lower positions, "with substantially diminished
salaries and benefits," and conditioned on their being
considered as new employees. Thus, instead of providing
utmost security and reward to PAL's enduring and loyal
employees, PAL's acts effectively circumvented their security
of tenure and seniority rights.
11. DOLE PHILS. v. NLRC and JUAN BARRANCO, et al.
FACTS: ​Private respondents were Dole's employees of
different ranks and positions. The petition alleges that in
1990 and 1991, Dole carried out a massive manpower
reduction and restructuring program aimed at reducing the total
workforce and the number of positions in the company's table
of organization. Among the factors considered by the company
in undertaking the reduction program was the high
absenteeism rate, which in 1989 accounted for 16% of total
man hours. The high absenteeism rate translated to higher
paid sick leaves, higher operating costs for medical facilities,
and higher transportation costs due to under-filled and late
hauls. Dole also cites "the exacerbation of operating cost
problems due to factors beyond [its] control, i.e., the Gulf War,
oil price increases, mandated wage increases, the 9% import
levy, power rate hikes, [and] increased land rentals," existing at
that time. Furthermore, the "bloody December 1989 coup d'etat
shook investor confidence and put in doubt the continued
economic progress of the country."
Pursuant to its restructuring efforts, Dole abolished
the positions of foremen, bargaining ​capataces ​and foreladies.
Employees occupying these positions were either promoted or
were dismissed on grounds of redundancy. Overall, 2792
employees were separated under the SVR (Special Voluntary
Resignation) Program. A total of P298,199,000.00 in benefits
were paid by Dole to the separated employees. A complaint for
illegal dismissal was filed against DOLE.
ISSUE: ​Whether or not respondents’ dismissal from
employment based on redundancy was valid.
RULING: ​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. ​Dole's
redundancy program does not appear to be tainted by bad
faith. The petition alleges that the redundancy program is part
of a wide-scale restructuring of the company. This purported
restructuring is supported by the company's undisputed history
towards these ends, which culminated in the abolition of
certain positions and the Special Voluntary Resignation
program in 1990-1991. Among the avowed goals of such
restructuring is the reduction of absenteeism in the company.
The harsh economic and political climate then prevailing in the
country also emphasized the need for cost-saving measures.
Reorganization as a cost-saving device is acknowledged by
jurisprudence. An employer is not precluded from adopting a
new policy conducive to a more economical and effective
management​, and the law does not require that the employer
should be suffering financial losses before he can terminate
the services of the employee on the ground of redundancy.
12. ABBOTT LABORATORIES(PHILS.) v. MANUEL
TORRALBA, et al.
FACTS: ​Respondent Roselle P. Almazar (Almazar) was
employed by Abbott as the National Sales Manager of its
PediaSure Division, while respondents Redel Ulysses M.
Navarro (Navarro) and Manuel F. Torralba (Torralba) were
Regional Sales Managers of the same department. Abbott
decided to integrate into one sales unit its PediaSure Division
and its Medical Nutrition Division, both under the Specialty
Nutrition Group. The decision was made after a study, entitled
"Specialty Nutrition Group Sales Force Restructure
Philippines," (Study) revealed that both departments have
similar business models and sales execution methods. As a
result of the merger, respondents' positions were declared
redundant. Abbott informed both the Department of Labor and
Employment (DOLE) and respondents of the latter's
termination effective March 22, 2013 due to redundancy.
Thereafter, the company offered respondents the District Sales
Manager positions, with a lower job rate and with duties and
responsibilities different from that of a National or Regional
Sales Manager.
Respondents filed a complaint for illegal dismissal on
the ground that Abbott allegedly did not observe the criteria of
preference of status, efficiency, and seniority in determining
who among its redundant employees are to be retained.
Abbott maintained that respondents were terminated
for authorized cause; that respondents' functions as sales
managers were redundant because they were already being
performed by the Medical Nutrition Division​.
ISSUE: ​Whether or not the redundancy program was valid.
RULING: ​NO. ​No fair and reasonable criteria was utilized in
determining who among the employees are to be redundated.
Redundancy exists where the services of an
employee are in excess of what is reasonably demanded by
the actual requirement of the enterprise. For a valid
implementation of a redundancy program, the employer must
comply with the following requisites: (1) written notice served
on both the employee and the DOLE at least one month prior
to the intended date of termination; (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 position; and (4) fair and
reasonable criteria in ascertaining what positions are to be
declared redundant. The burden is on the employer to prove by
substantial evidence the factual and legal basis for the
dismissal of its employees on the ground of redundancy.
Petitioner failed to establish compliance with the
fourth requirement since Abbott did not gauge the redundant
employees against the preference criteria of status, efficiency,
and proficiency. However, petitioners are correct in pointing
out that the list of indices in ​Golden Thread is not exhaustive.
Quoting the pertinent portion of the case:
Furthermore, we have laid down the principle in selecting the
employees to be dismissed, a 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.
The data presented in the Study, by itself, does not
satisfy the evidentiary requirement to prove that respondents'
positions should be redundated. While there may be basis for
integrating the PediaSure Division and Medical Nutrition
Division into one unit as demonstrated in the Study, there is no
sufficient basis offered for retaining all the employees in one
unit while dismissing those from the other. It may be that there
are similarities in the functions and responsibilities attached to
the positions in both divisions that resulted in superfluity, but
determining who will occupy the newlymerged position is a
different matter altogether. This required, on the part of the
employer, an evaluation of not just the performance of the
divisions, but of the individual employees who may be affected
by the redundancy program.
Further, the employer's subsequent act of hiring
additional employees is inconsistent with the termination on the
ground of redundancy. In the notice furnished by Abbott to the
DOLE, the company declared that the reason for the
redundancy program, affecting four (4) of its employees, is to
reduce the company's manpower by eliminating positions that
were allegedly superfluous. However, this proffered justification
is readily contradicted by the fact that the affected employees
were offered newly-created District Sales Manager positions
that were entitled to lower pay and benefits. To Our mind, the
redundancy program is then a mere subterfuge to circumvent
respondents' right to security of tenure.
13. SPI Technologies v. Mapua G.R. No. 191154
Facts: ​Mapua, respondent herein, was employed by SPI as
the Corporate Development’s Research/Business Intelligence
Unit Head and Manager of the company. Sometime in October
2006, the hard disk on Mapua’s laptop crashed, causing her to
lose files and date. Mapua immediately informer her supervisor
as well as her colleagues regarding that matter and asked for
their patience for any possible delay on her part in meeting
deadlines. Shortly thereafter, Mapua eventually retrieved the
lost data. However, her supervisor informed her that she was
realigning her position to become a subordinate of a
co-manager due to the missed work deadline. It was likewise
disclosed by the supervisor that Mapua’s colleagues were
demotivated because she was taking things easy while
everyone is working hard. As such, Mapua’s colleagues began
to avoid and ostracize her. The supervisor and Mapua’s
co-manager gave out the majority of her work to the rank and
file staff which led to a substantial reduction of her work
projects and jobs. Mapua then saw a new table of organization
of the Corporate Development Division which would be
renamed as the Marketing Division and showed that Mapua’s
level would downgrade. After a month, she was informed by
her co-manager that she was terminated from employment
because her position was already considered redundant. This
prompted Mapua, to file before the LA a complaint for illegal
dismissal and claiming reinstatement. A recruitment
advertisement of SPI was published in an Inquirer
Advertisement which listed vacancies in SPI, including a
position for Marketing Communications Manager under
Corporate Support – the former group of Mapua. Another
advertisement was again seen by Mapua this time in the
website of Jobstreet posted by Prime Manpower for the
employment of a Corporate Development Manager and after
due investigation she discovered that Prime Manpower was
contracted by SPI.
On their part, SPI contends that they underwent a
reorganization of its structure with the objective of streamlining
its operations, embodied in an issued memorandum, and
discovered that the duties of a Corporate Development
Manager could be performed and were being performed by
other officers and managers of the company. SPI likewise
denied contracting with Prime Manpower but admitted the
Inquirer Advertisement. They maintain that Mapua was a
Corporate Development Manager and not a Marketing
Communications Manager, and that the functions of one are
entirely different from that of the other. The LA ruled that
Mapua was illegally dismissed since the redundancy of the
position of the later has no factual basis. However, the NLRC
reversed the decision of the LA, ruling that the determination of
whether Mapua’s Position as Corporate Development Manager
is redundant is not for her to decide and is essentially a
management prerogative. On appeal, the CA reinstated the
LA’s decision. Hence this petition.
Issue: ​Whether Mapua’s position is redundant to warrant her
dismissal
Ruling: ​NO. ​The primordial consideration is not the
nomenclature or title given to the employee, but the nature of
his functions. It is not the job title but the actual work that the
employee performs. Also change in the job title is not
synonymous to a change in the functions. A position cannot be
abolished by a mere change of job title. In cases of
redundancy, the management should adduce evidence and
prove that a position which was created in place of a previous
one should pertain to functions which are dissimilar and
incongruous to the abolished office. In the present case, the
memorandum made no mention that the position of the
Corporate Development Manager or any other position would
be abolished or deemed redundant. Moreover, SPI admitted
that it caused the Inquirer advertisement for a Marketing
Communications Manager position. And instead of explaining
how the functions of a Marketing Communications Manager
differ from a Corporate Development Manager, SPI hardly
disputed Mapua when it stated that “Judging from the titles or
designation of the positions, it is obvious that the functions of
one are entirely different from that of the other”. SPI, being the
employer, has possession of valuable information concerning
the functions of the offices within its organization.
Nevertheless, it did not even bother to differentiate the two
positions. It was not even discussed why Mapua was not
considered for the position of Marketing Communications
Manager. While SPI had no legal duty to hire Mapua as a
Marketing Communications Manager, it could have clarified
why she is not qualified for that position.
Ocean East Agency, Corp. v. Lopez G.R. No. 194410
Facts: ​Ocean East is a manning agency engaged in
recruitment and deployment of Filipino seamen for overseas
principals. On 1988, Lopez was employed as Documentation
Officer assigned to Ocean East's Operations Department. Prior
to his employment, Ocean East had already engaged the
services of one Grace Reynolds as Documentation Clerk.
Sometime in 1996, it hired one Ma. Corazon P. Hing also as
Documentation Clerk.
As Documentation Clerks and Officer they were tasked to
prepare the line-up of request crew by various principals in
close coordination with the Port Captain; assist in attending to
various operational expenses and disbursements among
others. However on 2001, Ocean East served notice to Lopez
his services will be terminated on the ground of redundancy, as
his position as Documentation Officer is but a duplication of
those occupied by its two (2) other personnel who were also
exercising similar duties and functions. As such, Lopez filled a
complaint for illegal dismissal against Ocean East. However,
both the LA and the NLRC upheld the legality of the dismissal.
Wherein the NLRC ruled that much leeway is granted to the
employer in the implementation of business decisions, such as
streamlining of workforce resulting in displacement of certain
personnel. On appeal the CA, reversed the decision of the
NLRC. The appellate court ruled that there is nothing in the
records that shows that indeed a study was conducted which
led to the termination of Lopez' services on the ground that his
position has become redundant and that Ocean east
committed a fatal error when it failed to give written notice to
the Department of Labor and Employment (DOLE) as required
under Article 283 of the Labor Code. On their part, Ocean East
assert that they have complied with all the 4 requisites that
would warrant the dismissal of Lopez on the ground of
redundancy. Anent their failure to serve notice to DOLE, they
cite d ​Dole Philippines, Inc. v. National Labor Relations
Commission​10 where it was held that the required previous
notice to the DOLE is not necessary when the employee
acknowledged the existence of a valid cause for termination of
his employment. They likewise maintain that fair and
reasonable criteria were used in what positions were to be
declared redundant.
Issue: ​Whether Lopez was legally dismissed
Ruling: ​NO. For the implementation of a redundancy program
to be valid, the employer must comply with these requisites:
(​1) written notice served on both the employee 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.
There is no merit in petitioners' contention that notice to the
DOLE may already be dispensed (case cited by Ocean East
was only an obiter dictum) with since there was no more useful
purpose for it, and he was already adequately compensated as
required by law. Indeed, to dispense with such notice would
not only disregard a clear labor law provision that affords
protection to an employee, but also defeats its very purpose
which is to give the DOLE the opportunity to ascertain the
veracity of the alleged authorized cause of termination.
Moreover, while it is true that 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 exercise of such
judgment must not violate the law and must not be arbitrary or
malicious. ​An employer cannot simply declare that it has
become over​manned and dismiss its employees without
adequate proof to sustain its claim of redundancy. To dispel
any suspicion of bad faith on the part of the employer, it must
present adequate proof of the redundancy, as well as the
criteria in the selection of the employees affected. The
following evidence may be proffered to substantiate
redundancy, to wit: 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.
In this case, petitioners were able to establish through Ocean
East's Quality Procedures Manual that Lopez' position as a
Documentation Officer was redundant because its duties and
functions were similar to those of the Documentation Clerks in
its operations department. However, they failed to prove by
substantial evidence their observance of the fair and
reasonable criteria of seniority and efficiency in ascertaining
the redundancy of the position of Documentation Officer, as
well as good faith on their part in abolishing such position.
Petitioners were unable to justify why it was more efficient to
terminate Lopez rather than its two other Documentation
Clerks, Reynolds and Hing. Also, while Reynolds was
supposedly retained for being more senior than Lopez,
petitioners were silent on why they chose to retain Hing who
was hired in 1996, instead of Lopez who was hired about eight
(8) years earlier in 1988.
15. Beralde vs. Lapanday Agricultural and Development
Corporation G.R. 205685
Facts: ​Respondent herein is engaged in the business of
Banana plantation and exporting of the same. On the other
hand, petitioners are the employees of the aforesaid business.
Between 1992-1994, respondent rentrenced and paid
separation pay to some of its employees in a downsizing effort
but some were rehired afterwards with the promise of the
turn-over of the land they worked on since the same was
covered by CARP. Sometime in 1999, respondent retrenched
again all its employees and offered to pay separation pay.
Meanwhile the land was not over turned since the subject land
was said to be exempted from the coverage of CARP.
Subsequently a new employment contract was entered into by
the petitioner and respondent. And on 2008, respondent issued
a Notice of Termination to all its employees, stating that the
company is instituting a retrenchment program to prevent
losses as a result of the dramatical increase in production cost
and lower productivity. Aggrieved, the petitioners filed a
complaint for illegal dismissal before the LA. On its defense,
respondent avers that It was beset with financial reverses due
to very low productivity, an onslaught of banana diseases and
the adverse effects of the imposition of the aerial spraying ban,
among others. The rendered a decision, dismissing the claim.
However, the same was later reversed by the NLRC and
ordered the reinstatement of the petitioners. On appeal, the CA
upheld the ruling of the LA and upheld the dismissal of the
petitioners. Hence, the petition.
Issue: ​Whether the circumstances warrant the retrenchment
program employed by the respondent
Ruling: ​YES. Retrenchment is the termination of employment
initiated by the employer through no fault of the employees and
without prejudice to the latter, resorted to by management
during periods of business recession; industrial depression; or
seasonal fluctuations, 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 automation. Retrenchment is a
valid management prerogative. It is, however, subject to faithful
compliance with the substantive and procedural requirements
laid down bylaw and jurisprudence. In the discharge of these
requirements, it is the employer who bears the onus, being in
the nature of affirmative defense. Thus, the requirements for
retrenchment are: (1) it is undertaken to prevent losses, which
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) the employer
serves written notice both to the employees and the DOLE at
least one month prior to the intended date of retrenchment;
and (3) the employer pays the retrenched employees
separation pay equivalent to one month pay or at least 1/2
month pay for every year of service, whichever is higher.
In the instant case, Respondent’s financial condition before
and at the time of petitioners' retrenchment, justified
petitioner’s retrenchment. It’s financial condition before and at
the time of the retrenchment clearly paints a picture of a losing
business. An independent auditor confirmed its claim of
financial losses, finding that is suffered a net loss of
Php26,297,297. in 2006 as compared to its net income of
Php14,128,589. in 2005. This net loss ballooned to
Php72,363,879. in 2007.
Moreover, when respondent continued its business operation
and eventually hired some of its retrenched employees and
new employees, it was merely exercising its right to continue
its business. The fact that respondent chose to continue its
business does not automatically make the retrenchment illegal.
We reiterate that in retrenchment, the goal is to prevent
impending losses or further business reversals- it therefore
does not require that there is an actual closure of the business.
Thus, when the employer satisfactorily proved economic or
business losses with sufficient supporting evidence and have
complied with the requirements mandated under the law to
justify retrenchment, as in this case, it cannot be said that the
subsequent acts of the employer to re-hire the retrenched
employees or to hire new employees constitute bad faith.

16. ORIENTAL PETROLEUM v. FUENTES
FACTS: Petitioner informed respondents of its retrenchment
program as a consequence of which respondents would be
terminated from employment. Respondents sought clarification
on the retrenchment package being offered to them.
Respondents requested for additional benefits. Acting on the
request, the petitioner only granted few of these additional
requested benefits. Dissatisfied with petitioner’s counter-offer,
respondents filed separate complaints for illegal retrenchment.
LA: The LA found the retrenchment invalid as there was
allegedly no sufficient basis therefor.
NLRC: The NLRC reversed the LA finding that the petitioner’s
serious financial difficulties necessitated retrenchment of the
respondents as shown by the petitioner’s audited financial
statements.
CA: The CA reinstated the decision of the LA and held that
petitioner failed to prove the existence of substantial losses
that would justify retrenchment of respondents.
ISSUE:​ Whether or not the retrenchment is valid undertaken
RULING:​ NO.
The Court has laid down the following standards that a
company must meet to justify retrenchment:
1. The losses expected should be substantial and not
merely di minimis in extent.
2. The substantial loss apprehended must be
reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer.
3. The retrenchment must be reasonably necessary and
likely to effectively prevent expected losses.
4. The alleged losses if already realized, and the
expected imminent loss sought to be forestalled, must be
proved by sufficient and convincing evidence.
In this case, petitioner presented its audited financial
statements. However, while it is true that the Court has ruled
that financial statements audited by independent external
auditors constitute the normal method of proof of the profit and
loss performance of a Company, financial statements, in
themselves, do not suffice to meet the stringent requirement of
the law that the losses must be substantial, continuing and
without any immediate prospect of abating.
Retrenchment being a measure of last resort, petitioner should
have been able to demonstrate that it expected no abatement
of its losses in the coming years. Petitioner having failed in this
regard, we find that the Court of Appeals did not err in
dismissing as unimpressive and insufficient petitioner's audited
financial statements.
As to the finding of the LA and CA that petitioner failed to show
that it adopted other cost-cutting measures short of
retrenchment, both failed to appreciate the significance of
petitioner’s assertion borne out by the records that it took
several measures prior or parallel to retrenchment, such as (1)
the sale of its shareholdings in Magellan Capital Holdings
Corporation to raise money to pay off the oil drilling operator to
avoid being declared in default; (2) the sale of several of its
assets consisting of cars, townhouse unit, and office
condominium unit (where petitioner holds office), and
equipment like jaw crushers and other scrap materials in the
company's Sabina Mines in Mindanao; (3) the sale of the land,
building and other assets of its wholly-owned subsidiary,
Oriental Mahogany and Woodworks, Inc.; and (4) the call to its
various stockholders to pay all of their unpaid subscriptions to
petitioner's capital stock and offer of pre-emptive rights to its
stockholders for the sale of its Class B Common Stocks to
raise capital to meet its various obligations.
As regards the rule that reasonable criteria be used in effecting
retrenchment, such as but not limited to: (a) less preferred
status (e.g., temporary employee); (b) efficiency; and (c)
seniority, the Court finds that petitioner failed to demonstrate
its transparency and good faith in the implementation of its
decision to retrench respondents. While it contends that the
termination of two (2) non-regular employees ahead of
respondents shows that it complied with the requisite fair and
reasonable criteria, that fact alone is insufficient, considering
the importance this Court has given to the observance of fair
and reasonable criteria in the implementation of a
retrenchment scheme. The petitioner’s contention that it
terminated two non-regular employees first is a bare allegation
and unsatisfactory. Petitioner utterly failed to show that it had
any standard at all in selecting the employees to be
retrenched.
17. FASAP v PAL
Facts: PAL retrenched cabin crew in a retrenchment and
demotion scheme in June 15, 1998 which was made effective
a month later. This case was already decided by the Supreme
Court in 2008 and was again submitted to the Court via a
motion for reconsideration. In 2011, SC Second Division
denied the motion. In 2012, the court en banc assumed
jurisdiction over the case which ultimately led to this decision.
Issue: Whether or not the retrenchment made by PAL of its
1400 cabin crew personnel was valid.
Ruling:​ Yes. The action of PAL was valid.
Retrenchment or downsizing is a mode of terminating
employment initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted to by
management during periods of business recession, industrial
depression or seasonal fluctuations or during lulls over
shortage of materials. It is a reduction in manpower, a measure
utilized by an employer to minimize business losses incurred in
the operation of its business.
Anent retrenchment, Article 298 of the ​Labor Code provides as
follows:
Article 298. ​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 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 closure 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 or to 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.
Accordingly, the employer may resort to retrenchment in order
to avert serious business losses. To justify such retrenchment,
the following conditions must be present, namely:
 1. The retrenchment must be reasonably necessary
and likely to prevent business losses;
2. The losses, if already incurred, are not merely ​de
minimis, but substantial, serious, actual and real, or, if
only expected, are reasonably imminent;
3. The expected or actual losses must be proved by
sufficient and convincing evidence;
4. The retrenchment must be in good faith for the
advancement of its interest and not to defeat or
circumvent the employees' right to security of tenure;
and
5. There must be fair and reasonable criteria m
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.
Based on the July 22, 2008 decision, PAL failed to: (1) prove
its financial losses because it did not submit its audited
financial statements as evidence; (2) observe good faith in
implementing the retrenchment program; and (3) apply a fair
and reasonable criteria in selecting who would be terminated.
Evidently, FASAP’s express recognition of PAL’s grave
financial situation meant that such situation no longer needed
to be proved, the same having become a judicial admission. in
the context of the issues between the parties. As a rule,
indeed, admissions made by parties in the pleadings, or in the
course of the trial or other proceedings in the same case are
conclusive, and do not require further evidence to prove them.
By FASAP’s admission of PAL’s severe financial woes, PAL
was relieved of its burden to prove its dire financial condition to
justify the retrenchment. Thusly, PAL should not be taken to
task for the non-submission of its audited financial statements
in the early part of the proceedings inasmuch as the
non-submission had been rendered irrelevant.
Yet, the July 22, 2008 decision ignored the judicial admission
and unfairly focused on the lack of evidence of PAL’s financial
losses. The Special Third Division should have realized that
PAL had been discharged of its duty to prove its precarious
fiscal situation in the face of FASAP’s admission of such
situation. Indeed, PAL did not have to submit the audited
financial statements because its being in financial distress was
not in issue at all.
After having been placed under corporate rehabilitation and its
rehabilitation plan having been approved by the SEC on June
23, 2008, PAL’s dire financial predicament could not be
doubted. Incidentally, the SEC’s order of approval came a
week after PAL had sent out notices of termination to the
affected employees. It is thus difficult to ignore the fact that
PAL had then been experiencing difficulty in meeting its
financial obligations long before its rehabilitation.
Moreover, the fact that airline operations were capital intensive
but earnings were volatile because of their vulnerability to
economic recession, among others. The Asian financial crisis
in 1997 had wrought havoc among the Asian air carriers, PAL
included. ​The peculiarities existing in the airline business made
it easier to believe that at the time of the Asian financial crisis,
PAL incurred liabilities amounting to ₱90,642,933,919.00,
which were way beyond the value of its assets that then only
stood at ₱85,109,075,35l.
PAL could not have been motivated by ill will or bad faith when
it decided to terminate FASAP’s affected members. On the
contrary, good faith could be justly inferred from PAL’s conduct
before, during and after the implementation of the
retrenchment plan.
Notable in this respect was PAL’s candor towards FASAP
regarding its plan to implement the retrenchment program. This
impression is gathered from PAL’s letter dated February 11,
1998 inviting FASAP to a meeting to discuss the matter, thus:
Roberto D. Anduiza
President
Flight Attendants’ and Stewards' Association of the Philippines
(FASAP)
xxxx
Mr. Anduiza:
Due to critical business losses and in view of severe financial
reverses, Philippine Airlines must undertake drastic measures
to strive at survival. In order to meet maturing obligations
amidst the present regional crisis, the Company will implement
major cost-cutting measures in its fleet plan, operating budget,
routes and frequencies. These moves include the closure of
stations, downsizing of operations and reducing the workforce
through layoff/retrenchment or retirement.
In this connection, the Company would like to meet with the
Flight Attendants' and Stewards’ Association of the Philippines
(FASAP) to discuss the implementation of the
lay-off/retrenchment or retirement of F ASAP-covered
employees. The meeting shall be at the Allied Bank Center
(81h Floor-Board Room) on February 12, 1998 at 4:00 p.m.
This letter serves as notice in compliance with Article 283 of
the Labor Code, as amended and DOLE Orders Nos[.] 9 and
10, Series of 1997.
Very truly yours,
(Sgd.)
JOSE ANTONIO GARCIA
President & Chief Operating Officer
The records also show that the parties met on several
occasions to explore cost-cutting measures, including the
implementation of the retrenchment program. PAL likewise
manifested that the retrenchment plan was temporarily shelved
while it implemented other measures (like termination of
probationary cabin attendant, and work-rotations). ​Obviously,
the dissent missed this part as it stuck to the belief that PAL
did not implement other cost-cutting measures prior to
retrenchment.
Given PAL’s dire financial predicament, it becomes
understandable that PAL was constrained to finally implement
the retrenchment program when the ALPAP pilots strike
crippled a major part of PAL’s operations. As between
maintaining the number of its flight crew and PAL’s survival, it
was reasonable for PAL to choose the latter alternative. This
Court cannot legitimately force PAL as a distressed employer
to maintain its manpower despite its dire financial condition. To
be sure, the right of PAL as the employer to reasonable returns
on its investments and to expansion and growth is also
enshrined in the 1987 Constitution. ​Thus, although labor is
entitled to the right to security of tenure, the State will not
interfere with the employer's valid exercise of its management
prerogative.
18. Lopez Sugar Corp. v. FFW
FACTS:
Petitioner, allegedly to prevent losses due to major economic
problems, and exercising its privilege under Article XI, Section
2 of its 1975-1977 Collective Bargaining Agreement ("CBA")
entered into between petitioner and private respondent
Philippine Labor Union Association ("PLUA-NACUSIP"),
caused the retrenchment and retirement of a number of its
employees.

Thus, on 3 January 1980, petitioner filed with the Bacolod
District Office of the then Ministry of Labor and Employment
("MOLE") a combined report on retirement and application for
clearance to retrench, dated 28 December 1979, 1 affecting
eighty six (86) of its employees. Of these eighty-six (86)
employees, fifty-nine (59) were retired effective 1 January 1980
and twenty-eight (27) were to be retrenched effective 16
January 1980 "in order to prevent losses."
Private respondent Federation of Free Workers (“FFW”), as the
certified bargaining agent of the rank-and-file employees of
petitioner, filed with the Bacolod District Office of the MOLE a
complaint dated 27 December 1979 for unfair labor practices
and recovery of union dues. In said complainant, FFW claimed
that the terminations undertaken by petitioner were violative of
the security of tenure of its members and were intended to
“bust” the union and hence constituted an unfair labor practice.
FFW claimed that after the termination of the services of its
members, petitioner advised 110 casuals to report to its
personnel office. FFW further argued that to justify
retrenchment, serious business reverses must be “actual, real
and amply supported by sufficient and convincing evidence.”
Petitioner denied having hired casuals to replace those it had
retired or retrenched. It explained that the announcement
calling for 110 workers to report to its personnel office was only
for the purpose of organizing a pool of extra workers which
could be tapped whenever there were temporary vacancies by
reason of leaves of absence of regular workers.
Thereafter, another report on retirement affecting an additional
twenty-five (25) employees effective 1 February 1980 was filed
by petitioner. Petitioner filed its Position Paper in NLRC Case
No. A-217-80 contending that certain economic factors
jeopardizing its very existence rendered the dismissals
necessary.
(Petitioner alleged: that under the law, it has the right to reduce
its workforce if made necessary by economic factors which
would endanger its existence, and that for retrenchment to be
valid, it is not necessary that losses be actually sustained. The
existence of valid grounds to anticipate or expect losses would
be sufficient justification to enable the employer to take the
necessary actions to prevent any threat to its survival.)
LA: denied petitioner’s application for clearance to retrench its
employees on the ground that for retrenchment to be valid, the
employer’s losses must be serious, actual and real and must
be amply supported by sufficient and convincing evidence. The
application to retire was also denied on the ground that
petitioner’s prerogative to so retire its employees was granted
by the 1975-77 collective bargaining agreement which
agreement had long ago expired. Petitioner was, therefore,
ordered to reinstate twenty-seven retired or retrenched
employees.
NLRC:​ affirmed the decision of the LA.
ISSUE:
WON petitioner’s application for clearance to retrench its
employees should be granted.
RULING:
NO.
Article 283 of the Labor Code provides:
Article 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
cricumventing the provisions of this Title, by serving a written
notice on the workers and the Ministry of Labor and Employer
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 se 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 financial 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.
(Emphasis supplied)
In its ordinary connotation, he phrase “to revent losses” means
hat retrenchment or termination of the services of some
employees is authorized to be undertaken by the employer
sometime before the losses anticipated are actually sustained
or realized. It is not, in other words, the intention of the
lawmaker to compel the employer to stay his hand and keep all
his employees until sometime after losses shall have in fact
materialized ; 7 if such an intent were expressly written into the
law, that law may well be vulnerable to constitutional attack as
taking property from one man to give to another. This is simple
enough.
At the other end of the spectrum, it seems equally clear that
not every asserted possibility of loss is sufficient legal warrant
for reduction of personnel. Thus, the difficult question is
determination of when, or under what circumstances, the
employer becomes legally privileged to retrench and reduce
the number of his employees.
Firstly, the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to
be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character, the bona fide
nature of the retrenchment would appear to be seriously in
question.
Secondly, the substantial loss apprehended must be
reasonably imminent, as such imminence can be perceived
objectively and in good faith by the employer. There should, in
other words, be a certain degree of urgency for the
retrenchment, which is after all a drastic recourse with serious
consequences for the livelihood of the employees retired or
otherwise laid-off.
Because of the consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to effectively
prevent the expected losses. The employer should have taken
other measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs than labor costs.
Lastly, but certainly not the least important, alleged 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 quantum of proof is
readily apparent: any less exacting standard of proof would
render too easy the abuse of this ground for termination of
services of employees.
The submissions made by petitioner in this respect are
basically that from the crop year 1975-1976 to the crop year
1980-981, the amount of cane deliveries made to petitioner
Central was declining and that the degree of utilization of the
mill’s capacity and the sugar recovery from the cane actually
processed, were similarly declining. Petitioner also argued that
the competition among the existing sugar mills for the limited
supply of sugar cane was lively and that such competition
resulted in petitioner having to close approximately —
thirty-eight (38) of its railroad lines by the end of 1979.
According to the petitioner, the cost of producing one (1) picul
of sugar during the same period
The principal difficulty with petitioner’s case as above
presented was that no proof of actual declining gross and net
revenues was submitted. No audited financial statements
showing the financial condition of petitioner corporation during
the above mentioned crop years were submitted. Since
financial statements audited by independent external auditors
constitute the normal method of proof of the profit and loss
performance of a company, it is not easy to understand why
petitioner should have failed to submit such financial
statements.
Upon the other hand, it appears from the record that petitioner,
after reducing its work force, advised 110 casual workers to
register with the company personnel officer as extra workers.
Petitioner, as earlier noted, argued that it did not actually hire
casual workers but that it merely organize(d] a pool of “extra
workers” from which workers could be drawn whenever
vacancies occurred by reason of regular workers going on
leave of absence. Both the Labor Arbiter and the NLRC did not
accord much credit to petitioner’s explanation but petitioner
has not shown that the Labor Arbiter and the NLRC were
merely being arbitrary and capricious in their evaluation.
19. Sanoh Fulton Phils., Inc. v. Bernardo
FACTS:
Sanoh is a domestic corporation engaged in the manufacture
of automotive parts and wire condensers for home appliances.
Its Wire Condenser Department employed 61 employees.
Respondents belonged to this department.
Emmanuel Bernardo and Samuel Taghoy, the respondents,
belonged to the Wire Condenser department. In view of job
order cancellations relating to the manufacture of wire
condensers by Matsushita, Sanyo and National Panasonic,
Sanoh decided to phase out the Wire Condenser Department.
A grievance conference was held where the affected
employees were informed of the following grounds for
retrenchment: lack of local market, competition from imported
products, and phasing out of Wire Condenser department. Two
succeeding conciliation conferences were likewise held but the
parties failed to reach an amicable settlement.
Complaints for illegal dismissal were filed and Sanoh on its
part, filed a petition for declaration of the partial closure of its
Wire Condenser Department and valid retrenchment of the 17
employees
During the course of the proceedings before the Labor Arbiter,
14 of the 17 employees executed individual quitclaims. Hence,
their interest in the cases was dismissed with prejudice. Only 3
employees, respondents Emmanuel Bernardo and Samuel
Taghoy, and Manny Santos persisted.
The complainants alleged that there was no valid cause for
retrenchment and in effecting retrenchment, there was a
violation of the "first in-last out" and "last in-first out" (LIFO)
policy embodied in the Collective Bargaining Agreement.
Sanoh, on the other hand, asserted that retrenchment was a
valid exercise of management prerogative. Sanoh averred that
some employees who were hired much later were either
assigned to other departments or were bound by the terms of
their job training agreement to stay with the company for 3
years.
LA:​ dismissed the complaint.
NLRC: affirmed the decision of Labor Arbiter, stating that
retrenchment was a valid exercise of management prerogative.
CA: overturned findings of LA and NLRC, and ruled that Sanoh
failed to prove existence of substantial losses that would justify
a valid retrenchment.
ISSUE:
WON the retrenchment was valid.
RULING:
NO​.
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 Department 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 financial reverses, the separation pay shall
be equivalent to one (1) month pay or to 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.
Retrenchment to prevent losses and closure not due to serious
business losses are two separate authorized causes for
terminating the services of an employee. In J.A.T. General
Services v. NLRC, the Court took the occasion to draw the
distinction between retrenchment and closure, to wit:
Closure of business, on one hand, is the reversal of fortune of
the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of
establishment, usually due to financial losses. Closure of
business as an authorized cause for termination of
employment aims to prevent further financial drain upon an
employer who cannot pay anymore his employees since
business has already stopped. On the other hand,
retrenchment is reduction of personnel usually due to poor
financial returns so as to cut down on costs of operations in
terms of salaries and wages to prevent bankruptcy of the
company. It is sometimes also referred to as down-sizing.
Retrenchment is an authorized cause for termination of
employment which the law accords an employer who is not
making good in its operations in order to cut back on expenses
for salaries and wages by laying off some employees. The
purpose of retrenchment is to save a financially ailing business
establishment from eventually collapsing.
The respective requirements to sustain their validity are
likewise different.
For retrenchment, the three (3) basic requirements are: (a)
proof that the retrenchment is necessary to prevent losses or
impending losses; (b) service of written notices to the
employees and to the Department of Labor and Employment at
least one (1) month prior to the intended date of retrenchment;
and (c) payment of 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.14In addition, jurisprudence has
set the standards for losses which may justify retrenchment,
thus:
(1) the losses incurred are substantial and not de minimis; (2)
the losses are actual or reasonably imminent; (3) the
retrenchment is reasonably necessary and is likely to be
effective in preventing the expected losses; and (4) the alleged
losses, if already incurred, or the expected imminent losses
sought to be forestalled, are proven by sufficient and
convincing evidence.15
Upon the other hand, in termination, the law authorizes
termination of employment due to business closure, regardless
of the underlying reasons and motivations therefor, be it
financial losses or not. However, to put a stamp to its validity,
the closure/cessation of business must be bona fide, i.e., its
purpose is to advance the interest of the employer and not to
defeat or circumvent the rights of employees under the law or a
valid agreement.16
In termination cases either by retrenchment or closure, the
burden of proving that the termination of services is for a valid
or authorized cause rests upon the employer. Not every loss
incurred or expected to be incurred by an employer can justify
retrenchment. The employer must prove, among others, that
the losses are substantial and that the retrenchment is
reasonably necessary to avert such losses. And to repeat, in
closures, the bona fides of the employer must be proven.
In this case, there was no valid retrenchment. Nor was there a
closure of business because the Sanoh was not able to
provide a document evidencing the company’s projected
business losses in contrast to respondents’ refutation which
were supported by documentary evidence in the form of four
outstanding orders of condensers of refrigerators.
As the Wire Condenser Department is still in operation and no
business losses were proven by Sanoh, the dismissal of
respondents was unlawful.
20. Me-Shurn Corp. v. Me-Shurn Workers Union
FACTS:
The regular rank and file employees of Me-Shurn Corporation
organized Me-Shurn Workers Union-FSM, an affiliate of the
February Six Movement (FSM). Respondent union had a
pending application for registration with the Bureau of Labor
Relations. Ten days later, petitioner corporation started placing
on forced leave all the rank and file employees who were
members of the union‘s bargaining unit. Respondent union
filed a Petition for Certification Election with the Med-Arbitration
Unit of the DOLE. The corporation filed a comment stating that
it would temporarily lay off employees and cease operations,
on account of its alleged inability to meet the export quota
required by the Board of Investment.
While the Petition was pending, 184 union members allegedly
submitted a retraction/withdrawal thereof. The med-arbiter
dismissed the Petition. DOLE Undersecretary granted the
union‘s appeal and ordered the holding of a certification
election among the rank and file employees of the corporation.
Respondent union filed a Notice of Strike against petitioner
corporation on the ground of unfair labor practice (illegal
lockout and union busting). – Chou Fang Kuen (alias Sammy
Chou, the other petitioner herein) and Raquel Lamayra (the
Filipino administrative manager of the corporation) imposed a
precondition for the resumption of operation and the rehiring of
laid off workers. He allegedly required the remaining union
officers to sign an Agreement containing a guarantee that upon
their return to work, no union or labor organization would be
organized. Instead, the union officers were to serve as
mediators between labor and management. After the signing of
the Agreement, the operations of the corporation resumed. The
union reorganized and elected a new set of officers.
Respondent Rosalina Cruz was elected president. Thereafter,
it filed two Complaints charging petitioner corporation with
unfair labor practice, illegal dismissal, underpayment of wages
and deficiency in separation pay, for which they prayed for
damages and attorney‘s fees. The corporation countered that
because of economic reversals, it was compelled to close and
cease its operations to prevent serious business losses and
invoked the Labor Code regarding authorized causes.
LA: ​dismissed the Complaints for lack of merit. He ruled that
(1) actual and expected losses justified the closure of petitioner
corporation and its dismissal of its employees; (2) the voluntary
acceptance of separation pay by the workers precluded them
from questioning the validity of their dismissal; and (3) the
claim for separation pay lacked factual basis.
NLRC: reversed the Decision of Labor Arbiter Isorena. Finding
petitioners guilty of unfair labor practice, the Commission ruled
that the closure of the corporation shortly after respondent
union had been organized, as well as the dismissal of the
employees, had been effected under false pretenses. The true
reason therefor was allegedly to bar the formation of the union.
Accordingly, the NLRC held that the illegally dismissed
employees were entitled to back wages.
CA: dismissed the Petition because of the failure of petitioners
to submit sufficient proof of business losses. It found that they
had wanted merely to abort or frustrate the formation of
respondent union. The burden of proving that the dismissal of
the employees was for a valid or authorized cause rested on
the employer.
ISSUE:
WON the dismissal of the employees of petitioner Meshurn
Corporation is for an authorized cause.
RULING:
NO.
The reason invoked by petitioners to justify the cessation of
corporate operations was alleged business losses. Yet, other
than generally referring to the financial crisis in 1998 and to
their supposed difficulty in obtaining an export quota,
interestingly, they never presented any report on the financial
operations of the corporation during the period before its
shutdown. Neither did they submit any credible evidence to
substantiate their allegation of business losses.
Basic is the rule in termination cases that the employer bears
the burden of showing that the dismissal was for a just or
authorized cause. Otherwise, the dismissal is deemed
unjustified. Apropos this responsibility, petitioner corporation
should have presented clear and convincing evidence of
imminent economic or business reversals as a form of
affirmative defense in the proceedings before the labor arbiter
or, under justifiable circumstances, even on appeal with the
NLRC.
However, as previously stated, in all the proceedings before
the two quasi-judicial bodies and even before the CA, no
evidence was submitted to show the corporation’s alleged
business losses. It is only now that petitioners have belatedly
submitted the corporation’s income tax returns from 1996 to
1999 as proof of alleged continued losses during those years.
Again, elementary is the principle barring a party from
introducing fresh defenses and facts at the appellate stage.
This Court has ruled that matters regarding the financial
condition of a company -- those that justify the closing of its
business and show the losses in its operations -- are questions
of fact that must be proven below. Petitioners must bear the
consequence of their neglect. Indeed, their unexplained failure
to present convincing evidence of losses at the early stages of
the case clearly belies the credibility of their present claim.
Obviously, on the basis of the evidence -- or the lack thereof --
the appellate court cannot be faulted for ruling that the NLRC
did not gravely abuse its discretion in finding that the closure of
petitioner corporation was not due to alleged financial losses.
21. ​CHENIVER DECO PRINT vs. NLRC
Facts:
On June 5, 1992, petitioner informed its workers about the
transfer of the company from its site in Makati to Sto. Tomas,
Batangas. Petitioner decided to relocate its business in view of
the expiration of the lease contract on the premises it occupied
in Makati and the refusal of the lessor to renew the same.
Earlier, the local authorities also took action to force out
petitioner from Makati because of the alleged hazards
petitioner's plant posed to the residents nearby.1âwpPet
h​i1.nêt
Pet. gave its employees until end of June 1992 to inform the
former of their willingness to transfer to the new site.
Five days later, the union advised petitioner that its members
are not willing to go along with the transfer to the new site.
Nonetheless, petitioner gave its workers additional time within
which to report to the new workplace. Later on, the labor
federation informed petitioner that the employees decided to
continue working for petitioner. However, not one reported for
work at petitioner's new site. It appears that several employees
decided not to work at the new site but just opted to be paid
financial assistance offered by petitioner.
Cases of ID, ULP, underpayment of wages, etc. were filed
against Pet.
LA: Pet’s act of transfer is valid; no ULP nor ID; ordered to pay
separation pay
NLRC: ​affirmed but deleted attorney’s fees
ISSUE: ​WON the transfer of workplace can be considered as
closure or cessation of operation of an establishment or
undertaking not due to serious business losses or reverses
HELD: ​Yes. There is no doubt that petitioner has legitimate
reason to relocate its plant because of the expiration of the
lease contract on the premises it occupied. That is its
prerogative. But even though the transfer was due to a reason
beyond its control, petitioner has to accord its employees some
relief in the form of severance pay.
Since the closure of petitioner's business is not on account of
serious business losses, petitioner shall give private
respondents separation pay equivalent to at least one (1)
month or one-half (1/2) month pay for every year of service,
whichever is higher.
Petitioner's contention that private respondents resigned from
their jobs, does not appear convincing. As public respondent
observed, the subsequent transfer of petitioner to another
place hardly accessible to its workers resulted in the latter's
untimely separation from the service not to their own liking,
hence, not construable as resignation. ​Resignation must be
voluntary and made with the intention of relinquishing the
office, accompanied with an act of relinquishment.
22. ​PHILIPPINE TOBACCO FLUE-CURING & REDRYING
CORPORATION, petitioner, vs. NATIONAL LABOR
RELATIONS COMMISSION
FACTS:
There are two groups of employees, namely, the Lubat group
and the Luris group. The Lubat group is composed of
petitioner’s seasonal employees who were not rehired for the
1994 tobacco season. At the start of that season, they were
merely informed that their employment had been terminated at
the end of the 1993 season. They claimed that petitioner’s
refusal to allow them to report for work without mention of any
just or authorized cause constituted illegal dismissal. In their
Complaint, they prayed for separation pay, back wages,
attorney’s fees and moral damages.
On the other hand, the Luris group is made up of seasonal
employees who worked during the 1994 season. On August 3,
1994, they received a notice informing them that, due to
serious business losses, petitioner planned to close its
Balintawak , Quezon City plant and transfer its tobacco
processing and redrying operations to Ilocos Sur. Although the
closure was to be effective September 15, 1994, they were no
longer allowed to work starting August 4, 1994. Instead,
petitioner awarded them separation pay computed according to
the following formula:
total no. of days actually worked
—————————————————– x daily rate x 15 days
total no. of working days in one year
The cases were consolidated.
ISSUES: (a) ​Did petitioner prove “serious business losses,” its
justification for the nonpayment of separation pay; Was the
dismissal of the employees valid
(b) How should the separation pay of illegally dismissed
seasonal employees be computed.
HELD:
The petition is not meritorious.
(a) Serious Business Losses Not Proven
Article 283 of the Labor Code prescribes the requisites and the
procedure for an employee’s dismissal arising from the closure
or cessation of operation of the establishment.
The present case involves the closure of merely a unit or
division, not the whole business of an otherwise viable
enterprise. Although Article 283 uses the phrase “closure or
cessation of operation of an establishment or undertaking,” ,
the said statutory provision applies in cases of both complete
and partial cessation of the business operation.

The ‘loss’ referred to in Article 283 cannot be just any kind or
amount of loss; otherwise, a company could easily feign
excuses to suit its whims and prejudices or to rid itself of
unwanted employees. To guard against this possibility of
abuse, the Court laid down the following standard which a
company must meet to justify retrenchment:
the losses expected should be substantial and not merely de
minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature of the
retrenchment would appear to be seriously in question.
the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and
in good faith by the employer. There should, in other words,
be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the
livelihood of the employees retired or otherwise laid off.
it must be reasonably necessary and likely to effectively
prevent the expected losses.
alleged losses if already realized, and the expected imminent
losses sought to be forestalled, must be proved by sufficient
and convincing evidence.
Petitioner did not actually close its entire business. It merely
transferred or relocated its tobacco processing and redrying
operations. Moreover, it was also engaged in, among others,
corn and rental operations, which were unaffected by the
closure of its Balintawak plant. Petitioner was not able to prove
serious financial losses arising from its tobacco operations.
Petitioner was not able to establish that the closure of its
business operations in its Balintawak plant was in fact due to
serious financial losses. Therefore, under the last two
sentences of Article 283 of the Labor Code, the dismissed
employees belonging to the Luris group are entitled to
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. A fraction of at least six (6) months shall be considered
one (1) whole year.”
(b) Amount of Separation Pay
Petitioner posits that the separation pay of a seasonal worker,
who works for only a fraction of a year, should not be equated
with that of a regular worker. Positing that the total number of
working days in one year is 303 days, petitioner submits the
following formula for the computation of a seasonal worker’s
separation pay:
Total No. of Days Actually Worked
————————————————— X Daily Rate X 15
days
Total No. Of Working Days In One Year
Private respondents, on the other hand, claim that their
separation pay should be based on the actual number of years
they have been in petitioner’s service.
The amount of separation pay is based on two factors: the
amount of monthly salary and the number of years of service.
Although the Labor Code provides different definitions as to
what constitutes “one year of service,” Book Six does not
specifically define “one year of service” for purposes of
computing separation pay. However, Articles 283 and 284
both state in connection with separation pay that a fraction of
at least 6 months shall be considered one whole year.
Applying this to the case at bar, we hold that the amount of
separation pay which respondent members of the Lubat and
Luris groups should receive is 1/2 their respective average
monthly pay during the last season they worked multiplied by
the number of years they actually rendered service, provided
that they worked for at least six months during a given year.
The formula that petitioner proposes, wherein a year of work is
equivalent to actual work rendered for 303 days, is both unfair
and inapplicable, considering that Articles 283 and 284 provide
that in connection with separation pay, a fraction of at least six
months shall be considered one whole year. Under these
provisions, an employee who worked for only six months in a
given year — which is certainly less than 303 days — is
considered to have worked for one whole year.
WHEREFORE, the assailed Decision of Respondent NLRC is
hereby AFFIRMED WITH THE MODIFICATION.
23. Deoferio vs. Intel Technology Philippines, Inc.
FACTS:
In 1996, Intel hired Marlo Deoferio as a product quality and
reliability engineer with a monthly salary of P9,000.00.
In 2001, Deoferio was assigned to the US as validation
engineer for two years, with a monthly salary of US$3,000.00.
In 2002, Deoferio was repatriated to the Philippines after being
confined at Providence St. Vincent Medical Center for major
depression with psychosis.
In the Philippines, Deoferio worked as a product engineer with
a monthly salary of P23,000.00 and underwent a series of
medical and psychiatric treatment at Intel’s expense after his
confinement in the US.
Dr. Elizabeth Rondain of Makati Medical Center diagnosed him
to be suffering from mood disorder, major depression, and
auditory hallucination. He was also referred to Dr. Norieta
Balderrama, Intel’s forensic psychologist, and to a certain Dr.
Cynthia Leynes who both confirmed his mental condition.
In 2005, Dr. Paul Lee, a consultant psychiatrist of the
Philippine General Hospital, concluded that Deoferio was
suffering from schizophrenia. After several consultations, Dr.
Lee issued a psychiatric report dated January 17, 2006
concluding and stating that Deoferio’s psychotic symptoms are
not curable within a period of six months and “will negatively
affect his work and social relation with his co- worker[s].”
Pursuant to these findings, Intel issued Deoferio a notice of
termination on March 10, 2006.
Deoferio filed a complaint for illegal dismissal with prayer for
money claims, denying that he ever had mental illness and
insisting his satisfactory performance as product engineer. He
argued that Intel violated his statutory right to procedural due
process when it summarily issued a notice of termination.
Intel argued that Deoferio’s dismissal was based on Dr. Lee’s
certification. It claimed that Deoferio’s presence at Intel’s
premises would pose an actual harm to his co-employees as
shown by his previous acts [On May 8, 2003, Deoferio emailed
an Intel employee with this message: “All soul’s day back to
work Monday WW45.” On January 18, 2005, he cut the mouse
cables, stepped on the keyboards, and disarranged the desks
of his co-employees.] Also, he incurred numerous absences
and took an administrative leave due to his medical condition.
Further, Intel asserted that the twin-notice requirement in
dismissals does not apply to terminations under Article 284 of
the Labor Code and that only a competent public health
authority’s certification is required to terminate the employee.

Labor Arbiter: Deoferio had been validly dismissed. The LA
gave weight to Dr. Lee’s certification that Deoferio had been
suffering from schizophrenia and was not fit for employment. It
further held that the Labor Code and its IRR do not require the
employer to comply with the twin-notice requirement in
dismissals due to disease.
NLRC​: Affirmed LA’s ruling.
CA: ​Affirmed NLRC and CA. It ruled that the only procedural
requirement under the IRR is the certification by a competent
public health authority on the non-curability of the disease
within a period of six months even with proper medical
treatment.
Hence, this petition. Deoferio argues that the uniform finding
that he was suffering from schizophrenia is belied by his
subsequent employment at Maxim Philippines Operating Corp.
and Philips Semiconductors Corp., which both offered him
higher compensations. He also asserts that the Labor Code
does not exempt the employer from complying with the
twin-notice requirement in terminations due to disease.
ISSUE: ​Whether the twin-notice requirement in dismissals
applies to terminations due to disease
HELD: · ​The twin-notice requirement  ​applies to
terminations under Article 284 of the Labor Code.
The Labor Code and its IRR are silent on the procedural due
process required in terminations due to disease. Despite the
seeming gap in the law, Section 2, Rule 1, Book VI of the IRR
expressly states that the employee should be afforded
procedural due process in all cases of dismissals.
In ​Sy v.Court of Appeals and ​Manly Express, Inc. v. Payong,
Jr.,​ promulgated in 2003 and 2005, respectively, the Court
finally pronounced the rule that the ​employer must furnish the
employee two written notices in terminations due to disease,
namely: (1) the notice to apprise the employee of the ground
for which his dismissal is sought; and (2) the notice informing
the employee of his dismissal, to be issued after the employee
has been given reasonable opportunity to answer and to be
heard on his defense. These rulings reinforce the State policy
of protecting the workers from being terminated without cause
and without affording them the opportunity to explain their side
of the controversy.
24. G.R. No. 204944-45 December 3, 2014
FUJI TELEVISION NETWORK, INC., Petitioner,
vs.
ARLENE S. ESPIRITU, Respondent.
Facts: In 2005, Arlene S. Espiritu ("Arlene") was engaged by
Fuji Television Network, Inc. ("Fuji") as a news
correspondent/producer ​"tasked to report Philippine news to
Fuji through its Manila Bureau field office." ​Arlene’s
employment contract initially provided for a term of one (1)
year but was successively renewed on a yearly basis with
salary adjustment upon every renewal. ​Sometime in January
2009, Arlene was diagnosed with lung cancer. ​She informed
Fuji about her condition. In turn, the Chief of News Agency of
Fuji, Yoshiki Aoki, informed Arlene "that the company will have
a problem renewing her contract" ​since it would be difficult for
her to perform her job. ​She "insisted that she was still fit to
work as certified by her attending physician."
After several verbal and written communications, ​Arlene and
Fuji signed a non-renewal contract on May 5, 2009 where it
was stipulated that her contract would no longer be renewed
after its expiration on May 31, 2009. The contract also provided
that the parties release each other from liabilities and
responsibilities under the employment contract.
In consideration of the non-renewal contract, Arlene
"acknowledged receipt of the total amount of US$18,050.00
representing her monthly salary from March 2009 to May 2009,
year-end bonus, mid-year bonus, and separation pay."
However, Arlene affixed her signature on the nonrenewal
contract with the initials "U.P." for "under protest."
On May 6, 2009, the day after Arlene signed the non-renewal
contract, she filed a complaint for illegal dismissal and
attorney’s fees with the National Capital Region Arbitration
Branch of the National Labor Relations Commission.
Issues: Whether or not the disease of the respondent is a valid
ground for her dismissal
Ruling: ​For dismissal under Article 284 to be valid, two
requirements must be complied with: (1) the employee’s
disease cannot be cured within six (6) months and his
"continued employment is prohibited by law or prejudicial to his
health as well as to the health of his co-employees"; and (2)
certification issued by a competent public health authority that
even with proper medical treatment, the disease cannot be
cured within six (6) months. ​The burden of proving compliance
with these requisites is on the employer. Noncompliance leads
to the conclusion that the dismissal was illegal.
There is no evidence showing that Arlene was accorded due
process. After informing her employer of her lung cancer, she
was not given the chance to present medical certificates. Fuji
immediately concluded that Arlene could no longer perform her
duties because of chemotherapy. It did not ask her how her
condition would affect her work. Neither did it suggest for her to
take a leave, even though she was entitled to sick leaves.
Worse, it did not present any certificate from a competent
public health authority. What Fuji did was to inform her that her
contract would no longer be renewed, and when she did not
agree, her salary was withheld. Thus, the Court of Appeals
correctly upheld the finding of the National Labor Relations
Commission that for failure of Fuji to comply with due process,
Arlene was illegally dismissed.
25. TRIPLE EIGHT INTEGRATED SERVICES, INC.,
petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, HON.
LABOR ARBITER POTENCIANO S. CANIZARES, JR. and
ERLINDA OSDANA, respondents.
Facts: Private respondent Osdana was recruited by petitioner
for employment with the latter's principal, Gulf Catering
Company (GCC), a firm based in the Kingdom of Saudi Arabia.
Under the original employment contract, Osdana was engaged
to work as "Food Server" for a period of thirty-six (36) months
with a salary of five hundred fifty Saudi rials (SR550).
Osdana claims she was required by petitioner to pay a total of
P11,950.00 in placement fees and other charges, for which no
receipt was issued. She was likewise asked to undergo a
medical examination conducted by the Philippine Medical
Tests System, a duly accredited clinic for overseas workers,
which found her to be "Fit of Employment."
Subsequently, petitioner asked Osdana to sign another
"Contractor Employee Agreement" which provided that she
would be employed as a waitress for twelve (12) months with a
salary $280. It was this employment agreement which was
approved by the Philippine Overseas Employment
Administration (POEA).
Osdana then left for Riyadh, Saudi Arabia, and commenced
working for GCC. She was assigned to the College of Public
Administration of the Oleysha University and, contrary to the
terms and conditions of the employment contract, was made to
wash dishes, cooking pots, and utensils, perform janitorial work
and other tasks which were unrelated to her job designation as
waitress. Making matters worse was the fact that she was
made to work a gruelling twelve-hour shift, from six o'clock in
the morning to six o'clock in the evening, without overtime pay.
Because of the long hours and the strenuous nature of her
work, Osdana suffered from numbness and pain in her arms.
She was twice confined in the Ladies Villa without any
compensation, even when she returned to work. She was then
diagnosed with Bilateral Carpal Tunnel Syndrome, a condition
precipitated by activities requiring repeated flexion, pronation,
and supination of the wrist and characterized by excruciating
pain and numbness in the arms. She underwent to surgical
operations and was not given anymore nor compensation. She
was then dismissed from her work on the ground of illness
without any separation pay nor backwages.
Issue: Whether or not there was an authorized cause for her
dismissal
Ruling: No. Osdana's continued employment despite her
illness was not prohibited by law nor was it prejudicial to her
health, as well as that of her co-employees. In fact, the medical
report issued after her second operation stated that "she had
very good improvement of the symptoms." Besides, "Carpal
Tunnel Syndrome" is not a contagious disease.
Petitioner attributes good faith on the part of its principal,
claiming that "It was the concern for the welfare and physical
well-being of private respondent that drove her employer to
take the painful decision of terminating her from the service
and having her repatriated to the Philippines at its expense.
The employer did not want to risk the aggravation of the illness
of private respondent which could have been the logical
consequence were private respondent allowed to continue with
her job."
The Court notes, however, that aside from these bare
allegations, petitioner has not presented any medical certificate
or similar document from a competent public health authority in
support of its claims.
On the medical certificate requirement, petitioner erroneously
argues that "private respondent was employed in Saudi Arabia
and not here in the Philippines. Hence, there was a physical
impossibility to secure from a Philippine public health authority
the alluded medical certificate that public respondent's illness
will not be cured within a period of six months."
Petitioner entirely misses the point, as counsel for private
respondent states in the Comment. The rule simply prescribes
a "certification by a competent public health authority" and not
a "Philippine public health authority."
If, indeed, Osdana was physically unfit to continue her
employment, her employer could have easily obtained a
certification to that effect from a competent public health
authority in Saudi Arabia, thereby heading off any complaint for
illegal dismissal.
26. G.R. No. 142293 February 27, 2003
VICENTE SY, TRINIDAD PAULINO, 6B’S TRUCKING
CORPORATION, and SBT TRUCKING CORPORATION,
petitioners,
vs.
HON. COURT OF APPEALS and JAIME SAHOT,
respondents.
Facts: Sometime in 1958, private respondent Jaime Sahot
started working as a truck helper for petitioners’ family-owned
trucking business named Vicente Sy Trucking. In 1965, he
became a truck driver of the same family business, renamed T.
Paulino Trucking Service, later 6B’s Trucking Corporation in
1985, and thereafter known as SBT Trucking Corporation since
1994. Throughout all these changes in names and for 36
years, private respondent continuously served the trucking
business of petitioners.
In April 1994, Sahot was already 59 years old. He had been
incurring absences as he was suffering from various ailments.
Particularly causing him pain was his left thigh, which greatly
affected the performance of his task as a driver. He inquired
about his medical and retirement benefits with the Social
Security System (SSS) on April 25, 1994, but discovered that
his premium payments had not been remitted by his employer
.
Sahot had filed a week-long leave sometime in May 1994. On
May 27th, he was medically examined and treated for EOR,
presleyopia, hypertensive retinopathy, HPM, UTI,
Osteoarthritis, and heart enlargement. On said grounds, Belen
Paulino of the SBT Trucking Service management told him to
file a formal request for extension of his leave. At the end of his
week-long absence, Sahot applied for extension of his leave
for the whole month of June, 1994. It was at this time when
petitioners allegedly threatened to terminate his employment
should he refuse to go back to work.
At this point, Sahot found himself in a dilemma. He was facing
dismissal if he refused to work, But he could not retire on
pension because petitioners never paid his correct SSS
premiums. The fact remained he could no longer work as his
left thigh hurt abominably. Petitioners ended his dilemma. They
carried out their threat and dismissed him from work, effective
June 30, 1994. He ended up sick, jobless and penniless.
Issue: ​Whether or not there was a valid dismissal
Ruling: No. In the case at bar, the employer clearly did not
comply with the medical certificate requirement before Sahot’s
dismissal was effected. Since the burden of proving the validity
of the dismissal of the employee rests on the employer, the
latter should likewise bear the burden of showing that the
requisites for a valid dismissal due to a disease have been
complied with. In the absence of the required certification by a
competent public health authority, this Court has ruled against
the validity of the employee’s dismissal. It is therefore
incumbent upon the private respondents to prove by the
quantum of evidence required by law that petitioner was not
dismissed, or if dismissed, that the dismissal was not illegal;
otherwise, the dismissal would be unjustified. This Court will
not sanction a dismissal premised on mere conjectures and
suspicions, the evidence must be substantial and not arbitrary
and must be founded on clearly established facts sufficient to
warrant his separation from work.
27. GENERAL TEXTILE VS. NLRC
FACTS: ​Private Respondent ​RODOLFO LOPEZ ​was
employed by ​GENTEX ​as machine operator. ​Lopez fell ill and
was later diagnosed as suffering from moderately
advanced pulmonary tuberculosis. He went on sick leave
upon the advice of the company physician. Lopez went to
Gentex with the intention of returning to work. He was instead
told by the company physician to extend his leave for another
six months. Gentex sent Lopez a Notice of Termination on the
ground that he had been absent without official leave (AWOL).
Lopez filed a complaint for illegal dismissal. Petitioners
contended that Lopez abandoned work.
LA​: ordered the reinstatement of Lopez with full back wages,
subject to his fitness to work.
NLRC: there was no abandonment. However, Lopez’
reinstatement could not be forced upon Gentex, since there
was showing that his ​pulmonary tuberculosis was already
arrested.
ISSUE: ​WON Lopez may be separated from employment on
the ground of illness
RULING: NO​. ​Disease as a ground for dismissal explicitly
requires a certification by a competent public health
authority that the disease is of such nature or at such a stage
that ​it cannot be cured within a period of six months even
with proper medical treatment​. There is ​no showing that
such a certification was presented in the course of the
proceedings before the Labor Arbiter and NLRC. In fact, in its
Memorandum submitted in the case, petitioners stated: "It is a
fact that Lopez is ill with PTB for more than one year. Thus, it
is a more conclusive proof that his illness, which is undeniably
contagious, cannot be cured for (sic) a period of six months,
than a certification from a public health officer as required by
the rules implementing said Article 284 of the Labor Code.”
This statement can only mean that petitioners deemed a
certification superfluous and did not submit one.
Notwithstanding the lack of a certification, we cannot ignore the
fact that Lopez has been suffering from pulmonary tuberculosis
in its moderately advanced stage. Hence, although we must
rule in favor of Lopez' reinstatement to which he is entitled by
virtue of the illegality of his dismissal, such reinstatement must
be subject to his fitness to resume work.
28. DUTERTE vs. KINGSWOOD
FACTS: DUTERTE ​was hired a truck/trailer driver by
KINGSWOOD (KTC). ​Duterte was on the 6AM – 6PM shift. ​On
November 8, 1998, petitioner had his first ​heart attack and
was confined for two weeks at the Philippine Heart Center
(PHC). This was confirmed by respondent KTC which admitted
that petitioner was declared on sick leave with corresponding
notification. ​A month later, petitioner returned to work armed
with a medical certificate signed by his attending physician at
the PHC, attesting to petitioner’s fitness to work. However, said
certificate was not honored by the respondents who refused to
allow petitioner to work. Duterte suffered a ​second heart
attack ​and was again confined at the PHC. Upon release, he
stayed home and spent time to recuperate. He ​attempted to
report back to work but was told to look for another job
because he was unfit. Respondents refused to declare
petitioner fit to work unless physically examined by the
company physician. ​Duterte filed against his employer a
complaint for illegal dismissal and damages.
LA: ​ruled that complainant have been terminated from
employment on the ground that he has been suffering from a
disease.
NLRC: ​Art. 284 has no application to this case, there being no
illegal dismissal to speak of.
CA: ​upheld NLRC resolution
ISSUE: ​WON he can be separated from employment on the
ground of illness
HELD: NO. ​In a very real sense, ​both the NLRC and the
appellate court placed on the petitioner the burden of
establishing​, by a certification of a competent public authority,
that his ailment is such that it cannot be cured within a period
of six months even with proper medical treatment. And
pursuing their logic, petitioner could not claim having been
illegally dismissed due to disease, failing, as he did, to present
such certification. The law is unequivocal: the employer,
before it can legally dismiss its employee on the ground of
disease, ​must adduce a certification from a competent
public authority that the disease of which its employee is
suffering is of such nature or at such a stage that it cannot be
cured within a period of six months even with proper treatment.
Here, the record does not contain the required
certification. ​And when the respondents asked the petitioner
to look for another job because he was unfit to work, such
unilateral declaration, even if backed up by the findings of its
company doctors, did not meet the quantum requirement
mandated by the law, ​i.e.​ , there must be a certification by a
competent public authority.
29. SOLIS vs NLRC
FACTS: Pedro Solis was employed as an underground miner
by private respondent ​Philex. Due to constant exposure to the
elements in the mining area, Solis became ill and was
medically diagnosed sometime in 1983 to be afflicted with
Koch's infection. The examining physicians recommended
that Solis be assigned to surface work to facilitate his speedy
recovery from the illness. This recommendation were not
heeded by Philex. In his medical check-up at the Baguio
General Hospital and Medical Center, Solis was diagnosed to
be suffering from: tuberculosis, bronchial, asthma and
arthralgia and was declared unfit to continue working for
underground mine. He was accordingly dismissed by Philex.
After his dismissal from service, Solis submitted himself for
medical examination in another hospital, the Baguio Filipino
Chinese Hospital, which issued a medical certificate declaring
him physically fit. Armed with this new medical certificate, he
went back to Philex demanding reinstatement, but to no avail.
Solis sued Philex for illegal dismissal. ​In its position paper,
Philex alleged that the dismissal is valid since Solis was
suffering from contagious diseases​. The ​LA found Solis’
dismissal was illegal. ​NLRC also ruled that he was illegally
dismissed.
ISSUE: WON he can be dismissed under Art. 284 (Disease as
ground for termination)
RULING. NO. The implementing rules of Art. 284 requires ​two
requirements: ​(a) the employee is afflicted with a ​disease that
cannot be cured within six (6) months​, and (b) a ​certification to
that effect must be ​issued by a competent public health
authority. ​The Court found nothing in the medical certificate
issued by the Baguio General Hospital which states that Solis’
ailment cannot be cured within six months. ​The statement
that Solis was "unfit to work underground" does not mean
that his ailment cannot be cured within six months. In fact,
a subsequent medical examination from another hospital less
than six months from the first medical check-up showed that
Solis was still physically fit. This negates Philex's assertion that
the dismissal is valid. In dismissal cases, the employer has the
burden of proving that the termination from service of an
employee is for a valid or authorized cause. Philex failed to
discharged that burden in the case at bench.
CASE 30
G.R. No. 167727 July 30, 2007
CRAYONS PROCESSING, INC., Petitioner,
vs.
FELIPE PULA and COURT OF APPEALS (Fifth Division),
FACTS:
Felipe Pila was a preparation machine operator by Crayons
Processing inc. He suffered a heart attack and was rushed to
the hospital and confined for a week. His wife duly notified
Crayons Processing of her husband’s condition. Upon his
discharge from the hospital, Pula was advised by his attending
physician to take a leave of absence from work and rest for
three (3) months. Subsequently, Pula underwent an
Angiogram Test at the Philippine Heart Center under the
supervision of a Dr. Recto, who advised him to take a
two-week leave from work
Following the angiogram procedure, respondent was certified
as "fit to work" by Dr. Recto and Pula returned to work, but 13
days later, he was taken to the company clinic after
complaining of dizziness.
Diagnosed as having suffered a relapse, he was advised by his
physician to take a leave of absence from work for one (1)
month. Pula then reported back to work, with a certification of
“fit to work” but he was not assigned any post, and was later on
asked to resign. But he was given 12k as financial assistance.
Pula then filed a case for illegal dismissal.
LA: There was illegal dismissal
LA DECISION: Labor Arbiter concluded as evident from the
facts that Pula was illegally dismissed and "denied his right to
security of tenure when he was not allowed to work on 13 June
2000." Rejecting Crayons’ contention that Pula’s ailment was a
proper reason to dismiss him, the Labor Arbiter stressed that
no evidence was presented to show that his illness could not
be cured within the period of six months. It was pointed out that
under Section 8, Rule I, Book VI of the Omnibus Rules
Implementing the Labor Code, implementing in particular
Article 284 of the Labor Code, termination on the ground of
disease is prohibited unless there is a certification by a
competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period
of six months even with proper medical treatment.
NLRC: valid cause for dismissal
CA: There was illegal dismissal
ISSUE: Whether or not there was a valid cause for dismissal?
HELD:
No. There was no valid cause for dismissal. The NLRC ruled
incorrectly. The LA decision should be reinstated. The
termination as upheld by the NLRC was grounded on Article
284 of the Labor Code, which reads:
An employer may terminate the services of an employee who
has been found to be suffering from any disease and whose
continued employment is prohibited by law or is prejudicial to
his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least
one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six
(6) months being considered as one (1) whole year.
The particular manner by which it is determined that the
employee is suffering from the disease of such character as
expressed in Article 284 is in turn spelled out in Section 8, Rule
I, Book VI of the Omnibus Rules Implementing the Labor Code,
which provides:
Sec. 8. Disease as a ground for dismissal. — Where the
employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or
to the health of his co-employees, the employer shall not
terminate his employment unless there is a certification by a
competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. If the
disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the
restoration of his normal health.
For a dismissal on the ground of disease to be considered
valid, two requisites must concur: (a) the employee must be
suffering from a disease which cannot be cured within six
months and his continued employment is prohibited by law or
prejudicial to his health or to the health of his co-employees;
and (b) a certification to that effect must be issued by a
competent public health authority. The burden falls upon the
employer to establish these requisites and in the absence of
such certification, the dismissal must necessarily be declared
illegal. As succinctly stressed in Tan v. NLRC,"it is only where
there is a prior certification from a competent public authority
that the disease afflicting the employee sought to be dismissed
is of such nature or at such stage that it cannot be cured within
six (6) months even with proper medical treatment that the
latter could be validly terminated from his job.
Without the required certification, the characterization or even
diagnosis of the disease would primarily be shaped according
to the interests of the parties rather than the studied analysis of
the appropriate medical professionals. The requirement of a
medical certificate under Article 284 cannot be dispensed with;
otherwise, it would sanction the unilateral and arbitrary
determination by the employer of the gravity or extent of the
employee's illness and thus defeat the public policy in the
protection of labor.
The NLRC’s conclusion that no such certification was required
since Pula had effectively been absented due to illness for
more than six (6) months is unsupported by jurisprudence and
plainly contrary to the language of the Implementing Rules.
The indefensibility of such conclusion is further heightened by
the fact that Pula was able to obtain two different medical
certifications attesting to his fitness to resume work. Assuming
that the burden did fall on Pula to establish that he was fit to
return to work, those two medical certifications stand as
incontestable in the absence of contrary evidence of similar
nature from Crayons. Then again, the burden lies solely on
Crayons to prove that Pula was unfit to return to work. Even
absent the certifications favorable to Pula, Crayons would still
be unable to justify his dismissal on the ground of ill health or
disease, without the necessary certificate from a competent
public health authority.
CASE 31 : CEBU ROYAL PLANT VS DEPUTY MINISTER
FACTS:
Ramon Pilones, private respondent, was employed on
February 16, 1978 on a probationary period of employment for
six (6) months with petitioner CRP. After said period, he
underwent medical examination for qualification as regular
employee but the results showed that he is suffering from PTB
minimal. Consequently, he was informed of the termination of
his employment by respondent since his illness was not
curable within 6 months.
Pilones complained against his termination before the Ministry
of Labor which dismissed the same. The dismissal was
reversed by the public respondent who ordered the
reinstatement and payment of back wages.
Granting reinstatement, the public respondent argues that
Pilones was already a permanent employee at the time of his
dismissal and so was entitled to security of tenure. The alleged
ground for his removal, to wit, “pulmonary tuberculosis
minimal,” was not certified as incurable within six months as to
justify his separation and that the petitioner should have first
obtained a clearance, as required by the regulations then in
force, for the termination of his employment.
CRP claims that the private respondent was still on probation
at the time of his dismissal and so had no security of tenure.
The dismissal was necessary for the protection of the public
health, as he was handling ingredients in the processing of soft
drinks which were being sold to the public.
We are satisfied that whether his employment began on
February 16, 1978, or even earlier as he claims, the private
respondent was already a regular employee when he was
dismissed on August 21, 1978. As such, he could validly claim
the security of tenure guaranteed to him by the Constitution
and the Labor Code.
ISSUE: Whether or not there was a valid dismissal?
HELD: No. The dismissal was not valid. The employee in this
case was already a regular empolyee.
The applicable rule on the ground for dismissal invoked against
him is Section 8, Rule I, Book VI, of the Rules and Regulations
Implementing the Labor Code reading as follows:
Sec. 8. Disease as a ground for dismissal. — Where the
employee suffers from a disease and his continued
employment is prohibited by law or prejudicial to his health or
to the health of his co-employees, the employer shall not
terminate his employment unless there is a certification by a
competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period
of six (6) months even with proper medical treatment. If the
disease or ailment can be cured within the period, the
employer shall not terminate the employee but shall ask the
employee to take a leave. The employer shall reinstate such
employee to his former position immediately upon the
restoration of his normal health.
The record does not contain the certification required by the
above rule. The medical certificate offered by the petitioner
came from its own physician, who was not a "competent public
health authority," and merely stated the employee's disease,
without more. We may surmise that if the required certification
was not presented, it was because the disease was not of such
a nature or seriousness that it could not be cured within a
period of six months even with proper medical treatment. If so,
dismissal was unquestionably a severe and unlawful sanction.
It is also worth noting that the petitioner's application for
clearance to terminate the employment of the private
respondent was filed with the Ministry of Labor only on August
28, 1978, or seven days after his dismissal. As the NLRC has
repeatedly and correctly said, the prior clearance rule (which
was in force at that time) was not a "trivial technicality." It
required "not just the mere filing of a petition or the mere
attempt to procure a clearance" but that "the said clearance be
obtained prior to the operative act of termination.
The record does not contain the certification required by the
above rule. Hence, dismissal was illegal.
CASE 32
G.R. No. 166377 November 28, 2008
MA. ISABEL T. SANTOS, represented by ANTONIO P.
SANTOS, petitioner,
vs.
SERVIER PHILIPPINES, INC. and NATIONAL LABOR
RELATIONS COMMISSION, respondents.
Petitioner Ma. Isabel T. Santos was the Human Resource
Manager of respondent Servier Philippines, Inc. They went to
Paris and while having dinner, petitioner. complained of
stomach pain, then vomited. Eventually, she was brought to
the hospital known as Centre Chirurgical de L'Quest where she
fell into coma for 21 days. She was confined at the Intensive
Care Unit (ICU) for 52 days. According to the findings, the
probable cause of her sudden attack was "alimentary allergy,"
as she had recently ingested a meal of mussels which resulted
in a concomitant uticarial eruption. Petitioner's hospitalization
expenses, as well as those of her husband and son, were paid
by respondent company.
She was then confined at the St. Luke's Medical Center for
rehabilitation. During the period of petitioner's rehabilitation,
respondent continued to pay the former's salaries; and to
assist her in paying her hospital bills.
Petitioner's physician concluded that the former had not fully
recovered mentally and physically. Hence, respondent was
constrained to terminate petitioner's services effective August
31, 1999, respondent offered a retirement package
Of the promised retirement benefits amounting to
P1,063,841.76, only P701,454.89 was released to petitioner's
husband, the balance thereof was withheld allegedly for
taxation purposes.
Petitioner, represented by her husband, instituted the instant
case for unpaid salaries; unpaid separation pay; unpaid
balance of retirement package plus interest; insurance pension
for permanent disability; educational assistance for her son;
medical assistance; reimbursement... of medical and
rehabilitation expenses; moral, exemplary, and actual
damages, plus attorney's fees.
The petitioner, in support of her contentions invokes ART 284
of the LC.
ISSUE: Whether or not the dismissal is valid, and in line with
the validity of the dismissal,
Whether or not the deduction of 362, 386.87 for taxation
purposes is proper?
HELD: YES. The dismissal in this case was valid as she was
dismissed in accordance with ART 284 of the labor code to wit.
However, the retirement plan bars the separation pay that is
awarded by ART 284 of the LC. The pertinent legal basis are
what’s controlling
Article 284 of the Labor Code, as amended, which reads:
Art. 284. DISEASE AS GROUND FOR TERMINATION:
An employer may terminate the services of an employee who
has been found to be suffering from any disease and whose
continued employment is prohibited by law or is prejudicial to
his health as well as to the health of his co-employees:
Provided, That he is paid separation pay equivalent to at least
one (1) month salary or to one-half (1/2) month salary for every
year of service, whichever is greater, a fraction of at least six
(6) months being considered as one (1) whole year.
As she was dismissed on the abovementioned ground, the law
gives the petitioner the right to demand separation pay.
However, respondent established a retirement plan in favor of
all its employees which specifically provides for "disability
retirement," to wit:
Sec. 4. DISABILITY RETIREMENT
In the event that a Member is retired by the Company due to
permanent total incapacity or disability, as determined by a
competent physician appointed by the Company, his disability
retirement benefit shall be the Full Member’s Account Balance
determined as of the last valuation date. x x x.
On the basis of the above-mentioned retirement plan,
respondent offered the petitioner a retirement package which
consists of retirement plan benefits, insurance pension, and
educational assistance. The amount of P1,063,841.76
represented the disability retirement benefit provided for in the
plan; while the insurance pension was to be paid by their
insurer; and the educational assistance was voluntarily
undertaken by the respondent as a gesture of compassion to
the petitioner.
We have declared in Aquino v. National Labor Relations
Commission that the receipt of retirement benefits does not bar
the retiree from receiving separation pay. Separation pay is a
statutory right designed to provide the employee with the
wherewithal during the period that he/she is looking for another
employment. On the other hand, retirement benefits are
intended to help the employee enjoy the remaining years of his
life, lessening the burden of worrying about his financial
support, and are a form of reward for his loyalty and service to
the employer. Hence, they are not mutually exclusive.
However, this is only true if there is no specific prohibition
against the payment of both benefits in the retirement plan
and/or in the Collective Bargaining Agreement (CBA).
In the instant case, the Retirement Plan bars the petitioner
from claiming additional benefits on top of that provided for in
the Plan. Section 2, Article XII of the Retirement Plan provides:
Section 2. NO DUPLICATION OF BENEFITS
No other benefits other than those provided under this Plan
shall be payable from the Fund. Further, in the event the
Member receives benefits under the Plan, he shall be
precluded from receiving any other benefits under the Labor
Code or under any present or future legislation under any other
contract or Collective Bargaining Agreement with the
Company.
There being such a provision, as held in Cruz v. Philippine
Global Communications, Inc., petitioner is entitled only to either
the separation pay under the law or retirement benefits under
the Plan, and not both.
Clearly, the benefits received by petitioner from the respondent
represent her retirement benefits under the Plan. The question
that now confronts us is whether these benefits are taxable. If
so, respondent correctly made the deduction for tax purposes.
Otherwise, the deduction was illegal and respondent is still
liable for the completion of petitioner’s retirement benefits.
The tax deductions, are therefore valid as the petitioner did not
fall under the tax exemptions. (DID NOT INCLUDE THE
RULING ON TAX HERE NA)
CASE 33: Padillo vs Bank of Nabunturan
The Facts
The petitioner, the late Eleazar Padillo (Padillo), was employed
by respondent Rural Bank of Nabunturan, Inc. (Bank) as its SA
Bookkeeper. Due to liquidity problems which arose sometime
in 2003, the Bank took out retirement/insurance plans with
Philippine American Life and General Insurance Company
(Philam Life) for all its employees in anticipation of its possible
closure and the concomitant severance of its personnel. In this
regard, the Bank procured Philam Plan Certificate of Full
Payment No. 88204, Plan Type 02FP10SC, Agreement No.
PP98013771 (Philam Life Plan) in favor of Padillo for a benefit
amount of P100,000.00 and which was set to mature on July
11, 2009.
On October 14, 2004, respondent Mark S. Oropeza (Oropeza),
the President of the Bank, bought majority shares of stock in
the Bank and took over its management which brought about
its gradual rehabilitation. The Bank's finances improved and
eventually, its liquidity was regained.
During the latter part of 2007, Padillo suffered a mild stroke
due to hypertension which consequently impaired his ability to
effectively pursue his work. In particular, he was diagnosed
with Hypertension S/P CVA (Cerebrovascular Accident) with
short term memory loss, the nature of which had been
classified as a total disability.[9] On September 10, 2007, he
wrote a letter addressed to respondent Oropeza expressing his
intention to avail of an early retirement package. Despite
several follow-ups, his request remained unheeded.
On October 3, 2007, Padillo was separated from employment
due to his poor and failing health as reflected in a Certification
dated December 4, 2007 issued by the Bank. Not having
received his claimed retirement benefits, Padillo filed on
September 23, 2008 with the NLRC Regional Arbitration
Branch No. XI of Davao City a complaint for the recovery of
unpaid retirement benefits. He asserted, among others, that
the Bank had adopted a policy of granting its aging employees
early retirement packages, pointing out that one of his
co-employees, Nenita Lusan (Lusan), was accorded retirement
benefits in the amount of P348,672.72[10] when she retired at
the age of only fifty-three (53). The Bank and Oropeza
(respondents) countered that the claim of Padillo for retirement
benefits was not favorably acted upon for lack of any basis to
grant the same.
ISSUE: whether or not, the provision under the LC regarding
termination under the ground ot disease is applicable in this
case?
HELD:
No. At the outset, it must be maintained that the Labor Code
provision on termination on the ground of disease under Article
297 does not apply in this case, considering that it was the
petitioner and not the Bank who severed the employment
relations.
As borne from the records, the clear import of Padillo's
September 10, 2007 letter and the fact that he stopped working
before the foregoing date and never reported for work even
thereafter show that it was Padillo who voluntarily retired and
that he was not terminated by the Bank.
As held in Villaruel, a precedent which the CA correctly
applied, Article 297 of the Labor Code contemplates a situation
where the employer, and not the employee, initiates the
termination of employment on the ground of the latter's disease
or sickness, viz:
A plain reading of the [Article 297 of the Labor Code] clearly
presupposes that it is the employer who terminates the
services of the employee found to be suffering from any
disease and whose continued employment is prohibited by law
or is prejudicial to his health as well as to the health of his
co-employees. It does not contemplate a situation where it is
the employee who severs his or her employment ties. This is
precisely the reason why Section 8, Rule 1, Book VI of the
Omnibus Rules Implementing the Labor Code, directs that an
employer shall not terminate the services of the employee
unless there is a certification by a competent public health
authority that the disease is of such nature or at such a stage
that it cannot be cured within a period of six (6) months even
with proper medical treatment. (Emphasis, underscoring and
words in brackets supplied)
Thus, given the inapplicability of Article 297 of the Labor Code
to the case at bar, it necessarily follows that petitioners' claim
for separation pay anchored on such provision must be denied.
CASE 34​: G.R. No. 122827 March 29, 1999
LIDUVINO M. MILLARES, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, (FIFTH
DIVISION) and PAPER INDUSTRIES CORPORATION OF
THE PHILIPPINES (PICOP)
FACTS:
Petitioners numbering one hundred sixteen (116) occupied the
position of Technical Staff, Unit Manager, Section Manager,
Department Manager, Division Manager and Vice President in
the mill site of respondent Paper Industries Corporation of the
Philippines (PICOP) in Bislig, Surigao del Sur. In 1992 PICOP
suffered a major financial setback
allegedly brought about by the joint impact of restrictive
government regulations on logging and the economic crisis. To
avert further losses, it undertook a retrenchment program and
terminated the services of petitioners.
Accordingly, petitioners received separation pay computed at
the rate of one (1) month basic pay for every year of service.
Believing however that the allowances they allegedly regularly
received on a monthly basis during their employment should
have been included in the computation thereof they lodged a
complaint for separation pay differentials.
The allowances in question pertained to the following —
1. Staff/Manager's Allowance —
Respondent PICOP provides free housing facilities to
supervisory and managerial employees assigned in Bislig. The
privilege includes free water and electric consumption. Owing
however to shortage of such facilities, it was constrained to
grant Staff allowance instead to those who live in rented
houses outside but near the vicinity of the mill site. But the
allowance ceases whenever a vacancy occurs in the
company's housing facilities. The former grantee is then
directed to fill the vacancy. For Unit, Section and Department
Managers, respondent PICOP gives an additional amount to
meet the same kind of expenses called Manager's allowance.
2. Transportation Allowance —
To relieve respondent PICOP's motor pool in Bislig from a
barrage of requests for company vehicles and to stabilize
company vehicle requirements it grants transportation
allowance to key officers and Managers assigned in the mill
site who use their own vehicles in the performance of their
duties. It is a conditional grant such that when the conditions
no longer obtain, the privilege is discontinued. The recipients of
this kind of allowance are required to liquidate it by submitting
a report with a detailed enumeration of expenses incurred.
3. Bislig Allowance —
The Bislig Allowance is given to Division Managers and
corporate officers assigned in Bislig on account of the hostile
environment prevailing therein. But once the recipient is
transferred elsewhere outside Bislig, the allowance ceases.
Applying Art. 97, par. (f), of the Labor Code which defines
"wage," the Executive Labor Arbiter opined that the subject
allowances, being customarily furnished by respondent PICOP
and regularly received by petitioners, formed part of the latter's
wages.
Resolving the controversy from another angle, on the strength
of the ruling in Santos v. NLRC and Soriano v. NLRC that in
the computation of separation pay account should be taken not
just of the basic salary but also of the regular allowances that
the employee had been receiving, he concluded that the
allowances should be included in petitioners' base pay. Thus
respondent PICOP was ordered on 28 April 1994 to pay
petitioners Four Million Four Hundred Eighty-One Thousand
Pesos P(4,481,000.00) representing separation pay
differentials plus ten per cent (10%) thereof as attorney's fees.
The National Labor Relations Commission (NLRC) did not the
view of the Executive Labor Arbiter. On 7 October 1994 it set
aside the assailed decision by decreeing that the allowances
did not form part of the salary base used in computing
separation pay. Its ruling was based on the finding that the
cases relied upon by the Executive Labor Arbiter were
inapplicable since they involved illegal dismissal where
separation pay was granted in lieu of reinstatement which was
no longer feasible. Instead, what it considered in point was
Estate of the late Eugene J. Kneebone v. NLRC where the
Court held that representation and transportation allowances
were deemed not part of salary and should therefore be
excluded in the computation of separation benefits. Relating
the present case with Art. 97, par. (f), of the Labor Code, the
NLRC likewise found that petitioners' allowances were
contingency-based and thus not included in their salaries. On
26 September 1995 reconsideration was denied.

In this petition for certiorari, petitioners submit that their

allowances are included in the definition of "facilities" in Art. 97,
par. (f), of the Labor Code, being necessary and indispensable
for their existence and subsistence. Furthermore they claim
that their availment of the monetary equivalent of those
"facilities" on a monthly basis was characterized by
permanency, regularity and customariness. And to fortify their
arguments they insist on the applicability of Santos, Soriano,
The Insular Life Assurance Company, Planters Products,
Inc.and Songco which are all against the NLRC holding that
the salary base in computing separation pay includes not just
the basic salary but also the regular allowances.
There is no showing of grave abuse of discretion on the part of
the NLRC.

ISSUE: Does the subject allowances form part of petitioners’

“wages” for the computation of separation pay?

HELD:

In case of retrenchment to prevent losses, Art. 283 of the

Labor Code imposes on the employer an obligation to grant to
the affected 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. Since the law speaks of "pay,"
the question arises, "What exactly does the term connote?" We
correlate Art. 283 with Art. 97 of the same Code on definition of
terms. "Pay" is not defined therein but "wage." In Songco the
Court explained that both words (as well as salary) generally
refer to one and the same meaning, i.e., a reward or
recompense for services performed. Specifically, "wage" is
defined in letter (f) as the remuneration or earnings, however
designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or
commission basis, or other method of calculating the same,
which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to
be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the
Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.

We invite attention to the above-underlined clause. Stated

differently, when an employer customarily furnishes his
employee board, lodging or other facilities, the fair and
reasonable value thereof, as determined by the Secretary of
Labor and Employment, is included in "wage." In order to
ascertain whether the subject allowances form part of
petitioner's "wages," we divide the discussion on the following
— "customarily furnished;" "board, lodging or other facilities;"
and, "fair reasonable value as determined by the Secretary of
Labor."