G.R. No.

L-38482 June 18, 1976

BATANGAS LAGUNA TAYABAS BUS COMPANY, Petitioner, vs.

HONORABLE COURT OF APPEALS and TEOTIMO DE MESA, Respondents.

Factual Antecedents:
- Timoteo De Mesa worked for BLTB for 31 years. In 1967, he was terminated for violating a memo
restricting cash advances for confidential employees. De Mesa filed a complaint, but BLTB maintained
that De Mesa violated the policy of obtaining cash advances or “vales” without prior approval. The
lower court dismissed the complaint but ordered BLTB to pay De Mesa’s retirement pay. On Appeal,
the CA ordered the payment of separation pay on top of the retirement pay.

Issue(s): WON De Mesa’s dismissal on the ground of willful disobedience valid.

Held: NO, even granting that a willful disobedience of said rules, instructions or commands limiting the cash
advances of the employees is a valid cause for his discharge, yet his dismissal was arbitrary because he was not
given a hearing on the alleged cause of his dismissal in total disregard of the Service Manual of 1962 of the joint
management of the Laguna Tayabas Company and Batangas Transportation Company and the Labor
Agreement.
- One of the fundamental duties of the employee is to yield obedience to all reasonable rules, orders and
instructions of the employer and willful or intentional disobedience thereof, as a general rule justifies
recission of the contract of service and the peremptory dismissal of the employee. However, in order to
constitute disobedience, the employee's conduct must have been willful or intentional, willfulness being
characterized by a wrongful and perverse mental attitude rendering the employee's act inconsistent with
proper subordination.
- The rules, instructions or commands in order to be a ground for discharge on the score of disobedience,
must be reasonable and lawful, must be known to the employee, and must pertain to the duties which
the employees have been engaged to discharge.
- There can be no doubt that the private respondent here has repeatedly abused the "vale" privilege and
therefore in this respect can be considered willful. He cannot claim that he is ignorant of the
memoranda and the circulars limiting the cash advances of employees to not more than P100.00 each
payroll period. But the rules, instructions or commands limiting the cash advances of confidential
employees, do not pertain to the duties which the petitioner has been engaged to discharge. Said rules,
instructions or commands are primarily intended for the benefit of the company itself and have nothing
to do with the duties of its employees and therefore cannot be a valid ground for their discharge on the
score of disobedience.

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 161305 February 9, 2007

MILAGROS PANUNCILLO, Petitioner, vs. CAP PHILIPPINES, INC., Respondent.

Factual Antecedents:
- Panuncillo was an employee of CAP PH where she procured an education plan for her son. She later
sold this Plan to Pernes. But before the actual transfer, Panuncillo pledged it to another person, Chua,
who sold it in turn to Bonghanoy. Acting on a letter given by Pernes, CAP’s Integrated Internal Audit
Operations (IIAO) required Panuncillo to explain in writing where she admitted the wrongdoing
because of financial needs. The IIAO also reported other matters involving Panuncillo and other
persons. CAP, upon the recommendation of IIAO, terminated Panincillo’s employment for violating
the company’s Code of Conduct.

Issue(s): WON Panuncillo’s dismissal for violating the Code of Conduct valid.

Held: YES, by the petitioner’s repeated violation of Section 8.4 of respondent’s Code of Discipline, she violated
the trust and confidence of respondent and its customers. To allow her to continue with her employment puts
respondent under the risk of being embroiled in unnecessary lawsuits from customers similarly situated as
Josefina, et al. Clearly, the respondent exercised its management prerogative when it dismissed the petitioner.

- This Court has upheld a company’s management prerogatives so long as they are exercised in good faith
for the advancement of the employer’s interest and not for the purpose of defeating or circumventing
the rights of the employees under special laws or under valid agreements.
- Deliberate disregard or disobedience of rules by the employees cannot be countenanced. Whatever may be
the justification behind the violations is immaterial at this point, because the fact still remains that an
infraction of the company rules has been committed.
- Under the Labor Code, the employer may terminate an employment on the ground of serious
misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work. Infractions of company rules and regulations have been
declared to belong to this category and thus are valid causes for termination of employment by the
employer.
- Whether the respondent did not suffer any damage resulting from the transactions entered into by the
petitioner is immaterial. As Lopez v. National Labor Relations Commission instructs:
- That the [employer] suffered no damage resulting from the acts of [the employee] is
inconsequential. In Glaxo Wellcome Philippines, Inc. v. Nagkakaisang Empleyado ng
Wellcome-DFA (NEW-DFA), we held that deliberate disregard or disobedience of company
rules could not be countenanced, and any justification that the disobedient employee might
put forth would be deemed inconsequential. The lack of resulting damage was unimportant,
because "the heart of the charge is the crooked and anarchic attitude of the employee towards
his employer. Damage aggravates the charge but its absence does not mitigate nor negate the
employee’s liability."
- While it is true that compassion and human consideration should guide the disposition of cases
involving termination of employment since it affects one’s source or means of livelihood, it should not
be overlooked that the benefits accorded to labor do not include compelling an employer to retain the
services of an employee who has been shown to be a gross liability to the employer. The law in
protecting the rights of the employees authorizes neither oppression nor self-destruction of the
employer. It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a
recognition of the inherent economic inequality between labor and management. The intent is to
balance the scale of justice; to put the two parties on relatively equal positions. There may be cases
where the circumstances warrant favoring labor over the interests of management but never should the
scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be
denied to none).

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 162053 March 7, 2007

ST. LUKE'S MEDICAL CENTER EMPLOYEES ASSOCIATION-AFW (SLMCEA-AFW) AND

MARIBEL S. SANTOS, Petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND ST. LUKE'S MEDICAL
CENTER, INC., Respondents.

Factual Antecedents:
- Santos was hired as an X-Ray Technician by St. Luke's Medical Center (St. Luke’s) in 1984. By virtue of
RA 7431, the law required that no person shall practice as an x-ray technologist without the proper
certificate of registration from the Board of Radiologic Technology. St. Luke’s issued a notice to all its
practitioners of Radiologic Technology to comply with the law including Santos; otherwise, they may
be compelled to retire her from employment. After repeated demands and Santos’ failure to comply,
SLMC issued a Notice of Separation from the Company to Santos.

Issue(s): WON Santos’ dismissal valid on the basis of her inability to secure a certificate of registration from the
Board of Radiologic Technology.

Held: YES, while the right of workers to security of tenure is guaranteed by the Constitution, its exercise may be
reasonably regulated pursuant to the police power of the State to safeguard health, morals, peace, education,
order, safety, and the general welfare of the people. Consequently, persons who desire to engage in the learned
professions requiring scientific or technical knowledge may be required to take an examination as a prerequisite
to engaging in their chosen careers.
- The enactment of R.A. (Nos.) 7431 and 4226 are recognized as an exercise of the State's inherent police
power. It should be noted that the police power embraces the power to prescribe regulations to
promote the health, morals, education, good order, safety or general welfare of the people. The state is
justified in prescribing the specific requirements for x-ray technicians and/or any other professions
connected with the health and safety of its citizens. Respondent-appellee being engaged in the hospital
and health care business, is a proper subject of the cited law; thus, having in mind the legal requirements
of these laws, the latter cannot close its eyes and [let] complainant-appellant's private interest override
public interest.
- No malice or ill-will can be imputed upon private respondent as the separation of petitioner Santos was
undertaken by it conformably to an existing statute. It is undeniable that her continued employment
without the required Board certification exposed the hospital to possible sanctions and even to a
revocation of its license to operate. Certainly, private respondent could not be expected to retain
petitioner Santos despite the inimical threat posed by the latter to its business. This notwithstanding,
the records bear out the fact that petitioner Santos was given ample opportunity to qualify for the
position and was sufficiently warned that her failure to do so would result in her separation from work
in the event there were no other vacant positions to which she could be transferred. Despite these
warnings, petitioner Santos was still unable to comply and pass the required exam. To reiterate, the
requirement for Board certification was set by statute. Justice, fairness and due process demand that an
employer should not be penalized for situations where it had no participation or control.
- While our laws endeavor to give life to the constitutional policy on social justice and the protection of
labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also
recognizes that management has rights which are also entitled to respect and enforcement in the interest
of fair play. Labor laws, to be sure, do not authorize interference with the employer's judgment in the
conduct of the latter's business. Private respondent is free to determine, using its own discretion and
business judgment, all elements of employment, "from hiring to firing" except in cases of unlawful
discrimination or those which may be provided by law. None of these exceptions is present in the
instant case.

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 165594 April 23, 2007

FRANCISCO SORIANO, JR., Petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE LONG DISTANCE
TELEPHONE COMPANY, INCORPORATED, Respondents.

Factual Antecedents:
- Soriano and others were employed by PLDT in 1980 as Switchman. In 1995, PLDT implemented a
company-wide redundancy program and issued a Notice of Separation Due to Redundancy. PLDT gave
separate letters to Soriano and others, and denied the request of the latter to be transferred to other
positions for there were no more vacancies. Soriano and others’ employment were terminated and each
was given their separation pay.

Issue(s): WON Soriano and others’ dismissal were valid on the basis of redundancy.

Held: YES, the records show that respondent PLDT had sufficiently established the existence of redundancy in
the position of Switchman.
- 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.
- The respondent PLDT, as employer, has the recognized right and prerogative to select the persons to be
hired and to designate the work as well as the employee or employees to perform it. This includes the
right of the respondent PLDT to determine the employees to be retained or discharged and who among
the applicants are qualified and competent for a vacant position. The rationale for this principle is that
respondent PLDT is in the best position to ascertain what is proper for the advancement of its interest.
Thus, this 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. Since the respondent PLDT determined that petitioner’s services are no longer necessary
either as a Switchman or in any other position, and such determination was made in good faith and in
furtherance of its business interest, the petitioner’s contention that he should be the last switchman to
be laid-off by reason of his qualifications and outstanding work must fail.

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 82249 February 7, 1991

WILTSHIRE FILE CO., INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE T. ONG, respondents.

Factual Antecedents:
- Ong was the Sales Manager of Wiltshire. On June 18, 1985, he was terminated on the ground of
redundancy. Wilshire claimed that the decision was a cost-cutting measure due to financial losses of the
company - retrenchment - and Ong’s position became redundant. During the proceedings, Wiltshire
closed its operations due to substantial losses.

Issue(s): WON Ong’s dismissal was valid.

Held: YES, Ong’s dismissal was justified and not illegal. Wiltshire maintains that it had been incurring business
losses beginning 1984 and that it was compelled to reduce the size of its personnel force.
- We believe that redundancy, for purposes of our Labor Code, exists where the services of an employee
are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly
put, a position is redundant where it is superfluous, and superfluity of a position or positions may be
the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise.
- The employer has no legal obligation to keep in its payroll more employees than are necessarily for the
operation of its business.
- The position of Sales Manager was abolished and the duties previously discharged by the Sales Manager
simply added to the duties of the General Manager, to whom the Sales Manager used to report.
- It is of no legal moment that the financial troubles of the company were not of private respondent's
making. Private respondent cannot insist on the retention of his position upon the ground that he had
not contributed to the financial problems of Wiltshire. The characterization of private respondent's
services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of
business judgment on the part of the petitioner company. The wisdom or soundness of such
characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor
of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not
shown.
- The determination of the continuing necessity of a particular officer or position in a business
corporation is management's prerogative, and the courts will not interfere with the exercise of such so
long as no abuse of discretion or merely arbitrary or malicious action on the part of management is
shown.

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 127718 March 2, 2000

NATIONAL FEDERATION OF LABOR, et. al, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et. al, respondents.

Factual Antecedents:
- Petitioners were members of the NFL employed by the Patalon Coconut Estate engaged in growing
agricultural products and in raising livestock. The Congress passed the Comprehensive Agrarian
Reform Law which mandated the compulsory acquisition of all covered agricultural lands for
distribution to qualified farmer beneficiaries. The Patalon Coconut Estate was awarded to a cooperative
PEARA of which petitioners are also members. Pataon Coconut Estate stopped its operation and the
employment of the Petitioners were severed without giving separation pay.

Issue(s): WON Patalon Coconut Estate is liable to pay separation pay.

Held: NO, the Patalon Coconut Estate was closed down because a large portion of the said estate was acquired
by the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut Estate was not effected
voluntarily by private respondents who even filed a petition to have said estate exempted from the coverage of
RA 6657.
- It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction
of personnel. The peculiar circumstances in the case at bar, however, involves neither the closure of an
establishment nor a reduction of personnel as contemplated under the aforesaid article. When the
Patalon Coconut Estate was closed because a large portion of the estate was acquired by DAR pursuant
to CARP, the ownership of that large portion of the estate was precisely transferred to PEARA and
ultimately to the petitioners as members thereof and as agrarian lot beneficiaries. Hence, Article 283 of
the Labor Code is not applicable to the case at bench.
- Article 283 of the Labor Code does not contemplate a situation where the closure of the business
establishment is forced upon the employer and ultimately for the benefit of the employees.
- The closure contemplated under Article 283 of the Labor Code is a unilateral and voluntary act on the
part of the employer to close the business establishment as may be gleaned from the wording of the said
legal provision that "The employer may also terminate the employment of any employee due to. . .." The
use of the word "may," in a statute, denotes that it is directory in nature and generally permissive only.
The "plain meaning rule" or verba legis in statutory construction is thus applicable in this case. Where
the words of a statute are clear, plain and free from ambiguity, it must be given its literal meaning and
applied without attempted interpretation.
- While the Constitution provides that "the State . . . shall protect the rights of workers and promote their
welfare", that constitutional policy of providing full protection to labor is not intended to oppress or
destroy capital and management. Thus, the capital and management sectors must also be protected
under a regime of justice and the rule of law.

R. Rances
UNEP College of Law
Labor Law and Social Legislation
G.R. No. 157611 August 9, 2005

ALABANG COUNTRY CLUB, et. al, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION, et. al, respondents.

Factual Antecedents:
- ACCI conducted a study on the profitability of its Food and Beverage Department. Finding that it was
no longer profitable for ACCI to maintain its own F & B Department, the management decided to
cease operating the department and to open the same to a contractor, such as a concessionaire, which
would be willing to operate its own food and beverage business within the club. They informed all
affected employees of the termination with separation pay and option for an employment with La
Tasca, the new entity to operate the F&B Department.

Issue(s): WON ACCI’s termination of its employees valid.

Held: YES, the Court views the case as one involving closure of a business undertaking, not retrenchment. While
retrenchment and closure of a business establishment or undertaking are often used interchangeably and are
interrelated, they are actually two separate and independent authorized causes for termination of employment.
- Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in
terms of salaries and wages resorted to by an employer because of losses in operation of a business
occasioned by lack of work and considerable reduction in the volume of business.
- Closure of a business or undertaking due to business losses is the reversal of fortune of the employer
whereby there is a complete cessation of business operations to prevent further financial drain upon an
employer who cannot pay anymore his employees since business has already stopped.
- One of the prerogatives of management is the decision to close the entire establishment or to close or
abolish a department or section thereof for economic reasons, such as to minimize expenses and reduce
capitalization.
- While the Labor Code provides for the payment of separation package in case of retrenchment to
prevent losses, it does not obligate the employer for the payment thereof if there is closure of business
due to serious losses.
- In the present case, when petitioner decided to cease operating its F & B Department and open the
same to a concessionaire, it did not reduce the number of personnel assigned thereat. It terminated the
employment of all personnel assigned at the department.
- As in the case of retrenchment, however, for the closure of a business or a department due to serious
business losses to be regarded as an authorized cause for terminating employees, it must be proven that
the losses incurred are substantial and actual or reasonably imminent; that the same increased through a
period of time; and that the condition of the company is not likely to improve in the near future.
- Notwithstanding, ACCI failure to prove that the closure of its F&B Department was due to substantial
losses, this Court finds that individual respondents were dismissed on the ground of closure or
cessation of an undertaking not due to serious business losses or financial reverses, which is allowed
under Article 283 of the Labor Code.
- While petitioner did not sufficiently establish substantial losses to justify closure of its F&B Department
on this ground, there is basis for its claim that the continued maintenance of said department had
become more expensive through the years.
- In fine, management's exercise of its prerogative to close a section, branch, department, plant or shop
will be upheld as long as it is done in good faith to advance the employer's interest and not for the
purpose of defeating or circumventing the rights of employees under the law or a valid agreement.

R. Rances
UNEP College of Law
Labor Law and Social Legislation