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A Report on Balancing of Interest

The constitution is the Supreme law of the land, whereby, it is enacted by direct action of the
people by which the fundamental powers of government are established, limited and defined,
and by which those powers are distributed among the several departments for the safe and
useful exercise for the benefit of all.
It is the same constitution that mandates the protection of labor and the promotion of their
welfare. It provides the fundamental labor standards and labor relations rights of the employees.
The constitutional provisions on labor are provided under Articles II, III, IX-B and XIII.
In the case of Marbury vs Madison, the U.S. SC laid down the classic statement of constitutional
supremacy. It states that the c0nstitution is the fountain of all laws, should the latter will not
conform to the former, it shall be declared unconstitutional. It is then the glory of our
institutions that they are founded upon law and no one can exercise any authority over the
rights and interest of others except pursuant to and in the manner authorized by law.
Balancing of interest, as Justice Castro clearly stated in his dissenting opinion in the case of
Gonzales vs. COMELEC (G.R. No. L-27833), requires a court to take conscious and detailed
consideration of the interplay of interest observable in a given situation or type of situation. The
Court, as expressly provided for by Section 1, Art VIII of the 1987 Constitution, has the power to
settle actual controversies involving rights which are legally demandable and enforceable. In this
light, the court exercises its judicial review whereby it is the power of the court to test the
validity of governmental acts in conformity with the constitution.
This paper then aims to present the role of the principle of balance of interest in adjudicating
labor cases.


Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by the State so that
justice in its rational and objectively secular conception may at least be approximated. Social
justice means the promotion of the welfare of all the people, the adoption by the Government of
measures calculated to insure economic stability of all the competent elements of society,
through the maintenance of a proper economic and social equilibrium in the interrelations of
the members of the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of
all governments on the time-honored principle of salus populi est suprema lex. (Calalang vs.
Williams, G.R. No. L-47800, 02 December 1940)

The State is bound under the Constitution to afford full protection to labor and when
conflicting interests of labor and capital are to be weighed on the scales of social justice the
heavier influence of the latter should be counterbalanced with the sympathy and compassion the
law accords the less privileged workingman. This is only fair if the worker is to be given the
opportunity and the right to assert and defend his cause not as a subordinate but as part of
management with which he can negotiate on even plane. Thus labor is not a mere employee of
capital but its active and equal partner. (Fuente vs. NLRC, G.R. No. 110017, 02 January 1997)

The cause of social justice is not served by upholding the interest of petitioners in
disregard of the right of private respondents. Social justice ceases to be an effective instrument
for the "equalization of the social and economic forces" by the State when it is used to shield
wrongdoing. 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. 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, Justicia remini regarda est(Justice is to be denied to none). (Jamer vs. NLRC, G.R.
No. 112630, 05 September 1997)

It is true the Constitution regards labor as "a primary social economic force." But so does
it declare that it "recognizes the indispensable role of the private sector, encourages private
enterprise, and provides incentives to needed investment." The Constitution bids the State to
"afford full protection to labor." But it is equally true that "the law, in protecting the rights of the
laborer, authorizes neither oppression nor self-destruction of the employer." And it is
oppression to compel the employer to continue in employment one who is guilty or to force the
employer to remain in operation when it is not economically in his interest to do so. (Serrano vs.
NLRC [G.R. No. 117040, 27 January 2000])


Although labor law is based on social justice, it does not necessarily mean that the
employer is left to its own devices. The Supreme Court itself has repeatedly mandated that
injustice should not be done to the employer (Southeastern Shipping v. Federico U. Navarra,
G.R. No. 167678, 22 June 2010). We cannot simply tolerate injustice to employers if only to
protect the welfare of undeserving employees (Mansion Printing Center and Clement Cheng v.
Diosdado Bitara, Jr., G.R. No. 168120, 25 January 2012).

The high tribunal recognizes that social justice is not one-sided. (C. Alcantara & Sons,
Inc. v. Court of Appeals, et al., G.R. Nos. 155109, 155135, and 179220, 29 September 2010)
While labor law is designed to protect the rights of the employees, the Supreme Court has
categorically stated that such law authorizes neither oppression nor self-destruction of the
employer there may be cases where the circumstances warrant favoring labor over the
interests of management but never should the scale be so tilted as to result in an injustice to the
employer. (Southeastern Shipping v. Federico U. Navarra, G.R. No. 167678, 22 June 2010)
A collective bargaining dispute requires due consideration and proper balancing of the
interests of the parties to the dispute and of those who might be affected by the dispute. To our
mind, the best way in approaching this task holistically is to consider the available
objective facts, including, where applicable, factors such as the bargaining history
of the company, the trends and amounts of arbitrated and agreed wage awards and
the company's previous CBAs, and industry trends in general. (Asia Brewery Inc. vs.
Tunay na Pagkakaisa ng mga Manggagawa sa Asia, GR No. 171594-96, 18 September 2013)

In sum, labor law may be tilted in favor of the employees, it is but a measure of
protection against the immense economic advantage wielded by an employer who is accorded
the highly discretionary and powerful right called management prerogative.


A strike is "any temporary stoppage of work by the concerted action of employees as a result of
an industrial or labor dispute." It is the most preeminent of the economic weapons of workers
which they unsheathe to force management to agree to an equitable sharing of the joint product
of labor and capital. Undeniably, strikes exert some disquieting effects not only on the
relationship between labor and management but also on the general peace and
progress of society. Our laws thus regulate their exercise within reasons by
balancing the interests of labor and management together with the overarching
public interest. (Lapanday Workers Union vs. NLRC [G.R. Nos. 95494-97, 07 September



Management Prerogative
An owner of a business enterprise is given considerable leeway in managing his business
because it is deemed important to society as a whole that he should succeed. Our law, therefore,
recognizes certain rights as inherent in the management of business enterprises. These rights
are collectively called management prerogatives or acts by which one directing a business is able
to control the variables thereof so as to enhance the chances of making a profit. "Together, they
may be taken as the freedom to administer the affairs of a business enterprise such that the costs
of running it would be below the expected earnings or receipts. In short, the elbow room in the
quest for profits." (Chu vs. NLRC [G.R. No. 106107, 02 June 1994])
It is noteworthy to state that an employer is free to manage and regulate, according to his
own discretion and judgment, all phases of employment, which includes hiring, work
assignments, working methods, time, place and manner of work, supervision of workers,
working regulations, transfer of employees, lay-off of workers, and the discipline, dismissal and
recall of work. While the law recognizes and safeguards this right of an employer to exercise
what are clearly management prerogatives, such right should not be abused and used as a tool of
oppression against labor. The company's prerogatives must be exercised in good faith and with
due regard to the rights of labor. a priori, they are not absolute prerogatives but are subject to
legal limits, collective bargaining agreements and the general principles of fair play and justice.

The power to dismiss an employee is a recognized prerogative that is inherent in the

employer's right to freely manage and regulate his business. Corollarily, an employer cannot
rationally be expected to retain the employment of a person whose lack of morals, respect and
loyalty to his employer, regard for his employer's rules and appreciation of the dignity and
responsibility of his office, has so plainly and completely been bared. He may not be compelled
to continue to employ such person whose continuance in the service will patently be inimical to
his employer's interest. The right of the company to dismiss an employee is a measure of self-
protection. Such right, however, is subject to regulation by the State, basically in the exercise of
its paramount police power. Thus, the dismissal of employees must be made within the
parameters of the law and pursuant to the basic tenets of equity, justice and fairplay. It must not
be done arbitrarily and without just cause. (Philippine-Singapore Transit vs. NLRC [GR No.
95449, August 1997])

The free will of management to conduct its own business affairs to achieve its purpose
cannot be denied (Abbot Laboratories v. NLRC, G.R. No. 76959, October 12, 1987, 154 SCRA
713). Even as the law is solicitous of the welfare of employees, it must also protect the right of an
employer to exercise what are clearly management prerogatives. Hence, management is not
precluded from undertaking reorganization within the company or entering into mergers with
other companies to meet the demands of the enterprise. In such cases, the company has the
prerogative to abolish managerial and confidential positions or create new ones as the necessity
for them requires. (Yap vs. Ichong [G.R. No. L-51314, 21 June 1990])

Obedience to Company Rules and Regulations

This Court fails to see, however, how these objections and accusations justify the
deliberate and obdurate refusal of the sales representatives to obey the management's simple
requirement for submission by all Premise Sales Representatives (PSRs) of individual reports or
memoranda requiring reflecting target revenues which is all that GTE basically required and
which it addressed to the employees concerned no less than six (6) times. The Court fails to see
how the existence of objections made by the union justify the studied disregard, or wilful
disobedience by the sales representatives of direct orders of their superior officers to submit
reports. Surely, compliance with their superiors' directives could not have foreclosed their
demands for the revocation or revision of the new sales policies or rules; there was nothing to
prevent them from submitting the requisite reports with the reservation to seek such revocation
or revision.

To sanction disregard or disobedience by employees of a rule or order laid down by

management, on the pleaded theory that the rule or order is unreasonable, illegal, or otherwise
irregular for one reason or another, would be disastrous to the discipline and order that it is in
the interest of both the employer and his employees to preserve and maintain in the working
establishment and without which no meaningful operation and progress is possible. Deliberate
disregard or disobedience of rules, defiance of management authority cannot be countenanced.
This is not to say that the employees have no remedy against rules or orders they regard as
unjust or illegal. They may object thereto, ask to negotiate thereon, bring proceedings for
redress against the employer before the Ministry of Labor. But until and Unless the rules or
orders are declared to be illegal or improper by competent authority, the employees ignore or
disobey them at their peril. It is impermissible to reverse the process: suspend enforcement of
the orders or rules until their legality or propriety shall have been subject of negotiation,
conciliation, or arbitration. (GTE Directories vs. Sanchez [G.R. No. 76219, 27 May 1991])

The situation here presented is of an employer transferring an employee to another
office in the exercise of what it took to be sound business judgment and in accordance with pre-
determined and established office policy and practice, and of the latter having what was believed
to be legitimate reasons for declining that transfer, rooted in considerations of personal
convenience and difficulties for the family. Under these circumstances, the solution proposed by
the employee herself, of her voluntary termination of her employment and the delivery to her of
corresponding separation pay, would appear to be the most equitable. Certainly, the Court
cannot accept the proposition that when an employee opposes his employer's decision to
transfer him to another work place, there being no bad faith or underhanded motives on the part
of either party, it is the employee's wishes that should be made to prevail. In adopting that
proposition by way of resolving the controversy, the respondent NLRC gravely abused its
discretion. (PT & T vs. Laplana [G.R. No. 76645, 23 July 1991])

The Court has recognized and upheld the prerogative of management to transfer an
employee from one office to another within the business establishment provided that there is no
demotion in rank or a diminution of his salary, benefits and other privileges. This is a privilege
inherent in the employer's right to control and manage its enterprise effectively. Even as the law
is solicitous of the employees' welfare, it cannot ignore the right of the employer to exercise what
are clearly and obviously management prerogatives. The freedom of management to conduct its
business operations to achieve its purpose cannot be denied.

But like all other rights, there are limits. The managerial prerogative to transfer
personnel must be exercised without grave abuse of discretion and putting to mind the basic
elements of justice and fair play. Having the right should not be confused with the manner in
which that right must be exercised. Thus it cannot be used as a subterfuge by the employer to rid
himself of an undesirable worker. Nor when the real reason is to penalize an employee for his
union activities and thereby defeat his right to self-organization. But the transfer can be upheld
when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced
employee .
The reassignment of Halili and Magno to Manila is legally indefensible on several
grounds. Firstly, it was grossly inconvenient to private respondents. They are working students.
When they received the transfer memorandum directing their relocation to Manila within seven
days from notice, classes had already started. The move from Tarlac to Manila at such time
would mean a disruption of their studies. Secondly, there appears to be no genuine business
urgency that necessitated their transfer. As well pointed out by private respondents' counsel, the
fabrication of aluminum handles for ice boxes does not require special dexterity. Many workers
could be contracted right in Manila to perform that particular line of work. (Yuco Chemicals vs.
Minster of Labor [G.R. No. L-75656, 1991])

Waiver of Management Prerogatives Possible; CBA provision to the contrary

Section 2, Article II of the CBA expressly provides that:
Sec. 2. In the exercise of its functions of management, the COMPANY shall have the sole and
exclusive right and power, among other things, to direct the operations and the working force of
its business in all respects; to be the sole judge in determining the capacity or fitness of an
employee for the position or job to which he has been assigned; to schedule the hours of work,
shifts and work schedules; to require work to be done in excess of eight hours or Sundays or
holidays as the exigencies of the service may require; to plan, schedule, direct, curtail and
control factory operations and schedules of production; to introduce and install new or
improved methods or facilities; to designate the work and the employees to perform it; to select
and hire new employees; to train new employees and improve the skill and ability of employees
from one job to another or form one shift to another; to classify or reclassify employees; and to
make such changes in the duties of its employees as the COMPANY may see fit or convenient for
the proper conduct of its business.
Verily and wisely, management retained the prerogative, whenever exigencies of the service so
require, to change the working hours of its employees. And as long as such prerogative is
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, this Court will uphold such exercise (Union Carbide Labor Union vs. Union Carbide
[215 SCRA 554])

Imposition of Penalty; A commensurate penalty for an offense

While Clarete may be guilty of violation of company rules, we find the penalty of
dismissal imposed upon him by respondent Caltex too harsh and unreasonable. As enunciated
in Radio Communications of the Philippines, Inc. v. National Labor Relations Commission,
supra, "such a penalty (of dismissal) must be commensurate with the act, conduct or omission
imputed to the employee and imposed in connection with the employer's disciplinary authority"
(at p. 667). Even when there exist some rules agreed upon between the employer and employee
on the subject of dismissal, we have ruled in Gelmart Industries Phils., Inc. v. National Labor
Relations Commission, 176 SCRA 295 (1989), that the same cannot preclude the State from
inquiring on whether its rigid application would work too harshly on the employee. (Caltex
Refinery vs. NLRC [ G.R. No. 102993, 14 July 1995])

Application of; With minor infractions, first violations and length of service.
Mary Johnston Hospital v. NLRC, where the employee had a heated argument with the
department head, the Court held that since the incident was her first offense during her
seventeen (17) years of employment the penalty of termination was not commensurate with the
act committed.

Manila Electric Company v. NLRC, where the employee was declared guilty of breach of
trust and violation of company rules the penalty of dismissal was not meted to him considering
his twenty (20) years of service without any previous derogatory record and his two (2)
commendations for honesty from the company.

Dolores v. NLRC, where the employee absented herself without permission from her
superior, the Court ruled that the penalty of dismissal was too severe considering her twenty-
one (21) years of service with the company and it appearing that it was her first offense.

Philippine Telegraph and Telephone Corporation v. NLRC, where the employee was
adjudged guilty of tampering a receipt, the Court ruled that the imposition of the supreme
penalty of dismissal would certainly be very harsh and disproportionate to the infraction
committed, especially after noting that it was his first offense after seven (7) long years of
satisfactory service.

Radio Communications of the Philippines, Inc. v. NLRC, where the employee was found
guilty of misappropriating company funds and withholding messages for transmission, the
Court ruled that in view of the employee's continuous service of ten (10) years with the company
the penalty of dismissal for the minor infractions would be unduly harsh and grossly

Bonotan v. NLRC, where the employee shouted at the operations manager, the Court
ruled that since the employee has been with the company for twenty-six (26) years and nowhere
in the records did it appear that she committed any previous violation of company rules and
regulations, dismissal from work would be too severe a penalty under the circumstances.

Tanduay Distillery Labor Union v. NLRC, where the employees were found guilty of
eating while at work, the Court ruled that inasmuch as they had served the company without any
record of violation or infraction of company rules and regulations prior to the incident for
periods ranging from 16 to 26 years, respectively, the dismissal meted out on them was too
harsh a penalty.