D.M. CONSUNJI, INC.

, vs GOBRES

FACTS :

Respondents Antonio Gobres, Magellan Dalisay, Godofredo Paragsa, Emilio Aleta and Generoso Melo worked as
carpenters in the construction projects of petitioner D.M. Consunji, Inc., on several occasions and/or at various
times. Respondents last assignment was at Quad 4-Project in Glorietta, Ayala, Makati, where they started working on
September 1, 1998. On October 14, 1998, respondents saw their names included in the Notice of Termination posted on
the bulletin board at the project premises.

Respondents filed a Complaint with the Arbitration Branch of the National Labor Relations Commission
(NLRC) against petitioner D.M. Consunji, Inc. and David M. Consunji for illegal dismissal, and non-payment of 13th month
pay, five (5) days service incentive leave pay, damages and attorneys fees.

Petitioner averred that respondents services were terminated when their phases of work for which their services
were engaged were completed or when the projects themselves were completed. Petitioner contended that since
respondents were terminated by reason of the completion of their respective phases of work in the construction project,
their termination was warranted and legal.

Respondents replied that the Quad 4-Project at Glorietta, Ayala, Makati City was estimated to take two years to
finish, but they were dismissed within the two-year period.They had no prior notice of their termination. Hence, granting
that they were project employees, they were still illegally dismissed for non-observance of procedural due process.

Labor Arbiter found that respondents were project employees, that they were dismissed from the last project they
were assigned to when their respective phases of work were completed, and that petitioner D.M. Consunji, Inc. and David
M. Consunji reported their termination of services to the DOLE in accordance with the requirements of law. NLRC affirmed
the decision of the Labor Arbiter, and dismissed the appeal for lack of merit.

Respondents filed a petition for certiorari with the Court of Appeals and prayed that their dismissal be declared as
illegal.Court of Appeals rendered a Decision, finding petitioners dismissal as valid are AFFIRMED with MODIFICATION
that private respondents are ordered to pay each of the petitioners the sum of P20,000.00 as nominal damages for non-
compliance with the statutory due process. Costs against petitioners.
Petitioner contends that the award of nominal damages in the amount of P20,000.00 to each respondent is
unwarranted under Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code, which states, If
the termination is brought about by the completion of the contract or phase thereof, no prior notice is required.

ISSUE:

Whether or not respondents, as project employees, are entitled to nominal damages for lack of advance notice of their
dismissal.

HELD:
A project employee is defined under Article 280 of the Labor Code as one whose employment has been fixed for
a specific project or undertaking the completion or termination of which has been determined at the time of the
engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is
for the duration of the season.

In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents, as project employees, were
validly terminated due to the completion of the phases of work for which their services were engaged. However, the Court
of Appeals held that respondents were entitled to nominal damages, because petitioner failed to give them advance notice
of their termination. The appellate court cited the case of Agabon v. NLRC as basis for the award of nominal damages.

The Court holds that Agabon v. NLRC is not applicable to this case, because it involved the dismissal of regular
employees for abandonment of work, which is a just cause for dismissal under Article 282 of the Labor Code.Although the
dismissal was for a cause, the employer therein was required to observe the standard of due process for termination of
employment based on just causes under Article 282 of the Labor Code, which procedural due process requirements are
enumerated in Section 2, Rule 1, Book VIof the Omnibus Rules Implementing the Labor Code. Since the employer therein
failed to comply with the twin requirements of notice and hearing, the Court ordered the employer to pay the employees
involved nominal damages in the amount of P30,000.00 for failure to observe procedural due process.

Unlike in Agabon, respondents, in this case, were not terminated for just cause under Article 282 of the Labor
Code. Dismissal based on just causes contemplate acts or omissions attributable to the employee. Instead, respondents
were terminated due to the completion of the phases of work for which their services were engaged.
 Records show that respondents were dismissed after the expiration of their respective project employment
contracts, and due to the completion of the phases of work respondents were engaged for. Hence, the cited provisions
requirements of due process or prior notice when an employee is dismissed for just or authorized cause (under Articles
282 and 283 of the Labor Code) prior to the completion of the project or phase thereof for which the employee was
engaged do not apply to this case.

Further, Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code provides:

Section 2. Standard of due process: requirements of notice. In all cases of termination of

employment, the following standards of due process shall be substantially observed.

1. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain
his side;

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to the
charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice [of] termination served on the employee indicating that upon
due consideration of all the circumstance, grounds have been established to justify his
termination.

In case of termination, the foregoing notices shall be served on the employees last known
address.

II. For termination of employment as based on authorized causes defined in Article 283 of the
Code, the requirements of due process shall be deemed complied with upon service of a written notice to
the employee and the appropriate Regional Office of the Department at least thirty (30) days before the
effectivity of the termination, specifying the ground or grounds for termination.

III. If the termination is brought about by the completion of the contract or phase thereof,
no prior notice is required. If the termination is brought about by the failure of an employee to meet the
standards of the employer in the case of probationary employment, it shall be sufficient that a written
notice is served the employee within a reasonable time from the effective date of termination.

In this case, the Labor Arbiter, the NLRC and the Court of Appeals all found that respondents were validly
terminated due to the completion of the phases of work for which respondents services were engaged. The above rule
clearly states, If the termination is brought about by the completion of the contract or phase thereof, no prior
notice is required. Cioco, Jr. v. C.E. Construction Corporation, explained that this is because completion of the work or
project automatically terminates the employment, in which case, the employer is, under the law, only obliged to render a
report to the DOLE on the termination of the employment.

Hence, prior or advance notice of termination is not part of procedural due process if the termination is brought
about by the completion of the contract or phase thereof for which the employee was engaged. Petitioner, therefore, did
not violate any requirement of procedural due process by failing to give respondents advance notice of their termination;
thus, there is no basis for the payment of nominal damages.

In sum, absent the requirement of prior notice of termination when the termination is brought about by the
completion of the contract or phase thereof for which the worker was hired, respondents are not entitled to nominal
damages for lack of advance notice of their termination.
ACEBEDO OPTICAL AND MIGUEL ACEBEDO III, vs NLRC

FACTS:
Petitioners engaged the services of private respondent as a packaging clerk . Initially, the private respondents
employment status was probationary. Six months later, or on 1 March 1992, however, she was regularized. But before her
employment status was made permanent, private respondent was given a Memorandum, to apprise her of her
accumulated tardiness of one hour and a half for the month , likewise, it served as a warning to her that habitual
tardiness/absenteeism is considered a violation of company policy. On 15 October 1992, private respondent received
another memorandum essentially warning her that habitual tardiness was considered a grave violation of Company
Policy, it was to serve as private respondents first written warning as well. a three-day suspension from work was
imposed on private respondent on the ground of her being tardy twenty-six times within the period of January to March
1994. On 28 February 1995, private respondent was served a fourth Memorandum. For having incurred twenty-one
counts of tardiness for the months of [unreadable] to December 1994, the latter was meted another suspension, this time
for seven days.
Private respondent filed an application for an indefinite leave of absence. Petitioner corporations Head of
Personnel denied said application. On 29 August 1995, private respondent was suspended for the third time, this time for
thirteen days. The reason given for the imposition of such penalty was the employees failure to meet the company policy
on tardiness.
On 12 November 1996, private respondent did not report for work allegedly due to the demolition of the place that
her family was renting. On 2 December 1996, private respondent again absented herself from work this time because her
child was allegedly hospitalized. Six days later, or on 8 December 1996, the Head of the Personnel Department
of petitioner corporation issued a Notice of Termination against private respondent. Private respondents dismissal from
service was brought on by her supposed exhaustion of the allowable sick and vacation leaves per month constituting
gross and habitual neglect of your duty.

Foregoing state of affairs prompted private respondent to file a case for illegal dismissal with the NLRC the very
next day.

Labor Arbiter Emerson C. Tumanon rendered judgment declaring private respondent illegally dismissed from
service. The Labor Arbiter held that petitioners failed to accord said employee due process of law; and found that private
respondents dismissal from service was anchored on past infractions for which she had already been penalized. On
appeal, in a Resolution dated 17 November 1999, public respondent NLRC rendered a decision dismissing petitioners
appeal for allegedly being filed out of time long after the assailed decision of the Labor Arbiter had supposedly become
final and executory.

Petitioners went to the Court of Appeals via a Petition for Certiorari under Rule 65 of the Rules of Court, as
amended, ascribing grave abuse of discretion to the National Labor Relations Commission for ordering the payment of
backwages, damages and attorneys fees to an employee who had been dismissed for just cause.

The Court of Appeals held that herein petitioners failed to marshal the obligatory quantum of evidence needed to
substantiate a finding of legitimacy or validity in the termination of employment of private respondent, the reason for which
was supposedly her repeated defiance of company policy. According to the appellate court, petitioners failure to adduce in
evidence a copy of the contravened company policy was fatal to their cause. Absent proof of evidence of such document
embodying the flouted rule, the appellate court, along with the labor arbiter and the NLRC, was unable to make a
categorical finding on the issue of whether or not the private respondents accumulated absences and/or tardiness were,
indeed, in violation of petitioner companys rules and regulations. Further, as to the allegation of chronic absenteeism
and/or tardiness for the period of 1991 to 1995, the appellate court likewise held that the non-presentation of the Daily
Time Records (DTRs) for said period was a grave error. It held that the numerous memoranda issued to private
respondent were mere self-serving evidence and made the following observations.

Petitioners, through the instant Petition for Review on Certiorari under Rule 45 of the Rules of Court, as amended,
seek recourse to this Court .

ISSUE:

WON the respondent was illegally dismissed.

HELD: YES
Petitioners assert that private respondents numerous tardiness and/or absenteeism is tantamount to gross
habitual neglect of duty amounting to gross negligence; thus, a valid ground for dismissal of an employee.

We find the instant petition to be without merit.

The Labor Code, specifically Article 277(b), guarantees the right of an employee to security of tenure. It provides that

ART. 277. MISCELLANEOUS PROVISIONS. x x x

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal
except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code,
the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a
statement of the causes for termination and shall afford the latter ample opportunity to be heard and to defend himself
with the assistance of his representative if he so desires in accordance with company rules and regulations x x x.

From the foregoing, it is quite clear that the dismissal of private respondent may be upheld only if shown to have been
made for a just or authorized cause and attended with due process.

Corollary to the preceding legal policy is the equally basic principle of labor law, that, it is the employer who has the
burden of proving that the dismissal is for just cause, and failure to do so would necessarily mean that the dismissal was
unjustified; and, therefore, illegal.

But even assuming for the sake of argument that the past infractions could still validly be the subject of future punishment,
still there is no basis for petitioners claim that private respondents supposed habitual absenteeism and tardiness is a form
of gross and habitual neglect of duty. Under Article 282(b) of the Labor Code, gross and habitual neglect of duty by the
employee of his duties is a just cause for the termination of the latters employment. To warrant removal from service,
however, the negligence should not merely be gross but also habitual.

In this case, assuming the absences and tardiness of private respondent Asegurado to be habitual, can they also be
categorized as gross?

Gross negligence implies a want or absence of or failure to exercise even slight care or diligence, or the entire absence of
care. It evinces a thoughtless disregard of consequences without exerting any effort to avoid them. [31] Though there may
have been times when private respondents absences were undertaken without the necessary approved leave
applications, nevertheless, she would send word for when these would occur. Moreover, quite telling is the fact that
nowhere in the memoranda sent to private respondent was there any mention of a complaint relating to the quality of her
work. As the present case does not show the presence of one of the two requisites to make the finding of negligence a
just cause for dismissal The penalty of dismissal is too harsh, considering that private respondent had been with the
company for five years and, apparently, the management had no complaint as regards the formers quality of work.

Petitioners have not sufficiently shown that private respondent had willfully disobeyed the company rules and regulations
respecting absences and tardiness. Though petitioners referred to their company policies, they never presented a copy of
these in evidence except in their Motion for Reconsideration too late in the day.

By failing to prove the existence of the company rules in due time, i.e., non-presentation of an authenticated copy,
unarguably the best evidence, casts skepticism on the factual basis of the charge of violation thereof; arguably, therefore,
it cannot be said that the assailed conduct can be considered gross neglect of duty.

From the preceding discussion, the dearth of reliable evidence on record constitutes serious doubt as to the factual basis
of the charge of violation of company policy filed against private respondent. This doubt shall be resolved in her favor in
line with the policy under the Labor Code to afford protection to labor and construe doubts in favor of labor.

Having failed to satisfy this burden of proof, we find that petitioners dismissed private respondent without just cause.
Consequently, the termination of her employment was illegal. o finish, as a final nail to the coffin that is the petitioners
recourse to this Court, we find that private respondent was not accorded due process by petitioners prior to being
dismissed from service. Despite the fact that private respondent was repeatedly warned through the numerous
memoranda sent to her for coming in late or not reporting at all to the office, she was never asked to defend her position,
much less voice an objection to the charges leveled at her.

Law and jurisprudence require an employer to furnish the employee two written notices before termination of his
employment may be ordered.

In retrospection, if, indeed, private respondent was a delinquent and an errant employee, why did petitioners put up with
such behavior for no less than five years?
PHILIPPINE INDUSTRIAL SECURITY AGENCY CORPORATION, petitioner, vs. VIRGILIO DAPITON and the
NATIONAL LABOR RELATIONS COMMISSION, respondents.

FACTS:
Petitioner hired respondent as a security guard. His initial assignment was at PCIBank in Kalookan City. During
his tour of duty at PCIBank on January 25, 1994, respondent had a heated argument with his fellow security guard,
Roderick Lumen. The incident almost led to a shootout. After investigation, petitioners chief investigator recommended
their dismissal. Lumen was compelled to resign while respondent was suspended from work for seven (7) days.
Petitioner alleged that respondent did not serve his suspension and instead went on a leave of absence. Nonetheless, he
was assigned at different establishments and Allegedly, respondent refused to accept his assignments.
Respondent denied petitioners allegations. Respondent alleged that thereafter, he was reduced to a mere reliever
of absent security guards and was frequently transferred from one post to another. His last assignment was at the
Philippine Savings Bank (PSB) in Makati. It lasted for only one (1) day. Since April 13, 1994, he was not given any
assignment. He reported to petitioners office regularly for his posting but to no avail. Consequently, on April 22, 1994, he
sued petitioner for illegal dismissal and asked for separation pay.

Labor Arbiter Felipe P. Pati rendered a decision[5] finding petitioner liable for constructive dismissal. Essentially, the labor
arbiter found that from 1990 up to 1993, respondent was assigned at PCIBank in Kalookan City. After his suspension on
January 26, 1994, respondent was transferred frequently to different posts and despite its accusation that respondent was
always absent from work, it continued to give him new assignments and did not take any disciplinary action against
him. Thus, the labor arbiter concluded that said transfers were a mere scheme of petitioner to ease out respondent from
work. The labor arbiter ordered respondents reinstatement with payment of backwages.

Petitioner and Lirag appealed to the NLRC. NLRC dismissed the appeal. Petitioner contends that there was no dismissal,
constructive or otherwise. Hence this petition.

Petitioner claims that respondent abandoned his post, refused to accept his new assignments and went on AWOL.

ISSUE: Won there is a constructive dismissal.

HELD: YES

Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or
unlikely; as an offer involving a demotion in rank and diminution in pay. On the other hand, abandonment of work means a
clear, deliberate and unjustified refusal of an employee to resume his employment and a clear intention to sever the
employer-employee relationship. Abandonment is incompatible with constructive dismissal.

In the case at bar, we hold that there was no deliberate intent on the part of the respondent to abandon his employment
with petitioner. The clear evidence that respondent did not wish to be separated from work is that, after his last
assignment on April 12, 1994, he reported to petitioners office regularly for a new posting but to no avail. He then lost no
time in filing the illegal dismissal case. An employee who forthwith takes steps to protest his layoff cannot by any logic be
said to have abandoned his work.
Petitioner cannot overinflate the significance of the fact that respondent often absented himself from work without
an approved leave. It is a settled rule that mere absence or failure to report for work is not tantamount to abandonment of
work

The burden of proving that respondent has abandoned his job rests with petitioner. However, petitioner failed miserably to
discharge the burden. The records show no memoranda concerning respondents alleged unauthorized absences and
refusal to work. Even the telegram petitioner sent to respondent after he allegedly went on AWOL merely required
respondent to report to its office for a conference but did not mention anything about his absences.

Petitioner contends that respondent was only provisionally relieved from his last post and not dismissed from
employment. Hence, the filing of the illegal dismissal case on April 22, 1994 was premature.If at all, it is argued that
respondent should be considered on temporary off-detail status. Petitioner relies on the case of Superstar Security
Agency, Inc. vs. NLRC, where we held that placing an employee on temporary off-detail is not equivalent to dismissal
provided that such temporary inactivity should continue only for a period of six (6) months. Otherwise, the security agency
concerned could be held liable for constructive dismissal under Article 287 (now Article 286) of the Labor Code.

Petitioners argument lacks merit. The case of Superstar Security Agency does not apply to the case at bar as it was
decided on a different factual milieu.
The ruling was anchored in Article 286 of the Labor Code. It reads:

Art. 286. When employment not deemed terminated.The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not
terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of
seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations
of his employer or from his relief from the military or civic duty.

We stress that Article 286 applies only when there is a bona fide suspension of the employers operation of a
business or undertaking for a period not exceeding six (6) months. In such a case, there is no termination of
employment but only a temporary displacement of employees, albeit the displacement should not exceed six (6)
months. The paramount consideration should be the dire exigency of the business of the employer that compels it to put
some of its employees temporarily out of work. In security services, the temporary off-detail of guards takes place when
the security agencys clients decide not to renew their contracts with the security agency, resulting in a situation where the
available posts under its existing contracts are less than the number of guards in its roster.

In the case at bar, the records do not show that respondent had to be placed on temporary off-detail for lack of available
post. Petitioner just stopped giving respondent his assignment after his duty at the PSB. It was the straw that broke the
camels back, so to speak, as far as respondent was concerned.

Be that as it may, the prerogative of the management to transfer its employees must be exercised without grave abuse of
discretion. The exercise of the prerogative should not defeat an employee's right to security of tenure. The employers
privilege to transfer its employees to different workstations cannot be used as a subterfuge to rid itself of an
undesirable worker.

In the case at bar, the evidence show that respondent enjoyed a single post at the PCIBank for three (3) years. It changed
after his suspension. In a span of less than three (3) months, respondent was assigned to at least four (4) establishments,
namely, BPI Family Bank, Mercury Drugstore, Sevilla Candle Factory and Philippine Savings Bank. He suddenly found
himself being tossed to different posts and relieving absent security guards. Respondent was then left uncertain as to
when and where his next assignments would be. Considering the totality of the facts of this case, the labor officials below
rightly found that the frequent transfers of respondent to different posts on short periods of time were indirect ways of
dismissing him.
BLUE DAIRY CORPORATION vs. NLRC

Facts:

Blue Dairy Corporation, engaged in the processing of dairy and chocolate products, juices and vegetables, hired on
private respondent Elvira R. Recalde as a food technologist in its laboratory.
On 21 October 1994 Recalde allegedly accompanied Production Manager Editha Nicolas in conducting a sensory
evaluation of vanilla syrup in one of the outlets of a client. While on their way back to the office a post fell on the company
vehicle they were riding due to a raging typhoon damaging the vehicle's windshield and side mirror.
Recalde was then transferred from the laboratory to the vegetable processing section and was restricted from entering the
laboratory. She was unhappy and considered her new job humiliating and menial. She stopped reporting for work.
Recalde filed a complaint against petitioner Blue Dairy Corporation for constructive dismissal.
Petitioner Blue Dairy contended that Recalde was given a less sensitive assignment outside of the laboratory on account
of her dishonesty which resulted in loss of trust and confidence. They seriously took into account the result of the
investigation concerning the 21 October incident that Recalde was actually scouting for a new residence using company
vehicle without prior permission from the General Manager and during office hours. Petitioner accorded credence to the
narrations of the company driver, to that effect which act of dishonesty could even have merited dismissal from
employment had they adhered simply to jurisprudential rule but took into account instead the spirit of the approaching
Christmas season.
The Labor Arbiter was convinced that petitioner Blue Dairy was guilty of constructive dismissal as he found the
justification for Recaldes transfer unreasonable.
Petitioner Blue Dairy insist that the transfer of Recalde from the laboratory to the vegetable processing section
was effected in the exercise of management prerogative. It did not amount to a constructive dismissal as Recalde
erroneously maintained.
The NLRC affirmed the ruling of the Labor Arbiter.
Issue: Whether Blue Dairy Corporation was guilty of constructive dismissal.

Held: YES

Indeed, it is the prerogative of management to transfer an employee from one office to another within the business
establishment based on its assessment and perception of the employees qualifications, aptitudes and competence, and
in order to ascertain where he can function with maximum benefit to the company. But, like other rights, there are limits
thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing
in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that
right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In
particular, the employer must not be able to show that the transfer is not unreasonable, inconvenient or
prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and
other benefits. Should the employer fail to overcome this burden of proof, the employees transfer shall be
tantamount to constructive dismissal, which has been defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay.
In the present case, petitioner Blue Dairy failed to justify Recaldes transfer from the position of food technologist in
the laboratory to a worker in the vegetable processing section. Iit does not appear that Recalde was provided an
opportunity to refute the reason for the transfer. Petitioners merely relied on the narrations of the company driver. Nor
was Recalde notified in advance of her impending transfer which was, as we shall elucidate later, a demotion in rank.
Further, petitioner overstretched the effect of Recaldes claimed wrongdoing. We have ruled that breach of trust and
confidence as a ground for dismissal from employment must be related to the performance of the duties of the employee
such as would show him to be thereby unfit to continue working for the employer. By analogy, breach of trust and
confidence as a ground for reassignment must be related to the performance of the duties of the employee such as would
show him to be thereby unfit to discharge the same task. Clearly, the act of dishonesty imputed to Recalde has no
bearing at all to her work in the laboratory.
Petitioner Blue Dairy failed to realize that it was not relief from dismissal which they provided to Recalde when they
assigned her to the vegetable processing section but discomfiture.
Agabon vs. NLRC / Riviera Home - GR No. 158693 Case Digest

FACTS:

Petitioners were employed by Riviera Home as gypsum board and cornice installers from January 1992 to February 23,
1999 when they were dismissed for abandonment of work. Petitioners filed a complaint for illegal dismissal and was
decided in their favor by the Labor Arbiter. Riviera appealed to the NLRC contending just cause for the dismissal because
of petitioners abandonment of work. NLRC ruled there was just cause and petitioners were not entitled to backwages and
separation pay. The CA in turn ruled that the dismissal was not illegal because they have abandoned their work but
ordered the payment of money claims.

ISSUE: Whether or not petitioners were illegally dismissed.

RULING:

To dismiss an employee, the law required not only the existence of a just and valid cause but also enjoins the employer to
give the employee the right to be heard and to defend himself. Abandonment is the deliberate and unjustified refusal of an
employee to resume his employment. For a valid finding or abandonment, two factors are considered: failure to report for
work without a valid reason; and, a clear intention to sever employer-employee relationship with the second as the more
determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more
intention to work.

Where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the
dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as
the Wenphil Doctrine of the Belated Due process Rule.

Art. 279 means that the termination is illegal if it is not for any of the justifiable or authorized by law. Where the dismissal
is for a just cause, the lack of statutory due process should not nullify the dismissal but the employer should indemnify the
employee for the violation of his statutory rights. The indemnity should be stiffer to discourage the abhorrent practice of
dismiss now, pay later which we sought to deter in Serrano ruling. The violation of employees rights warrants the
payment of nominal damages.
JAKA Food Processing vs. Pacot - GR No. 151378 Case Digest

FACTS:

Respondents were hired by JAKA until their termination on August 29, 1997 because the Corporation was in dire
financial straits. It was not disputed that they were terminated without complying with the requirement under Art. 283 of
the Labor Code regarding the service of notice upon the employees and DOLE at least one month before the intended
date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations Commission
(NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service incentive leave and
13th month pay against JAKA and its HRD Manager, Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision[3] declaring the termination illegal and ordering JAKA and its
HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement is not possible.

ISSUE:

Whether or not full backwages and separation pay be awarded to respondents when employers effected termination
without complying with the twin notice rule.

what are the legal implications of a situation where an employee is dismissed for cause but such dismissal was effected
without the employers compliance with the notice requirement under the Labor Code.

RULING:

The dismissal of the respondents was for an authorized cause under Article 283. A dismissal for authorized cause does
not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by
the employers exercise of his management prerogative, i.e. when the employer opts to install labor-saving devices, when
he decides to cease business operations or when he undertakes to implement a retrenchment program.

Accordingly, it is wise to hold that:

1) if the dismissal is based on a just cause but the employer failed to comply with the notice requirement, the sanction to
be imposed upon him should be tempered because the dismissal was initiate by an act imputable to the employee.

2) if the dismissal is based on an authorized cause but the employer fails to comply with the notice requirement, the
sanction should be stiffer because the dismissal process was initiated by the employers exercise of his management
prerogative. Thus, dismissal was upheld but ordered JAKA to pay each of the respondents the amount of PhP 50,000.00
representing nominal damages for non-compliance with statutory due process.

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some
violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against
the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the
dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or
culpability on the part of the employee. Instead, the dismissal process is initiated by the employers exercise of his
management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business
operations or when, as in this case, he undertakes to implement a retrenchment program.

The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized cause under
Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is not required, while in
the second, the law requires payment of separation pay. [9]

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just causes
under Article 282, and when based on one of the authorized causes under Article 283.

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to
comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal
process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized
cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative.

The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it terminated
respondents employment.

The losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and
satisfactory evidence. Losses incurred were adequately shown with respondent-appellants audited financial statement.
Having established the loss incurred by the respondent-appellant corporation, it necessarily necessarily (sic) follows that
the ground in support of retrenchment existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic] not well
substantiated by substantial proofs. It is therefore logical for the corporation to implement a retrenchment program to
prevent further losses.

It is, therefore, established that there was ground for respondents dismissal, i.e., retrenchment, which is one of the
authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply
with the notice requirement under the same Article. Considering the factual circumstances in the instant case and the
above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.
Golden Ace Builders and Arnold Azul vs. Jose A. Talde G.R. No. 187200; 5 May 2010

Facts: In 1990, Golden Ace Builders hired Jose A. Talde (Talde) as a carpenter. In February 1999, the owner-manager,
Arnold Azul, stopped giving Talde work assignment due allegedly to the unavailability of construction projects.
Consequently, Talde filed a complaint for illegal dismissal. The Labor Arbiter ruled in Taldesfavor and ordered his
immediate reinstatement without loss of seniority rights, with payment of full backwages as well as premium pay for rest
days, service incentive leave pay and 13th month pay.

The company brought the case to the National Labor Relations Commission (NLRC) for review. Pending such appeal, the
company advised Talde to report for work within 10 days from notice. Talde, however, manifested to the Labor Arbiter that
due to actual animosity between him and the company and threats to his life and his familys safety, he opted for payment
of separation pay. The company denied there was such an animosity.

The NLRC later dismissed the companys appeal. The companys appeal to the Court of Appeals was likewise dismissed.
The Court of Appeals decision attained finality. The monetary award, as recomputed by the NLRCs Fiscal Examiner, was
approved by the Labor Arbiter who thereupon issued the writ of execution.

The company questioned the recomputation before the NLRC, arguing that since Talde refused to report back to work as
the company advised, he should be deemed to have abandoned the same, thus, the re-computation should not be
beyond 15 May 2001, the day he manifested his refusal to be reinstated. The NLRC vacated the re-computation, holding
that since Talde did not appeal the Labor Arbiters decision granting him only reinstatement and backwages, not
separation pay in lieu of reinstatement, he may not be afforded affirmative relief, and since he refused to go back to work,
he may recover backwages only up to 20 May 2001, the day he was supposed to return to the job site. When Taldes
motion for reconsideration was denied by the NLRC, he filed a petition for certiorari with the Court of Appeals.

The Court of Appeals set aside the NLRC findings and held that Talde was entitled to both backwages and separation
pay, even if separation pay was not granted by the Labor Arbiter, in view of the strained relations between the parties.
Consequently, the company filed a petition for review on certiorari before the Supreme Court.

Issue:

(1) Whether or not Talde was entitled to separation pay in lieu of actual reinstatement on account of strained relations
between him and the company; and

(2) Up to what date should Taldesbackwages be computed?

Held: An illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The two reliefs are
separate and distinct. When reinstatement is no longer feasible because of strained relations between the employee and
the employer, separation pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. In effect, an illegally dismissed
employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is nolonger viable, and
backwages. (Citing Macasero vs. Southern Industrial Gases Philippines, G.R. No. 178524; 30 January 2009).

Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to
reinstatement when the latter option is no longer desirable or viable. On one hand, such payment liberates the employee
from what could be a highly oppressive work environment. On the other hand, it releases the employer from the grossly
unpalatable obligation of maintaining in its employ a worker it could no longer trust.

Strained relations must be demonstrated as a fact and must be supported by substantial evidence showing that the
relationship between the employer and the employee is indeed strained as a necessary consequence of the judicial
controversy. In this case, the Labor Arbiter found that actual animosity existed between the owner-manager Azul and
Talde as a result of the filing of the illegal dismissal case. Such finding, especially when affirmed by the appellate court as
in the case at bar, is binding upon the Supreme Court, consistent with the prevailing rules that the Supreme Court will not
try facts anew and that findings of facts of quasi-judicial bodies are accorded great respect, even finality.

Thus, Talde was entitled to backwages and separation pay as his reinstatement had been rendered impossible due to
strained relations. His backwages must be computed from the time he was unjustly dismissed until his actual
reinstatement, or from February 1999 until 30 June 2005 when his reinstatement was rendered impossible without fault on
his part.

The Court of Appeals erroneously computed his separation pay from 1990 (when he was hired) to 1999 (when he was
unjustly dismissed), covering a period of 8 years. He must be considered to have been in the service of the company not
only until 1999, but until 30 June 2005, the day he is deemed to have been actually separated (his reinstatement having
been rendered impossible) from the company, or for a total of 15 years.
ASIAN ALCOHOL CORPORATION vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU
CITY and ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO, LEANDRO
O. VERAYO and ERENEO S. TORMO

Facts: The Parsons family, who originally owned the controlling stocks in Asian Alcohol Corporation (AAC), was driven by
mounting business losses to sell their majority rights to Prior Holdings which took over its management and operation the
following month.

Prior Holding implemented organizational plan and other cost-saving measures. 117 employees out of a total workforce of
360 were separated. 72 of them occupied redundant positions that were abolished. Of these positions, 21 held by union
members and 51 by non-union members.

Private respondents are among those union members whose positions were abolished due to redundancy. Carias,
Martinez, and Sendon were water pump tenders; Amacio was a machine shop mechanic; Verayo was a briquetting plant
operator while Tormo was a plant helper under him. They were all assigned at the Repair and Maintenance Section of the
Pulupandan plant.They received individual notices of termination; were paid the equivalent of one month salary for every
year of service as separation pay, the money value of their unused sick, vacation, emergency and seniority leave credits,
13th month pay, medicine allowance, tax refunds, and goodwill cash bonuses for those with at least 10 years of service.
All of them executed sworn releases, waivers and quitclaims. Except for Verayo and Tormo, they all signed sworn
statements of conformity to the company retrenchment program. And except for Martinez, they all tendered letters of
resignation.

Private respondents filed with the NLRC complaints for illegal dismissal with a prayer for reinstatement with backwages,
moral damages and attorney's fees. They alleged that Asian Alcohol used the retrenchment program as a subterfuge for
union busting. They claimed that they were singled out for separation by reason of their active participation in the union.
They also asseverated that AAC was not bankrupt as it has engaged in an aggressive scheme of contractual hiring.
LA dismissed the complainants and held that the fact that respondent AAC incurred losses in its business operations was
not seriously challenged by the complainants. The fact that it incurred losses in its business operations prior to the
implementation of its retrenchment program is amply supported by the documents on records, indicating an accumulated
deficit of P26,117,889.00.

The law allows an employer to retrench some of its employees to prevent of its employees to prevent losses. In the case
of respondent AAC, it implemented its retrenchment program not only to prevent losses but to prevent further losses as it
was then incurring huge losses in its operations.The dismissal of complainants on ground of redundancy / retrenchment
was perfectly valid or legal. Private respondents appealed to the NLRC. NLRC ruled that the positions of private
respondents were not redundant for the simple reason that they were replaced by casuals. The company at the time of
retrenchment was not then in the state of business reverses. There is therefore no reason to retrench. . . . The alleged
deficits of the corporation did not prove anything for the respondent. The financial status shown in records submitted was
before Prior Holdings took over the operation and management of the corporation. This is no proof that when the
termination of complainant[s] took effect the company was experiencing losses or at least imminent losses. Possible
future losses do not authorize retrenchment.

Retrenchment and/or redundancy not having been proved, complainants, therefore, were illegally dismissed.AAC moved
for reconsideration of the foregoing decision. NLRC denied the motion.

AAC filed in this Court a petition for certiorari assailing both the decision of the NLRC and the resolution denying its
reconsideration.

Issues: W/N there was no valid retrenchment thus making the dismissal of private respondents illegal.

Ruling: Negative.

The right of management to dismiss workers during periods of business recession and to install labor saving devices to
prevent losses is governed by Art. 283 of the labor Code, as amended. Retrenchment and redundancy are just causes for
the employer to terminate the services of workers to preserve the viability of the business. In exercising its right, however,
management must faithfully comply with the substantive and procedural requirements laid down law and jurisprudence.

The requirements for valid retrenchment which must be proved by clear and convincing evidence are: (1) that the
retrenchment is reasonably necessary and likely to prevent business losses, which, if already incurred, 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) that the employer served written notice both to the employees and to the DOLE at least one month prior to the intend
date of retrenchment;
(3) that 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;
(4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest of
its interest and not to defeat or circumvent the employees' right to security of tenure; and
(5) that the employer used fair and reasonable criteria in 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.

The condition of business losses is normally shown by audited financial documents like yearly balance sheets and profit
and loss statements as well as annual income tax returns. It is our ruling that financial statements must be prepared and
signed by independent auditors. Unless duly audited, they can be assailed as self-serving documents. It is necessary that
the employer also show that its losses increased through a period of time and that the condition of the company is not
likely to improve in the near future.

Private respondents never contested the veracity of the audited financial documents proffered by Asian Alcohol before the
LA. Neither did they object to their admissibility. They show that petitioner has accumulated losses amounting to
P306,764,349.00 and showing nary a sign of abating in the near future. The allegation of union busting is bereft of proof.
Union and non-union members were treated alike. The records show that the positions of 51 other non-union members
were abolished due to business losses.

Article 283 of the Labor Code uses the phrase "retrenchment to prevent losses". This means that retrenchment must be
undertaken by the employer before losses are actually sustained. The employer need not keep all his employees until
after his losses shall have materialized. Otherwise, the law could be vulnerable of attack as undue taking of property for
the benefit of another.

Irrefutable was the fact that losses have bled Asian Alcohol incessantly over a span of several years. The law gives the
new management every right to undertake measures to save the company from bankruptcy.

We find that the reorganizational plan and comprehensive cost-saving program to turn the business around were not
designed to bust the union of the private respondents. Retrenched were 117 employees. 72 of them including private
respondents were separated because their positions had become redundant. In this context, what may technically be
considered as redundancy may verily be considered as retrenchment measure. Their positions had to be declared
redundant to cut losses.

Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet the
demands on the enterprise. A 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 a service activity priorly undertaken by the business.Under these conditions, the employer has
no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.

For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1)
written notice served on both the employees 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.

AAC did not own the land where the wells stood. It only leased them. The lease contract, which also provided for a right of
way leading to the site of the wells, was terminated. Also, the water from the wells had become salty due to extensive
prawn farming nearby and could no longer be used by AAC for its purpose. The wells had to be closed and needless to
say, the services of Carias, Martinez and Sendon had to be terminated on the twin grounds of redundancy and
retrenchment.
The need for a briquetting plant operator ceased as the services of only two 2 helpers were all that was necessary to
attend to the much lesser amount of coal required to run the boiler. Thus, the position of Verayo had to be abolished. Of
the 3 briquetting helpers, Tormo was the oldest. Age, with the physical strength that comes with it, was particularly taken
into consideration by the management team in deciding whom to separate. Hence, it was Tormo who was separated from
service. The management choice rested on a rational basis.

Amacio was among the 10 mechanics who manned the machine shop at the plant site. It was more cost efficient to
maintain only 9 mechanics. In choosing whom to separate among the ten (10) mechanics, the management examined
employment records and reports to determine the least efficient among them. Amacio appeared the least efficient
because of his poor health condition.

Not one of the private respondents refuted the foregoing facts. The characterization of positions as redundant is an
exercise of business judgment on the part of the employers. It will be upheld as long as it passes the test of arbitrariness.

Private respondents failed to proffer any proof that the management acted in a malicious or arbitrary manner in engaging
the services of an independent contractor to operate the Laura wells. Absent such proof, the Court has no basis to
interfere with the bona fide decision of management to effect more economic and efficient methods of production.

Private respondent now claim that they signed the quitclaims, waivers and voluntary resignation letters only to get their
separation package. They maintain that in principle, they did not believe that their dismissal was valid.

Generally, quit claims and releases are contrary to public policy and therefore, void. Nonetheless, voluntary agreements
that represent a reasonable settlement are binding on the parties and should not later be disowned. It is only where there
is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are
unconscionable, that the law will step in to bail out the employee. While it is our duty to prevent the exploitation of
employees, it also behooves us to protect the sanctity of contracts that do not contravene our laws.

There is no showing that the quitclaims, waivers and voluntary resignation letters were executed by the private
respondents under force or duress. In truth, the documents embodied separation benefits that were well beyond what the
company was legally required to give private respondents. We note that out of the more than one hundred workers that
were retrenched by Asian Alcohol, only these private respondents were not impressed by the generosity of their employer.
Their late complaints have no basis and deserves our scant consideration.
Ledesma vs NLRC

FACTS:

Petitioner was employed as a bus/service driver by the private respondent on probationary basis. Petitioner filed a
complaint against de Leon for allegedly abusing his authority as site administrator by using the private respondents
vehicles and other facilities for personal ends. In the same complaint, petitioner also accused de Leon of immoral conduct
allegedly carried out within the private respondents premises.
de Leon filed a written report against the petitioner addressed to private respondents Vice-President for
Administration, Ricky Ty (Ty), citing his suspected drug use.
In view of de Leons report, private respondents Human Resource Manager, Trina Cueva (HR Manager Cueva),
on 29 November 2000, served a copy of a Notice to petitioner requiring him to explain within 24 hours why no disciplinary
action should be imposed on him for allegedly violating Section 14, Article IV of the private respondents Code of Conduct.

On 3 December 2000, petitioner filed a complaint for illegal dismissal against private respondent before the Labor
Arbiter.

Petitioner averred that in view of the complaint he filed against de Leon for his abusive conduct as site
administrator, the latter retaliated by falsely accusing petitioner as a drug user. VP for Administration Ty, however, instead
of verifying the veracity of de Leons report, readily believed his allegations and together with HR Manager Cueva, verbally
dismissed petitioner from service on 29 November 2000.

Petitioner was then asked by HR Manager Cueva to sign a resignation letter . Petitioner did not yet sign the
resignation letter replying that he needed time to think over the offers. When petitioner went back to private respondents
training site in Dasmarias, Cavite, to get his bicycle, he was no longer allowed by the guard to enter the premises.

On the following day, petitioner immediately went to St. Dominic Medical Center for a drug test and he was found
negative for any drug substance. With his drug result on hand, petitioner went back to private respondents main office
in Manila to talk to VP for Administration Ty and HR Manager Cueva and to show to them his drug test result.Petitioner
then told VP for Administration Ty and HR Manager Cueva that since his drug test proved that he was not guilty of the
drug use charge against him, he decided to continue to work for the private respondent.

On 2 December 2000, petitioner reported for work but he was no longer allowed to enter the training site for he
was allegedly banned therefrom according to the guard on duty.

This incident prompted the petitioner to file the complaint for illegal dismissal against the private respondent
before the Labor Arbiter.
The Labor Arbiter found that the petitioner was illegally dismissed from employment warranting the payment of his
backwages. The NLRC and the Court of Appeals found otherwise.

In reversing the Labor Arbiters Decision, the NLRC underscored the settled evidentiary rule that before the
burden of proof shifts to the employer to prove the validity of the employees dismissal, the employee must first sufficiently
establish that he was indeed dismissed from employment. The petitioner, in the present case, failed to establish the fact of
his dismissal. The NLRC did not give credence to petitioners allegation that he was banned by the private respondent
from entering the workplace, opining that had it been true that petitioner was no longer allowed to enter the training site
when he reported for work thereat on 2 December 2000, it is quite a wonder he was able to do so the very next day, on 3
December 2000, to claim his salary.[27]

The Court of Appeals validated the above conclusion reached by the NLRC and further rationated that petitioners
positive allegations that he was dismissed from service was negated by substantial evidence to the contrary. Petitioners
averments of what transpired inside private respondents main office on 29 November 2000, when he was allegedly
already dismissed from service, and his claim that he was effectively banned from private respondents premises are
belied by the fact that he was able to claim his salary for the period of 16-30 November 2000 at private respondents
training site.
ISSUE: WON the petitioner was illegally dismissed from employment.

HELD: NO

Well-entrenched is the principle that in order to establish a case before judicial and quasi-administrative bodies, it
is necessary that allegations must be supported by substantial evidence. [28] Substantial evidence is more than a mere
scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. [29]

In the present case, there is hardly any evidence on record so as to meet the quantum of evidence required, i.e.,
substantial evidence. Petitioners claim of illegal dismissal is supported by no other than his own bare, uncorroborated
and, thus, self-serving allegations, which are also incoherent, inconsistent and contradictory.

Moreover, the petitioner alleged that he was not allowed to enter the training site by the guard on duty who told
him that he was already banned from the premises.Subsequently, however, petitioner admitted in his Supplemental
Affidavit that he was able to return to the said site on 3 December 2000, to claim his 16-30 November 2000 salary, and
again on 9 December 2000, to receive his 13th month pay. The fact alone that he was able to return to the training site to
claim his salary and benefits raises doubt as to his purported ban from the premises.

Finally, petitioners stance that he was dismissed by private respondent was further weakened with the
presentation of private respondents payroll bearing petitioners name proving that petitioner remained as private
respondents employee up to December 2000. Again, petitioners assertion that the payroll was merely fabricated for the
purpose of supporting private respondents case before the NLRC cannot be given credence. Entries in the payroll, being
entries in the course of business, enjoy the presumption of regularity under Rule 130, Section 43 of the Rules of Court. It
is therefore incumbent upon the petitioner to adduce clear and convincing evidence in support of his claim of fabrication
and to overcome such presumption of regularity.

On these scores, there is a dearth of evidence to establish the fact of petitioners dismissal. We have scrupulously
examined the records and we found no evidence presented by petitioner, other than his own contentions that he was
indeed dismissed by private respondent.

The rule is that one who alleges a fact has the burden of proving it; thus, petitioners were burdened to prove
their allegation that respondents dismissed them from their employment. It must be stressed that the evidence to
prove this fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal
dismissal cases finds no application here because the respondents deny having dismissed the petitioners.

It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the
allegations ei incumbit probatio, qui dicit, non qui negat. If he claims a right granted by law, he must prove his claim
by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his
opponent.

It is true that the Constitution affords full protection to labor, and that in light of this Constitutional mandate, we
must be vigilant in striking down any attempt of the management to exploit or oppress the working class. However, it does
not mean that we are bound to uphold the working class in every labor dispute brought before this Court for our resolution.
LOPEZ SUGAR CORPORATION, petitioner, vs.FEDERATION OF FREE WORKERS, PHILIPPINE LABOR UNION
ASSOCIATION (PLUA-NACUSIP) and NATIONAL LABOR RELATIONS COMMISSION, respondents.

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.
Petitioner filed a combined report on retirement and application for clearance to retrench, 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 docketed as NLRC Case No. A-198-80. 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.

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.

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.

Labor Arbiter 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 represented by
private respondent Philippine Labor Union Association ("PLUA") and FFW and to pay them full backwages from the time
of termination until actual reinstatement.

Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent FFW appealed the case to public
respondent NLRC. On appeal, the NLRC, finding no justifiable reason for disturbing the decision of the Labor Arbiter,
affirmed that decision on 2 July 1986. 5

Hence, this Petition for certiorari.

Petitioner contends that the NLRC acted with grave abuse of discretion in denying its combined report on
retirement and application for clearance to retrench. Petitioner argues 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.

ISSUE:
WON 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.

HELD: YES

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 ts 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.

the general standards in terms of which the acts of petitioner employer must be appraised. 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. An employer who, for
instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or
so-called "golden parachutes", can scarcely claim to be retrenching in good faith to avoid losses. To impart operational
meaning to the constitutional policy of providing "full protection" to labor, the employer's prerogative to bring down labor
costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means e.g., reduction
of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing
efficiencies, trimming of marketing and advertising costs, etc. have been tried and found wanting.

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

Whether or not an employer would imminently suffer serious or substantial losses for economic reasons is essentially a
question of fact for the Labor Arbiter and the NLRC to determine. In the instant case, the Labor Arbiter found no sufficient
and convincing evidence to sustain petitioner's essential contention that it was acting in order to prevent substantial and
serious losses. The Labor Arbiter said:

There is no question that an employer may reduce its work force to prevent losses, however, these losses must be
serious, actual and real. In the instant case, even assuming arguendo that applicant company was, in fact, surrounded by
the major economic problems stated earlier, the question may be asked will it suffer serious losses as a result of the
said economic problems? We find the answer to be negative. We have scanned the records but failed to find evidence
submitted to show that applicant company would suffer serious business losses or reverses as a consequence of the
alleged major economic problems. In fact, applicant company asseverated that these problems only threatens its survival,
hence, it had to reduce its work force. Another thing, while applicant company was retrenching its regular employees, it
also hired the services of casuals. This militated its claim to reduce its work force to set up cost reduction. It must be
stated that settled is the rule that serious business losses or reverses must be actual, real and amply supported by
sufficient and convincing evidence.

Petitioner argues that the CBA was "extended" not merely by implication, but by reciprocal acts in the sense that even
after the CBA had expired, petitioner continued to give, and the workers continued to receive, the benefits and exercise
the prerogatives provided therein. Under these circumstances, petitioner urges, the employees are estopped from denying
the extended effectivity of the CBA.

The Solicitor General, as well as private respondents, argue basically that petitioner's right to retire its employees was
coterminous with the life of the CBA.

On this point, we must find for petitioner. Although the CBA expired on 31 December 1977, it continued to have legal
effects as between the parties until a new CBA had been negotiated and entered into. This proposition finds legal support
in Article 253 of the Labor Code, which provides:

Article 253 Duty to bargain collectively when there exists a collective bargaining agreement. When there is a
collective bargaining agreement, the duty to bargain collectively shall also mean that neither party shall terminate nor
modify such agreement during its lifetime. However, either party can serve a written notice to terminate or modify the
agreement at least sixty (60) days prior to its expiration date. It shall be the duty of both parties to keep the status quo and
to continue in full force and effect the terms and conditions of the existing agreement during the 60-day period and/or until
a new agreement is reached by the parties. (Emphasis supplied)

Accordingly, in the instant case, despite the lapse of the formal effectivity of the CBA by virtue of its own provisions, the
law considered the same as continuing in force and effect until a new CBA shall have been validly executed. Hence,
petitioner acted within legal bounds when it decided to retire several employees in accordance with the CBA. That the
employees themselves similarly acted in accordance with the CBA is plain from the record. Even after the expiration of the
CBA, petitioner's employees continued to receive the benefits and enjoy the privileges granted therein. They continued to
avail of vacation and sick leaves as computed in accordance with Articles VII and VIII of the CBA. They also continued to
avail of medical and dental aid under Article IX, death aid and bereavement leave under Articles X and XIV, insurance
coverage under Article XVI and housing allowance under Article XVIII. Seventeen (17) employees even availed of Section
XI (dealing with retirement) when they voluntarily retired between 1 January 1978 and 31 December 1980 and received
retirement pay computed on the basis of Section 3 of the same article. If the workers chose to avail of the CBA despite its
expiration, equity if not the law-dictates that the employer should likewise be able to invoke the CBA.

We conclude that because the attempted retrenchment on the part of the petitioner was legally ineffective, all retrenched
employees should be reinstated and backwages paid them corresponding to a period of three (3) years without
qualification or deduction, in accordance with the three-year rule laid down in a long line of cases. 17 In the case of
employees who had received payments for which they had executed quitclaims, the amount of such payments shall be
deducted from the backwages due to them. Where reinstatement is no longer possible because the positions they had
previously filled are no longer in existence, petitioner shall pay backwages plus, in lieu of reinstatement, separation pay in
the amount of one-month's pay for every year of service including the three (3) year-period of putative service for which
backwages will be paid. Upon the other hand, we find valid the retirement of those employees who were retired by
petitioner pursuant to the applicable provisions of the CBA.