Labor1 Digest Part7

8/9/2019 Labor1 Digest Part7

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Labor Law 1 A2010 - 1 - DisiniOTHER CAUSES, BUSINESS RELATEDCAUSES

RECOGNITION OF RIGHT BUSINESS-RELATED CAUSES/[PROTECTION

AGABON V NLRC[PAGE 35]

UICHICO V NLRC273 SCRA 35

HERMOSISIMA JR; June 2, 1997

NATURESpecial civil action for certiorari

FACTS- Private respondents were employed by Crispa, Inc. for manyyears in the latter's garments factory. Their services wereterminated on the ground of retrenchment due to allegedserious business losses suffered by Crispa, Inc. in the years

immediately preceding 1990.- Three (3) separate complaints for illegal dismissal anddiminution of compensation against Crispa, Inc., Valeriano Floro(a major stockholder and director), and the petitioners (high-ranking officers and directors).- Labor Arbiter rendered a decision dismissing the complaintsfor illegal dismissal but at the same time ordering Crispa, Inc.,Floro and the petitioners to pay respondent employeesseparation pays equivalent to seventeen (17) days for everyyear of service- The NLRC found Crispa, Inc., Valeriano Floro, together with thepetitioners liable for illegal dismissal and modified the award ofseparation pay in the amount of one (1) month for every year ofservice instead of seventeen (17) days.- Private respondents sought a clarification of public respondentNLRC's Resolution dated September 30, 1993 insofar as thecomputation of separation pay by the Examination and

computation division was concerned as well as the failure of theResolution to award them full backwages despite the finding ofillegal dismissal.- On April 21, 1995, the NLRC, treating the Motion to ClarityJudgment as an Appeal, granted the same in this wise: herebydirected to include in the computation, six months backwages.- Petitioners filed a Motion for Reconsideration of the April 21,1995 Resolution, which was denied. Hence, this petition

ISSUES1. WON Respondents were illegally dismissed (i.e. there was novalid retrenchment)2. WON petitioners may be held solidarily liable with thecompany

HELD

1.YESReasoning- Article 2831 of the Labor Code covers retrenchment.

1Art. 283. Closure of establishment and reduction of personnel. - The employer may

also terminate the employment of any employee due to the installation of laborsaving devices, redundancy, retrenchment to prevent losses or the closing orcessation of operation of the establishment or undertaking unless the closing is forthe purpose of circumventing the provisions of this Title, by serving a written noticeon the worker and the Ministry of Labor and Employment at least one (1) monthbefore the intended date thereof. In case of termination due to the installation oflabor saving devices or redundancy, the worker affected thereby shall be entitled to aseparation 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 toprevent losses and in cases of closures or cessation of operations of establishment orundertaking not due to serious business losses or financial reverses, the separationpay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay forevery year of service, whichever is higher. A fraction of at least six (6) months shallbe considered as one (1) whole year."

Retrenchment, or "lay-off" in layman's parlance, is thetermination of employment initiated by the employethrough no fault of the employee's and without prejudice tothe latter, resorted to by the management during periods ofbusiness recession, industrial depression, or seasonafluctuations, or during lulls occasioned by lack of ordersshortage of materials, conversion of a plant for a newproduction program or the introduction of new methods omore efficient machinery, or of automation.

Simply put, it is an act of employer of dismissing employeesbecause of losses in the operation of a business, lack of workand considerable reduction on the volume of his business, aright consistently recognized and affirmed by this court.- Any claim of actual or potential business losses must satisfycertain established standards before any reduction of personnebecomes legal, viz:

1. The losses expected and sought to be avoided mustbe substantial and not merely de minimis in extent;2. The substantial losses apprehended must bereasonably imminent, as such imminence can beperceived objectively and in good faith by the employer;3. The retrenchment must be reasonably necessary andlikely to effectively prevent the expected losses.

4. The alleged losses. If already realized, and theexpected imminent losses sought to be forestalled, must

be proved by sufficient and convincing evidence- The Statement of Profit and Losses submitted by Crispa, Inc. toprove its alleged losses, without the accompanying signature oa certified public accountant or audited by an independenauditor, are nothing but self-serving documents which ought tobe treated as a mere scrap of paper devoid of any probativevalue.2. YESReasoning- The general rule is that obligations incurred by thecorporation, acting through its directors, officers andemployees, are its sole liabilities. There are times, howeverwhen solidary liabilities may be incurred but only whenexceptional circumstances warrant such as in the followingcases:

1. When directors and trustees or, in appropriate cases, theofficers of a corporation: (a) vote for or assent to patently

unlawful acts of the corporation; (b) act in bad faith or withgross negligence in directing the corporate affairs; (c) areguilty of conflict of interest to the prejudice of thecorporation, its stockholders or members, and other persons

- In labor cases, particularly, corporate directors and officers aresolidarily liable with the corporation for the termination oemployment of corporate employees done with malice or in badfaith. In this case, it is undisputed that petitioners have a direchand in the illegal dismissal of respondent employees.Disposition Petition is DISMISSED.

FILIPINAS V GATLABAYAN487 SCRA 673

CALLEJO; April 19, 2006

NATUREPetition for Review on Certiorari of the decision of the CA

FACTS- Filipinas Systems FILSYSTEMS, Inc. (Filsystems) is adomestic corporation engaged in the construction businessFilsystems employed complainants as grillers, carpenters andlaborers on various dates from 1992 to July 24, 1999. Theiaverage length of service with Filsystems ranged from two tonine years. Their latest and last assignment was in Meralco, inAntipolo, after which they reported back to the main plantComplainants narrated that they were verbally informed thatheir services were no longer needed on July 24, 1999(considering that they were only project employees and theproject to which they were last assigned had already been


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Labor Law 1 A2010 - 2 - Disinicompleted). The said employees filed their respectivecomplaints for illegal dismissal against Filsystems.- Filsystems, on the other hand, averred that the complainantswere employed merely as project employees.

ISSUEWON the employees were legally dismissed by reason ofretrenchment

HELDNO- Petitioners claim that respondents were retrenched must berejected. Indeed, petitioners even failed to adduce in evidenceany notes addressed to respondents notifying them that theiremployment was terminated on the ground of retrenchment. InSebuguero v. National Labor Relations Commission, this Courtsaid:

The requirement of notice to both the employees concernedand the Department of Labor and Employment (DOLE) ismandatory and must be written and given at least one monthbefore the intended date of retrenchment. In this case, it isundisputed that the petitioners were given notice of thetemporary lay-off. There is, however, no evidence that anywritten notice to permanently retrench them was given atleast one month prior to the date of the intendedretrenchment. ..But what the law requires is a written noticeto the employees concerned and that requirement ismandatory. The notice must also be given at least onemonth in advance of the intended date of retrenchment toenable the employees to look for other means of employmentand therefore to ease the impact of the loss of their jobs andthe corresponding income. That they were already ontemporary lay-off at the time notice should have been givento them is not an excuse to forego the one-month writtennotice because by this time, their lay-off is to becomepermanent and they were definitely losing their employment.

- Moreover, the minutes of the meeting on August 22, 2000(supposedly between the management of petitionercorporation, and rank and file and supervisory employees),show that only 13 rank and file employees attended. There is noevidence on record that respondents attended the meeting. There is likewise no evidence on record that petitioners

complied with the requirements of Article 283 of the Labor Codeof the Philippines, which reads:

Article 283. Closure of establishment and reduction ofpersonnel The employer may also terminate theemployment of any employee due to the installment of laborsaving devices, redundancy, retrenchment to prevent lossesor the closing or cessation of operation of the establishmentor undertaking unless the closing is for the purpose ofcircumventing the provisions of this Title, by serving a writtennotice on the workers and the Ministry of Labor andEmployment at least one (1) month before the intended datethereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected therebyshall be entitled to a separation pay equivalent to at least one(1) month pay or to at least one (1) month pay for every yearof service, whichever is higher. In case of retrenchment to

prevent losses and in cases of closures or cessation ofoperations of establishment or undertaking not due to seriousbusiness losses or reverses, the separation pay shall beequivalent to one (1) month pay or at least one half (1/2)month pay for every year of service, whichever is higher. Afraction of at least six (6) months shall be considered one (1)whole year.

- The general standards in retrenchment are: firstly, the lossesexpected should be substantial and not merely de minimis inextent. If the loss purportedly sought to be forestalled byretrenchment is clearly shown to be insubstantial andinconsequential in character, the bona fide nature of theretrenchment would appear to be seriously in question.Secondly, the substantial loss apprehended must be reasonablyimminent, as such imminence can be perceived objectively andin good faith by the employer. There should, in other words, be

a certain degree of urgency for the retrenchment, which is afteall a drastic recourse with serious consequences for thelivelihood of the employees retired or otherwise laid-offBecause of the consequential nature of retrenchment, it mustthirdly, be reasonably necessary and likely to effectivelyprevent the expected losses. The employer should have takenother measures prior or parallel to retrenchment to forestalosses, i.e., cut other costs than labor costs. An employer whofor instance, lays off substantial numbers of workers while

continuing to dispense fat executive bonuses and perquisites oso-called golden parachutes, can scarcely claim to beretrenching in good faith to avoid losses. The employersprerogative to bring down labor costs by retrenching after lessdrastic means e.g., reduction of both management and rankand-file bonuses and salaries, going on reduced time, improvingmanufacturing efficiencies, trimming of marketing andadvertising costs, etc. have been tried and found wanting.- Alleged losses if already realized, and the expected imminenlosses sought to be forestalled, must be proved by sufficientand convincing evidence. The reason for requiring this quantumof proof is readily apparent: any less exacting standard of proowould render too easy the abuse of this ground for terminationof services of employees. Thus, petitioner failed to adduce amorsel of evidence to prove the factual basis for a validretrenchment.Disposition Petition denied

BUSINESS SERVICES OF THE FUTURE TODAY INC VCA

480 SCRA 571QUISUMBING; January 30, 2006

NATUREPetition for review on certiorari the decision of the Court oAppeals declaring the dismissal of the private respondentillegal and awarding to them separation pay, backwages, and13th month pay, and attorneys fees.

FACTS- Mailboxes, Etc. (Davao) is the local franchisee of MailboxesEtc. (MBE), a US-based corporation operating business support

and communication service centers worldwide. It is operatedlocally by petitioner Business Services of the Future Today, Inc(BSFTI), whose stockholders are petitioner Ramon Allado andhis nominees.- On January 8, 1996, Allado hired private respondents, spousesGilbert and Ma. Celestina Veruasa, as manager and assistantmanager, respectively, of Mailboxes, Etc. (Davao). During thecourse of their employment the spouses advances exceededtheir unpaid salaries by P43,402.54.- On January 8, 1998, Allado personally gave notices otermination effective immediately to the spouses. They gave asreason, the negative cashflow and BSFTIs failure to infuseadditional capital to the business. No written notice of closure obusiness was given to the Department of Labor andEmployment (DOLE). Allado then padlocked the offices oMailboxes, Etc. (Davao), confiscated all its business records

and appropriated for himself all the transferable rights andequipment of the office.- Despite repeated demands, the petitioners did not pay thealleged balance of P129,488.93 due to the spouses. Thereafterthe Veruasa spouses instituted a complaint for illegal dismissal.

ISSUEWON the dismissal was illegalHELDNO- The BSFTIs closure was bona fide and under ART. 283. of theLabor Code closure of establishment is a valid ground fotermination of employment. The records before us revealed thatit suffered losses from 1996 to 1998. The failure of thepetitioners to notify the DOLE through a written notice of thetermination of its corporate life should not nullify the dismissal


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Labor Law 1 A2010 - 4 - Disini- Turning to the legality of the termination of privaterespondent's employment, we find merit in petitioner's basicargument. The Court was unable to sustain public respondentNLRC's holding that private respondent's dismissal was not justified by redundancy and hence illegal. In the first place,while the letter informing private respondent of the terminationof his services used the word "redundant", that letter alsoreferred to the company having "incur[red] financial losseswhich [in] fact has compelled [it] to resort to retrenchment to

prevent further losses". 3Thus, what the letter was in effectsaying was that because of financial losses, retrenchment wasnecessary, which retrenchment in turn resulted in theredundancy of private respondent's position.- In the second place, the Court does not believe thatredundancy in an employer's personnel force necessarily oreven ordinarily refers to duplication of work. That no otherperson was holding the same position that private respondentheld prior to the termination of his services, does not show thathis position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to findduplication of work and two (2) or more people doing the workof one person. Redundancy, for purposes of our Labor Code,exists where the services of an employee are in excess of whatis reasonably demanded by the actual requirements of theenterprise. Succinctly put, a position is redundant where it issuperfluous, and superfluity of a position or positions may bethe outcome of a number of factors, such as overhiring ofworkers, decreased volume of business, or dropping of aparticular product line or service activity previouslymanufactured or undertaken by the enterprise. 4 The employerhas no legal obligation to keep in its payroll more employeesthan are necessarily for the operation of its business.- In the third place, in the case at bar, petitioner Wiltshire, inview of the contraction of its volume of sales and in order to cutdown its operating expenses, effected some changes in itsorganization by abolishing some positions and thereby effectinga reduction of its personnel. Thus, the position of Sales Managerwas abolished and the duties previously discharged by theSales Manager simply added to the duties of the GeneralManager, to whom the Sales Manager used to report.- It is of no legal moment that the financial troubles of thecompany were not of private respondent's making. Private

respondent cannot insist on the retention of his position uponthe ground that he had not contributed to the financialproblems of Wiltshire. The characterization of privaterespondent's services as no longer necessary or sustainable,and therefore properly terminable, was an exercise of businessjudgment on the part of petitioner company. The wisdom orsoundness of such characterization or decision was not subjectto discretionary review on the part of the Labor Arbiter nor ofthe NLRC so long, of course, as violation of law or merelyarbitrary and malicious action is not shown. It should also benoted that the position held by private respondent, SalesManager, was clearly managerial in character.

DOLE PHILIPPINES INC V NLRC (BARRANCO)365 SCRA 124

KAPUNAN; September 13, 2001

NATURECertiorari

FACTS- Dole Philippines, Inc., is a corporation organized and existingunder Philippine laws. It is engaged in the business of growing,canning, processing and manufacturing pineapples and otherallied products. The other petitioners were Dole corporateofficers at the time the cases were instituted- Private respondents were Doles employees of different ranksand positions.- In 1990 and 1991, DOLE carried out a massive manpowerreduction and restructuring program aimed at reducing the

total workforce and the number of positions in the companystable of organization.- Dole intimates that the 1990-1991 reduction was acontinuation of previous efforts to restructure its organization.- Previously, in 1982, Dole reduced its manpower by 509workers but prolonged collective bargaining negotiations, whichended in 1990, prevented the company from proceeding withits restructuring- Among the factors considered by the company in undertaking

the reduction program was the high absenteeism rate, which in1989 accounted for 16% of total man hours. The highabsenteeism rate translated to higher paid sick leaves, higheoperating costs for medical facilities, and higher transportationcosts due to under-filled and late hauls.- Dole also cites the exacerbation of operating cost problemsdue to factors beyond [its] control, i.e., the Gulf War, oil priceincreases, mandated wage increases, the 9% import levypower rate hikes, [and] increased land rentals, existing at thatime.- Furthermore, the bloody December 1989 coup detat shookinvestor confidence and put in doubt the continued economicprogress of the country.- Pursuant to its restructuring efforts, Dole abolished thepositions of foremen, bargaining capataces and foreladiesEmployees occupying these positions were either promoted owere dismissed on grounds of redundancy.- To address the surplus of manpower relative to its operationsDole also decided to reduce the number of employeescompany-wide. In 1990, the company offered a SpeciaVoluntary Resignation (SVR) program of which manyemployees, including a number of private respondents, availed.- Upon approval of the applications, notices of termination weresent to the employees who availed of the SVR.- After receiving the benefits, said employee-applicantexecuted a Release stating that the employee had no claimsagainst Dole in connection with his or her employmentSubsequently, the dismissed employees executed anotheRelease of Claim in favor of Dole.- A total of 2,357 hourly and monthly salaried employees wereseparated from Dole during this period.- After assessing the outcome of the SVR, Dole found that icould still do with lesser employees, and proceeded to dismiss

more of them in March 1991.- Overall, 2,792 employees were separated under the SVRProgram.- In Oct. 1991, complaints for illegal dismissal were filed againsDole by De Lara et al.- LA Solano dismissed the complaints for lack of merit; theidismissal was valid.- NLRC reversed the LA and ordered reinstatement. DeniedDOLEs MR.

ISSUEWON DOLES redundancy program is valid and if so, won thedismissal of the respondent employees are valid as well

HELDYES

- Redundancy is one of the authorized causes for the dismissaof an employee.- The lack of notice to the DOLE does not render theredundancy program void.Reasoning- Wiltshire File Co. Inc., vs. NLRC: x x x redundancy in anemployers personnel force necessarily or even ordinarily refersto duplication of work. That no other person was holding thesame position that private respondent held prior to thetermination of his services, does not show that his position hadnot become redundant. Indeed, in any well-organized businesenterprise, it would be surprising to find duplication of work andtwo (2) or more people doing the work of one person. Webelieve that redundancy, for purposes of the Labor Code, existswhere the services of an employee are in excess of what isreasonably demanded by the actual requirements of the


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Labor Law 1 A2010 - 5 - Disinienterprise. Succinctly put, a position is redundant where it issuperfluous, and superfluity of a position or positions may bethe outcome of a number of factors, such as overhiring ofworkers, decreased volume of business, or dropping of aparticular product line or service activity previouslymanufactured or undertaken by the enterprise.- The characterization of an employees services as no longernecessary or sustainable, and, therefore, properly terminable, isan exercise of business judgment on the part of the employer.

The wisdom or soundness of such characterization or decision isnot subject to discretionary review provided, that violation oflaw or arbitrary or malicious action is not shown.- Doles redundancy program does not appear to be tainted bybad faith even if it hired casual employees to replace thosedismissed (as it has always hired casual employees to augmentits manpower in accordance with the demands of the industry.)- The petition alleges that the redundancy program is part of awide-scale restructuring of the company.- This purported restructuring is supported by the companysundisputed history towards these ends, which culminated in theabolition of certain positions and the Special VoluntaryResignation program in 1990-1991.- Among the avowed goals of such restructuring is the reductionof absenteeism in the company. The harsh economic andpolitical climate then prevailing in the country also emphasizedthe need for cost-saving measures.- Reorganization as a cost-saving device is acknowledged by jurisprudence. An employer is not precluded from adopting anew policy conducive to a more economical and effectivemanagement, and the law does not require that the employershould be suffering financial losses before he can terminate theservices of the employee on the ground of redundancy.- The law, however, does not prevent employers from saving onlabor costs.- International Macleod, Inc. vs. Intermediate Appellate Court:held that the determination of the need for the phasing out of adepartment as a labor and cost saving device because it was nolonger economical to retain said department is a managementprerogative, with which the courts will not interfere.- De Ocampo vs. NLRC: [t]he reduction of the number ofworkers in a company made necessary by the introduction ofthe services of Gemac Machineries in the maintenance and

repair of its industrial machinery is justified. There can be noquestion as to the right of the company to contract the servicesof Gemac Machineries to replace the services rendered by theterminated mechanics with a view to effecting more economicand efficient methods of production. So long as theundertaking to save on labor costs is not attended by malice,arbitrariness, or intent on the part of the employer tocircumvent the law, as in this case, the Court will not interferewith such endeavor.Ratio If an employee consented to his retrenchment orvoluntarily applied for retrenchment with the employer due tothe installation of labor-saving devices, redundancy, closure orcessation of operation or to prevent financial losses to thebusiness of the employer, the required previous notice to theDOLE is not necessary as the employee thereby acknowledgedthe existence of a valid cause for termination of his

employment (International Harvester, Inc. vs. NLRC).- Here, most of the private respondents even filled upapplication forms to be considered for the redundancy programand thus acknowledged the existence that their services wereredundant.- Private respondents executed two releases in favor ofpetitioner company.- Not all quitclaims are per se invalid or against public policy.But those

(1) where there is clear proof that the waiver was wangledfrom an unsuspecting or gullible person or(2) where the terms of settlement are unconscionable ontheir face are invalid. In these cases, the law will step in toannul the questionable transaction. There is no showing herethat private respondents are unsuspecting or gullible persons.Neither are the terms of the settlement unconscionable.

Indeed, private respondents received a generous separationpackage, as set out in the narration of facts above.

Disposition Petition is GRANTED and the decision of the NLRCANNULLED and SET ASIDE. TRO LIFTED

ASUFRIN JR V SAN MIGUEL CORP425 SCRA 270

YNARES-SANTIAGO; March 10, 2004

FACTS- Coca Cola Plant, then a department of respondent San MigueBeer Corporation (SMC), hired petitioner as autility/miscellaneous worker.- He became a regular employee paid on daily basis as a ForkliftOperator. Then became a monthly paid employee promoted aStock Clerk.- The sales office and operations at the Sum-ag, Bacolod CitySales Office were reorganized. Several positions wereabolished including petitioners position as Stock Clerk. Aftereviewing petitioners qualifications, he was designatedwarehouse checker at the Sum-ag Sales Office.- SMC implemented a new marketing system known as the pre-selling scheme at the Sum-ag Beer Sales Office. As aconsequence, all positions of route sales and warehousepersonnel were declared redundant. Respondent notified theDOLE Director of Region VI that 22 personnel of the SalesDepartment of the Negros Operations Center would be retired.- SMC thereafter wrote a letter to petitioner informing him thatowing to the implementation of the pre-selling operationsscheme, all positions of route and warehouse personnel will bedeclared redundant and the Sum-ag Sales Office will be closedeffective April 30, 1996. Thus, from April 1, 1996 to May 151996, petitioner reported to respondents PersonneDepartment at the Sta. Fe Brewery, pursuant to a previousdirective.- Thereafter, the employees of Sum-ag sales force wereinformed that they can avail of respondents early retirementpackage pursuant to the retrenchment program, while thosewho will not avail of early retirement would be redeployed oabsorbed at the Brewery or other sales offices.- Petitioner opted to remain and manifested to Acting Personne

Manager Salvador Abadesco his willingness to be assigned toany job, considering that he had three children in college.- Petitioner was surprised when he was informed by the ActingPersonnel Manager that his name was included in the list oemployees who availed of the early retirement packagePetitioners request that he be given an assignment in thecompany was ignored by the Acting Personnel Manager.- Petitioner thus filed a complaint for illegal dismissal with theNLRC.- The Labor Arbiter dismissed the complaint for lack of merit.- Petitioner appealed to the NLRC which set aside the LaborArbiters decision and ordered respondent SMC to reinstatepetitioner to his former or equivalent position with fulbackwages.- Respondent filed a petition with the Court of Appeals whichreversed the decision of the NLRC and reinstated the judgment

of the Labor Arbiter dismissing the complaint for illegadismissal.- Petitioners motion for reconsideration] was denied.

ISSUEWON the dismissal of petitioner is based on a just andauthorized cause

HELDNO- Dole Philippines, Inc. v. NLRC, citing the leading case oWiltshire File Co., Inc. v. NLRC:

redundancy in an employers personnel force necessarilyor even ordinarily refers to duplication of work. That noother person was holding the same position that privaterespondent held prior to the termination of his services,


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Labor Law 1 A2010 - 6 - Disinidoes not show that his position had not become redundant.Indeed, in any well-organized business enterprise, it wouldbe surprising to find duplication of work and two (2) ormore people doing the work of one person. We believe thatredundancy, for purposes of the Labor Code, exists wherethe services of an employee are in excess of what isreasonably demanded by the actual requirements of theenterprise. Succinctly put, a position is redundant where itis superfluous, and superfluity of a position or positions

may be the outcome of a number of factors, such asoverhiring of workers, decreased volume of business, ordropping of a particular product line or service activitypreviously manufactured or undertaken by the enterprise.

- The determination that employees services are no longernecessary or sustainable and, therefore, properly terminable isan exercise of business judgment of the employer.- The wisdom or soundness of this judgment is not subject todiscretionary review of the Labor Arbiter and the NLRC,provided there is no violation of law and no showing that it wasprompted by an arbitrary or malicious act.- It is not enough for a company to merely declare that it hasbecome overmanned. It must produce adequate proof that suchis the actual situation to justify the dismissal of the affectedemployees for redundancy.- Persuasive as the explanation proffered by respondent may beto justify the dismissal of petitioner, a number of disturbingcircumstances, however, leave the Court unconvinced.

1. Of the 23 SMC employees assigned at the Sum-ag SalesOffice/Warehouse, 9 accepted the offer of SMC to avail of theearly retirement whose separation benefits was computed at250% of their regular pay. The rest, including petitioner, didnot accept the offer. Out of the remaining fourteen 14, onlypetitioner clearly manifested, through several letters, hisdesire to be redeployed to the Sta. Fe Brewery or any salesoffice and for anyposition not necessarily limited to that ofa warehouse checker. In short, he was even willing to accepta demotion just to continue his employment. Meanwhile,other employees who did not even write a letter to SMC wereredeployed to the Sta. Fe Brewery or absorbed by otheroffices/outlets outside Bacolod City.2. Petitioner was in the payroll of the Sta. Fe Brewery andassigned to the Materials Section, Logistics Department,

although he was actually posted at the Sum-ag Warehouse. Thus, even assuming that his position in the Sum-agWarehouse became redundant, he should have been returnedto the Sta. Fe Brewery where he was actually assigned andwhere there were vacant positions to accommodate him.3. It appears that despite respondents allegation that itceased and closed down its warehousing operations at theSum-ag Sales Office, actually it is still used for warehousingactivities and as a transit point where buyers and dealers gettheir stocks.4. In selecting employees to be dismissed, a fair andreasonable criteria must be used, such as but not limited to(a) less preferred status, e.g. temporary employee; (b)efficiency; and (c) seniority. In the case at bar, no criterionwhatsoever was adopted by respondent in dismissingpetitioner. - Furthermore, as correctly observed by the NLRC,

respondent has not shown how the cessation of operationsof the Sum-ag Sales Office contributed to the ways andmeans of improving effectiveness of the organization with theend in view of efficiency and cutting distribution overheadand other related costs.

- Respondent, thus, clearly resorted to sweepinggeneralization[s] in dismissing complainant. Indeed,petitioners predicament may have something to do with anincident where he incurred the ire of an immediate superior inthe Sales Logistics Unit for exposing certain irregularitiescommitted by the latter.- Whether it be by redundancy or retrenchment or any of theother authorized causes, no employee may be dismissedwithout observance of the fundamentals ofgood faith.- It is not difficult for employers to abolish positions in the guiseof a cost-cutting measure and we should not be easily swayed

by such schemes which all too often reduce to near nothingwhat is left of the rubble of rights of our exploited workers.- Given the nature of petitioners job as a Warehouse Checker, itis inconceivable that respondent could not accommodate hiservices considering that the warehousing operations at Sum-agSales Office has not shut down.- To sustain the position taken by the appellate court would beto dilute the workingmans most important right: hisconstitutional right to security of tenure.

- While respondent may have offered a generous compensationpackage to those whose services were terminated upon theimplementation of the pre-selling scheme, we find such anoffer, in the face of the prevailing facts, anathema to theunderlying principles which give life to our labor statutesbecause it would be tantamount to likening an employeremployee relationship to a salesman and a purchaser of acommodity.- To quote what has been aptly stated by former GovernoGeneral Leonard Wood in his inaugural message before the 6t

Philippine Legislature on October 27, 1922 labor is neither achattel nor a commodity, but human and must be dealt withfrom the standpoint of human interest.- As has been said: We do not treat our workers amerchandise and their right to security of tenure cannot bevalued in precise peso-and-centavo terms. It is a right whichcannot be allowed to be devalued by the purchasing power ofemployers who are only too willing to bankroll the separationpay of their illegally dismissed employees to get rid of them.- This right will never be respected by the employer if wemerely honor it with a price tag. The policy of dismiss now andpay later favors moneyed employers and is a mockery of theright of employees to social justice.Disposition.The petition was granted.

FINANCIAL LOSS

ESCAREAL V NLRC (PHILIPPINE REFINING CO INC)213 SCRA 472

DAVIDE JR; September 2, 1992

NATUREPetition for certiorari

FACTS- Escareal was hired by the PRC for the position of PollutionControl Manager effective on 16 September 1977 with astarting monthly pay of P4,230 00; the employment was madepermanent effective on 16 March 1978. The contract oemployment provides, inter alia, that his "retirement date wilbe the day you reach your 60th birthday, but there is provision(sic) for voluntary retirement when you reach your 50thbirthday. Bases for the hiring of Escareal are LOI No. 588implementing the National Pollution Control Decree, P.D No984, and Memorandum Circular No. 02, implementing LOI No588, which amended Memorandum Circular No. 007, Series of1977, issued by the National Pollution Control Commission(NPCC).

- 1 April 1979: Escareal was also designated as Safety Managepursuant to Article 162 of the Labor Code (P.D. 442, aamended) and the pertinent implementing rule thereon. At thetime of such designation, Escareal was duly accredited as aSafety Practitioner by the Bureau of Labor StandardsDepartment of Labor and Employment (DOLE) and the SafetyOrganization of the Philippines.- In addition, the pertinent rules on Occupational Health andSafety implementing the Labor Code provide for the designationof full-time safety men to ensure compliance with the safetyrequirements prescribed by the Bureau of Labor StandardsConsequently, Escareal's designation was changed to PollutionControl and Safety Manager.- In the course of his employment, Escareal's salary wasregularly upgraded; the last pay hike was granted on 28 March


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Labor Law 1 A2010 - 7 - Disini1988 when he was officially informed that his salary was beingincreased to P23,100.00 per month effective 1 April 1988. Thislast increase is indisputably a far cry from his starting monthlysalary of P4,230.00.- Sometime in the first week of November 1987, PRC'sPersonnel Administration Manager George B. Ditching informedEscareal about the company's plan to declare the position ofPollution Control and Safety Manager redundant. Ditchingattempted to convince Escareal to accept the redundancy offer

or avail of the company's early retirement plan. Escarealrefused and instead insisted on completing his contract as hestill had about three and a half (3 1/2) years left before reachingthe mandatory retirement age of sixty (60).- 15 June 1988: Escareal's immediate superior, PRC's Engg DeptManager Jesus P. Javelona, formally informed Escareal that theposition of "Safety and Pollution Control Manager will bedeclared redundant effective at the close of work hours on 15thJuly 1988." Escareal was also notified that the functions andduties of the position to be declared redundant will be absorbedand integrated with the duties of the Industrial EngineeringManager; as a result thereof, Escareal "will receive fullseparation benefits provided under the PRC Retirement Planand additional redundancy payment under the scheme applyingto employees who are 50 years old and above and whose jobshave been declared redundant by Management."- Escareal protested his dismissal via his 22 June 1988 letter toJavelona. This notwithstanding, the PRC unilaterally circulated aclearance dated 12 July 1988, to take effect on 15 July 1988,indicating therein that its purpose is for Escareal's "earlyretirement" and not redundancy. Escareal confronted Javelona;the latter, in his letter dated 13 July 1988, advised the formerthat the employment would be extended for another month, orup to 15 August 1988. Escareal responded with a letter dated25 July 1988 threatening legal action.- 14 July 1988: PRC's Industrial Relations Manager Bernardo N.Jambalos III sent a Notice of Termination to the DOLE informingthe latter that Escareal was being terminated on the ground ofredundancy effective 16 August 1988.- 5 August 1988:Escareal had a meeting with Cesar Bautistaand Dr. Reynaldo Alejandro, PRC's President and CorporateAffairs Director, respectively. To his plea that he be allowed tofinish his contract of employment as he only had three (3) years

left before reaching the mandatory retirement age, Bautistaretorted that the termination was final.- 8 August 1988: Escareal presented to Javelona a computationshowing the amount of P2,436,534.50 due him (Escareal) byway of employee compensation and benefits.- On the date of the effectivity of his termination, Escareal wasonly fifty-seven (57) years of age. He had until 21 July 1991, hissixtieth (60th) birth anniversary, before he would have beencompulsorily retired. Also, on the date of effectivity ofEscareal's termination, 16 August 1988, (UP Chemical Engggraduate) Miguelito S. Navarro, PRC's Industrial EngineeringManager, was designated as the Pollution Control and SafetyOfficer.- In view of all this, Escareal filed a complaint for illegaldismissal with damages against the private respondent PRCbefore the NLRC. Labor Arbiter Manuel P. Asuncion rendered a

decision ordering PRC to pay Escareal his redundancy pay inaccordance with existing company policy on the matter, withoutprejudice to the grant of additional benefits offered by PRCduring the negotiation stage of the case, though it nevermaterialized for failure of the parties to reach an agreement.- On appeal, NLRC affirmed the Labor Arbiter's decision, withmodification ordering PRC to pay Escareal his retirement pay inaccordance with the company policy and other benefits grantedto him thereunder, less outstanding obligations of thecomplainant with the company at the time of his dismissal.Separate MFRs of PRC and Escareal were both dismissed.Hence, this petition.

ISSUES1. WON PRC had valid and acceptable basis to declare theposition of Pollution Control and Safety Manager redundant

2. WON Escareal's right to security of tenure was violated byPRC3. WON Escareal's employment was for a fixed definite periodto end at his 60th birthday because of the stipulation as to theretirement age of sixty (60) years4. WON Escareal is entitled to backwages and retiremenbenefits5. WON Escareal is entitled to damages and attorney's fees

HELD1. NO- Wiltshire File Co., Inc. vs. NLRC: Redundancy, for purposesof the Labor Code, exists where the services of an employee arein excess of what is reasonably demanded by the actuarequirements of the enterprise; a position is redundant when itis superfluous, and superfluity of a position or positions may bethe outcome of a number of factors, such as 257the overhiringof workers, a decreased volume of business or the dropping of aparticular product line or service activity previouslymanufactured or undertaken by the enterprise.- Redundancy in an employer's personnel force, however, doesnot necessarily or even ordinarily refer to duplication of workThat no other person was holding the same position which thedismissed employee held prior to the termination of his servicesdoes not show that his position had not become redundant.- PRC had no valid and acceptable basis to declare the positionof Pollution Control and Safety Manager redundant as the samemay not be considered as superfluous; said positions arerequired by law. Thus, it cannot be gainsaid that the services oEscareal are in excess of what is reasonably required by theenterprise. Otherwise, PRC would not have allowed ten (10long years to pass before opening its eyes to that fact; neitherwould it have increased the Escareal's salary to P23,100.00 amonth effective 1 April 1988. That Escareal's positions were noduplicitous is best evidenced by PRC's recognition of theiimperative need thereof, this is underscored by the fact thaMiguelito S. Navarro, the company's Industrial EngineeringManager, was designated as Pollution Control and SafetyManager on the very same day of Escareal's termination.- Indeed, the proposition that a department manned by anumber of engineers presumably because of the heavyworkload, could still take on the additional responsibilities which

were originally reposed in an altogether separate sectionheaded by Escareal, is difficult to accept.- If PRC felt that either Escareal was incompetent or that thetask could be performed by someone more qualified, then whyis it that the person designated to the position hardly had anyexperience in the field concerned? And why reward Escarealbarely five (5) months before the dismissal, with an increase insalary?- If based on the ground of redundancy, such a move would beinvalid as the creation of said position is mandated by the law;the same cannot therefore be declared redundant.- If the aim was to generate savings in terms of the salaries thaPRC would not be paying Escareal any more as a result of thestreamlining of operations for improved efficiency, such a movecould hardly be justified in the face of PRC's hiring of ten (10)fresh graduates for the position of Management Trainee and

advertising for vacant positions in the Engineering/TechnicaDivision at around the time of the termination.- There would seem to be no compelling reason to save moneyby removing such an important position. As shown by theirecent financial statements, PRC's year-end net profits hadsteadily increased from 1987 to 1990.- While concededly, Article 283 of the Labor Code does norequire that the employer should be suffering financial lossesbefore he can terminate the services of the employee on theground of redundancy, it does not mean either that a companywhich is doing well can effect such a dismissal whimsically ocapriciously. The fact that a company is suffering from businesslosses merely provides stronger justification for the termination2. YES- It is evident that Escareal's right to security of tenure wasviolated by the private respondent PRC. Both the Constitution


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Labor Law 1 A2010 - 8 - Disini(Section 3, Article XIII) and the Labor Code (Article 279, P.D.442, as amended) enunciate this right as available to anemployee.- Security of tenure is a right which may not be denied on merespeculation of any unclear and nebulous basis.- In this regard, it could be concluded that the respondent PRCwas merely in a hurry to terminate the services of Escareal assoon as possible in view of the latter's impending retirement; itappears that said company was merely trying to avoid paying

the retirement benefits Escareal stood to receive upon reachingthe age of sixty (60). PRC acted in bad faith.3. NO- There is no indication that PRC intended to offer uninterruptedemployment until Escareal reached the mandatory retirementage, the contract of employement merely informs Escareal ofthe compulsory retirement age and the terms pertaining to theretirement.- The letter to Escareal confirming his appointment does notcategorically state when the period of employment would end.It stands to reason then that Escareal's employment was notone with a specific period.4. YES- Article 279, LC: an "employee who is unjustly dismissed fromwork shall be entitled to reinstatement without loss of seniorityrights and other privileges and to his full backwages, inclusiveof allowances, and to his other benefits or their monetaryequivalent computed from the time his compensation waswithheld from him up to the time of his actual reinstatement."- Torillo vs. Leagardo, Jr. / Santos vs. NLRC: "The normalconsequences of a finding that an employee has been illegallydismissed are, firstly, that the employee becomes entitled toreinstatement to his former position without loss of seniorityrights and, secondly, the payment of backwages correspondingto the period from his illegal dismissal up to actualreinstatement. xxx Though the grant of reinstatementcommonly carries with it an award of backwages, theinappropriateness or non-availability of one does not carry withit the inappropriateness or non-availability of the other. xxx Puta little differently, payment of backwages is a form of relief thatrestores the income that was lost by reason of unlawfuldismissal, separation pay, in contrast, is oriented towards theimmediate future, the transitional period the dismissed

employee must undergo before locating a replacement job."- Reinstatement of Escareal would have been proper. However,since he reached the mandatory retirement age on 21 July1991, reinstatement is no longer feasible. He should thus beawarded his backwages from 16 August 1988 to 21 July 1991,inclusive of allowances and the monetary equivalent of theother benefits due him for that period, plus retirement benefitsunder the PRC's compulsory retirement scheme which he wouldhave been entitled to had he not been illegally dismissed.5. NO- In his complaint and the attached Affidavit-Complaint, Escarealdoes not mention any claim for damages and attorney s fees;furthermore, no evidence was offered to prove them. An awardtherefor would not be justified.Disposition Petition granted.

LAW REQUIRED POSITION

ESCAREAL V NLRC[PAGE 260]

WHEN REDUNDANCY

LOPEZ SUGAR CORP V FRANCO[PAGE 150]

WILTSHIRE FILE CO INC V NLRC[PAGE 257]

TIERRA INTERNATIONAL CONSTRUCTION CORP VNLRC (OLIVAR)

211 SCRA 73PADILLA; July 3, 1992

NATUREPetition for the annulment of the decision of NLRC.

FACTS- March 7 1984: private respondent Isidro P. Olivar was hired byFEBROE, a foreign shipping company, through its local agentTierra International Construction Corporation, to work as shifsupervisor in its Base Operating Support (BOS) project for theU.S. Navy in the British Indian Ocean Territory of Diego Garciafor a period of one (1) year with a basic monthly salary of US$680.00.- Olivars employment contract was renewed in 1985; the lastrenewal was on 8 May 1986. But on 1 October 1986, he wasdismissed from employment, and subsequently repatriated tothe Philippines.- Olivar alleged that he was a victim of improper termination ofemployment thru gradual and systematic removal of highsalaried employees.

- FEBROE averred that in July and August 1986, its managementundertook a comprehensive audit and evaluation of its entirework force to promote economy, efficiency and profitability inits operations, and to reduce personnel whose positions wereconsidered redundant or surplusage and/or to re-assignpersonnel to other available useful positions. One of thepositions listed for abolition was the position of the olivar as"13401 Supervisor, Technical."- POEA held that the termination was for authorized causePOEA then ordered Tierra and FEBROE to pay Olivar hisseparation pay.- Tierra contended that the employment contract does noprovide for separation pay in case of termination based onredundancy or reduction of force due to a decrease in volumeor scope of work.- NLRC reversed the decision of POEA and ordered the companyto pay Olivar corresponding to the unexpired portion of his

contract.

ISSUES1. WON termination of Olivar is illegal2. WON Olivar is entitled to separation pay

HELD1. YES, the termination was for a valid cause.Ratio In redundancy, what is looked into is the position itselfthe nature of the services performed by the employee and thenecessity of such position.

Reasoning- Termination of an employee's services because of a reductionof work force due to a decrease in the scope or volume of work

of the employer is synonymous to, or a shade of terminationbecause of redundancy under Article 283 of the Labor Code.- Redundancy exists where the services of an employee are inexcess of what is reasonably demanded by the actuarequirements of the enterprise. A position is redundant where iis superfluous, and superfluity of a position or positions may bethe outcome of a number of factors, such as over-hiring oworkers, decreased volume of business, or dropping of aparticular product line or service activity previouslymanufactured or undertaken by the enterprise.- Olivar received his notice of termination advising him that hisposition will be deleted because of a reduction of force due to adecrease in scope of work assigned. 28 other positions werealso abolished. Olivar was not singled out and that histermination was not arbitrary or malicious on the part of theemployer.


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Labor Law 1 A2010 - 9 - Disini- The law does not make any distinction between a technicaland a non-technical position for purposes of determining thevalidity of termination due to redundancy. Neither does the lawnor the stipulations of the employment contract here involvedrequire that junior employees should first be terminated (inanswer to NLRCs reasoning that junior employees should beterminated first before the technical and senior positions).2. YES, Olivar is entitled to separation pay.Ratio Not only are existing laws read into contracts in order to

fix the obligations as between the parties, but the reservation ofessential attributes of sovereign power is also read intocontracts as a postulate of the legal order.Reasoning- There is no mention of an award of separation pay in thecontract between the parties. HOWEVER, Tierra admits thatArticle 283 of the Labor Code governs its employer-employeerelationship with the private respondent as the same is deemedwritten in the employment contract signed by the parties. Thus,although a contract is the law between the parties, thereto, thisprovisions of law which regulate such contracts are deemedincluded and shall limit and govern the relations between theparties.Disposition. Decision of the NLRC is reversed and set aside,and the decision of the POEA is revived. No pronouncements asto costs.

ESCAREAL V NLRC[PAGE 260]

EDGE APPAREL INC V NLRC349 PHIL 972

VITUG; February 12, 1998

NATUREPetition for certiorari and prohibition assailing the decision ofthe NLRC

FACTS- Pursuing its retrenchment program, petitioner Edge Apparel,Inc., dismissed private respondents from employment. The

subsequent receipt of their separation pay benefits did notdeter them from going through with their complaint for illegaldismissal against petitioner. The charge averred that theretrenchment program was a mere subterfuge used by EdgeApparel to give a semblance of regularity and validity to thedismissal.- Satisfied with the legality of the retrenchment program, theLabor Arbiter dismissed the complaint of private respondentsagainst petitioner. The decision was appealed to the NLRC. Intheir appeal, private respondents claimed that the documentssubmitted to demonstrate the alleged losses had been"bloated" so as to reflect financial losses. The NLRC held thatthere was no basis for the retrenchment of the workers .- The NLRC found, however, that the workers were terminateddue to redundancy and ordered petitioner to pay privaterespondents additional separation pay in accordance with Art.283. The NLRC noted that the workers were assigned to thesewing line for simple garments which was phased out due infact to the dropping of this particular line of business. It washeld that the dismissal of private respondents could beconsidered to have been due to redundancy since it was onlyprivate respondents' line of work which was phased out bypetitioner. Edge Apparels MFR was denied, hence this petition.

ISSUEWON private respondents were dismissed due to redundancy

HELDNORatio The fact that a mere portion of the business of anemployer is shut down does not necessarily remove that

measure from the ambit of the term "retrenchment" within themeaning of Art. 283.Reasoning- The Labor Arbiter, affirmed by the NLRC, found petitioner tohave complied with the requirements of the law in effecting avalid retrenchment. The law acknowledges the right of everybusiness entity to reduce its work force if it is compelled byeconomic factors that would otherwise endanger its stability oexistence. In exercising its right to retrench employees, the firm

may choose to close all, or a part of, its business to avoidfurther losses or mitigate expenses.Obiter- Redundancy exists where the services of an employee are inexcess of what would reasonably be demanded by the actuarequirements of the enterprise. A position is redundant when iis superfluous, and superfluity of a position or positions could bethe result of a number of factors, such as the overhiring oworkers, a decrease in the volume of business or the droppingof a particular line or service previously manufactured oundertaken by the enterprise. An employer has no legaobligation to keep on the payroll employees more than thenumber needed for the operation of the businessRetrenchment, in contrast to redundancy, is an economicground to reduce the number of employees. A dismissal due toredundancy entitles the worker to separation pay equivalent to1 month pay for every year of service. When the termination oemployment is due to retrenchment to prevent losses, theseparation pay is only an equivalent of 1/2 month pay for everyyear of service. In the above instances, a fraction of at least 6months is considered as 1 whole year.Disposition The appealed decision is MODIFIED by deletingthe additional award of separation pay to private respondents.

CRITERIA-SELECTION OF EMPLOYEE

PANLILIO V NLRC ( FINDSTAFF PLACEMENTSERVICES INC, OMAN SHERATON HOTEL INC)

281 SCRA 53ROMERO; October 17, 1997

NATUREReview of the decision of the NLRC

FACTS- Petitioner Moises B. Panlilio was recruited by privaterespondent Findstaff Placement Services (FPS) for employmentin the Sheraton Hotel in Oman as Recreational Manager inOctober 1991. The contract was for a period of two yearsHowever, in March 1992, his services were terminated.- He filed a complaint for illegal dismissal before the POEAPOEA rendered a decision in favor of the petitioner on theground that the alleged redundancy of his position was noadequately proven.- FPS filed an appeal before the NLRC, submitting affidavits fromthe officers of the Director of Personnel and Training Division oSheraton Hotel by FPS substantiating the redundancy o

petitioners position. However, NLRC affirmed the decision othe POEA. On MFR, NLRC reversed its decision.

ISSUEWON Panlilio was illegally dismissed

HELDYES- The redundancy of his position wasnt fully substantiated. Theaffidavits and documents it submitted are entitled to littleweight, for it does not prove the superfluity of petitionerposition. In fact, these documents do not even present thenecessary factors which would confirm that a position is indeedredundant, such as overhiring of workers, decreased volume obusiness or dropping of a product line or service activity.


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Labor Law 1 A2010 - 10 - Disini- Undoubtedly, said documents still do not sufficiently explainthe reason why petitioners position had become redundant, butonly elucidated the fact that he was not a victim of anydiscrimination in effecting the termination.- We have held that it is important for a company to have fairand reasonable criteria in implementing its redundancyprogram, such as but not limited to, (a) preferred status, (b)efficiency and (c) seniority. Unfortunately for FPS, suchappraisal was not done in the instant case.

Disposition Decision reversed

GOLDEN THREAD KNITTING INDUSTRIES INC VNLRC

[PAGE 194]

TANJUAN V PHIL POSTAL SAVINGS BANK411 SCRA 168

PANGANIBAN; September 16, 2003

NATUREPetition for Review of a CA ruling

FACTS- Tanjuan (petitioner) was employed by Philippine PostalSavings Bank, Inc. (respondent), a government financinginstitution and a subsidiary of the Philippine Postal Corporation(Philpost), as Property Appraisal Specialist and Officer-in-Chargeof its Credit Supervision and Control Department. At the timematerial to this case, he was on his fourth year of service. Torres (respondent Torres), PPSBIs President and ChiefExecutive Officer, issued Memorandum 145-98 addressed topetitioner and five (5) other employees belonging to itsAccounts Management Department and Credit Supervision andControl Department charging them with negligence in theperformance of duties and misrepresentation. Petitionersubmitted his written explanation alleging that he merelyreviewed and validated the findings of the Property Appraiser.- OP Order No. 003-99 was issued by respondent Torres topetitioner informing him of his preventive suspension for aperiod of ninety (90) days in view of the pending administrativeinvestigation against him, later reduced to 30 days. Petitionerssuspension would only be up to February 11, 1999, after whichhe could already report back to work.- Board of Directors of respondent PPSBI issued BoardResolution No. 99-14 approving the banks reorganization viaretrenchment of employees and re-alignment of functions andpositions for the purpose of preventing further serious losses. Infurtherance of the Boards decision, a letter was released byrespondent Torres addressed to all employees of respondentPPSBI, informing them of the impending reorganization andenjoining them to apply for their desired plantilla positionsunder the new organizational set-up not later than July 20,

1999, otherwise they shall not be included in the selectionprocess and shall be deemed to have opted to be separatedinstead. Petitioner did not apply for any position in the neworganizational set-up.- Petitioner received a Notice of Termination dated October 4,1999 informing him that pursuant to respondent PPSBIsadoption of a new organizational structure under BoardResolution No. 99-14, his employment therewith shall cease [at]the close of office hours on November 4, 1999 or thirty (30)calendar days from date of receipt of the notice on the groundof abolition of position. The Department of Labor andEmployment was likewise seasonably notified prior to theeffectivity date of petitioners termination as required by law.However, the release of his separation pay of one and a half (11/2) months salary for every year of service was withheld in

view of the pendency of a criminal case against him with theOffice of the Ombudsman for alleged irregularities in thegranting of loans for which he could likewise be held pecuniarilyliable.- Petitioner filed a complaint for illegal dismissal with moneyclaims.- Labor Arbiter declared Philippine Postal Savings Bank, Incguilty of illegal dismissal.Respondents appealed to the NLRC asseverating that they were

denied due process of law when Labor Arbiter allegedly hastilydecided that they did not adduce evidence to support theiclaim of business losses to justify retrenchment. In support otheir appeal, respondents submitted in evidence differendocuments.- Petitioner duly opposed the presentation of the aforesaiddocuments contending that [these] cannot be presented for thefirst time on appeal. Moreover, even if the same can beadmitted on appeal, the aforesaid documents are insufficient toprove the existence of business losses. Finally, petitioner positsthat if serious losses were in fact incurred by respondent PPSBIthe same was due to the mismanagement of its officers whichshould not be borne by its rank and file employees.- NLRC issued a Resolution admitting the evidence presented byrespondents on appeal and finding the same adequate to provethe existence of business losses on the part of respondenPPSBI. Petitioner elevated the case to the CA which affirmed theNLRC.

ISSUES1. WON proof of business losses maybe admitted on appeal2. WON the CA has a Power to review findings of fact3. WON the Retrenchment was valid

HELD1. YES- It is well-settled that the NLRC is not precluded from receivingevidence, even for the first time on appeal, because technicarules of procedure are not binding in labor cases. This ruleapplies equally to both the employee and the employer. In theinterest of due process, the Labor Code directs labor officials touse all reasonable means to ascertain the facts speedily andobjectively, with little regard to technicalities or formalities

However, delay in the submission of evidence should be clearlyexplained and should adequately prove the employersallegation of the cause for termination.- In the instant case, it is undisputed that the evidence obusiness losses for the years 1996 up to 1999 was introducedbefore the NLRC only. The CA correctly noted, however, tharespondents reserved the right to introduce the evidence to thelabor arbiter, if and when required to do so. Reasons oconfidentiality and the volatile nature of PPSBIs business as abanking institution prompted respondents to limit thepresentation of this evidence at the outset. Indeed, it wouldhave been foolhardy for the NLRC and the CA to reject theevidence, just because it had not been presented before thelabor arbiter. Such evidence was absolutely necessary toresolve the issue of whether petitioners employment wasvalidly terminated. For strictly adhering to technical rules o

procedure at the expense of equity, the Commission has in facbeen chided by the Court in Philippine Telegraph and TelephoneCorporation v. NLRC, from which we quote:

Thus, even if the evidence was not submitted to the laboarbiter, the fact that it was duly introduced on appeal torespondent commission is enough basis for the latter to havebeen more judicious in admitting the same, instead of fallingback on the mere technicality that said evidence can nolonger be considered on appeal. Certainly, the first course oaction would be more consistent with equity and the basicnotions of fairness.

- As to petitioners claim that he was denied due processbecause of the belated admission of the evidence, suffice it tosay that he was given every opportunity to refute it and tosubmit counter-evidence. The essence of due process consistssimply in according parties reasonable opportunity to be heard


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Labor Law 1 A2010 - 11 - Disiniand to submit any evidence they may have in support of theirdefense.2. YES- Section 9 of Batas Pambansa Blg. 129, as amended byRepublic Act No. 7902, expanded the jurisdiction of the CA asfollows:

SEC. 9. Jurisdiction. - The Court of Appeals shall exercise:(1) Original jurisdiction to issue writs of mandamus,prohibition, certiorari, habeas corpus, and quo warranto, and

auxiliary writs or processes, whether or not in aid of itsappellate jurisdiction;

- The Court of Appeals shall have the power to try cases andconduct hearings, receive evidence and perform any and allacts necessary to resolve factual issues raised in cases fallingwithin its original and appellate jurisdiction, including the powerto grant and conduct new trials or further proceedings. Verily,the appellate court, pursuant to the exercise of its originaljurisdiction over petitions for certiorari, has the power to reviewNLRC cases. Such review extends to the factual findings of thelabor arbiter when, as in this case, these are at variance withthose of the NLRC.- The CA acted within its power when it disregarded the laborarbiters findings and upheld the contrary ruling of the NLRC. Inturn, the factual findings of the former affirming those of thelatter are generally binding on this Court and will not as a rulebe reviewed on appeal. Petitioner has not shown any reason forus to depart from this rule.3. YES- The Court has consistently recognized and affirmed theemployers management right and prerogative to terminate theservices of its employees in order to obviate or minimizebusiness losses. Retrenchment, one of the authorized causesfor termination under the Labor Code, has been defined as thetermination of employment initiated by the employer throughno fault of the employees and without prejudice to the latter,resorted by management during periods of business recession,industrial depression, or seasonal fluctuations[;] or during lullsoccasioned by lack of orders, shortage of materials, conversionof the plant for a new production program or the introduction ofnew methods or more efficient machinery, or of automation.- For the exercise of such prerogative, Article 283 of the LaborCode provides these conditions:

Art. 283. Closure of establishment and reduction ofpersonnel. -- The employer may also terminate theemployment of any employee due to the installation of laborsaving devices, redundancy, retrenchment to prevent lossesor the closing or cessation of operation of the establishmentor undertaking unless the closing is for the purpose ofcircumventing the provisions of this Title, by serving a writtennotice on the worker and the Ministry of Labor andEmployment at least one (1) month before the intended datethereof. In case of termination due to the installation of laborsaving devices or redundancy, the worker affected therebyshall be entitled to a separation pay equivalent to at least hisone (1) month pay or to at least one (1) month pay for everyyear of service, whichever is higher. In case of retrenchmentto prevent losses and in cases of closures or cessation ofoperations of establishment or undertaking not due to serious

business losses or financial reverses, the separation pay shallbe equivalent to one (1) month pay or at least one-half ()month pay for every year of service, whichever is higher. Afraction of at least six (6) months shall be considered as one(1) whole year.

-Thus, the requisites for valid retrenchment are the following:(1) necessity of the retrenchment to prevent losses, and proofof such losses; (2) written notice to the employees and to theDepartment of Labor and Employment (DOLE) at least onemonth prior to the intended date of retrenchment; and (3)payment of separation pay equivalent to one-month pay or atleast one-half month pay for every year of service, whichever ishigher. There is no dispute that respondents have seasonablycomplied with the procedural requirement of serving writtennotice to petitioner and the DOLE. On the other hand, the

withholding of separation pay, which has not been raised as anissue in this Petition, was satisfactorily resolved by the CA.- The only remaining question is whether respondents havesufficiently and convincingly established business reverses othe kind or the amount that would justify the retrenchment. Asthis Court has held, before any reduction of personnel becomelegal, any claim of actual or potential business losses mussatisfy established standards as follows: (1) the losses incurredare substantial and not de minimis; (2) the losses are actual or

reasonably imminent; (3) the retrenchment is reasonablynecessary and is likely to be effective in preventing theexpected losses; and (4) the alleged losses, if already incurredor the expected imminent losses sought to be forestalled areproven by sufficient and convincing evidence. The employer hasthe burden of proving that the losses are serious, actual andreal.- The Court had previously ruled that financial statementsaudited by independent external auditors constituted thenormal method of proof of the profit-and-loss performance of acompany. Audit reports conducted by no less than theCommission on Audit (COA) showec the losses alleged byrespondents to have been the primary reason for the Board ofDirectors decision to effect retrenchment and reorganizationwere clearly not at all fictitious, imaginary or mere conjecturesas claimed by petitioner. Furthermore, the fact that respondenPPSBI was being regularly monitored by the Bangko Sentral ngPilipinas (BSP) and the Philippine Deposit Insurance Corporation(PDIC) due to its precarious financial position for several yearspositively affirms respondents asseveration of continuouserious business losses. The findings of the CA affirming thoseof the NLRC showed real and grave financial reverses, whichmade downsizing the only recourse for the bank to followIndeed, the retrenchment of petitioner was the consequence othe banks reorganization and a cost-saving device recognizedby jurisprudence.Disposition Petition is DENIED, and the assailed Decision andResolution AFFIRMED.

LOPEZ SUGAR CORP V FRANCO[PAGE 150]

EMPLOYMENT OF INDEPENDENTCONTRACTOR EFFECT

ASIAN ALCOHOL CORPORATION V NLRC305 SCRA 416

PUNO; March 25, 1999

NATUREPetition for Review on certiorari of NLRC decision

FACTS- In Sept 91, the Parsons family, who originally owned thecontrolling stocks in Asian Alcohol Corp (AAC), were driven bymounting business losses to sell their majority rights to Prio

Holdings, Inc. which took over AACs management andoperation.- To prevent further losses, Prior Holding implemented anorganizational plan and other cost-saving measures. Some 117employees out of a total workforce of 360 were separated. 72 ofthem occupied redundant positions that were abolished. Othese positions, 21 held by union members and 51 by non-unionmembers.- The 6 private respondent workers are among those unionmembers whose positions were abolished due to redundancy. InOct, 92, they received individual notices of terminationeffective Nov 30, 92. They were paid the equivalent of 1 monthsalary for every year of service as separation pay, the moneyvalue of their unused sick, vacation, emergency and seniorityleave credits, 13th month pay for the year 1992, medicineallowance, tax refunds, and goodwill cash bonuses for those


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Labor Law 1 A2010 - 12 - Disiniwith at least 10 years of service. All of them executed swornreleases, waivers and quitclaims. Except for 2, they all signedsworn statements of conformity to the company retrenchmentprogram. And except for one, they all tendered letters ofresignation.- The 6 private respondents filed with the NLRC complaints forillegal dismissal with a prayer for reinstatement withbackwages, moral damages and atty's fees. They alleged thatAAC used the retrenchment program as a subterfuge for union

busting. They claimed that they were singled out for separationby reason of their active participation in the union. They alsoasseverated that Asian Alcohol was not bankrupt as it hasengaged in an aggressive scheme of contractual hiring.- LA ruled in favor of AAC saying that retrenchment was valid.NLRC reversed LA ruling that there was illegal dismissal. Itrejected the evidence by AAC to prove its business reversals. Itruled that the positions of private respondents were notredundant for the simple reason that they were replaced bycasuals. Hence, this petition.

ISSUEWON the positions of the herein private respondent workers areunnecessary redundant and superfluous, thereby justifying thetermination of their employment

HELDYESRatio Retrenchment and redundancy under A283 of LaborCode2 are just causes for the employer to terminate theservices of workers to preserve the viability of the business. Inexercising its right, however, management must faithfullycomply with the substantive and procedural requirements laiddown by law and jurisprudenceReasoning- On Retrenchment: AAC was able to prove the ff. requirementsfor retrenchment to be valid: (1) the retrenchment wasreasonably necessary and likely to prevent business losses,which, if already incurred, are not merely de minimis, butsubstantial, serious, actual and real, or if only expected, arereasonably imminent as perceived objectively and in good faithby the employer; (2) ER served written notice both to the EEs

and to DOLE at least 1 mo. prior to the intend date ofretrenchment;(3) ER paid the retrenched employees separationpay equivalent to 1 mo. pay or at least 1/2 month pay for everyyear of service, whichever is higher; (4) ER exercised itsprerogative to retrench employees in good faith for theadvancement of its interest of its interest and not to defeat orcircumvent the employees' right to security of tenure;and (5)ER used fair and reasonable criteria in ascertaining who wouldbe dismissed and who would be retained among the EEs, suchas status (i.e., whether they are temporary, casual, regular ormanagerial employees), efficiency, seniority, physical fitness,age, and financial hardship for certain workers.- On Redundancy: Redundancy exists when the servicecapability of the work force is in excess of what is reasonablyneeded to meet the demands on the enterprise. A redundantposition is one rendered superfluous by any of these factors:

overhiring of workers, decreased volume of business, droppingof a particular product line previously manufactured by thecompany or phasing out of a service activity priorly undertaken

2Art. 283. Closure of establishment and reduction of personnel. The employer may

also terminate the employment of any employee due to the installation of laborsaving devices, redundancy, retrenchment, to prevent losses or the closing orcessation of operation of the establishment or undertaking unless the closing is forthe purpose of circumventing the provisions of this Title, by serving a written noticeon the workers and the Ministry of Labor and Employment at least one (1) monthbefore the intended date thereof. In case of termination due to the installation oflabor saving devices or redundancy, the worker affected thereby shall be entitled to aseparation pay equivalent to at least one (1) month pay or to at least one (1) monthpay for every year of service, whichever is higher. In case of retrenchment to preventlosses and in case of closures or cessation of operations of establishment orundertaking not due to serious business losses or financial reverses, the separationpay shall be equivalent to one (1) month pay at least one-half (1/2), month pay forevery year of service, whichever is higher. A fraction of at least six (6) month shall beconsidered one (1) whole year.

by the business. Under these conditions, ER has no legaobligation to keep in its payroll more EEs than are necessary fothe operation of its business.- Procedure Requisites for valid implementation of validredundancy program: (1) written notice served on both theemployees and the Department of Labor and Employment aleast one month prior to the intended date of retrenchment; (2payment of separation pay equivalent to at least one monthpay or at least one month pay for every year of service

whichever is higher; (3) good faith in abolishing the redundanpositions; and (4) fair and reasonable criteria in ascertainingwhat positions are to be declared redundant and accordinglyabolished.- On Effect of Employment of Independent Contractor: Anemployer's good faith in implementing a redundancy program isnot necessarily destroyed by availment of the services of anindependent contractor to replace the services of theterminated employees. We have previously ruled that thereduction of the number of workers in a company madenecessary by the introduction of an independent contractor isjustified when the latter is undertaken in order to effectuatemore economic and efficient methods of production. In the caseat bar, private respondents failed to proffer any proof that themanagement acted in a malicious or arbitrary manner inengaging the services of an independent contractor to operatethe Laura wells. Absent such proof, the Court has no basis tointerfere with the bona fide decision of management to effectmore economic and efficient methods of production.Disposition Petition GRANTED. NLRC decision set aside. LAruling reinstated.

PROCEDURE REQUIREMENT

ASIAN ALCOHOL CORP V NLRC[PAGE 264]

HEARING

WILTSHIRE FILE CO INC V NLRC

[PAGE 257]

VENUE OF COMPLAINT

WILTSHIRE FILE CO INC V NLRC[PAGE 257]

C. RETRENCHMENT TO PREVENT LOSSES

DEFINED

FF MARINE CORP V NLRC455 SCRA 154

TINGA; April 8, 2005

FACTS- On 26 October 1998, petitioners filed with the Department ofLabor and Employment (DOLE) a notice that petitionecorporation was undertaking a retrenchment program to curbthe serious business reverses brought about by the Asianeconomic crisis. Notices and separation were given to theaffected employees.


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Labor Law 1 A2010 - 13 - Disini- 21 employees were retrenched including petitioner Magnowho despite receiving separation pay, filed a case for illegaldismissal. Magno claimed that he was beguiled into acceptingthe separation pay since petitioners terminated his services onthe pretext that the dredging machine where he was assignedwas temporarily stalled in Zambales. Magno eventually learnedthat the company had been adducing to others a differentreason for retrenchment, primarily the Asian financial crisis- Labor Arbiter Salimathar V. Nambi promulgated a Decision

upholding the validity of retrenchment. NLRC reversed decision.CA affirmed NLRC decision.- Material to the resolution of the case was the issue ofadmissibility and competency as evidence of the 31 December1997 and 1996 Financial Statements of petitioners. However,the appellate court ruled that a perusal of the certificationissued by Banaria, Banaria and Company (independent auditor)regarding the Financial Statements reveals that the same wereexecuted on 30 March 1998 or nine (9) months prior to thefiling of the complaint for illegal dismissal on 12 January 1999. Thus, the financial statements could have been offered asevidence before the Labor Arbiter and the NLRC. Thus, theCourt of Appeals reproached petitioners for having suppressedmaterial evidence- Accordingly, the appellate court found that petitioners failed tosubstantiate the substantive requirements of a validretrenchment

ISSUEWON retrenchment was valid

HELDNO- Retrenchment is the termination of employment initiated bythe employer through no fault of the employees and withoutprejudice to the latter, resorted to by management duringperiods of business recession, industrial depression, or seasonalfluctuations or during lulls occasioned by lack of orders,shortage of materials, conversion of the plant for a newproduction program or the introduction of new methods or moreefficient machinery, or of automation- There are three (3) basic requisites for a valid retrenchment toexist, to wit: (a) the retrenchment is necessary to prevent

losses and such losses are proven; (b) written notice to theemployees and to the DOLE at least one (1) month prior to theintended date of retrenchment; and (c) payment of separationpay equivalent to one (1) month pay or at least one-half (1/2)month pay for every year of service, whichever is higher- Also according to jurisprudence: the employers prerogativeto bring down labor costs by retrenching must be exercisedessentially as a measure of last resort, after less drasticmeans alleged losses if already realized, and the expectedimminent losses sought to be forestalled, must be proved bysufficient and convincing evidence- The law recognizes this under Article 283 of the Labor Code.However, the employer bears the burden to prove his allegationof economic or business reverses.- petitioners adduced before the Labor Arbiter the 1994 and1995 FinancialStatements. Said Financial Statements, however,

were prepared only by petitioners accountant, RosalieBengzon, and approved by the manager Bernadette Rosales.They were not audited by an independent external auditor. Thefinancial statements show that in 1994 and 1995, petitionercorporation earned an income of only P77,609.79 andP155,339.96, respectively. In contrast, the 1996 and 1997Financial Statements, however, showed losses of P18,005,918.08, and P21,316,072.89, respectively. It was onlybefore the Court of Appeals that the financial statements for theyears 1996 and 1997 as audited by an independent externalauditor were introduced. They were not presented before theLabor Arbiter and the NLRC although they were executed on 30March 1998, several months prior to the filing of the complaintfor illegal dismissal by Magno on 12 January 1999-The appellate courts affirmance of the decision of the NLRC isprincipally anchored on the ground that petitioners failed to

adduce the 1996 and 1997 FinancialStatements audited by anindependent external auditor before the Labor Arbiter and theNLRC. By merely upholding the evidentiary weight accorded tofinancial statements duly audited by independent externaauditors, grave abuse of discretion on the part of the NLRC ishardly imaginable as it is unfounded- It is essentially required that the alleged losses in businessoperations must be proven. The employer bears the burden oproving the existence or the imminence of substantial losses

with clear and satisfactory evidence that there are legitimatebusiness reasons justifying a retrenchment. Should theemployer fail to do so, the dismissal shall be deemed unjustified- Moreover, petitioners failed to act in consonance with the rulethat retrenchment shall be a remedy of last resortretrenchment is not perfectly justified as there was no showingthat the retrenchment was the last recourse resorted to bypetitioners. Although petitioners allege in their petition beforethis Court that they had undertaken cost-cutting measuresbefore they resorted to retrenchment, their contention does noinspire belief for the evidence shows that the petition focertiorari filed by petitioners with the Court of Appeals is bereftof any allegation of prior resort to cost-cutting measures otherthan retrenchment

DISTINCTION REDUNDANCY ANDRETRENCHMENT

AG&P UNITED RANK AND FILE ASSN V NLRC(ATLANTIC GULF AND PACIFIC COMPANY OF

MANILA INC)265 SCRA 159

MENDOZA; November 29, 1996

NATURESpecial Civil Action for Certiorari

FACTS- Petitioner union is the duly certified bargaining agent of therank and file employees of the respondent corporation.

- As a result of a deadlock in the negotiations for a collectivebargaining agreement, the union declared a strike onSeptember 22, 1987.- Less than a month later, the Department of Labor andEmployment assumed jurisdiction over the dispute. ThenSecretary Franklin Drilon rendered a decision on February 101988 from which both parties appealed.- On January 11, 1988, prior to the rendition of the decision othe Secretary of Labor and Employment, the president orespondent company announced the adoption by the companyof several cost-cutting measures to forestall impending financialosses. Among these was a so-called "redundancy program,which, as implemented on March 1, 1988, resulted in the layoffof around 177 employees, some of whom were officers andmembers of the petitioner union. The affected employees weregiven separation pay equivalent to one month pay for everyyear of service, for which they signed documents of waiver.- On March 14, 1988, however, petitioners filed a complaint founfair labor practice and illegal dismissal.- After trial, Labor Arbiter Mendoza found the complaint to bewithout merit and accordingly dismissed it. He found the"redundancy program" necessary for the company's existenceand considered private respondent's practice of rehiring oreemploying dismissed employees under the said program as amanagerial prerogative, made not only in pursuance of thecompany's policy of giving preference to its dismissed workersbut actually beneficial to the workers as well. Moreover, he heldthat petitioners' acceptance of termination pay and othebenefits constituted a waiver of their right to question theidismissal.- On appeal, the NLRC reversed the labor arbiter's ruling.


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Labor Law 1 A2010 - 15 - Disiniwho is not making good in its operations in order to cut back onexpenses for salaries and wages by laying off some employees. The purpose of retrenchment is to save a financially ailingbusiness establishment from eventually collapsing.- However, the burden of proving that such closure is bona fidefalls upon the employer. JATs submitted financial statementswere bereft of details on the extent of alleged losses incurred.- So we proceed to determining if there was valid dismissal onthe ground of closure or cessation of operations for reasons

other than substantial business losses. JATs income statementshowed declining sales enough to justify the closure ofbusiness.The dismissal being valid, backwages need not be awarded.Dispositive petition is given due course. The assailedResolutions of the Court of Appeals in CA-G.R. SP No. 60337 areAFFIRMED with the MODIFICATION that the award of P66,924.00as backwages is deleted. The award of separation payamounting to P10,296.00 and the other monetary awards,namely salary differentials in the amount of P1,066.00, legalholiday pay in the amount of P1,850.00, service incentive leavepay in the amount of P925.00 and the 13th month pay in theamount of P4,910, or a total of P29,047.00 are maintained. Nopronouncements as to costs.

ALABANG COUNTRY CLUB V NLRC (ALABANG

COUNTRY CLUB INDEPENDENT EMPLOYEES UNION)466 SCRA 329

CARPIO-MORALES; August 9, 2005NATUREPetition for review on certiorari. Alabang Country Club Inc.(ACCI) seeks to set aside the appellate courts decision whichdenied its motion for reconsideration, and ordered thereinstatement of herein 63 respondents-members of the labororganization Alabang Country Club Independent EmployeesUnion, without loss of seniority rights and other privileges, andpayment of full backwages.

FACTS- ACCIs internal auditor conducted a study on the profitabilityof ACCIs Food and Beverage Department

- Her report showed that from 1989-1993, the F&B Dept hadbeen incurring substantial losses of around P8,727,135- Realizing that it was no longer profitable for ACCI to maintainits own F&B Dept, the management decided to cease fromoperating it, and to open it to a contractor, which would bewilling to operate its own food and beverage business within theclub.- ACCI entered into an agreement with La Tasca Restaurant forit to operate the F&B Dept.- ACCI sent its F&B Dept employees letters informing them theirservices would be terminated effective 1 month later, that theywould get separation pay of 125% of their monthly salary forevery year of service, that La Tasca agreed to absorb allaffected employees immediately with the status of regularemployees without need of undergoing probationary period,and that they would receive the same salary they were

receiving at the time of their termination- The Union filed a com

Documents

Labor1 Digest Part7