2C - LABOR RELATIONS kept idle for long or merely laid to total waste.
AUTHORIZED CAUSES (Batch 5)
_____________________________________________
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.
14. 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 Commission10 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
hi1.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
. a certification was presented in the course of the proceedings
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
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
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 — for their existence and subsistence. Furthermore they claim
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
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."