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16.FUNCTIONAL, INC. Petitioner, v. SAMUEL C. GRANFIL, Respondent. 17. Heavylift Manila, Inc. v. CA

FACTS: Sometime in 1992, respondent Samuel C. Granfil was hired as key operator by petitioner Functional, Inc. (FI), a domestic FACTS:
corporation engaged in the business of sale and rental of various business equipments, including photocopying machines. As Key On February 23, 1999, petitioner, a maritime agency, thru a letter signed bypetitioner Josephine Evangelio, Administrative and
Operator, Granfil was tasked to operate the photocopying machine rented by the National Bookstore (NBS) at its SM Megamall Finance Manager of Heavylift,informed respondent Ma. Dottie Galay, Heavylift Insurance and Provisions Assistant,of her low
Branch. There is no dispute regarding the fact that, in the evening of 30 July 2002, Granfil attended to a customer by the name of performance rating and the negative feedback from her team membersregarding her work attitude. The letter also notified her that
Cosme Cavaldeja (Cavaldeja) who, together with his wife, asked to have their flyers photocopied. It appears that Bonnel Dechavez, she was being relievedof her other functions except the development of the new Access program.Galay was terminated for alleged
the security guard assigned at said establishment, saw Cavaldeja handing money to Granfil, instead of the cashier, after the loss of confidence. Thereafter, she filed withthe Labor Arbiter a complaint for illegal dismissal and nonpayment of serviceincentive
transaction was finished. leave and 13
th
On 3 September 2002, Granfil filed a complaint against FI for illegal dismissal, unpaid 13th month pay, moral and exemplary month pay against petitioners. Petitioner alleged that Galayhad an attitude problem and did not get along with her co-employees for
damages and attorneys fees. In support of his complaint, Granfil alleged, among other matters, that the money which Dechavez saw which shewas constantly warned to improve. They aver that Galays attitude resulted to thedecline in the companys efficiency and
him receive from Cavaldeja was a P200 tip said customer gave him in appreciation of his assistance in xeroxing and organizing the productivity. Petitioners presented a letterdated February 23, 1999 and a notice of termination
batches of voluminous materials he asked to be photocopied and that that payment for the materials was, however, already paid per .
batch by Cavaldejas wife who, by that time, had already left the premises. He also explained that he was quickly terminated after the The Labor Arbiter found that Galay was illegally terminated for petitionersfailure to prove that she violated any company regulation,
incident without being given the chance to explain his side. and for failure to give theproper notice as required by law. NLRC denied the appeal for lack of merit andaffirmed the decision of the
Labor Arbiter.Nonetheless, the Court of Appeals denied the motion for lack of justifyingcircumstances, and because the attached
FI, it its defense, argued that Granfil had abandoned his work after he was reassigned. board resolution was issued after thepetition was filed.
ISSUE:
ISSUE: Whether or not there was just cause in the termination of Galay?
HELD/ Ratio:
Was Granfil illegally dismissed? An employee who cannot get along with his co-employees isdetrimental to the company for he can upset and strain the working
environment.Without the necessary teamwork and synergy, the organization cannot function well. Thus, management has the
HELD: The rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of proof is upon the prerogative to take the necessary action to correct thesituation and protect its organization. When personal differences
employer to show that the employee's termination from service is for a just and valid cause. The employer's case succeeds or betweenemployees and management affect the work environment, the peace of the companyis affected. Thus, an employees
fails on the strength of its evidence and not the weakness of that adduced by the employee, in keeping with the principle that the attitude problem is a valid ground for histermination. It is a situation analogous to loss of trust and confidence that must beduly
scales of justice should be tilted in favor of the latter in case of doubt in the evidence presented by them. Often described as more proved by the employer. Similarly, compliance with the twin requirement of notice and hearing must also be proven by the
than a mere scintilla, the quantum of proof is substantial evidence which is understood as such relevant evidence as a reasonable employer.The Sc were not convinced that in the present case, petitioners have shownsufficiently clear and convincing evidence to
mind might accept as adequate to support a conclusion, even if other equally reasonable minds might conceivably opine otherwise. justify Galays termination. Though theyare correct in saying that in this case, proof beyond reasonable doubt is not required,still
Failure of the employer to discharge the foregoing onus would mean that the dismissal is not justified and therefore illegal. there must be substantial evidence to support the termination on the ground of attitude. The mere mention of negative feedback from
her team members, and theletter dated February 23, 1999, are not proof of her attitude problem. Technical rulesof procedure are not
binding in labor cases.

Besides, the burden of proof is not on theemployee but on the employer who must affirmatively show adequate evidence thatthe
dismissal was for justifiable cause. The letter did not inform her of the specific acts complained of and theircorresponding
penalty. The law requires the employer to give the worker to bedismissed two written notices before terminating his employment,
namely, (1) anotice which apprises the employee of the particular acts or omissions for which hisdismissal is sought; and (2) the
subsequent notice which informs the employee of the employers decision to dismiss him. Additionally, the letter never gave
respondentGalay an opportunity to explain herself, hence denying her due process.In sum, we find that Galay was illegally dismissed, because
petitioners failed toshow adequately that a valid cause for terminating respondent exists, and becausepetitioners failed to comply with the
twin requirement of notice and hearing
2

SECOND DIVISION locker.[6] In compliance therewith, he submitted an affidavit the following day, explaining that he only hid the phone as a practical joke
and had every intention of returning it to Braga.[7]
18. COSMOS BOTTLING CORP., G.R. No. 193676
Petitioner,
On 21 December 2002, Braga executed a handwritten narration of events stating the following: [8]

- versus -
(a) At around 6:00 a.m. on 16 December 2002, he was changing his clothes inside the locker room, with Fermin as
the only other person present.

WILSON FERMIN, (b) Braga went out of the locker room and inadvertently left his cellphone by the chair. Fermin was left inside the
Respondent. room.
x-----------------------------x
(c) After 10 minutes, Braga went back to the locker room to retrieve his cellphone, but it was already gone.
WILSON B. FERMIN,
Petitioner, G.R. No. 194303
(d) Braga asked if Fermin saw the cellphone, but the latter denied noticing it.
Present:
(e) Braga reported the incident to the security guard, who thereafter conducted an inspection of all the lockers.
- versus - CARPIO, J., Chairperson,
BRION, (f) The security guard found the cellphone inside Fermins locker.
PEREZ,
SERENO, and
COSMOS BOTTLING CORPORATION and CECILIA BAUTISTA, REYES, JJ. (g) Later that afternoon, Fermin talked to Braga to ask for forgiveness. The latter pardoned the former and asked
Respondents. him not to do the same to their colleagues.
Promulgated:

June 20, 2012 After conducting an investigation, COSMOS found Fermin guilty of stealing Bragas phone in violation of company rules and
regulations.[9] Consequently, on 2 October 2003,[10] the company terminated Fermin from employment after 27 years of
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x service,[11] effective on 6 October 2003.[12]

DECISION
Following the dismissal of Fermin from employment, Braga executed an affidavit, which stated the belief that the former
SERENO, J.: had merely pulled a prank without any intention of stealing the cellphone, and withdrew from COSMOS his complaint against
Fermin.[13]

Before this Court are two consolidated cases, namely: (1) Petition for Review dated 26 October 2010 (G.R. No. 193676) Meanwhile, Fermin filed a Complaint for Illegal Dismissal, [14] which the Labor Arbiter (LA) dismissed for lack of merit on the
and (2) Petition for Review on Certiorari under Rule 45 dated 14 October 2010 (G.R. No. 194303). [1] Both Petitions assail the ground that the act of taking a fellow employees cellphone amounted to gross misconduct. [15] Further, the LA likewise took into
Decision dated 20 May 2009[2] and Resolution dated 8 September 2010[3] issued by the Court of Appeals (CA). The dispositive consideration Fermins other infractions, namely: (a) committing acts of disrespect to a superior officer, and (b) sleeping on duty and
portion of the Decision reads: abandonment of duty.[16]

WHEREFORE, the August 31, 2005 Decision and October 21, 2005 Resolution of the National Labor Fermin filed an appeal with the National Labor Relations Commission (NLRC), which affirmed the ruling of the LA [17] and
Relations Commission in NLRC NCR CA No. 043301-05 are hereby SET ASIDE. Respondent Cosmos Bottling denied Fermins subsequent Motion for Reconsideration.[18]
Corporation is, in light of the foregoing discussions, hereby ORDERED to pay Petitioner his full retirement
benefits.
Thereafter, Fermin filed a Petition for Certiorari with the Court of Appeals (CA),[19] which reversed the rulings of the LA and
There being no data from which this Court can properly assess Petitioners full retirement benefits, the the NLRC and awarded him his full retirement benefits.[20] Although the CA accorded with finality the factual findings of the lower
case is, thus, remanded to the Labor Arbiter only for that purpose. tribunals as regards Fermins commission of theft, it nevertheless held that the penalty of dismissal from service was improper on the
ground that the said violation did not amount to serious misconduct or wilful disobedience, to wit:
SO ORDERED.

[COSMOS], on which the onus of proving lawful cause in sustaining the dismissal of [Fermin] lies,
failed to prove that the latters misconduct was induced by a perverse and wrongful intent, especially in the light
Wilson B. Fermin (Fermin) was a forklift operator at Cosmos Bottling Corporation (COSMOS), where he started his employment on of Bragas Sinumpaang Salaysay which corroborated [Fermins] claim that [Fermin] was merely playing a prank
27 August 1976.[4] On 16 December 2002, he was accused of stealing the cellphone of his fellow employee, Luis Braga when he hid Bragas cellular phone. Parenthetically, the labor courts dismissed Bragas affidavit of desistance as
(Braga).[5] Fermin was then given a Show Cause Memorandum, requiring him to explain why the cellphone was found inside his a mere afterthought because the same was executed only after [Fermin] had been terminated.
3

It must be pointed out, however, that in labor cases, in which technical rules of procedure are not to be strictly (a) Serious misconduct or willful disobendience by the employee of the lawful
applied if the result would be detrimental to the workingman, an affidavit of desistance gains added importance in orders of his employer or his representatives in connection with his work;
the absence of any evidence on record explicitly showing that the dismissed employee committed the act which xxx xxx xxx
caused the dismissal. While We cannot completely exculpate [Fermin] from his violation at this point, We cannot, (e) Other causes analogous to the foregoing.
however, turn a blind eye and disregard Bragas recantation altogether. Bragas recantation all the more bolsters
Our conclusion that [Fermins] violation does not amount to or borders on serious or willful misconduct or willful Misconduct involves the transgression of some established and definite rule of action, forbidden act, a
disobedience to call for his dismissal. dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. For
misconduct to be serious and therefore a valid ground for dismissal, it must be:
Morever, [COSMOS] failed to prove any resultant material damage or prejudice on their part as a consequence
of [Fermins] questioned act. To begin with, the cellular phone subject of the stealth belonged, not to [COSMOS], 1. of grave and aggravated character and not merely trivial or unimportant and
but to Braga. Secondly, the said phone was returned to Braga in due time. Under the circumstances, a penalty 2. connected with the work of the employee.
such as suspension without pay would have sufficed to teach [Fermin] a lesson and for him to realize his
wrongdoing. In this case, petitioner dismissed respondent based on the NBI's finding that the latter stole and used
Yusecos credit cards. But since the theft was not committed against petitioner itself but against one of its
employees, respondent's misconduct was not work-related and therefore, she could not be dismissed
xxxxxxxxx for serious misconduct.
On another note, [COSMOS], in upholding the legality of [Fermins] termination from service,
considered the latters past infractions with [COSMOS], i.e. threatening, provoking, challenging, insulting and Nonetheless, Article 282(e) of the Labor Code talks of other analogous causes or those which are
committing acts of disrespect to a superior officer/defiance to an instruction and a lawful order of a superior susceptible of comparison to another in general or in specific detail. For an employee to be validly dismissed for
officer; and, sleeping while on duty and abandonment of duty or leaving assigned post with permission from a cause analogous to those enumerated in Article 282, the cause must involve a voluntary and/or willful act or
immediate supervisor, as aggravating circumstances to his present violation [stealth (sic) of a co-employees omission of the employee.
property]. We disagree with Public Respondent on this matter.
A cause analogous to serious misconduct is a voluntary and/or willful act or omission attesting to an
employees moral depravity. Theft committed by an employee against a person other than his employer, if
The correct rule is that previous infractions may be used as justification for an employees dismissal proven by substantial evidence, is a cause analogous to serious misconduct.[27] (Emphasis supplied.)
from work in connection with a subsequent similar offense, which is obviously notthe case here. x x
x. [21] (Emphases in the original.)

In this case, the LA has already made a factual finding, which was affirmed by both the NLRC and the CA, that Fermin had
[22] committed theft when he took Bragas cellphone. Thus, this act is deemed analogous to serious misconduct, rendering Fermins
COSMOS and Fermin moved for reconsideration, but the CA likewise denied their motions. Thus, both parties filed the
dismissal from service just and valid.
present Petitions for Review.

Further, the CA was correct in ruling that previous infractions may be cited as justification for dismissing an employee only
COSMOS argues, among other things, that: (a) Fermin committed a clear act of bad faith and dishonesty in taking the if they are related to the subsequent offense. [28] However, it must be noted that such a discussion was unnecessary since the theft,
cellphone of Braga and denying knowledge thereof; (b) the latters recantation was a mere afterthought; (c) the lack of material
taken in isolation from Fermins other violations, was in itself a valid cause for the termination of his employment.
damage or prejudice on the part of COSMOS does not preclude it from imposing the penalty of termination; and (d) the previous
infractions committed by Fermin strengthen the decision of COSMOS to dismiss him from service. [23]
Finally, it must be emphasized that the award of financial compensation or assistance to an employee validly dismissed
from service has no basis in law. Therefore, considering that Fermins act of taking the cellphone of his co-employee is a case
On the other hand, Fermin contends that since the CA found that the penalty of dismissal was not proportionate to his
analogous to serious misconduct, this Court is constrained to reverse the CAs ruling as regards the payment of his full retirement
offense, it should have ruled in favor of his entitlement to backwages. [24] benefits. In the same breath, neither can this Court grant his prayer for backwages.

It must be noted that in the case at bar, all the lower tribunals were in agreement that Fermins act of taking Bragas WHEREFORE, the Petition in G.R. No. 194303 is DENIED, while that in G.R. No. 193676 is GRANTED. The Decision
cellphone amounted to theft. Factual findings made by administrative agencies, if established by substantial evidence as borne out
dated 20 May 2009 and Resolution dated 8 September 2010 of the Court of Appeals are hereby REVERSED and SET ASIDE. The
by the records, are final and binding on this Court, whose jurisdiction is limited to reviewing questions of law. [25] The only disputed Decision dated 20 August 2004 of the Labor Arbiter is REINSTATED.
issue left for resolution is whether the imposition of the penalty of dismissal was appropriate. We rule in the affirmative.
SO ORDERED.
Theft committed against a co-employee is considered as a case analogous to serious misconduct, for which the penalty of
dismissal from service may be meted out to the erring employee,[26] viz:

Article 282 of the Labor Code provides:

Article 282. Termination by Employer. - An employer may terminate an


employment for any of the following causes:
4

19. G.R. No. 173489 February 25, 2013 Pension House in Baguio City, together with a lady companion whom he introduced as his wife. Apparently, the lady was
not his wife because at that time, his wife reported for work in the Municipal Hall of Alilem. 10
ALILEM CREDIT COOPERATIVE, INC., now known as ALILEM MULTIPURPOSE COOPERATIVE, INC.,Petitioner,
vs. Respondent, on the other hand, denied the accusation against him. He, instead, claimed that the accusation was a result of the
SALVADOR M. BANDIOLA, JR., Respondent. insecurity felt by some members of the cooperative and of the Board because of his growing popularity owing to his exemplary record
as an employee.11 Thelma executed an affidavit likewise denying the allegations of extra-marital affair.12
DECISION
Meanwhile, on June 7, 1997, the Board received a petition from about fifty members of the cooperative asking the relief of
respondent due to his illicit affair with Thelma.13
PERALTA, J.:

In its Summary Investigation Report, the Ad Hoc Committee concluded that respondent was involved in an extra-marital affair with
This is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioner Alilem Credit Cooperative, Inc. against
Thelma. On July 10, 1997, the Chairman of the Board sent a letter14 to respondent informing him of the existence of a prima
respondent Salvador M. Bandiola, Jr. assailing the Court of Appeals (CA) Decision1 dated January 16, 2006 and Resolution2 dated
facie case against him for "illicit marital affair, an act that brings discredit to the cooperative organization and a cause for termination
July 5, 2006 in CAG. R. SP No. 64554.
per AMPC (Alilem Multi-Purpose Cooperative) Personnel Policy. Respondent was directed to appear and be present at the AMPC
office for a hearing. He was likewise advised of his right to be assisted by counsel.
The case stemmed from the following facts:
On the day of the hearing, respondent requested15 for postponement on the ground that his lawyer was not available. The request
Respondent was employed by petitioner as bookkeeper. Petitioner's Board of Directors (the Board) received a letter from a certain was, however, denied and the hearing proceeded as scheduled.
Napoleon Gao-ay (Napoleon) reporting the alleged immoral coaduct and unbecoming behavior of respondent by having an illicit
relationship with Napoleons sister, Thelma G. Palma (Thelma). This prompted the Board to conduct a preliminary investigation.3
In a Memorandum16 dated July 16, 1997, respondent was informed of Board Resolution No. 05, series of 1997 17embodying the
Boards decision to terminate his services as bookkeeper of petitioner, effective July 31, 1997, without any compensation or benefit
During the preliminary investigation, the Board received the following evidence of respondents alleged extramarital affair: except the unpaid balance of his regular salary for services actually rendered. 18

1. Melanie Gao-ays (Melanie) sworn statement declaring that sometime in December 1996, respondent slept on the same Aggrieved, respondent filed a Complaint for Illegal Dismissal against petitioner before the Regional Arbitration Branch of the National
bed with Thelma in a boarding house in San Fernando, La Union where she (Melanie) and Thelma resided. She personally Labor Relations Commission (NLRC).19
witnessed the intimacy of respondent and Thelma when they engaged in lovemaking as they slept in one room and openly
displayed their affection for each other.4
On April 30, 1998, the Labor Arbiter (LA) dismissed20 respondents complaint for lack of merit. The LA concluded that respondent had
been or might still be carrying on an affair with a married woman. The LA found it unforgiving in the case of a married employee who
2. Rosita Tegons (Rosita) sworn statement that on May 23, 1997, she saw Thelma talk to respondent in petitioners office sleeps with or has illicit relations with another married person for in such case, the employee sullies not only the reputation of his
asking him to accompany her in San Fernando, La Union.5 spouse and his family but the reputation as well of the spouse of his paramour and the latters family. 21 As opposed to respondents
claim that the accusation is a mere fabrication of some of the directors or cooperative members who were allegedly envious of his
growing popularity, the LA gave more credence to the testimonies of petitioners witnesses who were relatives of Thelma and who
3. Emma Gao-ay Lubrins (Emma, Thelmas sister) interview wherein she admitted that she and her family confronted had no motive to falsely testify because their family reputation was likewise at a risk of being tarnished. 22 The LA, thus, found
Thelma about the alleged extramarital affair which Thelma allegedly admitted.6
respondent to have been validly dismissed from employment for violation of the cooperatives Personnel Policy, specifically "the
commission of acts that bring discredit to the cooperative organization, especially, but not limited to conviction of any crime, illicit
4. Napoleons interview with the Board wherein he claimed that their family tried to convince Thelma to end her extramarital marital affairs, scandalous acts inimical to established and accepted social mores." The LA also found no violation of respondents
affair with respondent but instead of complying, she in fact lived together with respondent. 7 right to due process as he was given ample opportunity to defend himself from the accusation against him.23

The Board decided to form an Ad Hoc Committee to investigate the charges against respondent yielding the following additional On appeal, the NLRC set aside24 the LA decision and rendered a judgment disposed in this wise:
evidence:
WHEREFORE, the appealed Decision of the Executive Labor Arbiter is SET ASIDE. Judgment is hereby rendered:
1. Agustina Boteras (Agustina) sworn statement that she witnessed a confrontation between Thelma and her sister in the
latters residence concerning the alleged extramarital affair. At that time, respondents wife was allegedly present who in
1. declaring respondent Alilem Credit Cooperative, Inc. (ACCI) also known as Alilem Multi-Purpose Cooperative (AMPC)
fact pleaded Thelma to end her relationship with respondent but she supposedly said "No way!" 8 guilty of illegal dismissal for the reasons above-discussed;

2. Milagros Villacortes sworn statement that while she was at the Bethany Hospital in San Fernando, La Union where her
2. directing the said respondent to pay complainant Salvador Bandiola, Jr. full backwages computed from the time of (sic)
husband was confined, respondent approached her and asked her to look for Thelma who was then having her class. his wages were withheld until finality of this judgment;
When he finally found her, respondent and Thelma met and talked in the hospital premises. 9

3. directing, on account of strained relationship between the parties, the above-named respondent to pay complainant, in
3. Julienne Marie L. Dalangeys certification that on August 9 to 10, 1996, respondent attended a seminar on Internal lieu of reinstatement, separation pay computed at one (1) month pay for every year of service, a fraction of six (6) months
Control and Systems Design I at the Northern Luzon Federation of Cooperatives and Development Center (NORLU) to be computed as one (1) whole year; [and]
5

4. directing respondent to pay complainant ten (10%) percent attorneys fees based on the total monetary award. the event of a violation, an employee may be validly terminated from employment on the ground that an employer cannot rationally
be expected to retain the employment of a person whose lack of morals, respect and loyalty to his employer, regard for his
employers rules and application of the dignity and responsibility, has so plainly and completely been bared.41
SO ORDERED.25

Applying now the above-discussed ground for termination, we now determine whether respondent was properly dismissed from
The NLRC found petitioners Personnel Policy to be of questionable existence and validity because it was unnumbered. 26 It held that
employment. In other words, did petitioner adequately prove that respondent indeed engaged in extra-marital affairs, an act which
even assuming that respondent had an extra-marital affair with a married woman, the latter is not his fellow worker in petitioners
petitioner considers as would bring discredit to the cooperative?
business establishment.27 It, thus, concluded that respondents dismissal was not founded on any of the just causes for termination of
employment under Article 282 of the Labor Code, as amended.28 It, likewise, declared that respondent was not afforded his right to
his counsel of choice as his request for postponement was not allowed. 29 Therefore, the NLRC declared respondents dismissal from We answer in the affirmative.
employment illegal, entitling him to the payment of backwages, separation pay, and attorneys fees. 30
The employers evidence consists of sworn statements of either relatives or friends of Thelma and respondent. They either had direct
Petitioner elevated the matter to the CA, but it failed to obtain a favorable decision. The CA found respondents dismissal being personal knowledge of the illicit relationship or revealed circumstances indicating the existence of such relationship. As aptly
founded on the serious misconduct he allegedly committed by carrying an illicit relationship with a married woman. 31 While observed by the LA:
considering said act a serious misconduct, it refused to consider it sufficient to justify respondents dismissal, because it was not
done in the performance of his duties as would make him unfit to continue working for petitioner.32 Petitioners motion for
x x x Moreover, the credibility of the persons who bore witness against him can hardly be questioned because some of these persons
reconsideration was likewise denied in the assailed July 5, 2006 resolution.
are relatives or friends of either [respondent] or his lover. In particular, it is hard to see how Napoleon Gao-ay, the brother of his lover,
Thelma, could have resorted to a lie just to destroy him when the same scandal could also result in tarnishing the reputation of his
Unsatisfied, petitioner now comes before the Court in this petition for review on certiorari insisting on the validity of respondents own family. The motive of Napoleon in bringing the matter to the attention of the Board of Directors, after all, was based on ethical
dismissal from employment. grounds he wanted a stop to the affair because it was a disgrace to the community.

We find merit in the petition. There is also no reason to doubt the statement of Melanie Gao-ay, the wife of Napoleon, who witnessed the embarrassing
"encounter", to borrow the term she used, between [respondent] and Thelma in her own boarding house.42
It is undisputed that respondent was dismissed from employment for engaging in extramarital affairs, a ground for termination of
employment stated in petitioners Personnel Policy. This basis of termination was made known to respondent as early as the first While respondents act of engaging in extra--marital affairs may be considered personal to him and does not directly affect the
communication made by petitioner. In its June 20, 1997 letter, petitioner directed respondent to explain in writing or personal performance of his assigned task as bookkeeper, aside from the fact that the act was specifically provided for by petitioners
confrontation why he should not be terminated for violation of Section 4.1.4 of the Personnel Policy. 33 Respondent merely denied the Personnel Policy as one of the grounds for termination of employment, said act raised concerns to petitioner as the Board received
accusation against him34 and did not question the basis of such termination. When the LA was called upon to decide the illegal numerous complaints and petitions from the cooperative members themselves asking for the removal of respondent because of his
dismissal case, it ruled in favor of petitioner and upheld the basis of such dismissal which is the cited Personnel Policy.1wphi1 The immoral conduct.43
NLRC, however, refused to recognize the existence and validity of petitioners Personnel Policy on which the ground for termination
was embodied.35
The next question is whether procedural due process was observed in the termination of respondents services. "Before the services
of an employee can be validly terminated, the employer must furnish him two written notices: (a) a written notice served on the
The existence of the Personnel Policy containing provisions on the grounds for termination of employees was not questioned by employee specifying the ground or grounds for termination, and giving the employee reasonable opportunity to explain his side; and
respondent. In his position paper, respondent only assailed the effectivity of the policy, as for him as it was amended on the same (b) a written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds
date as the letter-complaints against him. In other words, he claimed that the policy was amended in order to include therein the have been established to justify his termination."44 The employer must inform the employee of the charges against him and to hear
ground for his termination to make sure that he is removed from his position.36 his defenses. A full adversarial proceeding is not necessary as the parties may be heard through pleadings, written explanations,
position papers, memorandum or oral argument.45
We do not subscribe to such an argument.
In this case, respondent was adequately afforded the opportunity to defend himself and explain the accusation against him. Upon
receipt of the complaint, petitioner conducted a preliminary investigation and even created an Ad Hoc Committee to investigate the
A comparison of petitioners old and new Personnel Policies attached by respondent himself to his Position Paper shows that under
matter. Respondent was directed to explain either in writing or by a personal confrontation with the Board why he should not be
the old policy, one of the grounds for termination of an employee is "commission of acts or commission (sic) of duties that bring
terminated for engaging in illicit affair.46 Not only did petitioner give him the opportunity but respondent in fact informed petitioner that
discredit to the organization,37" while under the new policy, one of the grounds is the "commission of acts that brings (sic)
he opted to present his side orally47 and did so as promised when he specifically denied such allegations before the AdHoc
discredit to the cooperative organization, especially, but not limited to, conviction of any crime, illicit marital affairs,
Committee.48 Moreover, respondent was also allowed to peruse the investigation report prepared by the Ad Hoc Committee and was
scandalous acts inimical to established and accepted social mores."38 Contrary to respondents claim, with the amendment of
advised that he was entitled to assistance of counsel.49 Afterwhich, hearing was conducted. It was only after thorough investigation
the Personnel Policy, petitioner did not create a new ground for the termination of employment to make sure that respondent is
and proper notice and hearing to respondent that petitioner decided whether to dismiss the former or not. The decision to terminate
removed from his position. The quoted ground under the old policy is similar to that provided for in the new policy. The enumeration
respondent from employment was embodied in Board Resolution No. 05, series of 1997 a copy of which was furnished
containing the specific act of "illicit marital affairs" is not an additional ground, but an example of an act that brings discredit to the
respondent.50 With this resolution, respondent was adequately notified of petitioners decision to remove him from his position.
cooperative. It is merely an interpretation of what petitioner considers as such. It is, thus, clear from the foregoing that engaging in
Respondent cannot now claim that his right to due process was infringed upon.
extra-marital affairs is a ground for termination of employment not only under the new but even under the old Personnel Policy of
petitioner. The effectivity of the policy as to respondent cannot, therefore, be questioned.
WHEREFORE, premises considered, the petition is hereby GRANTED. The Court of Appeals Decision dated January 16, 2006 and
39 Resolution dated July 5, 2006 in CA-G.R. SP No. 64554, are SET ASIDE. The Labor Arbiter's Decision dated April 30, 1998 in NLRC
To be sure, an employer is free to regulate all aspects of employment. It may make reasonable rules and regulations for the
Case No. RAB-1-08-1144-97 (IS) dismissing respondent Salvador M. Bandiola, Jr.'s complaint against petitioner Alilem Credit
government of its employees which become part of the contract of employment provided they are made known to the employee. 40 In
Cooperative, Inc., Is REINSTATED.
6

20. Jose S. Santos v. NLRC et al. case brief summary 21. [G.R. No. 125031. January 24, 2000]
G.R. No. 115795, March 6, 1998
PERMEX INC. and/or JANE (JEAN) PUNZALAN, PERSONNEL MANAGER and EDGAR LIM,
FACTS: Petitioner is a married man and is employed as a teacher by private respondent Hagonoy Institute Inc. from June 1980 until
MANAGER, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION and EMMANUEL FILOTEO, respondents. ALEX
his dismissal on June 1, 1991. Petitioner and Mrs. Arlene T. Martin, also a teacher employed at Hagonoy Institute, fell in love and had
an affair. Private respondent, upon hearing of circulating rumors among faculty and school officials, of the illicit relationship of
petitioner and Mrs. Martin, advised the latter to take a leave of absence, Mrs. Martin ignored such notice and was henceforth DECISION
prevented from entering the campus of private respondent, effectively dismissing her from work. Private respondent set-up a
committee to investigate the veracity of the rumors, after two weeks of investigation, the illicit relationship of petitioner and Mrs.
QUISUMBING, J.:
Martin was confirmed. Petitioner was charged administratively for immorality and asked to present his side, on May 1991, petitioner
was dismissed effective June 1, 1991. Petitioner filed a complaint for illegal dismissal with the NLRC Regional Arbitration Branch No. This special civil action for certiorari impugns the Resolution of the National Labor Relations Commission, Fifth Division, dated March
III, San Fernando, Pampanga and petitioners complaint was dismissed but awarded financial assistance of PHP 13,750. On appeal, 14, 1996, which reversed the decision of the Labor Arbiter in NLRC Case No. RAB-09-09-00259-94, as well as its Resolution, dated
April 17, 1996, denying the motion for reconsideration.
the NLRC affirmed the decision of the labor arbiter.
Petitioner, Permex Producer and Exporter Corporation (hereinafter Permex), is a company engaged in the business of canning tuna
ISSUE: Can the illicit relationship between the petitioner and Mrs. Martin be considered immoral as to constitute a cause for and sardines, both for export and domestic consumption. Its office and factory are both located in Zamboanga City. Ncm
Co-petitioners Edgar Lim and Jean Punzalan[1] are its Manager and Personnel Manager, respectively.
termination under Art. 282 of the Labor Code?
Private respondent Emmanuel Filoteo, an employee of Permex, was terminated by petitioners allegedly for flagrantly and deliberately
RULING: Court reiterates that to constitute a valid dismissal, two requisites must concur: (a) it must be for any offense expressed in violating company rules and regulations. More specifically, he was dismissed allegedly for falsifying his daily time record.
The pertinent facts, as found by both the NLRC and the Labor Arbiter, are as follows:
Art. 282 of the Labor Code, (b) employee must be accorded due process, that is, the opportunity to be heard and to defend oneself.
Art. 282 of the Labor Code lists the following just causes to terminate an employee: (1) serious misconduct or willful disobedience by Permex initially hired Emmanuel Filoteo on October 1, 1990, as a mechanic. Eventually, Filoteo was promoted to water treatment
employee of lawful orders of the employer or his representative in connection with his work, (2) gross and habitual neglect by operator, a position he held until his termination on August 29, 1994. As water treatment operator, Filoteo did not have a fixed
working schedule. His hours of work were dependent upon the company's shifting production schedules. Ncmmis
employee of his duties; (3) fraud or willful breach, (4) commission of crime or offense of the person of his employer or his family or his
authorized representative, (5) other courses analogous to the foregoing.
In addition, Section 94, Manual of Regulations for Private Schools, paragraph E, lists disgraceful or immoral conduct as ground for On July 31, 1994, Filoteo was scheduled for the night shift from 7:00 p.m. to 7:00 a.m. the following day. That night he reported for
termination. Furthermore, the Court ruled that Art. 68 of the Family Code enjoins the husband and wife to live together, observe work together with his co-workers, Felix Pelayo and Manuel Manzan. They logged in at the main gate and guardhouse of the
mutual love, respect and fidelity, and render mutual help and support. As a teacher, one stands in loco parentis to his students and petitioner's factory. Filoteo entered his time-in at 8:45 p.m. and since he was scheduled to work until 7:00 a.m. the next day, he wrote
must therefore act with a high standard of integrity and honesty. It is settled therefore that a teacher who engages in extra marital 7:00 a.m. in his scheduled time-out. This practice of indicating the time out at the moment they time in, was customarily done by most
affairs, when both are married, amounts to gross immorality justifying termination from employment. workers for convenience and practicality since at the end of their work shift, they were often tired and in a hurry to catch the available
Petition is dismissed, NLRC decision is affirmed with modification, deleting financial assistance. service vehicle for their trip home, so they often forgot to log out. There were times also when the Log Book was brought to the Office
of the Personnel Manager and they could not enter their time out. The company had tolerated the practice.

On the evening of July 31,1994, at around 9:20 p.m., Filoteo, together with Pelayo, went to see the Assistant Production Manager to
inquire if "butchering" of fish would be done that evening so they could start operating the boiler. They were advised to wait from 9:30
p.m. to 10:00 p.m. for confirmation. Scncm

At or about 10:00 p.m., Filoteo and Pelayo went back to the Assistant Production Manager's office. There they were informed that
there would be no "butchering" of tuna that night. Filoteo then sought permission to go home, which was granted. Filoteo then
hurriedly got his things and dashed off to the exit gate to catch the service jeep provided by Permex.

The next day, August 1, 1994, Filoteo reported for work as usual. He then remembered that he had to make a re-entry in his daily
time record for the previous day. He proceeded to the Office of the Personnel Manager to retime his DTR entry. Later, he received a
memorandum from the Assistant Personnel Officer asking him to explain, in writing, the entry he made in his DTR. Filoteo complied
and submitted his written explanation that same evening. Sdaamiso

On August 8, 1994, Filoteo was suspended indefinitely. His explanation was found unsatisfactory. He was dismissed from
employment on August 23, 1994.

The dismissal arose from Filoteo's alleged violation of Article 2 of the company rules and regulations. The offense charged was
entering in his DTR that he had worked from 8:45 p.m. of July 31, 1994 to 7:00 a.m. of August 1,1994, when in fact he had worked
only up to 10:00 p.m.

On September 5, 1994, Filoteo filed a complaint for illegal dismissal with claims for separation pay, damages, and attorney's fees with
the Labor Arbiter. His complaint was docketed as NLRC Case No. RAB 09-09-00259-94. Sdaad
7

On June 9, 1995, the Labor Arbiter dismissed the complaint for lack of merit. The decretal portion of the decision reads: "Art. 277. Miscellaneous provisions. -

"WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered dismissing the complaint xxx
for lack of merit. However, for violation of compliance of (sic) procedural due process, the respondent is hereby
ordered thru its Authorized Officer to pay complainant P1,000.00 by way of indemnity pay. Furthermore,
(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against
complainant's claims for damages and attorney's fees be dismissed for lack of merit.
dismissal except for a just and authorized cause...The burden of proving that the termination was for a valid or
authorized cause shall rest on the employer..."
"SO ORDERED."[2]
Second, the private respondent was not afforded an opportunity to be heard. As found by the NLRC: Calrsc
Filoteo appealed to the NLRC. Finding merit therein, the Commission's Fifth Division promulgated its resolution, reversing and setting
aside the Labor Arbiter's decision, by disposing as follows: Scsdaad
"... Aside from the fact that there was no valid and justifiable cause for his outright dismissal from the service,
complainant's dismissal as correctly held by the Labor Arbiter was tainted with arbitrariness for failure of
"WHEREFORE, the decision appealed from, is Vacated and Set Aside and a new one entered declaring the respondent company (petitioner herein) to observe procedural due process in effecting his dismissal. Admittedly,
complainant to have been illegally dismissed by respondent company. Accordingly, respondent Permex, Inc., complainant was suspended indefinitely on August 8, 1994 and subsequently dismissed on August 23, 1994
through its corporate officers, is hereby ordered and directed to pay complainant, Emmanuel Filoteo, separation without any formal investigation to enable complainant to defend himself."[11]
pay at the rate of one (1) month salary for every year of service or in the equivalent of four (4) months separation
pay and backwages effective August 23, 1994 up to the promulgation of this decision, inclusive of fringe benefits,
Such dismissal, in our view, was too harsh a penalty for an unintentional infraction, not to mention that it was his first offense
if any. Further, respondent company is ordered to pay complainant moral and exemplary damages in the sum of
committed without malice, and committed also by others who were not equally penalized. [12] Sppedsc
P10,000.00 and P5,000.00, respectively, as well as attorney's fees equivalent to ten (10%) percent of the total
monetary award after computation thereof at the execution stage.
"SO ORDERED."[3] It is clear that the alleged false entry in private respondent's DTR was actually the result of having logged his scheduled time-out in
advance on July 31, 1994. But it appears that when he timed in, he had no idea that his work schedule (night shift) would be
On April 3, 1996, petitioners filed a motion for reconsideration. It was denied for lack of merit by the NLRC in a resolution dated April cancelled. When it was confirmed at 10:00 p.m. that there was no "butchering" of tuna to be done, those who reported for work were
17, 1996. allowed to go home, including private respondent. In fact, Filoteo even obtained permission to leave from the Assistant Production
Hence, the present petition, assigning the following errors: Suprema Manager.
I
PUBLIC RESPONDENT'S RESOLUTIONS ARE CONTRARY TO THE EVIDENCE ON RECORD AND
Considering the factory practice which management tolerated, we are persuaded that Filoteo, in his rush to catch the service vehicle,
ADMITTED FACTS.
II merely forgot to correct his initial time-out entry. Nothing is shown to prove he deliberately falsified his daily time record to deceive the
PUBLIC RESPONDENT ERRED WHEN IT RULED THAT PRIVATE RESPONDENT WAS ILLEGALLY company. The NLRC found that even management's own evidence reflected that a certain Felix Pelayo, a co-worker of private
respondent, was also allowed to go home that night and like private respondent logged in advance 7:00 a.m. as his time-out. This
DISMISSED. Oldmiso
III supports Filoteo's claim that it was common practice among night-shift workers to log in their usual time-out in advance in the daily
PUBLIC RESPONDENT ERRED WHEN IT AWARDED PRIVATE RESPONDENT SEPARATION PAY, time record. Sdjad
BACKWAGES, DAMAGES AND ATTORNEY'S FEES SANS FACTUAL AND LEGAL BASIS.
We will now consider these assigned errors to resolve the principal issue of whether or not private respondent was illegally Moreover, as early as Tide Water Associated Oil Co. v. Victory Employees and Laborers Association, 85 Phil. 166 (1949), we ruled
terminated from his employment. that, where a violation of company policy or breach of company rules and regulations was found to have been tolerated by
Note that, firstly, petitioners seek a reversal of the public respondent's findings of the facts. But as the Court has repeatedly ruled the management, then the same could not serve as a basis for termination.
findings of facts of the NLRC, particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and
conclusive upon the Court.[4] For the Court is not a trier of facts.[5] Second, resort to judicial review of the decisions of the NLRC in a
special civil action for certiorari under Rule 65 of the Rules of Court, is limited only to the question generally of grave abuse of All told we see no reason to find that the NLRC gravely abused its discretion when it ruled that private respondent was illegally
discretion amounting to lack or excess of jurisdiction.[6] Thirdly, in this case, the NLRC's factual findings are supported by the dismissed. Hence we concur in that ruling. Nonetheless, we find that the award of moral and exemplary damages by the public
evidence on record. We are therefore constrained not to disturb said findings of fact. respondent is not in order and must be deleted. Moral damages are recoverable only where the dismissal of the employee was
tainted by bad faith or fraud, or where it constituted an act oppressive to labor, and done in a manner contrary to morals, good
customs, or public policy.[13] Exemplary damages may be awarded only if the dismissal was done in a wanton, oppressive, or
Whether private respondent was illegally dismissed or not is governed by Article 282 of the Labor Code.[7] To constitute a valid malevolent manner.[14] None of these circumstances exist in the present case. Misact
dismissal from employment, two requisites must concur: (a) the dismissal must be for any of the causes provided for in Article 282 of
the Labor Code; and (b) the employee must be afforded an opportunity to be heard and defend himself. [8] This means that an
employer can terminate the services of an employee for just and valid causes, which must be supported by clear and convincing WHEREFORE, the petition is DENIED. The assailed resolutions of the National Labor Relations Commission dated March 14, 1996
evidence.[9] It also means that, procedurally, the employee must be given notice, with adequate opportunity to be heard, [10] before he and April 17, 1996 in NLRC CA No. M-002808-95 are AFFIRMEDwith MODIFICATION. Petitioner Permex, through its corporate
is notified of his actual dismissal for cause. officers, is ORDERED to pay jointly and solidarily the private respondent separation pay at the rate of one (1) month salary for every
year of service as well as backwages effective August 23, 1994, inclusive of fringe benefits if any, with legal interest until fully paid,
and attorney's fees equivalent to ten (10%) percent of the total monetary award computed at the execution stage hereof. The award
In the present case, the NLRC found that the two-fold requirements for a valid dismissal were not satisfied by the petitioners. Sccalr of moral and exemplary damages, however, is DELETED. Costs against petitioners.

First, petitioner's charge of serious misconduct of falsification or deliberate misrepresentation was not supported by the evidence on SO ORDERED. A
the record contrary to Art. 277 of the Labor Code which provides that:
8

22. R.B. MICHAEL PRESS and G.R. No. 153510 (4) Insubordination - willfully disobeying, defying or
ANNALENE REYES ESCOBIA, disregarding company authority
Petitioners,
Present: The offenses youve committed are just causes for termination of employment as provided by the Labor
Code. You were given verbal warnings before, but there had been no improvement on your conduct.
QUISUMBING, J., Chairperson, Further investigation of this matter is required, therefore, you are summoned to a hearing at 4:00 p.m. today. The
- versus - CARPIO, hearing wills determine your employment status with this company.
CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ. (SGD) ANNALENE REYES-ESCOBIA
Manager[1]
NICASIO C. GALIT, Promulgated:
Respondent.
February 13, 2008 On February 24, 1999, respondent was terminated from employment. The employer, through petitioner Escobia, gave him his two-
x-----------------------------------------------------------------------------------------x day salary and a termination letter, which reads:

DECISION February 24, 1999

VELASCO, JR., J.: Dear Mr. Nicasio Galit,

The Case I am sorry to inform you that your employment with this company has been terminated effective today, February
24, 1999. This decision was not made without a thorough and complete investigation.
Year in, year out, a copious number of illegal dismissal cases reach the Court of Appeals (CA) and eventually end up with
this Court. This petition for review under Rule 45 registered by petitioners R.B. Michael Press and Annalene Reyes Escobia against You were given an office memo dated February 23, 1999 warning you of a possible dismissal. You were given a
their former machine operator, respondent Nicasio C. Galit, is among them. It assails the November 14, 2001 Decision of the CA in chance to defend yourself on a hearing that was held in the afternoon of the said date.
CA-G.R. SP No. 62959, finding the dismissal of respondent illegal. Likewise challenged is the May 7, 2002 Resolution denying
reconsideration. During the hearing, Mrs. Rebecca Velasquez and Mr. Dennis Reyes, were present in their capacity as
Production Manager and Supervisor, respectively.

The Facts Your admission to your offenses against the company and the testimonies from Mrs. Velasquez and Mr. Reyes
justified your dismissal from this company,
On May 1, 1997, respondent was employed by petitioner R.B. Michael Press as an offset machine operator, whose work schedule
was from 8:00 a.m. to 5:00 p.m., Mondays to Saturdays, and he was paid PhP 230 a day. During his employment, Galit was tardy for Please contact Ms. Marly Buita to discuss 13th-Month Pay disbursements.
a total of 190 times, totaling to 6,117 minutes, and was absent without leave for a total of nine and a half days.
Cordially,
On February 22, 1999, respondent was ordered to render overtime service in order to comply with a job order deadline, but he
refused to do so. The following day, February 23, 1999, respondent reported for work but petitioner Escobia told him not to work, and (SGD) Mrs. Annalene Reyes-Escobia[2]
to return later in the afternoon for a hearing. When he returned, a copy of an Office Memorandum was served on him, as follows:

Respondent subsequently filed a complaint for illegal dismissal and money claims before the National Labor Relations
To : Mr. Nicasio Galit Commission (NLRC) Regional Arbitration Branch No. IV, which was docketed as NLRC Case No. RAB IV-2-10806-99-C. On October
29, 1999, the labor arbiter rendered a Decision,
From : ANNALENE REYES-ESCOBIA

Re : WARNING FOR DISMISSAL; NOTICE OF WHEREFORE, premises considered, there being a finding that complainant was illegally dismissed, respondent
HEARING RB MICHAEL PRESS/Annalene Reyes-Escobia is hereby ordered to reinstate complainant to his former position
without loss of seniority rights and other benefits, and be paid his full backwages computed from the time he was
This warning for dismissal is being issued for the following offenses: illegally dismissed up to the time of his actual reimbursement.

(1) habitual and excessive tardiness All other claims are DISMISSED for lack of evidence.

(2) committing acts of discourtesy, disrespect in addressing SO ORDERED.[3]


superiors

(3) failure to work overtime after having been instructed to On January 3, 2000, petitioners elevated the case to the NLRC and their appeal was docketed as NLRC NCR CA No.
do so 022433-00. In the April 28, 2000 Decision, the NLRC dismissed the appeal for lack of merit.
9

Not satisfied with the ruling of the NLRC, petitioners filed a Petition for Certiorari with the CA. On November 14, 2001, the pertains to him.[10] Hence, the management prerogative to discipline employees and impose punishment is a legal right which cannot,
CA rendered its judgment affirming with modification the NLRCs Decision, thus: as a general rule, be impliedly waived.

In Cando v. NLRC,[11] the employee did not report for work for almost five months when he was charged for
WHEREFORE, the petition is DISMISSED for lack of merit. The Decision of public respondent is absenteeism. The employee claimed that such absences due to his handling of union matters were condoned. The Court held that
accordingly modified in that the basis of the computation of the backwages, 13 thmonth pay and incentive pay the employee did not adduce proof to show condonation coupled with the fact that the company eventually instituted the
should be respondents daily wage of P230.00; however, backwages should be computed from February 22, administrative complaint relating to his company violations.
1999 up to the finality of this decision, plus the 13thmonth and service incentive leave pay.[4]
Thus it is incumbent upon the employee to adduce substantial evidence to demonstrate condonation or waiver on the part
of management to forego the exercise of its right to impose sanctions for breach of company rules.

The CA found that it was not the tardiness and absences committed by respondent, but his refusal to render overtime work In the case at bar, respondent did not adduce any evidence to show waiver or condonation on the part of petitioners. Thus
on February 22, 1999 which caused the termination of his employment. It ruled that the time frame in which respondent was afforded the finding of the CA that petitioners cannot use the previous absences and tardiness because respondent was not subjected to any
procedural due process is dubitable; he could not have been afforded ample opportunity to explain his side and to adduce evidence penalty is bereft of legal basis. In the case of Filipio v. The Honorable Minister Blas F. Ople,[12]the Court, quoting then Labor Minister
on his behalf. It further ruled that the basis for computing his backwages should be his daily salary at the time of his dismissal which Ople, ruled that past infractions for which the employee has suffered the corresponding penalty for each violation cannot be used as
was PhP 230, and that his backwages should be computed from the time of his dismissal up to the finality of the CAs decision. a justification for the employees dismissal for that would penalize him twice for the same offense. At most, it was explained, these
collective infractions could be used as supporting justification to a subsequent similar offense. In contrast, the petitioners in the case
On December 3, 2001, petitioners asked for reconsideration[5] but was denied in the CAs May 7, 2002 Resolution. at bar did not impose any punishment for the numerous absences and tardiness of respondent. Thus, said infractions can be used
collectively by petitioners as a ground for dismissal.
Persistent, petitioners instituted the instant petition raising numerous issues which can be summarized, as follows: first, whether there
was just cause to terminate the employment of respondent, and whether due process was observed in the dismissal process; and The CA however reasoned out that for respondents absences, deductions from his salary were made and hence to allow
second, whether respondent is entitled to backwages and other benefits despite his refusal to be reinstated. petitioners to use said absences as ground for dismissal would amount to double jeopardy.

The Courts Ruling This postulation is incorrect.

It is well settled that findings of fact of quasi-judicial agencies, like the NLRC, are accorded not only respect but even finality if the Respondent is admittedly a daily wage earner and hence is paid based on such arrangement. For said daily paid workers,
findings are supported by substantial evidence. This is especially so when such findings of the labor arbiter were affirmed by the the principle of a days pay for a days work is squarely applicable. Hence it cannot be construed in any wise that such nonpayment of
CA.[6] However, this is not an iron-clad rule. Though the findings of fact by the labor arbiter may have been affirmed and adopted by the daily wage on the days he was absent constitutes a penalty.
the NLRC and the CA as in this case, it cannot divest the Court of its authority to review the findings of fact of the lower courts or
quasi-judicial agencies when it sees that justice has not been served, more so when the lower courts or quasi-judicial agencies Insubordination or willful disobedience
findings are contrary to the evidence on record or fail to appreciate relevant and substantial evidence presented before it. [7]
While the CA is correct that the charge of serious misconduct was not substantiated, the charge of insubordination however is
Petitioners aver that Galit was dismissed due to the following offenses: (1) habitual and excessive tardiness; (2) commission of meritorious.
discourteous acts and disrespectful conduct when addressing superiors; (3) failure to render overtime work despite instruction to do For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the employees assailed conduct must
so; and (4) insubordination, that is, willful disobedience of, defiance to, or disregard of company authority. [8] The foregoing charges have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable,
may be condensed into: (1) tardiness constituting neglect of duty; (2) serious misconduct; and (3) insubordination or willful lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. [13]
disobedience.
In the present case, there is no question that petitioners order for respondent to render overtime service to meet a
Respondents tardiness cannot be considered condoned by petitioners production deadline complies with the second requisite.Art. 89 of the Labor Code empowers the employer to legally compel his
employees to perform overtime work against their will to prevent serious loss or damage:
Habitual tardiness is a form of neglect of duty. Lack of initiative, diligence, and discipline to come to work on time everyday exhibit the
employees deportment towards work. Habitual and excessive tardiness is inimical to the general productivity and business of the Art. 89. EMERGENCY OVERTIME WORK
employer. This is especially true when the tardiness and/or absenteeism occurred frequently and repeatedly within an extensive
period of time. Any employee may be required by the employer to perform overtime work in any of the following cases:

In resolving the issue on tardiness, the labor arbiter ruled that petitioners cannot use respondents habitual tardiness and xxxx
unauthorized absences to justify his dismissal since they had already deducted the corresponding amounts from his
salary. Furthermore, the labor arbiter explained that since respondent was not subjected to any admonition or penalty for tardiness, (c) When there is urgent work to be performed on machines, installations, or equipment, in order to
petitioners then had condoned the offense or that the infraction is not serious enough to merit any penalty. The CA then supported avoid serious loss or damage to the employer or some other cause of similar nature;
the labor arbiters ruling by ratiocinating that petitioners cannot draw on respondents habitual tardiness in order to dismiss him since
there is no evidence which shows that he had been warned or reprimanded for his excessive and habitual tardiness. xxxx

We find the ruling incorrect.


In the present case, petitioners business is a printing press whose production schedule is sometimes flexible and varying. It
The mere fact that the numerous infractions of respondent have not been immediately subjected to sanctions cannot be is only reasonable that workers are sometimes asked to render overtime work in order to meet production deadlines.
interpreted as condonation of the offenses or waiver of the company to enforce company rules. A waiver is a voluntary and intentional
relinquishment or abandonment of a known legal right or privilege. [9] It has been ruled that a waiver to be valid and effective must be Dennis Reyes, in his Affidavit dated May 3, 1999, stated that in the morning of February 22, 1999, he approached and asked
couched in clear and unequivocal terms which leave no doubt as to the intention of a party to give up a right or benefit which legally respondent to render overtime work so as to meet a production deadline on a printing job order, but respondent refused to do so for
10

no apparent reason. Respondent, on the other hand, claims that the reason why he refused to render overtime work was because he (2) After serving the first notice, the employers should schedule and conduct
was not feeling well that day. a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their
The issue now is, whether respondents refusal or failure to render overtime work was willful; that is, whether such refusal defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the
or failure was characterized by a wrongful and perverse attitude. In Lakpue Drug Inc. v. Belga, willfulness was described evidence presented against them by the management. During the hearing or conference, the employees are
as characterized by a wrongful and perverse mental attitude rendering the employees act inconsistent with proper given the chance to defend themselves personally, with the assistance of a representative or counsel of their
subordination.[14] The fact that respondent refused to provide overtime work despite his knowledge that there is a production deadline choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an
that needs to be met, and that without him, the offset machine operator, no further printing can be had, shows his wrongful and amicable settlement.
perverse mental attitude; thus, there is willfulness.
(3) After determining that termination of employment is justified, the employers shall serve the
Respondents excuse that he was not feeling well that day is unbelievable and obviously an afterthought. He failed to employees a written notice of termination indicating that: (1) all circumstances involving the charge against the
present any evidence other than his own assertion that he was sick. Also, if it was true that he was then not feeling well, he would employees have been considered; and (2) grounds have been established to justify the severance of their
have taken the day off, or had gone home earlier, on the contrary, he stayed and continued to work all day, and even tried to go to employment.
work the next day, thus belying his excuse, which is, at most, a self-serving statement.

After a re-examination of the facts, we rule that respondent unjustifiably refused to render overtime work despite a valid order to do In addition, if the continued employment poses a serious and imminent threat to the life or property of the employers or of other
so. The totality of his offenses against petitioner R.B. Michael Press shows that he was a difficult employee. His refusal to render employees like theft or physical injuries, and there is a need for preventive suspension,[17] the employers can immediately suspend
overtime work was the final straw that broke the camels back, and, with his gross and habitual tardiness and absences, would merit the erring employees for a period of not more than 30 days. Notwithstanding the suspension, the employers are tasked to comply
dismissal from service. with the twin notice requirement under the law. The preventive suspension cannot replace the required notices.[18] Thus, there is still a
need to comply with the twin notice requirement and the requisite hearing or conference to ensure that the employees are afforded
Due process: twin notice and hearing requirement due process even though they may have been caught in flagrante or when the evidence of the commission of the offense is strong.
On the surface, it would seem that petitioners observed due process (twin notice and hearing requirement): On February 23, 1999
On the issue of due process, petitioners claim that they had afforded respondent due process. Petitioners maintain that petitioner notified respondent of the hearing to be conducted later that day. On the same day before the hearing, respondent was
they had observed due process when they gave respondent two notices and that they had even scheduled a hearing where he could furnished a copy of an office memorandum which contained a list of his offenses, and a notice of a scheduled hearing in the
have had explained his side and defended himself. afternoon of the same day. The next day, February 24, 1999, he was notified that his employment with petitioner R.B. Michael Press
had been terminated.
We are not persuaded.
A scrutiny of the disciplinary process undertaken by petitioners leads us to conclude that they only paid lip service to the due process
We held in Agabon v. NLRC: requirements.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give The undue haste in effecting respondents termination shows that the termination process was a mere simulationthe required notices
the employee two written notices and a hearing or opportunity to be heard if requested by the employee before were given, a hearing was even scheduled and held, but respondent was not really given a real opportunity to defend himself; and it
terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an seems that petitioners had already decided to dismiss respondent from service, even before the first notice had been given.
opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if
the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee Anent the written notice of charges and hearing, it is plain to see that there was merely a general description of the claimed offenses
and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. [15] of respondent. The hearing was immediately set in the afternoon of February 23, 1999the day respondent received the first
notice. Therefore, he was not given any opportunity at all to consult a union official or lawyer, and, worse, to prepare for his defense.

Under the twin notice requirement, the employees must be given two (2) notices before his employment could be terminated: (1) a Regarding the February 23, 1999 afternoon hearing, it can be inferred that respondent, without any lawyer or friend to counsel him,
first notice to apprise the employees of their fault, and (2) a second notice to communicate to the employees that their employment is was not given any chance at all to adduce evidence in his defense. At most, he was asked if he did not agree to render overtime work
being terminated. Not to be taken lightly of course is the hearing or opportunity for the employee to defend himself personally or by on February 22, 1999 and if he was late for work for 197 days. He was never given any real opportunity to justify his inability to
counsel of his choice. perform work on those days. This is the only explanation why petitioners assert that respondent admitted all the charges.

In King of Kings Transport v. Mamac,[16] we had the occasion to further elucidate on the procedure relating to the twin notice and In the February 24, 1999 notice of dismissal, petitioners simply justified respondents dismissal by citing his admission of the offenses
hearing requirement, thus: charged. It did not specify the details surrounding the offenses and the specific company rule or Labor Code provision upon which the
dismissal was grounded.

(1) The first written notice to be served on the employees should contain the specific causes or In view of the infirmities in the proceedings, we conclude that termination of respondent was railroaded in serious breach of his right
grounds for termination against them, and a directive that the employees are given the opportunity to submit their to due process. And as a consequence of the violation of his statutory right to due process and following Agabon, petitioners are
written explanation within a reasonable period. Reasonable opportunity under the Omnibus Rules means every liable jointly and solidarily to pay nominal damages to the respondent in the amount of PhP 30,000.[19]
kind of assistance that management must accord to the employees to enable them to prepare adequately for
their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to WHEREFORE, premises considered, the November 14, 2001 CA Decision in CA-G.R. SP No. 62959, the April 28, 2000
give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather Decision of the NLRC in NLRC NCR CA No.022433-00, and the October 29, 1999 Decision of the Labor Arbiter in NLRC Case No.
data and evidence, and decide on the defenses they will raise against the complaint. Moreover, in order to RAB IV-2-10806-99-C are hereby REVERSED and SET ASIDE. The Court declares respondents dismissal from
enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed employment VALID and LEGAL. Petitioners are, however, ordered jointly and solidarily to pay respondent nominal damages in the
narration of the facts and circumstances that will serve as basis for the charge against the employees. A general amount of PhP 30,000 for violation of respondents right to due process.
description of the charge will not suffice. Lastly, the notice should specifically mention which company rules, if
any, are violated and/or which among the grounds under Art. 282 is being charged against the employees. No costs.
11

23.GATBONTON vs NLRC Case Digest The Mapua Rules is one of those issuances that should be published for its effectivity, since its purpose is to enforce and implement
[G.R. NO. 146779 January 23, 2006] R.A. No. 7877, which is a law of general application.[14] In fact, the Mapua Rules itself explicitly required publication of the rules for
its effectivity, as provided in Section 3, Rule IV (Administrative Provisions), which states that [T]hese Rules and Regulations to
RENATO S. GATBONTON, Petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, MAPUA INSTITUTE OF implement the Anti-Sexual Harassment Act of 1995 shall take effect fifteen (15) days after publication by the Committee. Thus, at the
TECHNOLOGY and JOSE CALDERON, Respondents. time of the imposition of petitioners preventive suspension on January 11, 1999, the Mapua Rules were not yet legally effective, and
therefore the suspension had no legal basis.
FACTS: Petitioner Renato S. Gatbonton is an associate professor of respondent Mapua Institute of Technology (MIT), Faculty of Civil
Engineering. Some time in November 1998, a civil engineering student of respondent MIT filed a letter-complaint against petitioner Moreover, even assuming that the Mapua Rules are applicable, the Court finds that there is no sufficient basis to justify his preventive
for unfair/unjust grading system, sexual harassment and conduct unbecoming of an academician. Pending investigation of the suspension. Under the Mapua Rules, an accused may be placed under preventive suspension during pendency of the hearing under
complaint, respondent MIT, through its Committee on Decorum and Investigation placed petitioner under a 30-day preventive any of the following circumstances:
suspension effective January 11, 1999. The committee believed that petitioners continued stay during the investigation affects his
performance as a faculty member, as well as the students learning; and that the suspension will allow petitioner to prepare himself (a) if the evidence of his guilt is strong and the school head is morally convinced that the continued stay of the accused during the
for the investigation and will prevent his influences to other members of the community. Thus, petitioner filed with the NLRC a period of investigation constitutes a distraction to the normal operations of the institution; or
complaint for illegal suspension, damages and attorneys fees.
(b) the accused poses a risk or danger to the life or property of the other members of the educational community.
Petitioner questioned the validity of the administrative proceedings with the Regional Trial Court of Manila in a petition for certiorari
but the case was terminated on May 21, 1999 when the parties entered into a compromise agreement wherein respondent MIT In petitioners case, there is no indication that petitioners preventive suspension may be based on the foregoing circumstances.
agreed to publish in the school organ the rules and regulations implementing R.A. No. 7877 or the Anti-Sexual Harassment Act; Committee Resolution No. 1 passed by the Committee on Decorum and Investigation states the reasons for petitioners preventive
disregard the previous administrative proceedings and conduct anew an investigation on the charges against petitioner. Petitioner suspension.
agreed to recognize the validity of the published rules and regulations, as well as the authority of respondent to investigate, hear and
decide the administrative case against him. Said resolution does not show that evidence of petitioners guilt is strong and that the school head is morally convinced that
petitioners continued stay during the period of investigation constitutes a distraction to the normal operations of the institution; or that
ISSUE: Whether or not the preventive suspension of petitioner was valid. petitioner poses a risk or danger to the life or property of the other members of the educational community.

HELD: The SC held that preventive suspension is a disciplinary measure for the protection of the companys property pending Even under the Labor Code, petitioners preventive suspension finds no valid justification. As provided in Section 8, Rule XXIII, Book
investigation of any alleged malfeasance or misfeasance committed by the employee. The employer may place the worker concerned V of the Omnibus Rules Implementing the Labor Code:
under preventive suspension if his continued employment poses a serious and imminent threat to the life or property of the employer
or of his co-workers. However, when it is determined that there is no sufficient basis to justify an employees preventive suspension, Sec. 8. Preventive Suspension. The employer may place the worker concerned under preventive suspension if his continued
the latter is entitled to the payment of salaries during the time of preventive suspension. employment poses a serious threat to the life or property of the employer or of his co-workers.

R.A. No. 7877 imposed the duty on educational or training institutions to promulgate rules and regulations in consultation with and As previously stated, there is nothing on record which shows that respondent MIT imposed the preventive suspension on petitioner
jointly approved by the employees or students or trainees, through their duly designated representatives, prescribing the procedures as his continued employment poses a serious threat to the life or property of the employer or of his co-workers; therefore, his
for the investigation of sexual harassment cases and the administrative sanctions therefor. Petitioners preventive suspension was preventive suspension is not justified. Consequently, the payment of wages during his 30-day preventive suspension, i.e., from
based on respondent MITs Rules and Regulations for the Implementation of the Anti-Sexual Harassment Act of 1995, or R.A. No. January 11, 1999 to February 10, 1999, is in order.
7877. Rule II, Section 1 of the MIT Rules and Regulations provides:
Petition is partially granted.
Section 1. Preventive Suspension of Accused in Sexual Harassment Cases. Any member of the educational community may be
placed immediately under preventive suspension during the pendency of the hearing of the charges of grave sexual harassment
against him if the evidence of his guilt is strong and the school head is morally convinced that the continued stay of the accused
during the period of investigation constitutes a distraction to the normal operations of the institution or poses a risk or danger to the
life or property of the other members of the educational community.

However, the same is still not effective since it was still to be published as ruled in Taada vs. Tuvera:

all statutes, including those of local application and private laws, shall be published as a condition for their effectivity, which shall
begin fifteen days after publication unless a different effectivity is fixed by the legislature.

Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of legislative powers
whenever the same are validly delegated by the legislature or, at present, directly conferred by the Constitution. Administrative rules
and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.

Interpretative regulations and those merely internal in nature, that is, regulating only the personnel of the administrative agency and
not the public, need not be published. Neither is publication required of the so-called letters of instructions issued by administrative
superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties.

The SC agreed that the publication must be in full or it is no publication at all since its purpose is to inform the public of the contents
of the laws.
12

ARTICLES 283 TO 302

1. Agabon vs. NLRC / Riviera Home - GR No. 158693 Case Digest 2. JAKA Food Processing vs. Pacot - GR No. 151378 Case Digest
FACTS: FACTS:

Petitioners were employed by Riviera Home as gypsum board and cornice installers from January 1992 to February 23, 1999 when Respondents were hired by JAKA until their termination on August 29, 1997 because the Corporation was in dire financial straits. It
they were dismissed for abandonment of work. Petitioners filed a complaint for illegal dismissal and was decided in their favor by the was not disputed that they were terminated without complying with the requirement under Art. 283 of the Labor Code regarding the
Labor Arbiter. Riviera appealed to the NLRC contending just cause for the dismissal because of petitioners abandonment of work. service of notice upon the employees and DOLE at least one month before the intended date of termination.
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:

ISSUE: Whether or not full backwages and separation pay be awarded to respondents when employers effected termination without
complying with the twin notice rule.
Whether or not petitioners were illegally dismissed.
RULING:
RULING:
The dismissal of the respondents was for an authorized cause under Article 283. A dismissal for authorized cause does not
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 necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employers
employee the right to be heard and to defend himself. Abandonment is the deliberate and unjustified refusal of an employee to exercise of his management prerogative, i.e. when the employer opts to install labor-saving devices, when he decides to cease
resume his employment. For a valid finding or abandonment, two factors are considered: failure to report for work without a valid business operations or when he undertakes to implement a retrenchment program.
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. Accordingly, it is wise to hold that:

Where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be 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
upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil Doctrine of the upon him should be tempered because the dismissal was initiate by an act imputable to the employee.
Belated Due process Rule.
2) if the dismissal is based on an authorized cause but the employer fails to comply with the notice requirement, the sanction should
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 be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. Thus, dismissal
cause, the lack of statutory due process should not nullify the dismissal but the employer should indemnify the employee for the was upheld but ordered JAKA to pay each of the respondents the amount of PhP 50,000.00 representing nominal damages for non-
violation of his statutory rights. The indemnity should be stiffer to discourage the abhorrent practice of dismiss now, pay later which compliance with statutory due process.
we sought to deter in Serrano ruling. The violation of employees rights warrants the payment of nominal damages.
13

3. Hotel Enterprises of the Philippines, Inc. v. Samahan ng mga Manggagawa sa Hyatt-NationalUnion of Workers in the 4. [G.R. No. 97846. September 25, 1998]BOGO-MEDELLIN SUGARCANE PLANTERS ASSOCIATION, INC and HORACIO
Hotel and Restaurant and Allied Industries FRANCO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, ASSOCIATED LABOR UNIONS, BONIFACIO
MONTILLA, JOSE YBAEZ JR., BERNARDO DELA RAMA,, ILDEFONSO CARREDO, ROSETO CANALES, FORTUNATO
G.R. No. 165756, June 5, 2009 MIGABON JR. and HERACLEO MEGABON, respondents.
Facts :
The respondent union is a certified collective bargaining agent of the rank-and-file employeesof the Hyatt Regency Manila (HRM),
DECISION
a hotel owned by petitioner (Company). In 2001, the companysuffered a slump due to the local and international economic slowdown
aggravated by the 9/11 incidentin the USA. The company decided to cost-cut by implementing among others reducing work PANGANIBAN, J.:
weeks insome hotel departments.In August 2001, the union filed a notice of strike due to a bargaining deadlock before the
NatlCo n c i l i a t i o n Me d i a t i o n Bo a rd (NC MB ). I n t h e c o u rs e of t he proc eedi ngs, t he uni on ac c ept ed To justify retrenchment, the employer must prove, among other things, serious business losses, and not just any kind or
t he e c o n o m i c p r o p o s a l . H e n c e , a n e w C B A w a s s i g n e d . S u b s e q u e n t l y , t h e c o m p a n y d e c i d e d amount of loss. Furthermore, if the requisites provided in Article 283 of the Labor Code are not fulfilled, a deed of quitclaim and
t o im p l em e nt a d o wn s i zi n g s c h em e wh i c h t h e u n i o n o p p os ed. Des pi t e t he oppos i ti on, a l is t of t he position release is unavailing to exculpate an employer from liability for illegal retrenchment.
declared redundant and to be contracted out was given to the union. A notice of terminationwas also committed by the company to
the DOLE. Thereafter, the company engaged the services of independent job contractors.T he uni on fi l ed a not i c e of s t ri k e. A
c onc i l i a t i o n p ro c e e d i n g wa s a g a i n c o n d u c t e d b u t t o n o a v a i l . T h e u n i o n w e n t
on strike. The Secretary certified the labor dispute to the The Case

N L R C f o r compulsory arbitration. The NLRC orders the suspension of the conciliation proceedings. However,t he LA al ready
i s s ue d d e ci s i o n d ec l a ri n g t he s t rik e l e g a l . O n a p p e a l b y t he c om pany, t he N LRCrev ers ed t he LA dec i s i on In this special civil action for certiorari filed before this Court, petitioners seek the reversal of the November 12, 1990
and d e c l a re d t h e s t rik e t o b e i l l e g a l . O n p e t it i o n , t h e CA revers ed t he decision of the NLRC and declared the strike Decision[1] and the March 4, 1991 Resolution of the National Labor Relations Commission in NLRC NCR Case No. RAB VII-0801-85,
legal. Hence, this petition. both of which affirmed the labor arbiters Decision finding them liable for illegal dismissal.
Issue:
Whether the CAs decision declaring the strike legal is accordance with law and establishedfacts. Acting on private respondents amended Complaint for illegal dismissal and unfair labor practice, Executive Labor Arbiter Irenea
Ruling: E. Ceniza rendered a Decision dated May 5, 1989, which disposed as follows: [2]
A va l i d a n d l e g a l st ri k e m ust b e b a s e d o n s t ri k e a b l e grounds , bec aus e if it is based on anon -s t ri k eabl e
grou n d , i t i s g e n e ra l l y d e e m e d a n i l l e g a l s t rik e . Co ro l l a ri l y, a st ri k e grounded onULP is i l l egal if no ac ts WHEREFORE, premises considered, judgment is hereby rendered declaring the [Petitioners] Bogo Medellin Sugar Cane Planters
c ons t it u t i n g UL P a c t u a l l y e xi s t . As a n e xc e p t i o n , e ve n i f no s uc h ac ts are committed by the employer, if the Association and Horacio Franco guilty of unfair labor practice for dismissing the [private respondents] for their union activities;
employees believe in good faith that ULP actually exists, then thestrike held pursuant to such belief may be legal. As a general rule, ordering the said [petitioners] to reinstate the [private respondents] to their former position with backwages and other benefits and
therefore, where a union believesth a t a n em p l o ye r c om m it t e d ULP and t he s urroundi ng c i rc um st anc es warrant ed without loss of seniority rights; ordering the [petitioners] jointly and severally to pay to the [private respondents] their service incentive
s uc h b e l i e f i n g o o d f a i t h , t h e re s u l t i n g s t ri k e m a y b e c o ns i dered l egal al t hough, s ubs equent l y, s uc h leave[s], backwages and 13th month from the date of their dismissal until the date of this decision in the following amounts less the
al l eg a t i o n s o f u n f a i r labor practices were found to be groundless.Here, the union went on strike in the honest belief that amount paid to some [private respondents] as separation/gratuity benefits[:]
petitioner was committing ULP after the latter decided to downsize its workforce contrary to the staffing/manning standards adopted
by both parties under a CBA. Indeed, those circumstances showed prima facie that the hotel committed ULP.Thus, even if technically
there was no legal ground to stage a strike based on ULP, since the attendantcircumstances support the belief in good faith that and to pay the [private respondents] counsel 10% of the foregoing amount or the sum of FORTY THREE THOUSAND SEVEN
petitioners retrenchment scheme was structured toweaken the bargaining power of the union, the strike, by exception, may be HUNDRED EIGHTY NINE AND 14/100 (P43,789.14) as attorneys fees; ordering further the [petitioners] to deposit the [aggregate]
considered legal. amount of FOUR HUNDRED EIGHTY ONE THOUSAND SIX HUNDRED EIGHTY PESOS AND 56/100 (P481,680.56) with this
Branch of the Commission within ten (10) days from receipt of this decision.

All other claims are hereby dismissed for lack of merit.

On appeal, the National Labor Relations Commission (Cebu Branch), in its assailed Decision, affirmed with modification the
labor arbiters judgment:4

WHEREFORE, in view of all the foregoing, the decision appealed from is MODIFIED by setting aside the award for the money claims
of the [private respondents] as contained in the decision and directing the recomputation thereof in accordance with Section 3, Rule
XI of the NLRC Rules to determine [the] correct amount to be awarded to the [private respondents].

Except for the foregoing modification the rest of the decision stands AFFIRMED.

Respondent Commission denied reconsideration in its challenged Resolution. 5


The Facts

As found by the labor arbiter, the facts of this case are as follows: 6
x x x [T]he [private respondents] were former employees of the respondents with services ranging as follows;
Bonifacio Montilla - 15 years
Roseto Canales - 17 years
14

Ildefonso Carredo - 16 years [I]: Respondent xxx Commission erred in setting aside the deeds of quitclaim and release signed and executed by individual
Heracleo Megabon - 8 years [private respondents] as without any legal effect to bar and preclude them from proceeding against petitioners,
Jose Ybaez, Jr. - 6 years the same being contrary to law and jurisprudence.
Bernardo Dela Rama - 3 years [II]: Respondent xxx Commission disregarded the fact that said deeds of quitclaim and release were signed and executed by
Fortunato Megabon, Jr. - 1 year individual private respondents after they filed their complaints in its regional arbitration branch.
They performed the functions of computer, sampler and scalers. [O]n May 31, 1985, the [private respondents] joined and [III]: Respondent xxx Commission erred in sustaining the findings and conclusion of the executive labor arbiter as to the
became members of [Private Respondent] Associated Labor Unions, with [Private Respondent] Bonifacio Montilla as its [l]ocal illegality of the dismissal of the [private respondents] which is tantamount to grave abuse of discretion.
[p]resident. With 13 original members[,] Bonifacio Montilla being the president actively campaigned and convinced the rest of [IV]: Assuming arguendo there was illegal dismissal, it was error to find Petitioner Horacio Franco personally liable, jointly and
their co-employees to join with the union. While campaigning among his co-employees for union membership, the [t]reasurer of severally, with petitioner association.
respondent firm Mr. Jose Mari Miranda called [Private Respondent] Montilla to his office and told him to withdraw his [V]: Respondent xxx Commission erred in giving due credence to the testimony of Respondent Bonifacio Montilla and deciding
membership from the Associated Labor Unions or else they will not be hired at the start of the milling season and will be the case in favor of [private respondents] and finding [petitioners] liable for the alleged claims and for unfair labor
dismissed. That he and the [private respondents] herein did not heed the warning of Mr. Miranda and stuck to their practice on the sole basis of his testimony.
membership with the private respondent union. As a consequence and as earlier warned of being dismissed if they persist[ed] [VI]: Respondent xxx Commission commit[ted] grave abuse of discretion in rendering a decision in favor of [private
in their union activities, notices of termination were sent to [Private Respondents] Bernardo Dela Rama, Ildefonso Carredo, respondents] who did not appear at all in the case to prosecute their claims and support their charges against
Bonifacio Montilla and Jose Ybaez, Jr. (Exhibits 4-7), informing them that their services will be terminated due to financial herein petitioners, thus denying the latter due process of law guaranteed by the Constitution.
difficulties. While the said notices stated that their services will be terminated 30 days from date[,] they were not allowed to Put differently, the issues raised by petitioners are as follows:
work within that 30 day period and Montilla was immediately replaced by Gavino Negapatan (TSN June 18, 1987, p. 31). The 1. Whether private respondents retrenchment was valid and legal under Article 283 of the Labor Code
[private respondents] alleged that their dismissal was sought due to their membership [in] the private respondent union as they 2. Whether the Quitclaim and Release barred the private respondents from charging petitioners with illegal dismissal
have not violated any company rules and regulations. There is also no allegation to this effect by the respondents and the latter 3. Whether a corporate officer could be held liable for illegal dismissal without a showing that he acted maliciously and in bad faith in
strongly advocated retrenchment to prevent losses as their basis in terminating the [private respondents]. Aggrieved of the dismissing private respondents
respondents actuations they filed the present complaint on December 20, 1985, or before the expiration of the 30 days notice 4. Whether Respondent Commission gravely abused its discretion by denying due process to petitioners
The Courts Ruling
dated November 28, 1985. On December 28, 1985, or just on the 30th day of the notice of termination[,] four of the [private
respondents], namely Bonifacio Montilla, [I]ldefonso Carredo, Bernardo Dela Rama and Jose Ybaez, Jr., were paid their
corresponding separation/gratuity pay and accordingly signed their Quitclaim and Release (Exhibit 8-11). The petition is devoid of merit.

The respondents on the other hand strongly maintained that the dismissal of the [private respondents] was validly carried out in
accordance with corporate powers to prevent losses. To support this stand they submitted a comparative statement of First Issue: No Proof of Business Losses To Justify Retrenchment
Revenue and Expenses for the crop years 1983-1984 and 1984-1985, to show they suffered losses in the amount
of P54,692.31 in the crop year ending August 1985. In addition they claimed that the [private respondents] [were] already Retrenchment is the termination of employment effected by management during periods of business recession, industrial
barred from filing this present case by virtue of their Quitclaim and Release. depression, seasonal fluctuations, lack of work or considerable reduction in the volume of the employers business.9 Resorted to by
an employer to avoid or minimize business losses,10 it is a management prerogative consistently recognized by this Court 11 and
allowed under Article 283 of the Labor Code as follows:
The Ruling of Respondent Commission
ART. 283. Closure of establishment and reduction of personnel.The employer may also terminate the employment of any employee
While Respondent Commission agreed with petitioners that management had the prerogative to terminate employment on due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of
account of business reversals, it held, however, that petitioners failed to present adequate proof of such losses. First, the the establishment or undue taking unless the closing is for the purpose of circumventing the provisions of this Title by serving a
Comparative Statement of Revenue and Expenses submitted by Petitioner Corporation was neither sufficient nor substantial to written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. x x x
support the claim that private respondents were retrenched pursuant to Article 283 of the Labor Code. x In case of retrenchment to prevent losses xxx, the separation pay shall be equivalent to one (1) month pay for every year of service,
which ever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
Second, petitioners failed to show that, in undertaking the retrenchment, fair and reasonable standards were used in
determining who among its employees would be separated from the service. In a number of cases, the Court has laid down the following requisites of a valid retrenchment: (1) the losses incurred are
substantial and not de minimis; (2) the losses are actual or reasonably imminent; (3) the retrenchment is reasonably necessary and is
Third, petitioners failed to show that they gave the required 30-day notice to the labor department before effecting the likely to be effective in preventing the expected losses; and (d) the alleged losses, if already incurred, or the expected imminent
retrenchment. losses sought to be forestalled, are proven by sufficient and convincing evidence. 12 In the present case, petitioners miserably failed to
prove (1) substantial losses and (2) the reasonable necessity of the retrenchment.
Fourth, petitioners hired additional personnel after the private respondents were retrenched. Such actuation strengthened, No Sufficient and Substantial Evidence of Business Loss

rather than negated, private respondents contention that their dismissal was an orchestrated move to ease them out of employment
due to their union activities. To justify retrenchment, the employer must prove serious business losses.13 Indeed, not all business losses suffered by the
employer would justify retrenchment under this article.14 The Court has held that the loss referred to in Article 283 cannot be just any
Fifth, Respondent Commission gave credence to Private Respondent Montillas testimony, thus upholding the ruling of the labor kind or amount of loss; otherwise, a company could easily feign excuses to suit its whims and prejudices or to rid itself of unwanted
arbiter who was in a unique position [to observe] the demeanor of the witness. employees.15
It also rejected the posturing of the petitioners that the execution of a deed of quitclaim and release exculpated them from In the case at bar, Petitioner Corporation claimed that the retrenchment of private respondents was justified, because it
liability, as such undertaking did not bar the private respondents from questioning the legality of their dismissal. suffered business losses, as evidenced by its Comparative Statement of Revenue and Expenses for crop years 1983-1984 and
1984-1985.16
Hence, this petition.7
Assignment of Errors

Petitioners impute the following errors to Respondent Commission:8


15

On the other hand, Respondent Commission and the executive labor arbiter held that this evidence was neither sufficient nor We also note the observation of the executive labor arbiter that petitioners did not consider the long years of service rendered
substantial, viz.:17 by the private respondents, ranging from one to sixteen years. We agree with her conclusion that the real motive behind the
retrenchment must have been to discriminate against private respondents as a consequence of their membership in Respondent
Union.22
The only evidence adduced by the [petitioners] to prove that they suffered economic losses and [had] therefore to cut down expenses
and reduce personnel is [E]xhibit 3 which is a [C]omparative [S]tatement of Revenue and Expenses for two crop years, 1983-1984
and 1984-1985, which was allegedly submitted to the [B]ureau of Internal Revenue on November 12, 1985. This piece of evidence
was prepared by Ligaya R. Arcenas, [o]ffice [m]anager, certified correct by Jose Mari M. Miranda, [t]reasurer, Rosendo S. Hernaez, Assessment of Credibility by Respondent Commission
[a]uditor[,] and attested [to] by its president Mr. Horacio M. Franco. xxxx.
Petitioners further assail the labor arbiter and the NLRC for giving credence to Private Respondent Montillas testimony, as the
In the present case no financial statement, or statement of profit and loss or books of account have been presented to substantiate same was replete with substantial contradictions and material inconsistencies. Petitioners maintain that Montilla failed to substantiate
the alleged losses. It is also dubious why the said [C]omparative [S]tatement of Revenue and Expenses was prepared by the office his claim that he had been forced and intimidated to sign the quitclaim and release. They add that the new workers, who allegedly
manager instead of their accountant. Besides the said [C]omparative [S]tatement of [R]evenue and [E]xpenses is inconsistent with replaced the private respondents, had been working for Petitioner Corporation several months before the retrenchment.
the statement of Jose Mari M. Miranda that the [petitioners had] to cut down expenses and do some retrenchment to prevent further
losses and that they [had] been incurring losses of P54,692.21 for crop year 1984-1985, and P54,110.94 for the previous crop year Montillas testimony regarding the hiring of replacements after he and his co-private respondents had been retrenched was
1983-1984 (TSN December 7, 1 988, [pp.] 12-13). A closer scrutiny of Exhibit 3 [C]omparative [S]tatement of Revenue and Expenses given credence by Respondent Commission in this wise:23
[would] readily reveal that for the crop year 1983-1984, the [petitioners] had a net income of P54,110.94. The total revenue indicated
therein being P798,750.20 while the total expenses is only P744,639.26. Another instance which would clearly negate that the xxx [C]ertain persons were hired or rehired after [private respondents] were dismissed. Why would [petitioners] take in
[petitioners] did cut down on expenses to prevent any further losses are the marked increase in the amount of over P13,000.00 in the additional workers if it had to retrench? It becomes immaterial whether the persons hired had previously worked for
expenses for conferences, meetings and conventions in 1984-1985 over the previous year, the increase in the printing of office [petitioners]. The fact that there was hiring of additional personnel right after [private respondents] were retrenched is enough
supplies xxx for over P13,000.00 and the National Federation dues [which] were [unpaid] in 1983-1984[,] but in 1984-1985 the to destroy whatever pretense [petitioners] ha[d] with respect to retrenchment. Whether those hired were intended to replace
amount of P36,410.59 was paid. In this light the alleged losses become unjustifiable to warrant the dismissal of the [private [private respondents] or not is immaterial. The crucial point is that immediately after the so-called retrenchment, [petitioners]
respondents]. As earlier observed the [petitioners] should have come out with their books of accounts, profit and loss statements and hired other workers. Such actuation is inconsistent with retrenchment and merely strengthen[s] the observation that there was
better still should have presented their accountant to competently amplify their financial position. an orchestrated move to terminate the [private respondents] on account of their union activities.
In their rebuttal, petitioners allege the following: (1) the comparative financial statement of the corporation duly reflects its The Court finds no sufficient reason to modify or reverse the assessments of the labor arbiter and the Respondent Commission
income and expenses in a given taxable year and, despite its different nomenclature, is substantially the same as a profit and loss on the credibility of Montilla and his testimony. In fact, the testimony of Parilla and Florita that they used to be extras, who substituted
statement or any other financial statement; and (2) the National Internal Revenue Code (NIRC) requires the certification of an for absent workers, corroborate Montillas claims. They were taken in, after the retrenchment of the private respondents, and made to
independent certified public accountant only if the taxpayers gross receipts exceed P25,000 in any quarter of any taxable year. perform the tasks formerly assigned to the latter.
The contentions of petitioners are untenable. A comparative statement of revenue and expenses for two years, by itself, is not It is well-settled that factual findings of Respondent Commission affirming those of the labor arbiter, when sufficiently supported
conclusive proof of serious business losses. The Court has previously ruled that financial statements audited by independent external by evidence on record, are accorded respect if not finality.24
auditors constitute the normal method of proof of the profit and loss performance of a company. 18 While Petitioner Corporation avers
that it was not required to file audited financial statements under Section 232 of the Tax Code, it failed to establish its exemption
through any evidence showing that its quarterly gross revenues did not exceed P25,000.Thus, its claim that it did not need to have its
financial statements certified by a certified public accountant is without basis in fact and in law and does not excuse it from complying Written Notice to DOLE a Mandatory Requirement
with the usual requirement. Besides, the requirement of the Tax Code is one thing, and the requirement of the Labor Code is quite
another. Petitioners brush aside the procedural notice which Article 283 of the Code requires to be sent to the labor department before
the retrenchment can be effected. The written notice to the labor department has been previously declared to be a mandatory
Moreover, the financial statement of Petitioner Corporation for two crop years is insufficient proof of serious business losses requirement.25 Although the absence of this notice renders the dismissal merely defective, not illegal, 26 the failure of petitioners to
that would justify the retrenchment of private respondents. Thus, the Court held in Somerville Stainless Steel Corporation v. NLRC:19 comply with this requirement shows nonetheless the bankruptcy of their cause.

xxx The failure of petitioner to show its income or loss for the immediately preceding years or to prove that it expected no abatement
of such losses in the coming years bespeaks the weakness of its cause.The financial statement for 1992, by itself, does not
Second Issue: When Deed of Quitclaim and Release Is Not Bar
sufficiently prove petitioners allegation that it already suffered actual serious losses,20 because it does not show whether its losses
increased or decreased.Although petitioner posted a loss for 1992, it is also possible that such loss was considerably less than those
previously incurred, thereby indicating the companys improving condition. Petitioners pray that the present action should be barred, because private respondents have voluntarily executed quitclaims
and releases and received their separation pay. Petitioners claim that the present suit is a grave derogation of the fundamental
principle that obligations arising from a valid contract have the force of law between the parties and must be complied with in good
faith.
No Reasonable Necessity of Retrenchment
The Court disagrees. Jurisprudence holds that the constitutional guarantee of non-impairment of contracts is subject to the
Petitioner Corporation also failed to rebut the allegation that new employees were hired to replace the private respondents after police power of the state and to reasonable legislative regulations promoting public health, morals, safety and welfare. Not all
quitclaims are per se invalid or against public policy, except (1) where there is clear proof that the waiver was wangled from an
the latter had been retrenched. The executive labor arbiter found that Gavino Negapatan replaced Private Respondent
Montilla,21 while Reynaldo Parilla and Godofredo Florita replaced the other private respondents who had worked as sugar checkers unsuspecting or gullible person, or (2) where the terms of settlement are unconscionable on their face. In these cases, the law will
or samplers. The employment of these replacements clearly belies petitioners contention that the retrenchment was necessary to step in to annul the questionable transactions.27 Such quitclaim and release agreements are regarded as ineffective to bar the
workers from claiming the full measure of their legal rights.28
prevent or offset the expected losses effectively.
16

In the case at bar, the private respondents agreed to the quitclaim and release in consideration of their separation pay. Since 5. G.R. No. 165381 : February 9, 2011
they were dismissed allegedly for business losses, they are entitled to separation pay under Article 283 of the Labor Code. And since
there was thus no extra consideration for the private respondents to give up their employment, such undertakings cannot be allowed NELSON A. CULILI, Petitioner, v. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR HIZON (President and
to bar the action for illegal dismissal. Chief Executive Officer), EMILIANO JURADO (Chairman of the Board), VIRGILIO GARCIA (Vice President) and STELLA
GARCIA (Assistant Vice President), Respondents.

LEONARDO-DE CASTRO, J.:


Third Issue Liability of a Corporate Officer

FACTS:
Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts,
because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders and Respondent Eastern Telecommunications Philippines, Inc. (ETPI) is a telecommunications company engaged mainly in the business
members.29 However, this fictional veil may be pierced whenever the corporate personality is used as a means of perpetuating a of establishing commercial telecommunications systems and leasing of international datalines or circuits that pass through the
fraud or an illegal act, evading an existing obligation, or confusing a legitimate issue. 30 In cases of illegal dismissal, corporate international gateway facility (IGF). The other respondents are ETPIs officers.
directors and officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad
faith.31 Petitioner Nelson A. Culili was employed by ETPI as a Technician in its Field Operations Department in 1981. In 1996, Culili was
promoted to Senior Technician in the Customer Premises Equipment Management Unit of the Service Quality Department.
Respondent Commission adopted the executive labor arbiters findings and held that it can be reasonably inferred that private
respondents dismissal was tainted with bad faith. However, nowhere in the records is there such evidence to show malice or bad As a telecommunications company and an authorized IGF operator, ETPI was required, under RA No. 7925 and EO No. 109, to
faith on Petitioner Francos part. The executive labor arbiter found that it was Miranda, the corporate treasurer, who told Private establish landlines in Metro Manila and certain provinces. However, due to interconnection problems with the PLDT, poor
Respondent Montilla to withdraw membership from the union and threatened not to rehire him and his companions if they subscription and cancellation of subscriptions, and other business difficulties, ETPI was forced to halt its roll out of 129,000 landlines
refused. Petitioner Francos liability is based only on his being the chief executive officer of Petitioner Corporation and the lone already allocated to a number of its employees.
signatory to the Notice of Termination received by the private respondents. These findings, however, do not in themselves support
the allegation of bad faith or malice and are, therefore, insufficient to hold him solidarily liable with Petitioner Corporation for illegal In 1998, due to business troubles and losses, ETPI was compelled to implement a Right-Sizing Program which consisted of two
dismissal. phases: the first phase involved the reduction of ETPIs workforce to only those employees that were necessary and which ETPI
could sustain; the second phase entailed a company-wide reorganization which would result in the transfer, merger, absorption or
abolition of certain departments of ETPI.
Fourth Issue: No Violation of Due Process
As part of the first phase, ETPI offered to its employees who had rendered at least fifteen years of service, the Special Retirement
Program, which consisted of the option to voluntarily retire at an earlier age and a retirement package equivalent to two and a half (2)
Petitioners deny liability for the illegal dismissal of Private Respondents Fortunato Migabon Jr. and Roseto Canales, since said months salary for every year of service. This offer was initially rejected by the Eastern Telecommunications Employees Union
employees neither appeared before the hearing officer nor presented any evidence to support their claim. Therefore, to hold them (ETEU), ETPIs duly recognized bargaining agent, which threatened to stage a strike. ETPI explained to ETEU the exact details of the
liable will be a violation of their right to due process. Right-Sizing Program and the Special Retirement Program and after consultations with ETEUs members, ETEU agreed to the
The Court disagrees. The amendment of the complaint32 to include Private Respondents Fortunato Migabon Jr. and Roseto implementation of both programs. Thus, ETPI re-offered the Special Retirement Program and the corresponding retirement package
Canales was filed on April 24, 1986 or twenty-five days before May 19, 1986, when petitioners submitted their position to the one hundred two (102) employees who qualified for the program. Of all the employees who qualified to avail of the program,
paper.33Petitioners were not denied their day in court, because they were given an opportunity to rebut and refute said private only Culili rejected the offer.
respondents allegations in their position paper. The case was even further appealed to Respondent Commission, where petitioners
were undeniably accorded due process.34 Among the departments abolished was the Service Quality Department. The functions of the Customer Premises Equipment
Management Unit, Culilis unit, were absorbed by the Business and Consumer Accounts Department. As a result, Culilis position was
WHEREFORE, the petition is DENIED and the assailed Decision and Resolution are hereby AFFIRMED, with abolished due to redundancy and his functions were absorbed by the Business and Consumer Accounts Department.
the MODIFICATION that Petitioner Franco is exempted from liability for the illegal dismissal of private respondents. Costs against
Petitioner Corporation. ETPI, through its Assistant Vice President Stella Garcia, informed Culili of his termination from employment effective April 8, 1999.

SO ORDERED. Culili alleged that neither he nor the DOLE were formally notified of his termination. Culili believed that ETPI had already decided to
dismiss him even prior to the March 8, 1999 letter. Moreover, Culili asserted that ETPI had contracted out the services he used to
perform to a labor-only contractor which not only proved that his functions had not become unnecessary, but which also violated their
Collective Bargaining Agreement (CBA) and the Labor Code. Aside from these, Culili also alleged that he was discriminated against
when ETPI offered some of his co-employees an additional benefit in the form of motorcycles to induce them to avail of the Special
Retirement Program, while he was not.

ETPI denied singling Culili out for termination. ETPI claimed that because there was no more work for Culili, it was constrained to
serve a final notice of termination to Culili, which Culili ignored. Thus, on March 26, 1999, ETPI tendered to Culili his final pay check
of P859,033.99 consisting of his basic salary, leaves, 13th month pay and separation pay. ETPI claimed that Culili refused to accept
his termination and continued to report for work.

Culili filed a complaint against ETPI and its officers for illegal dismissal, unfair labor practice, and money claims before the Labor
Arbiter.

The Labor Arbiter found ETPI guilty of illegal dismissal and unfair labor practice.
17

6. G.R. No. 174300 : December 5, 2012


On appeal, the NLRC affirmed the Labor Arbiters decision but modified the amount of moral and exemplary damages awarded.
MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. and/or FORTUNATO V. DE CASTRO, Petitioners, v.
The Court of Appeals found that Culilis position was validly abolished due to redundancy. It further held that ETPI cannot be held NAGKAHIUSANG MAMUMUO SA MINTERBRO-SOUTHERN PHILIPPINES FEDERATION OF LABOR and/or MANUEL
guilty of unfair labor practice as mere contracting out of services being performed by union members does not per se amount to ABELLANA, ET AL., Respondents.
unfair labor practice unless it interferes with the employees right to self-organization. Hence, this petition.
LEONARDO-DE CASTRO, J.:
ISSUE: Whether or not Culili is illegally dismissed.
FACTS:
HELD: The decision of the Court of Appeals is sustained.
Petitioner Mindanao Terminal and Brokerage Service Inc. (Minterbro) is a domestic corporation managed by Fortunato De Castro (De
LABOR LAW Castro) and engaged in the business of providing arrastre and stevedoring services to its clientele. However, due to abnormal
vibration of the pier everytime a ship docks due to weak posts at the underwater portion, Minterbro brought up the matter to the
There is redundancy when the service capability of the workforce is greater than what is reasonably required to meet the demands of Philippine Ports Authority (PPA). On the basis of PPAs ocular inspection, the PPA advised Minterbro to conduct a thorough
the business enterprise. A position becomes redundant when it is rendered superfluous by any number of factors such as over-hiring investigation of the underdeck and underwater structures of the pier and initiate corrective measures if necessary.
of workers, decrease in volume of business, or dropping a particular product line or service activity previously manufactured or
undertaken by the enterprise. Soriano, Jr. v. NLRC, G.R. No. 165594, April 23, 2007 In the meantime, the union members/employees were forced to be laid off. The union members/employees were not given work
starting April 14, 1997, the day no more vessel was serviced at Minterbros pier after the last vessel was serviced on April 11 to 13,
This Court also held that the following evidence may be proffered to substantiate redundancy: the new staffing pattern, feasibility 1997. Subsequently, Minterbro decided to rehabilitate the pier on August 1, 1997 and, on the same day, sent a letter to the
studies/ proposal on the viability of the newly created positions, job description and the approval by the management of the Department of Labor and Employment (DOLE) to inform DOLE of Minterbros intention to temporarily suspend its operations. The
restructuring. next vessel serviced by Minterbro was on December 22-28, 1997.

In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing Program. Even in the face of initial Respondent Nagkahiusang Mamumuo sa Minterbro-Southern Philippines Federation of Labor composed of respondents Manuel
opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEUs officers to make them understand Abellana, et al. (union members/ employees), employees of Minterbro, filed a complaint for payment of separation pay against
ETPIs business dilemma and its need to reduce its workforce and streamline its organization. This evidently rules out bad faith on the Minterbro and De Castro. The Labor Arbiter dismissed the complaint. The NLRC reversed the said decision which is affirmed by CA.
part of ETPI.
ISSUE: Whether or not the union members/employees are entitled to separation pay.
The records show that ETPI had sufficiently established not only its need to reduce its workforce and streamline its organization, but
also the existence of redundancy in the position of a Senior Technician. ETPI explained how it failed to meet its business targets and HELD: The petition lacks merit.
the factors that caused this, and how this necessitated it to reduce its workforce and streamline its organization. ETPI also submitted
its old and new tables of organization and sufficiently described how limited the functions of the abolished position of a Senior LABOR LAW: lay-off
Technician were and how it decided on whom to absorb these functions.
The resolution of the issue as to the truth regarding the date when the union members/employees were laid off will determine
LABOR LAW whether Minterbro are liable for separation pay.

Although the Court finds Culilis dismissal was for a lawful cause and not an act of unfair labor practice, ETPI, however, was remiss in The NLRC and the CA found that the union members/employees were not given work starting April 14, 1997 and that more than six
its duty to observe procedural due process in effecting the termination of Culili. months have elapsed after the union members/employees were laid off when the next vessel was serviced at the Minterbro pier on
December 22 to 28, 1997. When Minterbro failed to make work available to the union members/employees for a period of more than
For termination of employment as defined in Article 283 of the Labor Code, the requirement of due process shall be deemed six months starting April 14, 1997 until December 22, 1997, they are deemed to have constructively dismissed the union
complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and members/employees.
Employment at least thirty days before effectivity of the termination, specifying the ground or grounds for termination.
As Minterbro and De Castro were responsible for the lack of work at the pier and, consequently, the layoff of the union
ETPI does not deny its failure to provide DOLE with a written notice regarding Culilis termination. It, however, insists that it has members/employees, they are liable for the separation from employment of the union members/employees on a ground similar to
complied with the requirement to serve a written notice to Culili as evidenced by his admission of having received it and forwarding it retrenchment. Lay-off is essentially retrenchment and under Article 283 of the Labor Code a retrenched employee is entitled to
to his union president. separation pay equivalent to one (1) month salary or one-half (12) month salary per year of service, whichever is higher.

The Court of Appeals, in finding that Culili was not afforded procedural due process, held that Culilis dismissal was ineffectual, and Petition is DENIED.
required ETPI to pay Culili full backwages in accordance with our decision in Serrano v. NLRC, 387 Phil. 345 (2000).

Hence, since it has been established that Culilis termination was due to an authorized cause and cannot be considered unfair labor
practice on the part of ETPI, his dismissal is valid. However, in view of ETPIs failure to comply with the notice requirements under the
Labor Code, Culili is entitled to nominal damages in addition to his separation pay.

DENIED.
18

7. [G.R. No. 109002. April 12, 2000] On the third issue with respect to the use of the "last-in-first-out" method in case of retrenchment and transfer to other schools or
units, the voluntary arbitrator upheld the "elementary right and prerogative of the management of the University to select and/or
choose its employees, a right equally recognized by the Constitution and the law. The employer, in the exercise of this right, can
DELA SALLE UNIVERSITY, petitioner, vs. DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION (DLSUEA) and
adopt valid and equitable grounds as basis for lay-off or separation, like performance, qualifications, competence, etc. Similarly, the
BUENAVENTURA MAGSALIN, respondents.
right to transfer or reassign an employee is an employers exclusive right and prerogative."[18]

[G.R. No. 110072. April 12, 2000]


Regarding the fourth issue concerning salary increases for the second and third years of the collective bargaining agreement, the
voluntary arbitrator opined that the "proposed budget of the University for SY 1992-93 could not sufficiently cope up with the demand
DELA SALLE UNIVERSITY EMPLOYEES ASSOCIATION-NATIONAL FEDERATION OF TEACHERS AND EMPLOYEES UNION for increases by the Union. xxx xxx. With the present financial condition of the University, it cannot now be required to grant another
(DLSUEA-NAFTEU), petitioner, vs. DELA SALLE UNIVERSITY and BUENAVENTURA MAGSALIN, respondents. round of increases through collective bargaining without exhausting its coffers for other legitimate needs of the University as an
institution,"[19] thus, he ruled that "the University can no longer be required to grant a second round of increase for the school years
under consideration and charge the same to the incremental proceeds."[20] Misspped
DECISION

On the fifth issue as to the Unions demand for a reduction of the workload of the union president, special leave benefits and indefinite
BUENA, J.:
union leave with pay, the voluntary arbitrator rejected the same, ruling that unionism "is no valid reason for the reduction of the
workload of its President,"[21] and that there is "no sufficient justification to grant an indefinite leave."[22] Finding that the Union and the
Filed with this Court are two petitions for certiorari,[1] the first petition with preliminary injunction and/or temporary restraining Faculty Association are not similarly situated, technically and professionally,[23] and that "[w]hile professional growth is highly
order,[2] assailing the decision of voluntary arbitrator Buenaventura Magsalin, dated January 19, 1993, as having been rendered with encouraged on the part of the rank-and-file employees, this educational advancement would not serve in the same degree as
grave abuse of discretion amounting to lack or excess of jurisdiction. These two petitions have been consolidated inasmuch as the demanded of the faculty members,"[24]the voluntary arbitrator denied the Unions demand for special leave benefits.
factual antecedents, parties involved and issues raised therein are interrelated.[3] Missc
On the last issue regarding the duration of the collective bargaining agreement, the voluntary arbitrator ruled that "when the parties
The facts are not disputed and, as summarized by the voluntary arbitrator, are as follows. On December 1986, Dela Salle University forged their CBA and signed it on 19 November 1990, where a provision on duration was explicitly included, the same became a
(hereinafter referred to as UNIVERSITY) and Dela Salle University Employees Association - National Federation of Teachers and binding agreement between them. Notwithstanding the Submission Agreement, thereby reopening this issue for resolution, this
Employees Union (DLSUEA-NAFTEU), which is composed of regular non-academic rank and file employees,[4](hereinafter referred to Voluntary Arbitrator is constrained to respect the original intention of the parties, the same being not contrary to law, morals or public
as UNION) entered into a collective bargaining agreement with a life span of three (3) years, that is, from December 23, 1986 to policy."[25] As to the economic aspect of the collective bargaining agreement, the voluntary arbitrator opined that the "economic
December 22, 1989.[5] During the freedom period, or 60 days before the expiration of the said collective bargaining agreement, the provisions of the CBA shall be re-opened after the third year in compliance with the mandate of the Labor Code, as amended." [26]
Union initiated negotiations with the University for a new collective bargaining agreement[6]which, however, turned out to be
unsuccessful, hence, the Union filed a Notice of Strike with the National Conciliation and Mediation Board, National Capital
Subsequently, both parties filed their respective motions for reconsideration which, however, were not entertained by the voluntary
Region.[7] After several conciliation-mediation meetings, five (5) out of the eleven (11) issues raised in the Notice of Strike were arbitrator "pursuant to existing rules and jurisprudence governing voluntary arbitration cases." [27] Josp-ped
resolved by the parties. A partial collective bargaining agreement was thereafter executed by the parties.[8] On March 18, 1991, the
parties entered into a Submission Agreement, identifying the remaining six (6) unresolved issues for arbitration, namely: "(1) scope of
the bargaining unit, (2) union security clause, (3) security of tenure, (4) salary increases for the third and fourth years [this should On March 5, 1993, the University filed with the Second Division of this Court, a petition for certiorari with temporary restraining order
properly read second and third years][9] of the collective bargaining agreement, (5) indefinite union leave, reduction of the union and/or preliminary injunction assailing the decision of the voluntary arbitrator, as having been rendered "in excess of jurisdiction
presidents workload, special leave, and finally, (6) duration of the agreement."[10] The parties appointed Buenaventura Magsalin as and/or with grave abuse of discretion."[28] Subsequently, on May 24, 1993, the Union also filed a petition for certiorari with the First
voluntary arbitrator.[11] On January 19, 1993, the voluntary arbitrator rendered the assailed decision.[12] Spped Division.[29] Without giving due course to the petition pending before each division, the First and Second Divisions separately resolved
to require the respondents in each petition, including the Solicitor General on behalf of the voluntary arbitrator, to file their respective
Comments.[30] Upon motion by the Solicitor General dated July 29, 1993, both petitions were consolidated and transferred to the
In the said decision, the voluntary arbitrator, on the first issue involving the scope of the bargaining unit, ruled that "the Computer
Second Division.[31]
Operators assigned at the CSC [Computer Services Center], just like any other Computer Operators in other units, [should be]
included as members of the bargaining unit,"[13] after finding that "[e]vidently, the Computer Operators are presently doing clerical and
routinary work and had nothing to do with [the] setting of management policies for the University, as [may be] gleaned from the duties In his consolidated Comment[32] filed on September 9, 1993 on behalf of voluntary arbitrator Buenaventura C. Magsalin, the Solicitor
and responsibilities attached to the position and embodied in the CSC [Computer Services Center] brochure. They may have, as General agreed with the voluntary arbitrators assailed decision on all points except that involving the employees of the College of St.
argued by the University, access to vital information regarding the Universitys operations but they are not necessarily Benilde. According to the Solicitor General, the employees of the College of St. Benilde should have been included in the bargaining
confidential."[14] Regarding the discipline officers, the voluntary arbitrator "believes that this type of employees belong (sic) to the rank- unit of the rank-and-file employees of the University.[33] The Solicitor General came to this conclusion after finding "sufficient evidence
and-file on the basis of the nature of their job."[15] With respect to the employees of the College of St. Benilde, the voluntary arbitrator to justify the Unions proposal to consider the University and the CSB [College of St. Benilde] as only one entity because the latter is
found that the College of St. Benilde has a personality separate and distinct from the University and thus, held "that the employees but a mere integral part of the University," to wit:[34]
therein are outside the bargaining unit of the Universitys rank-and-file employees."[16]
"1. One of the duties and responsibilities of the CSBs Director of Academic Services is to coordinate with the
On the second issue regarding the propriety of the inclusion of a union shop clause in the collective bargaining agreement, in addition Universitys Director of Admissions regarding the admission of freshmen, shiftees and transferees (Annex "3" of
to the existing maintenance of membership clause, the voluntary arbitrator opined that a union shop clause "is not a restriction on the the Universitys Reply);
employees right of (sic) freedom of association but rather a valid form of union security while the CBA is in force and in accordance
with the Constitutional policy to promote unionism and collective bargaining and negotiations. The parties therefore should
"2. Some of the duties and responsibilities of the CSBs Administrative Officer are as follows:
incorporate such union shop clause in their CBA."[17]

A. xxx xxx xxx.


19

4. Recommends and implements personnel policies and guidelines (in accordance with the AN EMPLOYEE WHO GOES ON LEAVE WITHOUT PRIOR PERMISSION FROM THE
Staff Manual) as well as pertinent existing general policies of the university as a whole. xxx. UNIVERSITY OR WHO OVEREXTENDS THE PERIOD OF HIS APPROVED LEAVE
WITHOUT SECURING AUTHORITY FROM THE UNIVERSITY, OR WHO REFUSE TO BE
RECALLED FROM AN APPROVED LEAVE SHALL BE CONSIDERED ABSENT WITHOUT
12. Conducts and establishes liaison with all the offices concerned at the Main Campus as
LEAVE AND SHALL BE SUBJECT TO DISCIPLINARY ACTION.
well (sic) with other government agencies on all administrative-related matters. xxx Spp-edjo

"6. The University officials themselves claimed during the 1990 University Athletic Association of the Philippines
B. xxx xxx xxx
(UAAP) meet that the CSB athletes represented the University since the latter and the CSB comprise only one
entity."
7. Handles processing, canvassing and direct purchasing of all requisitions worth more than
P10,000 or less. Coordinates and canvasses with the Main Campus all requisitions worth
On February 9, 1994, this Court resolved to give due course to these consolidated petitions and to require the parties to submit their
more than P10,000. xxx
respective memoranda.[35]

C. xxx xxx xxx


In its memorandum filed on April 28, 1994,[36] pursuant to the above-stated Resolution,[37] the University raised the following issues for
the consideration of the Court:[38] Ne-xold
7. Plans and coordinates with the Security and Safety Committee at the Main Campus the I.
development of a security and safety program during times of emergency or occurrence of "WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE VOLUNTARY
fire or other natural calamities. xxx (Annex "4" of the Universitys Reply). ARBITRATOR WHEN HE INCLUDED, WITHIN THE BARGAINING UNIT COMPRISING THE UNIVERSITYS
RANK-AND-FILE EMPLOYEES, THE COMPUTER OPERATORS ASSIGNED AT THE UNIVERSITYS
COMPUTER SERVICES CENTER AND THE UNIVERSITYS DISCIPLINE OFFICERS, AND WHEN HE
"3. The significant role which the University assumes in the admission of students at the CSB is revealed in the EXCLUDED THE COLLEGE OF SAINT BENILDE EMPLOYEES FROM THE SAID BARGAINING UNIT.
following provisions of the CSBs Bulletin for Arts and Business Studies Department for the schoolyear 1992-
II.
1993, thus: "WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE UPHELD THE UNIONS DEMAND FOR THE INCLUSION OF A UNION SHOP
Considered in the process of admission for a (sic) high school graduate applicants are the CLAUSE IN THE PARTIES COLLECTIVE BARGAINING AGREEMENT.
following criteria: results of DLSU College Entrance Examination xxx. III.
"WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE DENIED THE UNIONS PROPOSAL FOR THE "LAST-IN-FIRST-OUT" METHOD OF
Admission requirements for transferees are: xxx and an acceptable score in the DLSU LAY-OFF IN CASES OF RETRENCHMENT. Sc
admission test. xxx IV.
"WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE VOLUNTARY
Shiftees from DLSU who are still eligible to enroll may be admitted in accordance with the ARBITRATOR WHEN HE RULED THAT THE UNIVERSITY CAN NO LONGER BE REQUIRED TO GRANT A
DLSU policy on shifting. Considering that there sometimes exist exceptional cases where a SECOND ROUND OF WAGE INCREASES FOR THE SCHOOL YEARS 1991-92 AND 1992-93 AND CHARGE
very difficult but temporary situation renders a DLSU student falling under this category a THE SAME TO THE INCREMENTAL PROCEEDS.
last chance to be re-admitted provided he meets the cut-off scores required in the qualifying V.
examination administered by the university. xxx "WHETHER OR NOT GRAVE ABUSE OF DISCRETION WAS COMMITTED BY THE VOLUNTARY
ARBITRATOR WHEN HE DENIED THE UNIONS PROPOSALS ON THE DELOADING OF THE UNION
PRESIDENT, IMPROVED LEAVE BENEFITS AND INDEFINITE UNION LEAVE WITH PAY."
He may not be remiss in his study obligations nor incur any violation whatsoever, as such The Union, on the other hand, raised the following issues, in its memorandum,[39] filed pursuant to Supreme Court Resolution dated
will be taken by the University to be an indication of his loss of initiative to pursue further [40]
February 9, 1994, to wit; that the voluntary arbitrator committed grave abuse of discretion in:
studies at DLSU. In sch (sic) a case, he renders himself ineligible to continue studying at "(1)......FAILING AND/OR REFUSING TO PIERCE THE VEIL OF CORPORATE FICTION OF THE COLLEGE
DLSU. DLSU thus reserves the right to the discontinuance of the studies of any enrolee OF ST. BENILDE-DLSU DESPITE THE PRESENCE OF SUFFICIENT BASIS TO DO SO AND IN FINDING
whose presence is inimical to the objectives of the CSB/DLSU. xxx Mi-so THAT THE EMPLOYEES THEREAT ARE OUTSIDE OF THE BARGAINING UNIT OF THE DLSUS RANK-AND-
FILE EMPLOYEES. HE ALSO ERRED IN HIS INTERPRETATION OF THE APPLICATION OF THE
As a college within the university, the College of St. Benilde subscribes to the De La Salle DOCTRINE; x-sc
Mission." (Annexes "C-1," "C-2," and "C-3" of the Unions Consolidated Reply and Rejoinder) "(2)......DENYING THE PETITIONERS PROPOSAL FOR THE LAST-IN FIRST-OUT METHOD OF LAY-OFF IN
CASE OF RETRENCHMENT AND IN UPHOLDING THE ALLEGED MANAGEMENT PREROGATIVE TO
SELECT AND CHOOSE ITS EMPLOYEES DISREGARDING THE BASIC TENETS OF SOCIAL JUSTICE AND
"4. The academic programs offered at the CSB are likewise presented in the Universitys Undergraduate EQUITY UPON WHICH THIS PROPOSAL WAS FOUNDED;
Prospectus for schoolyear 1992-1993 (Annex "D" of the Unions Consolidated Reply and Rejoinder). "(3)......FINDING THAT THE MULTISECTORAL COMMITTEE IN THE RESPONDENT UNIVERSITY IS THE
LEGITIMATE GROUP WHICH DETERMINES AND SCRUTINIZES ANNUAL SALARY INCREASES AND
"5. The Leave Form Request (Annex "F" of the Unions Position Paper) at the CSB requires prior permission from FRINGE BENEFITS OF THE EMPLOYEES;
the University anent leaves of CSB employees, to wit: "(4)......HOLDING THAT THE 70% SHARE IN THE INCREMENTAL TUITION PROCEEDS IS THE ONLY
SOURCE OF SALARY INCREASES AND FRINGE BENEFITS OF THE EMPLOYEES;
"(5)......FAILING/REFUSING/DISREGARDING TO CONSIDER THE RESPONDENT UNIVERSITYS FINANCIAL
STATEMENTS FACTUALLY TO DETERMINE THE FORMERS CAPABILITY TO GRANT THE PROPOSED
20

SALARY INCREASES OVER AND ABOVE THE 70% SHARE IN THE INCREMENTAL TUITION PROCEEDS With the foregoing rules in mind, we shall now proceed to discuss the merit of these consolidated petitions.
AND IN GIVING WEIGHT AND CONSIDERATION TO THE RESPONDENT UNIVERSITYS PROPOSED
BUDGET WHICH IS MERELY AN ESTIMATE.
We affirm in part and modify in part. Scl-aw
"(6)......FAILING TO EQUATE THE POSITION AND RESPONSIBILITIES OF THE UNION PRESIDENT WITH
THOSE OF THE PRESIDENT OF THE FACULTY ASSOCIATION WHICH IS NOT EVEN A LEGITIMATE
LABOR ORGANIZATION AND IN SPECULATING THAT THE PRESIDENT OF THE FACULTY ASSOCIATION On the first issue involving the classification of the computer operators assigned at the Universitys Computer Services Center and
SUFFERS A CORRESPONDING REDUCTION IN SALARY ON THE ACCOUNT OF THE REDUCTION OF HIS discipline officers, the University argues that they are confidential employees and that the Union has already recognized the
WORKLOAD; IN FAILING TO APPRECIATE THE EQUAL RIGHTS OF THE MEMBERS OF THE UNION AND confidential nature of their functions when the latter agreed in the parties 1986 collective bargaining agreement to exclude the said
OF THE FACULTY FOR PROFESSIONAL ADVANCEMENT AS WELL AS THE DESIRABLE EFFECTS OF employees from the bargaining unit of rank-and-file employees. As far as the said computer operators are concerned, the University
THE INSTITUTIONALIZATION OF THE SPECIAL LEAVE AND WORKLOAD REDUCTION BENEFITS."[41] xl-aw contends that " the parties have already previously agreed to exclude all positions in the Universitys Computer Services Center
(CSC), which include the positions of computer operators, from the collective bargaining unit. xxx xxx." [46] The University further
The question which now confronts us is whether or not the voluntary arbitrator committed grave abuse of discretion in rendering the contends that "the nature of the work done by these Computer Operators is enough justification for their exclusion from the coverage
assailed decision, particularly, in resolving the following issues: (1) whether the computer operators assigned at the Universitys of the bargaining unit of the Universitys rank-and-file employees. xxx xxx."[47] According to the University, the Computer Services
Computer Services Center and the Universitys discipline officers may be considered as confidential employees and should therefore Center, where these computer operators work, "processes data that are needed by management for strategic planning and
be excluded from the bargaining unit which is composed of rank and file employees of the University, and whether the employees of evaluation of systems. It also houses the Universitys confidential records and information [e.g. student records, faculty records,
the College of St. Benilde should also be included in the same bargaining unit; (2) whether a union shop clause should be included in faculty and staff payroll data, and budget allocation and expenditure related data] which are contained in computer files and
the parties collective bargaining agreement, in addition to the existing maintenance of membership clause; (3) whether the denial of computer-generated reports. xxx xxx. Moreover, the Computer Operators are in fact the repository of the Universitys confidential
the Unions proposed "last-in-first-out" method of laying-off employees, is proper; (4) whether the ruling that on the basis of the information and data, including those involving and/or pertinent to labor relations. xxx xxx."[48]
Universitys proposed budget, the University can no longer be required to grant a second round of wage increases for the school
years 1991-92 and 1992-93 and charge the same to the incremental proceeds, is correct; (5) whether the denial of the Unions
proposals on the deloading of the union president, improved leave benefits and indefinite union leave with pay, is proper; (6) whether As to the discipline officers, the University maintains that "they are likewise excluded from the bargaining unit of the rank-and-file
employees under the parties 1986 CBA. The Discipline Officers are clearly alter egos of management as they perform tasks which
the finding that the multi-sectoral committee in the University is the legitimate group which determines and scrutinizes the annual
salary increases and fringe benefits of the employees of the University, is correct; and (7) whether the ruling that the 70% share in are inherent in management [e.g. enforce discipline, act as peace officers, secure peace and safety of the students inside the
the incremental tuition proceeds is the only source of salary increases and fringe benefits of the employees, is proper. campus, conduct investigations on violations of University regulations, or of existing criminal laws, committed within the University or
by University employees] xxx xxx."[49] The University also alleges that "the Discipline Officers are privy to highly confidential
information ordinarily accessible only to management."[50] Manik-s
Now, before proceeding to the discussion and resolution of the issues raised in the pending petitions, certain preliminary matters call
for disposition. As we reiterated in the case of Caltex Refinery Employees Association (CREA) vs. Jose S. Brillantes,[42] the following
With regard to the employees of the College of St. Benilde, the Union, supported by the Solicitor General at this point, asserts that
are the well-settled rules in a petition for certiorari involving labor cases. "First, the factual findings of quasi-judicial agencies (such as
the Department of Labor and Employment), when supported by substantial evidence, are binding on this Court and entitled to great the veil of corporate fiction should be pierced, thus, according to the Union, the University and the College of St. Benilde should be
respect, considering the expertise of these agencies in their respective fields. It is well-established that findings of these considered as only one entity because the latter is but a mere integral part of the University. [51]
administrative agencies are generally accorded not only respect but even finality.[43] Man-ikx
The Universitys arguments on the first issue fail to impress us. The Court agrees with the Solicitor General that the express exclusion
"Second, substantial evidence in labor cases is such amount of relevant evidence which a reasonable mind will accept as adequate of the computer operators and discipline officers from the bargaining unit of rank-and-file employees in the 1986 collective bargaining
agreement does not bar any re-negotiation for the future inclusion of the said employees in the bargaining unit. During the freedom
to justify a conclusion.[44]
period, the parties may not only renew the existing collective bargaining agreement but may also propose and discuss modifications
or amendments thereto. With regard to the alleged confidential nature of the said employees functions, after a careful consideration
"Third, in Flores vs. National Labor Relations Commission,[45] we explained the role and function of Rule 65 as an extraordinary of the pleadings filed before this Court, we rule that the said computer operators and discipline officers are not confidential
remedy: employees. As carefully examined by the Solicitor General, the service record of a computer operator reveals that his duties are
basically clerical and non-confidential in nature.[52] As to the discipline officers, we agree with the voluntary arbitrator that based on
the nature of their duties, they are not confidential employees and should therefore be included in the bargaining unit of rank-and-file
"It should be noted, in the first place, that the instant petition is a special civil action for certiorari under Rule 65 of
employees.
the Revised Rules of Court. An extraordinary remedy, its use is available only and restrictively in truly
exceptional cases those wherein the action of an inferior court, board or officer performing judicial or quasi-
judicial acts is challenged for being wholly void on grounds of jurisdiction. The sole office of the writ of certiorari is The Court also affirms the findings of the voluntary arbitrator that the employees of the College of St. Benilde should be excluded
the correction of errors of jurisdiction including the commission of grave abuse of discretion amounting to lack or from the bargaining unit of the rank-and-file employees of Dela Salle University, because the two educational institutions have their
excess of jurisdiction. It does not include correction of public respondent NLRC's evaluation of the evidence and own separate juridical personality and no sufficient evidence was shown to justify the piercing of the veil of corporate fiction.[53] Man-
factual findings based thereon, which are generally accorded not only great respect but even finality. ikan

"No question of jurisdiction whatsoever is being raised and/or pleaded in the case at bench. Instead, what is On the second issue involving the inclusion of a union shop clause in addition to the existing maintenance of membership clause in
being sought is a judicial re-evaluation of the adequacy or inadequacy of the evidence on record, which is the collective bargaining agreement, the University avers that "it is in the spirit of the exercise of the constitutional right to self-
certainly beyond the province of the extraordinary writ of certiorari. Such demand is impermissible for it would organization that every individual should be able to freely choose whether to become a member of the Union or not. The right to join
involve this Court in determining what evidence is entitled to belief and the weight to be assigned it. As we have a labor organization should carry with it the corollary right not to join the same. This position of the University is but in due recognition
reiterated countless times, judicial review by this Court in labor cases does not go so far as to evaluate of the individuals free will and capability for judgment."[54] The University assails the Unions demand for a union shop clause as
the sufficiency of the evidence upon which the proper labor officer or office based his or its "definitely unjust and amounts to oppression. Moreover, such a demand is repugnant to democratic principles and the constitutionally
determination but is limited only to issues of jurisdiction or grave abuse of discretion amounting to lack guaranteed freedom of individuals to join or not to join an association as well as their right to security of tenure, particularly, on the
of jurisdiction." (emphasis supplied). part of present employees."[55]
21

The Union, on the other hand, counters that the Labor Code, as amended, recognizes the validity of a union shop agreement in On the fifth issue involving the Unions proposals on the deloading of the union president, improved leave benefits and indefinite union
Article 248 thereof which reads: leave with pay, we agree with the voluntary arbitrators rejection of the said demands, there being no justifiable reason for the granting
of the same. Nc-mmis
"ART. 248. Unfair labor practices of employers.
On the sixth issue regarding the finding that the multi-sectoral committee in the University is the legitimate group which determines
and scrutinizes the annual salary increases and fringe benefits of the employees of the University, the Court finds that the voluntary
xxx......xxx......xxx
arbitrator did not gravely abuse his discretion on this matter. From our reading of the assailed decision, it appears that during the
parties negotiations for a new collective bargaining agreement, the Union demanded for a 25% and 40% salary increase for the
(e) To discriminate in regard to hire or tenure of employment or any term or condition of employment in order to second and third years, respectively, of the collective bargaining agreement.[65] The Universitys counter-proposal was for a 10%
encourage or discourage membership in any labor organization. Nothing in this Code or in any other law increase for the third year.[66] After the meeting of the multi-sectoral committee on budget, which is composed of students, parents,
shall prevent the parties from requiring membership in a recognized collective bargaining agent as a faculty, administration and union, the University granted across-the-board salary increases of 11.3% and 19% for the second and
condition for employment, except of those employees who are already members of another union at the third years, respectively.[67] While the voluntary arbitrator found that the said committee "decided to grant the said increases based on
time of the signing of the collective bargaining agreement. xxx xxx." (emphasis supplied) Ol-dmiso the Universitys viability which were exclusively sourced from the tuition fees. xxx xxx.," no finding was made as to the basis of the
committees decision. Be that as it may, assuming for the sake of argument that the said committee is the group responsible for
determining wage increases and fringe benefits, as ruled by the voluntary arbitrator, the committees determination must still be based
We affirm the ruling of the voluntary arbitrator for the inclusion of a union shop provision in addition to the existing maintenance of
on duly audited financial statements following our ruling on the fourth issue.
membership clause in the collective bargaining agreement. As the Solicitor General asserted in his consolidated Comment, the
Universitys reliance on the case of Victoriano vs. Elizalde Rope Workers Union[56] is clearly misplaced. In that case, we ruled that
"the right to join a union includes the right to abstain from joining any union. xxx xxx. The right to refrain from joining labor On the seventh and last issue involving the ruling that the 70% share in the incremental tuition proceeds is the only source of salary
organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to such right to increases and fringe benefits of the employees, the Court deems that any determination of this alleged error is unnecessary and
refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of irrelevant, in view of our rulings on the fourth and preceding issues and there being no evidence presented before the voluntary
which the employer may employ only members of the collective bargaining union, and the employees must continue to be members arbitrator that the University held incremental tuition fee proceeds from which any wage increase or fringe benefit may be satisfied.
of the union for the duration of the contract in order to keep their jobs. xxx xxx."[57]
WHEREFORE, premises considered, the petitions in these consolidated cases, G.R. No. 109002 and G.R. No. 110072 are partially
On the third issue regarding the Unions proposal for the use of the "last-in-first-out" method in case of lay-off, termination due to GRANTED. The assailed decision dated January 19, 1993 of voluntary arbitrator Buenaventura Magsalin is hereby AFFIRMED with
retrenchment and transfer of employees, the Union relies on social justice and equity to support its proposition, and submits that the the modification that the issue on salary increases for the second and third years of the collective bargaining agreement be
Universitys prerogative to select and/or choose the employees it will hire is limited, either by law or agreement, especially where the REMANDED to the voluntary arbitrator for definite resolution within one month from the finality of this Decision, on the basis of the
exercise of this prerogative might result in the loss of employment.[58] The Union further insists that its proposal is "in keeping with the externally audited financial statements of the University already submitted by the Union before the voluntary arbitrator and forming
avowed State policy (q) To ensure the participation of workers in decision and policy-making processes affecting their rights, duties part of the records. Scnc-m
and welfare (Art. 211, Labor Code, as amended)."[59]
SO ORDERED.
On the other hand, the University asserts its management prerogative and counters that "[w]hile it is recognized that this right of
employees and workers to participate in policy and decision-making processes affecting their rights and benefits as may be provided
by law has been enshrined in the Constitution (Article III, [should be Article XIII], Section 3, par. 2), said participation, however, does
not automatically entitle the Union to dictate as to how an employer should choose the employees to be affected by a retrenchment
program. The employer still retains the prerogative to determine the reasonable basis for selecting such employees." [60] Nc-m

We agree with the voluntary arbitrator that as an exercise of management prerogative, the University has the right to adopt valid and
equitable grounds as basis for terminating or transferring employees. As we ruled in the case of Autobus Workers' Union (AWU) and
Ricardo Escanlar vs. National Labor Relations Commission,[61] "[a] valid exercise of management prerogative is one which, among
others, covers: work assignment, working methods, time, supervision of workers, transfer of employees, work supervision, and the
discipline, dismissal and recall of workers. Except as provided for, or limited by special laws, an employer is free to regulate,
according to his own discretion and judgment, all aspects of employment." (emphasis supplied)

On the fourth issue involving the voluntary arbitrators ruling that on the basis of the Universitys proposed budget, the University can
no longer be required to grant a second round of wage increases for the school years 1991-92 and 1992-93 and charge the same to
the incremental proceeds, we find that the voluntary arbitrator committed grave abuse of discretion amounting to lack or excess of
jurisdiction. As we ruled in the case of Caltex Refinery Employees Association (CREA) vs. Jose S. Brillantes,[62] "xxx xxx. [w]e believe
that the standard proof of a company's financial standing is its financial statements duly audited by independent and credible external
auditors."[63] Financial statements audited by independent external auditors constitute the normal method of proof of profit and loss
performance of a company.[64] The financial capability of a company cannot be based on its proposed budget because a proposed
budget does not reflect the true financial condition of a company, unlike audited financial statements, and more importantly, the use
of a proposed budget as proof of a companys financial condition would be susceptible to abuse by scheming employers who might
be merely feigning dire financial condition in their business ventures in order to avoid granting salary increases and fringe benefits to
their employees.
22

8. [G.R. No. 131108. March 25, 1999] It has to be emphasized that the law allows an employer to retrench some 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
ASIAN ALCOHOL CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU incurring huge losses in its operations.
CITY and ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO, LEANDRO
O. VERAYO and ERENEO S. TORMO, respondents.
Complainants would want us to believe that their positions were abolished because they are union members, and that they were
replaced by casual employees. Complainants pretense is rather untenable. For one thing, the retrenchment program of AAC affected
DECISION not only union members but also the non-union members. As earlier said, there were 117 employees of AAC who were affected by
the reorganization. Of the 117 positions, 72 positions were abolished due to redundancy, 21 of which were occupied by union
PUNO, J.: members, while 51 were held by non-union members. Thus, the theory of complainants that they were terminated from work on
ground of their union membership is far from the truth.
Contending that the dismissal of private respondents Ernesto A. Carias, Roberto C. Martinez, Rafael H. Sendon, Carlos A.
Amacio, Leandro O. Verayo and Ereneo S. Tormo, was valid on the twin grounds of redundancy and retrenchment to prevent On the contrary, we find that complainants Ernesto Carias, Roberto Martinez and Rafael Sendon who were all Water Pump Tenders
business losses, petitioner Asian Alcohol Corporation (hereinafter referred to as Asian Alcohol) filed this petition for certiorari. Asian assigned to AACs water wells in Ubay, Pulupandan, Negros Occidental which were drilled and operated before under the old
Alcohol ascribes grave abuse of discretion to public respondents National Labor Relations Commission [1] (hereinafter referred to as management by virtue of right-of-way with the landowner, were retrenched as an offshoot to the termination of the lease agreement
NLRC) when, on May 30, 1997, it set aside[2] the decision[3] of the Executive Labor Arbiter dismissing the illegal termination as the water thereunder had become salty due to extensive prawn farming nearby, so that AAC could no longer use the water for its
complaints filed by private respondents. purpose. As a consequence, the services of Ernesto Carias, Roberto Martinez and Rafael Sendon had become unnecessary,
redundant and superfluous.
We first unfurl the facts.

In September, 1991, the Parsons family, who originally owned the controlling stocks in Asian Alcohol, were driven by mounting As regards complainants Leandro Verayo and Ereneo Tormo, the grounds cited by respondent AAC in support of its decision to
business losses to sell their majority rights to prior Holdings, Inc. (hereinafter referred to as Prior Holdings). The next month, Prior retrench them are too convincing to be ignored. Accordingly to respondent AAC, its boiler before was 100% coal fired. The boiler was
Holdings took over its management and operation.[4] manned by a briquetting plant operator in the person of Leandro Verayo and three (3) briquetting helpers, namely, Ereneo Tormo,
Eriberto Songaling, Jr. and Rudy Javier, Jr. Since AAC had shifted to the use of bunker fuel by about 70% to fire its boiler, its usage
To thwart further losses, Prior Holdings implemented a reorganizational plan and other cost-saving measures. Some one
of coal had been drastically reduced to only 30% of its total fuel usage in its production plant, thereby saving on fuel cost. For this
hundred seventeen (117) employees out of a total workforce of three hundred sixty (360) were separated. Seventy two (72) of them
reason, there was no more need for the position of briquetting plant operator and the services for only two briquetting helpers were
occupied redundant positions that were abolished. Of these positions, twenty one (21) were held by union members and fifty one (51)
determined to be adequate for the job of briquetting coal. Of the three (3) briquetting helpers, Ereneo Tormo was the oldest, being
by non-union members.
already 41 years old, the other two, Javier and Songaling, being only 28 and 35 respectively.Considering the manual nature of the
The six (6) private respondents are among those union members[5] whose positions were abolished due to redundancy. Private work of coal briquetting, younger workers are always preferred for reasons of efficiency [sic]. Hence the abolition of the position of
respondents Carias, Martinez, and Sendon were water pump tenders; Amacio was a machine shop mechanic; Verayo was a Ereneo Tormo. We have to stress that Eriberto Songaling, Jr. and Rudy Javier, Jr. are also union members. x x x
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.[6] With respect to Carlos Amacio, he was retrenched not because of his being a union member but because of his poor health condition
[7] which greatly affect[ed] his work efficiency. Records show that Carlos Amacio was among the ten machine shop mechanics
In October, 1992, they received individual notices of termination effective November 30, 1992. They were paid the equivalent
employed by respondent AAC. Under AACs reorganization plan, it needs only nine mechanics.
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, thirteenth (13th) month pay for the year 1992, medicine allowance, tax refunds, and goodwill cash bonuses for
those with at least ten (10) years of service. [8] All of them executed sworn releases, waivers and quitclaims. [9] Except for Verayo and xxx
Tormo, they all signed sworn statements of conformity to the company retrenchment program. [10] And except for Martinez, they all
tendered letters of resignation.[11]
On the whole, therefore, the dismissal of complainants on ground of redundancy/retrenchment was perfectly valid or legal. [12]
On December 18, 1992, the six (6) private respondents files with the NLRC Regional Arbitration Branch VI, Bacolod City,
complaints for illegal dismissal with a prayer for reinstatement with backwages, moral damages and attorneys fees. They alleged that Private respondents appealed to the NLRC.
Asian Alcohol used the retrenchment program as a subterfuge for the union busting. They claimed that they were singled out for
separation by reason for their active participation in the union. They also asseverated that Asian Alcohol was not bankrupt as it has On May 30, 1997, the NLRC rendered the challenged decision. It rejected the evidence proffered by Asian Alcohol to prove its
engaged in an aggressive scheme of contractual hiring. business reversals. It ruled that the positions of private respondents were not redundant for the simple reason that they were
replaced by casuals. The NLRC essayed this explanation:
The Executive Labor Arbiter dismissed the complaints. He explained, thus:

In this case, [that] the respondent terminated complainants to protect the company from future losses, does not create an impression
The fact that respondents AAC incurred losses in its business operations was not seriously challenged by the complainants. The fact of imminent loss. The company at the time of retrenchment was not then in the state of business reverses. There is therefore no
that it incurred substantial losses in its business operations prior to the implementation of its retrenchment program is amply reason to retrench. x x x
supported by the documents on records, (sic) namely: (1) Balance Sheet of AAC as of December 31, 1991 x x x, (2) Statement of
Income and Deficit for the year ended December 31, 1991 x x x, (3) Income Tax Return for Fiscal Year ending September 30, 1989 x
x x, (4) Income Tax Return for the Fiscal Year ending December 31, 1989 x x x, (5) Income Tax Return for Fiscal Year ending The alleged deficits of the corporations did not prove anything for the respondent. The financial status as shown in the Statement of
December 31, 1990 x x x, and (6) Income Tax Return for the Fiscal Year ending December 31, 1991 x x x, indicating an accumulated Income and Deficits and Income Tax Returns from 1989 to 1991, submitted by respondent was before the respondent, new
deficit of P26,117,889.00. management of Prior Holdings, Inc., took over the operation and management of the corporation in October, 199[1]. This is no proof
that on November 30, 1992 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.
23

Secondly in the case of REDUNDANCY. Out of its concern for those with less privilege in life, this Court has inclined towards the worker and upheld his cause in his
conflicts with the employer.[18] This favored treatment is directed by the social justice policy of the Constitution. [19] But while tilting the
scales of justice in favor of workers, the fundamental law also guarantees the right of the employer to reasonable returns from his
Redundancy exist where the service[s] of x x x employee[s] are in excess of what is reasonably demanded by the actual
investments.[20]Corollarily, the law allows an employer to downsize his business to meet clear and continuing economic
requirements of the enterprise. The evidence, however, proved that, in truth and in fact, the positions of the complainants were not
threats.[21] Thus, this Court has upheld reductions in the work force to forestall business losses or stop the hemorrhaging of capital.[22]
redundant for the simple reason that they were replaced by casuals.
The right of management to dismiss workers during periods of business recession and to install labor saving devices to prevent
xxx losses is governed by Art. 283 of the Labor Code, as amended. It provides, viz.:

Admittedly, from the testimonies of Engr. Palmares, the wells of the respondent were operated by contractors. Otherwise stated, Art. 283. Closure of establishment and reduction of personnel.--The employer may also terminate the employment of any employee
complainant[s] who are regular workers of the respondent, performing jobs necessary and desirable to the business of the company, due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of
were eased out in the guise of retrenchment or redundancy [so that] their jobs [will] be performed by workers belonging to a operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
contractor. serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service,
In summation, retrenchment and/or redundancy not having been proved, complainants, therefore, were illegally dismissed.[13] whichever is higher. In case of retrenchment to prevent losses and in case 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
The dispositive portion of the decision of the NLRC provides as follows: 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 ours]

WHEREFORE, premises considered, the Decision appealed from is hereby ordered SET ASIDE and VACATED and in lieu thereof,
the respondent Asian Alcohol Corporation is hereby ordered to reinstate complainants with full backwages from the time they were Under the foregoing provisions, retrenchment and redundancy are just causes for the employer to terminate the services of
dismissed on November 30, 1992 and up to actual reinstatement. Plus 10% attorneys fees. 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 by law and jurisprudence. [23]

SO ORDERED.[14] 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
On July 2, 1997, Asian Alcohol moved for reconsideration of the foregoing decision. On September 25, 1997, the NLRC denied employer;[24] (2) that the employer served written notice both to the employees and to the Department of Labor and Employment at
the motion.[15] least one month prior to the intended date of retrenchment; [25] (3) that the employer pays the retrenched employees separation pay
On January 12, 1998, Asian Alcohol filed in this Court a petition for certiorari assailing both the decision of the NLRC and the equivalent to one month pay or at least month pay for every year of service, whichever is higher; [26] (4) that the employer exercises its
resolution denying its reconsideration. It invoked the following grounds: prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees
right to security of tenure;[27] and (5) that the employer used fair and reasonable criteria[28] in ascertaining who would be dismissed
and who would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial
6. GROUNDS FOR THE PETITION employees), efficiency, seniority,[29] physical fitness, age, and financial hardship for certain workers.[30]

The condition of business losses is normally shown by audited financial documents like yearly balance sheets and profit and
6.1 Public respondent has committed, as hereinafter shown, a manifest grave abuse of discretion amounting to lack or excess of loss statements as well as annual income tax returns.[31] It is our ruling that financial statements must be prepared and signed by
jurisdiction in declaring in its assailed Decision x x x and Resolution x x x that the termination of the employment of private independent auditors.[32] Unless duly audited, they can be assailed as self-serving documents.[33] But it is not enough that only the
respondents by the petitioner herein is illegal and ordering their reinstatement with full backwages from the time they were dismissed financial statements for the year during which retrenchment was undertaken, are presented in evidence. For it may happen that while
on November 30, 1992 up to their actual reinstatement, plus 10% attorneys fees, said Decision and Resolution of the public the company has indeed been losing, its losses may be on a downward trend, indicating that business is picking up and
respondents being contrary to the established facts of the case, well-settled jurisprudence and the law on the matter. retrenchment, being a drastic move, should no longer be resorted to. [34] Thus, the failure of the employer to show its income or loss
for the immediately preceding year or to prove that it expected no abatement of such losses in the coming years, may bespeak the
6.2 Public respondent has likewise committed, as hereinafter shown, a manifest grave abuse of discretion amounting to lack or weakness of its cause.[35] It is necessary that the employer also show that its losses increased through a period of time and that the
excess of jurisdiction by totally disregarding and refusing to consider the factual findings of the Executive Labor Arbiter with respect to condition of the company is not likely to improve in the near future. [36]
the circumstances which rendered the positions of the private respondents unnecessary, redundant and superfluous, thereby
justifying the termination of their employment. In the instant case, private respondents never contested the veracity of the audited financial documents proffered by Asian
Alcohol before the Executive Labor Arbiter. Neither did they object their admissibility. They show that petitioner has accumulated
losses amounting to P306,764,349.00 and showing nary sign of abating in the near future. The allegation of union busting is bereft of
6.3 Public respondents has furthermore committed, as hereinafter shown, a manifest grave abuse of discretion amounting to lack or proof. Union and non-union members were treated alike. The records show that the positions of fifty one (51) other non-union
excess of jurisdiction in giving full credit to the oral testimonies quoted in its assailed Decision x x x and taking them as conclusive members were abolished due to business losses.
proof of the alleged replacement of the private respondents with casual workers despite the fact that said quoted testimonies clearly
amount to nothing but speculations, surmises and conjectures.[16] In rejecting petitioners claim of business losses, the NLRC stated that the alleged deficits of the corporation did not prove
anything for the [petitioners][37] since they were incurred before the take over of Prior Holdings. Theorizing that proof of losses before
the take over is no proof of losses after the take over, it faulted Asian Alcohol for retrenching private respondent on the ground of
On March 25, 1998, we issued a Temporary Restraining Order[17] enjoining the NLRC from enforcing its Decision and mere possible future losses[38].
Resolution dated May 30, 1997 and September 25, 1997, respectively.
We do not agree. It should be observed that Article 283 of the Labor Code uses the phrase retrenchment to prevent losses. In
We find the petition meritorious. its ordinary connotation, this phrase means that retrenchment must be undertaken by the employer before losses are actually
24

sustained.[39] We have, however, interpreted the law to mean that the employer need not keep all his employees until after his losses Private respondents call our attention to their allegation that casuals were hired to replace Carias, Martinez and Sendon as
shall have materialized.[40] Otherwise, the law could be vulnerable to attack as undue taking of property for the benefit of another. [41] water pump tenders at the Ubay wells. They rely on the testimony of Engr. Federico Palmares, Jr., the head of the Mechanical
Engineering Department who admitted the engagement of independent contractors to operate the wells. A reading of the testimony of
In the case at bar, Prior Holdings took over the operations of Asian Alcohol in October 1991. Plain to see, the last quarter Engr. Palmares, however, will reveal that he referred not to the Ubay wells which were tended by private respondents Carias,
losses in 1991 were already incurred under the new management. There were no signs that these losses would abate. Irrefutable Martinez and Sendon, but to the Laura wells. Thus, he declared in cross examinations:
was the fact that losses have bled Asian Alcohol incessantly over a span of several years. They were incurred under the
management of the Parsons family and continued to be suffered under the new management of Prior Holdings. Ultimately, it is Prior ATTY. YMBALLA: (cross-examination of respondent witness, Federico Palmares)
Holding that will absorb all the losses, including those incurred under the former owners of the company. The law gives the new Q But in the Laura well?
management every right to undertake measures to save the company from bankruptcy. WITNESS:
A Mansteel was hired as contractor.
We find that the reorganizational plan and comprehensive cost-saving program to turn the business around were nor designed ATTY. YMBALLA:
to bust the union of the private respondent. Retrenched were one hundred seventeen (117) employees. Seventy two (72) of them Q In other words, the persons mentioned are all workers of independent contractors?
including private respondent were separated because their positions had become redundant. In this context, what may technically be WITNESS:
considered as redundancy may verily be considered as retrenchment measures.[42] Their positions had to be declared redundant to A I am not sure, maybe.[50]
cut losses. In any event, we have held that an employers good faith in implementing a redundancy program is not necessarily destroyed
by availment of the services of an independent contractor to replace the services of the terminated employees. We have previously
Redundancy exist when the service capability of the work is in excess of what is reasonably needed to meet the demands on
ruled that the reduction of the number of workers in a company made necessary by the introduction of the services of an independent
the enterprise. A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased contractor is justified when the latter is undertaken in order to effectuate more economic and efficient methods of production.[51] In the
volume of business, dropping of a particular product line previously manufactured by the company or phasing out of a service activity case at bar, private respondent failed to proffer any proof that the management acted in a malicious or arbitrary manner in engaging
priorly undertaken by the business.[43] Under these conditions, the employer has no legal obligation to keep in its payroll more
the services of an independent contractor to operate the Laura wells. Absent such proof, the Court has no basis to interfere with
employees than are necessary for the operation of its business.[44] the bona fide decision of management to effect more economic and efficient methods of production.
For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (1) written Finally, private respondents now claim that they signed the quitclaims, waivers and voluntary resignation letters only to get their
notice served on both the employees and the Department of Labor and Employment at least one moth prior to the intended date of
separation package. They maintain that in principle, they did not believe that their dismissal was valid.
retrenchment;[45] (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; [46] and (4) fair and reasonable criteria in ascertaining It is true that this court has generally held that quitclaims and releases are contrary to public policy and therefore,
what positions are to be declared redundant and accordingly abolished. [47] void. Nonetheless, voluntary agreements that represents 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
In the case at bar, private respondent Carias, Martinez and Sendon were water pump tenders. They tended the water wells of settlement are unconscionable, that the law will step in to bail out the employees. While it is our duty to prevent the exploitation of
Asian Alcohol located in Ubay, Pulupandan, Negros Occidental. However, Asian Alcohol did not own the land where the wells employees, it is also behooves us to protect the sanctity of contracts that do not contravene our laws.
stood. It only leased them.
In the case at bar, there is no showing that the quitclaims, waivers and voluntary resignation letters were executed by the
In 1992, the lease contract which also provided for a right of way leading to the site of the wells, was terminated. Also, the private respondents under force or duress. In truth, the documents embodied separation benefits that were well beyond what the
water from the wells had become salty due to extensive prawn farming nearby and could no longer be used by Asian Alcohol for its company was legally required to give private respondents. We note that out of more than one hundred workers that were retrenched
purpose. The wells had to be closed and needless to say, the services of Carias, Martinez and Sendon had to be terminated on the
by Asian Alcohol, only these six (6) private respondents were not impressed by the generosity of their employer. Their late complaints
twin grounds of redundancy and retrenchment. have no basis and deserve our scant consideration.
Private respondent Verayo was the briquetting plant operator in charge of the coal-fired boiler. Private respondent Tormo was IN VIEW WHEREOF, the petition is GRANTED. The Decision of the National Labor Relations Commission dated May 30, 1997
one of the three briquetting helpers. To enhance production efficiency, the new management team shifted to the use of bunker fuel by
and its Resolution dated September 25, 1997 are ANNULED AND SET ASIDE. The Decision of the Executive Labor Arbiter dated
about seventy percent (70%) to fire its boiler. The shift meant substantial fuel cost savings. In the process, however the need for a January 10, 1996 in RAB Case No. 06-12-10893-92 is ORDERED REINSTATED. The complaints for illegal dismissal filed by private
briquetting plant operator ceased as the services of only two (2) helpers were all that was necessary to attend to the much lesser respondents against Asian Alcohol Corporation are hereby ORDERED DISMISSED FOR LACK OF MERIT. No cost.
amount of coal required to run the boiler. Thus, the positions of private respondent Verayo had to be abolished. Of the three (3)
briquetting helpers, Tormo, was the oldest, being already 41 years old. The other two, Rudy Javier Jr. and Eriberto Songaling, Jr., SO ORDERED.
were younger, being only 28 and 35, respectively. 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 private respondent Tormo who was separated
from service. The management choice rested on a rational basis.

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at the plant site. At their current
production level, the new management found that it was more cost efficient to maintain only nine (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. It was private respondent Amacio who appeared the least efficient because of his poor health conditions.

Not one of the private respondents refuted the foregoing facts. They only contend that the new management should have
followed the policy of first in, last out in choosing which positions to declare as redundant or whom to retrench to prevent further
business losses. No law mandates such a policy. And the reason is simple enough. A host of relevant factors come into play in
determining cost efficient measures and in choosing the employees who will be retained or separated to save the company from
closing shop. In determining these issues, management has to enjoy a pre-eminent role. The characterization of positions as
redundant is an exercise of business judgment on the part of the employer.[48] It will be upheld as long as it passes the test of
arbitrariness.[49]
25

9. 639 Phil. 1DIVISION


[ GR No. 170464, Jul 12, 2010 ] SO ORDERED.[12]
LAMBERT PAWNBROKERS v. HELEN BINAMIRA
Petitioners filed a Motion for Reconsideration.[13] On July 30, 2003, the NLRC set aside its Decision dated September 27, 2002 and
DEL CASTILLO, J.: entered a new one, the dispositive portion of which reads:

It is fundamental that an employer is liable for illegal dismissal when it terminates the services of the employee without just or
authorized cause and without due process of law. WHEREFORE, the Decision of November [sic] 27, 2002 is hereby SET ASIDE and a New One Entered declaring as valid the
redundancy of the position of the complainant. Accordingly respondent is hereby ordered to pay the complainant her redundancy pay
This Petition for Review on Certiorari[1] assails the Decision[2] dated August 4, 2005 of the Court of Appeals (CA) in CA-G.R. CEB SP of one month for every year of service and in lieu of notice, she should also be paid one (1) month salary as indemnity.
No. 00010, which reversed and set aside the Resolutions dated July 30, 2003 [3] and May 31, 2004[4] issued by the National Labor
Relations Commission (NLRC) in NLRC Case No. V-000454-00 (RAB VII-01-0003-99-B). SO ORDERED.[14]

Factual Antecedents In arriving at this conclusion, the NLRC opined that what was actually implemented by the petitioners was not retrenchment due to
serious business losses but termination due to redundancy. The NLRC observed that the Tagbilaran operations was overstaffed thus
Petitioner Lambert Lim (Lim) is a Malaysian national operating various businesses in Cebu and Bohol one of which is Lambert necessitating the termination of some employees. Moreover, the redundancy program was not properly implemented because no
Pawnbrokers and Jewelry Corporation. Lim is married to Rhodora Binamira, daughter of Atty. Boler Binamira, Sr., (Atty. Binamira), written notices were furnished the employee and the DOLE one month before the intended date of termination.
who is also the counsel and father-in-law of respondent Helen Binamira (Helen). Lambert Pawnbrokers and Jewelry Corporation -
Tagbilaran Branch hired Helen as an appraiser in July 1995 and designated her as Vault Custodian in 1996. The Motion for Reconsideration filed by Helen was denied by the NLRC through its Resolution[15] dated May 31, 2004.

On September 14, 1998, Helen received a letter[5] from Lim terminating her employment effective that same day. Lim cited business Ruling of the Court of Appeals
losses necessitating retrenchment as the reason for the termination.
On petition for certiorari,[16] the CA found that both the Labor Arbiter and the NLRC failed to consider substantial evidence showing
Helen thus filed a case for illegal dismissal against petitioners docketed as NLRC RAB-VII CASE NO. 01-0003-99-B.[6] In her that the exercise of management prerogative, in this instance, was done in bad faith and in violation of the employee's right to due
Position Paper[7] Helen alleged that she was dismissed without cause and the benefit of due process. She claimed that she was a process. The CA ruled that there was no redundancy because the position of vault custodian is a requisite, necessary and desirable
mere casualty of the war of attrition between Lim and the Binamira family. Moreover, she claimed that there was no proof that the position in the pawnshop business. There was likewise no retrenchment because none of the conditions for retrenchment is present
company was suffering from business losses. in this case.

In their Position Paper,[8] petitioners asserted that they had no choice but to retrench respondent due to economic reverses. The On August 4, 2005, the CA issued its Decision which provides:
corporation suffered a marked decline in profits as well as substantial and persistent increase in losses. In its Statement of Income
and Expenses, its gross income for 1998 dropped from P1million to P665,000.00.
WHEREFORE, the Resolution dated July 30, 2003 and May 31, 2004 issued by the National Labor Relations Commission in NLRC
Ruling of the Labor Arbiter Case No. V-000454-00 (RAB VII-01-0003-99-B), is hereby REVERSED and SET ASIDE.

On November 26, 1999, Labor Arbiter Geoffrey P. Villahermosa rendered a Decision[9] which held that Helen was not illegally A new Decision is hereby entered declaring the dismissal of petitioner, Helen B. Binamira, as illegal and directing the private
dismissed but was validly retrenched. The dispositive portion of the Labor Arbiter's Decision reads: respondents, Lambert's Pawnbroker and Jewelry Corporation and Lambert Lim, jointly and solidarily, to pay to the petitioner, the
following monetary awards:

WHEREFORE, all the foregoing premises being considered judgment is hereby rendered declaring the respondent not guilty of
illegally terminating the complainant but is however directed to pay the complainant her retrenchment benefit in the amount of Seven
Thousand Five Hundred Pesos (P7,500.00), considering that she was receiving a monthly salary of P5,000.00 and rendered service 1. Backwages from the date of her illegal suspension and dismissal until she is reinstated;
for three (3) years.
2. Considering that reinstatement is not feasible in view of the strained relations between the employer and the employee,
SO ORDERED. [10] separation pay is hereby decreed at the rate of one (1) month's pay for every year of service;

Ruling of the NLRC 3. Moral damages in the amount of Twenty Five Thousand Pesos (P25,000.00);

On appeal, the NLRC reversed and set aside the Decision of the Labor Arbiter. It observed that for retrenchment to be valid, a 4. Exemplary damages in the amount of Twenty Five Thousand Pesos (P25,000.00);
written notice shall be given to the employee and to the Department of Labor and Employment (DOLE) at least one month prior to the
5. Attorney's fees in the amount equivalent to Ten Percent (10%) of the monetary awards herein above enumerated; and
intended date thereof. Since none was given in this case, then the retrenchment of Helen was not valid. The dispositive portion of
the Decision[11]reads:
6. Costs.

WHEREFORE, premises duly considered, the decision of the Labor Arbiter dated 26 November 1999 is hereby REVERSED and SET SO ORDERED.[17]
ASIDE and respondents are ordered to reinstate complainant Helen Binamira to her former position without loss of seniority rights
and with full backwages from the time of her dismissal up to the promulgation of this decision. The Motion for Reconsideration filed by petitioners was denied by the CA through its Resolution[18] dated November 7, 2005.

Other claims are denied for lack of merit.


26

Issues reconsideration, the NLRC changed its posture and ruled that the dismissal was valid on the ground of redundancy due to over-
hiring. Considering the diverse findings of the Labor Arbiter and the NLRC, it behooved upon the CA in the exercise of
Hence, this petition raising the following issues: its certiorari jurisdiction to determine which findings are more in conformity with the evidentiary facts.

There was no valid dismissal based on


I. retrenchment.

Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari, the findings of facts of both the Labor Retrenchment is the termination of employment initiated by the employer through no fault of and without prejudice to the employees.
Arbiter and the NLRC that the dismissal of respondent was with valid and legal basis. It is resorted to during periods of business recession, industrial depression, seasonal fluctuations, or during lulls occasioned by lack
of orders, shortage of materials, conversion of the plant to a new production program, or automation. [21] It is a management
prerogative resorted to avoid or minimize business losses, and is recognized by Article 283 of the Labor Code, which reads:
II.

Whether the CA gravely erred in reversing, through the extra-ordinary remedy of certiorari, the unanimous findings of fact of both the Art. 283. Closure of establishment and reduction of personnel.- The employer may also terminate the employment of any employee
Labor Arbiter and the NLRC that the dismissal of respondent was not attended by bad faith or fraud. due to x x x retrenchment to prevent losses or the closing or cessation of operations of the establishment x x x by serving a written
notice on the worker and the DOLE at least one month before the intended date thereof. x x x In case of retrenchment to prevent
losses, the separation pay shall be equivalent to one (1) month pay or at least one-half month for every year of service whichever is
III. higher. x x x (Emphasis ours)

Whether the CA erred in reversing, through the extra-ordinary remedy of certiorari, the findings of facts of both the Labor Arbiter and To effect a valid retrenchment, the following elements must be present: (1) the retrenchment is reasonably necessary and likely to
the NLRC based merely on the allegations and evidences made and submitted by the former counsel, adviser and business partner prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious and real, or only if expected,
of petitioners.[19] are reasonably imminent as perceived objectively and in good faith by the employer; (2) the employer serves written notice both to
the employee/s concerned and the DOLE at least one month before the intended date of retrenchment; (3) the employer pays the
Petitioners' Arguments retrenched employee separation pay in an amount prescribed by the Code; (4) the employer exercises its prerogative to retrench in
good faith; and (5) the employer uses fair and reasonable criteria in ascertaining who would be retrenched or retained. [22]
Petitioners assail the propriety of the reversal by the CA of the factual findings of both the Labor Arbiter and the NLRC on a Petition
for Certiorari under Rule 65. Petitioners posit that a writ of certiorari is proper only to correct errors of jurisdiction or when there is The losses must be supported by sufficient and convincing evidence. The normal method of discharging this is by the submission of
grave abuse of discretion tantamount to lack or excess of jurisdiction committed by the labor tribunals. They asserted that where the financial statements duly audited by independent external auditors. In this case, however, the Statement of Income and
issue or question involved affects the wisdom or legal soundness of a decision, the same is beyond the province of a special civil Expenses[23] for the year 1997-1998 submitted by the petitioners was prepared only on January 12, 1999. Thus, it is highly
action for certiorari. improbable that the management already knew on September 14, 1998, the date of Helen's retrenchment, that they would be
incurring substantial losses.
Petitioners further contend that the CA erred in ruling that the dismissal was not valid and that it was done in bad faith.
At any rate, we perused over the financial statements submitted by petitioners and we find no evidence at all that the company was
Respondent's Arguments suffering from business losses. In fact, in their Position Paper, petitioners merely alleged a sharp drop in its income in 1998 from
P1million to only P665,000.00. This is not the business losses contemplated by the Labor Code that would justify a valid
On the other hand, Helen avers that the contradictory findings of fact of the Labor Arbiter and the NLRC justifies the CA to review the retrenchment. A mere decline in gross income cannot in any manner be considered as serious business losses. It should be
findings of fact of the labor tribunals. She further submits that both labor tribunals failed to consider substantial evidence showing that substantial, sustained and real.
petitioners' exercise of management prerogative was done in utter bad faith and in violation of her right to due process.
To make matters worse, there was also no showing that petitioners adopted other cost- saving measures before resorting to
retrenchment. They also did not use any fair and reasonable criteria in ascertaining who would be retrenched. Finally, no written
Our Ruling notices were served on the employee and the DOLE prior to the implementation of the retrenchment. Helen received her notice only
on September 14, 1998, the day when her termination would supposedly take effect. This is in clear violation of the Labor Code
The petition is without merit. provision which requires notice at least one month prior to the intended date of termination.

The CA correctly reviewed the factual There was no valid dismissal based on redundancy.
findings of the labor tribunals.
Redundancy, on the other hand, exists when the service capability of the workforce is in excess of what is reasonably needed to
As a rule, a petition for certiorari under Rule 65 is valid only when the question involved is an error of jurisdiction, or when there is meet the demands of the enterprise. A redundant position is one rendered superfluous by any number of factors, such as over hiring
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the court or tribunals exercising quasi-judicial of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company, or phasing
functions. Hence, courts exercising certiorari jurisdiction should refrain from reviewing factual assessments of the respondent court or out of a service activity previously undertaken by the business. Under these conditions, the employer has no legal obligation to keep
agency. Occasionally, however, they are constrained to wade into factual matters when the evidence on record does not support in its payroll more employees than are necessary for the operation of its business. [24]
those factual findings; or when too much is concluded, inferred or deduced from the bare or incomplete facts appearing on
record,[20] as in the present case. 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 DOLE at least one month prior to the intended date of termination of employment; (2)
We find that the CA rightfully reviewed the correctness of the labor tribunals' factual findings not only because of the foregoing payment of separation pay equivalent to at least one month pay for every year of service; (3) good faith in abolishing the redundant
inadequacies, but also because the NLRC and the Labor Arbiter came up with conflicting findings. The Labor Arbiter found that positions; and (4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly
Helen's dismissal was valid on account of retrenchment due to economic reverses. On the other hand, the NLRC originally ruled that abolished.[25]
Helen's dismissal was illegal as none of the requisites of a valid retrenchment was present. However, upon motion for
27

In this case, there is no proof that the essential requisites for a valid redundancy program as a ground for the termination of the expenses to protect his rights and interest, the award of attorney's fees is legally and morally justifiable.[32]
employment of respondent are present. There was no showing that the function of respondent is superfluous or that the business
was suffering from a serious downturn that would warrant redundancy considering that such serious business downturn was the WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision of the Court of Appeals in CA-G.R. CEB SP No.
ground cited by petitioners in the termination letter sent to respondent. [26] 00010 dated August 4, 2005 finding the dismissal of respondent Helen B. Binamira as illegal is Affirmed with MODIFICATIONS that
respondent is entitled to receive full backwages from the time she was illegally dismissed on September 14, 1998 as well as to
In fine, Helen's dismissal is illegal for lack of just or authorized cause and failure to observe due process of law. separation pay in lieu of reinstatement equivalent to one month salary for every year of service. The amounts awarded as moral
damages and exemplary damages are deleted for lack of basis. Finally, only petitioner Lambert Pawnbrokers and Jewelry
Lambert Pawnbrokers and Jewelry Corporation is solely liable for the illegal dismissal of respondent. Corporation is found liable for the illegal dismissal of respondent.

As a general rule, only the employer-corporation, partnership or association or any other entity, and not its officers, which may be SO ORDERED
held liable for illegal dismissal of employees or for other wrongful acts. This is as it should be because a corporation is a juridical
entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising
it.[27] A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred as a result of
the directors' and officers' acts as corporate agents, are not their personal liability but the direct responsibility of the corporation they
represent.[28] It is settled that in the absence of malice and bad faith, a stockholder or an officer of a corporation cannot be made
personally liable for corporate liabilities. [29] They are only solidarily liable with the corporation for the illegal termination of services of
employees if they acted with malice or bad faith. In Philippine American Life and General Insurance v. Gramaje,[30] bad faith is
defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for ulterior
purpose. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.

In the present case, malice or bad faith on the part of Lim as a corporate officer was not sufficiently proven to justify a ruling holding
him solidarily liable with the corporation. The lack of authorized or just cause to terminate one's employment and the failure to
observe due process do not ipso facto mean that the corporate officer acted with malice or bad faith. There must be independent
proof of malice or bad faith which is lacking in the present case.

There is no violation of attorney-client relationship.

We find no merit in petitioners' assertion that Atty. Binamira gravely breached and abused the rule on privileged communication
under the Rules of Court and the Code of Professional Responsibility of Lawyers when he represented Helen in the present case.
Notably, this issue was never raised before the labor tribunals and was raised for the first time only on appeal. Moreover, records
show that although petitioners previously employed Atty. Binamira to manage several businesses, there is no showing that they
likewise engaged his professional services as a lawyer. Likewise, at the time the instant complaint was filed, Atty. Binamira was no
longer under the employ of petitioners.

Respondent is entitled to the following


relief under the law.

An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges and to this full
backwages, inclusive of allowances, and to her other benefits or their monetary equivalent, computed from the time the
compensation was withheld up to the time of actual reinstatement. Where reinstatement is no longer feasible, separation pay
equivalent to at least one month salary or one month salary for every year of service, whichever is higher, a fraction of at least six
months being considered as one whole year, should be awarded to respondent.

In this case, Helen is entitled to her full backwages from the time she was illegally dismissed on September 14, 1998. Considering
the strained relations between the parties, reinstatement is no longer feasible. Consequently, Helen is also entitled to receive
separation pay equivalent to one month salary for every year of service.

A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the dismissed employee to moral
damages. The award of moral and exemplary damages cannot be justified solely upon the premise that the employer dismissed his
employee without authorized cause and due process.[31]

Considering that there is no clear and convincing evidence showing that the termination of Helen's services had been carried out in
an arbitrary, capricious and malicious manner, the award of moral and exemplary damages is not warranted.

Consequently, the moral and exemplary damages awarded by the CA are hereby deleted.

However, the award of attorney's fee is warranted pursuant to Article 111 of the Labor Code. Ten (10%) percent of the total award is
usually the reasonable amount of attorney's fees awarded. It is settled that where an employee was forced to litigate and, thus, incur
28

10. G.R. No. 178083 July 22, 2008 On September 4, 1998, PAL, through its Chairman and Chief Executive Officer (CEO) Lucio Tan, made an offer to transfer shares of
FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE PHILIPPINES (FASAP), Petitioner, stock to its employees and three seats in its Board of Directors, on the condition that all the existing Collective Bargaining
vs. Agreements (CBAs) with its employees would be suspended for 10 years, but it was rejected by the employees. On September 17,
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and COURT OF APPEALS, Respondents. 1998, PAL informed its employees that it was shutting down its operations effective September 23, 1998, 13 despite the previous
approval on June 23, 1998 of its rehabilitation plan.
DECISION
On September 23, 1998, PAL ceased its operations and sent notices of termination to its employees. Two days later, PAL
YNARES-SANTIAGO, J.: employees, through the Philippine Airlines Employees Association (PALEA) board, sought the intervention of then President Joseph
E. Estrada. PALEA offered a 10-year moratorium on strikes and similar actions and a waiver of some of the economic benefits in the
existing CBA. Lucio Tan, however, rejected this counter-offer.14
This petition for review on certiorari assails the Decision1 of the Court of Appeals (CA) dated August 23, 2006 in CA-G.R. SP No.
87956 which affirmed the National Labor Relations Commissions (NLRC) decision setting aside the Labor Arbiters findings of illegal
retrenchment and ordering the reinstatement of the retrenched Philippine Airlines, Inc. (PAL) employee-members of petitioner Flight On September 27, 1998, the PALEA board again wrote the President proposing the following terms and conditions, subject to
Attendants and Stewards Association of the Philippines (FASAP), with payment of backwages, moral and exemplary damages, and ratification by the general membership:
attorneys fees. Also assailed is the May 29, 2007 Resolution2 denying the motion for reconsideration.
1. Each PAL employee shall be granted 60,000 shares of stock with a par value of P5.00, from Mr. Lucio Tans
Petitioner FASAP is the duly certified collective bargaining representative of PAL flight attendants and stewards, or collectively known shareholdings, with three (3) seats in the PAL Board and an additional seat from government shares as indicated by His
as PAL cabin crew personnel. Respondent PAL is a domestic corporation organized and existing under the laws of the Republic of Excellency;
the Philippines, operating as a common carrier transporting passengers and cargo through aircraft.
2. Likewise, PALEA shall, as far as practicable, be granted adequate representation in committees or bodies which deal
On June 15, 1998, PAL retrenched 5,000 of its employees, including more than 1,400 of its cabin crew personnel, to take effect on with matters affecting terms and conditions of employment;
July 15, 1998. PAL adopted the retrenchment scheme allegedly to cut costs and mitigate huge financial losses as a result of a
downturn in the airline industry brought about by the Asian financial crisis. During said period, PAL claims to have incurred P90 billion
3. To enhance and strengthen labor-management relations, the existing Labor-Management Coordinating Council shall be
in liabilities, while its assets stood at P85 billion.3
reorganized and revitalized, with adequate representation from both PAL management and PALEA;

In implementing the retrenchment scheme, PAL adopted its so-called "Plan 14" whereby PALs fleet of aircraft would be reduced from
4. To assure investors and creditors of industrial peace, PALEA agrees, subject to the ratification by the general
54 to 14, thus requiring the services of only 654 cabin crew personnel. 4 PAL admits that the retrenchment is wholly premised upon
membership, (to) the suspension of the PAL-PALEA CBA for a period of ten (10) years, provided the following safeguards
such reduction in fleet,5 and to "the strike staged by PAL pilots since this action also translated into a reduction of flights."6 PAL
are in place:
claims that the scheme resulted in "savings x x x amounting to approximately P24 million per month savings that would greatly
alleviate PALs financial crisis."7
a. PAL shall continue recognizing PALEA as the duly certified bargaining agent of the regular rank-and-file
ground employees of the Company;
Prior to the full implementation of the assailed retrenchment program, FASAP and PAL conducted a series of consultations and
meetings and explored all possibilities of cushioning the impact of the impending reduction in cabin crew personnel. However, the
parties failed to agree on how the scheme would be implemented. Thus PAL unilaterally resolved to utilize the criteria set forth in b. The union shop/maintenance of membership provision under the PAL-PALEA CBA shall be respected.
Section 112 of the PAL-FASAP Collective Bargaining Agreement8 (CBA) in retrenching cabin crew personnel: that is, that
retrenchment shall be based on the individual employees efficiency rating and seniority.
c. No salary deduction, with full medical benefits.

PAL determined the cabin crew personnel efficiency ratings through an evaluation of the individual cabin crew members overall
performance for the year 1997 alone.9 Their respective performance during previous years, i.e., the whole duration of service with 5. PAL shall grant the benefits under the 26 July 1998 Memorandum of Agreement forged by and between PAL and
PAL of each cabin crew personnel, was not considered. The factors taken into account on whether the cabin crew member would be PALEA, to those employees who may opt to retire or be separated from the company.
retrenched, demoted or retained were: 1) the existence of excess sick leaves; 2) the crew members being physically overweight; 3)
seniority; and 4) previous suspensions or warnings imposed.10 6. PALEA members who have been retrenched but have not received separation benefits shall be granted priority in the
hiring/rehiring of employees.
While consultations between FASAP and PAL were ongoing, the latter began implementing its retrenchment program by initially
terminating the services of 140 probationary cabin attendants only to rehire them in April 1998. Moreover, their employment was 7. In the absence of applicable Company rule or regulation, the provisions of the Labor Code shall apply.15
made permanent and regular.11
In a referendum conducted on October 2, 1998, PAL employees ratified the above proposal. On October 7, 1998, PAL resumed
On July 15, 1998, however, PAL carried out the retrenchment of its more than 1,400 cabin crew personnel. domestic operations and, soon after, international flights as well.16

Meanwhile, in June 1998, PAL was placed under corporate rehabilitation and a rehabilitation plan was approved per Securities and Meanwhile, in November 1998, or five months after the June 15, 1998 mass dismissal of its cabin crew personnel, PAL began
Exchange Commission (SEC) Order dated June 23, 1998 in SEC Case No. 06-98-6004.12 recalling to service those it had previously retrenched. Thus, in November 199817 and up to March 1999,18 several of those
retrenched were called back to service. To date, PAL claims to have recalled 820 of the retrenched cabin crew personnel. 19 FASAP,
however, claims that only 80 were recalled as of January 2001. 20
29

In December 1998, PAL submitted a "stand-alone" rehabilitation plan to the SEC by which it undertook a recovery on its own while 2. Pay the concerned cabin attendants their full backwages from the time they were illegally dismissed/retrenched up to
keeping its options open for the entry of a strategic partner in the future. Accordingly, it submitted an amended rehabilitation plan to their actual reinstatements;
the SEC with a proposed revised business and financial restructuring plan, which required the infusion of US$200 million in new
equity into the airline.
3. Pay moral and exemplary damages in the amount of Five Hundred Thousand Pesos (P500,000.00); and

On May 17, 1999, the SEC approved the proposed "Amended and Restated Rehabilitation Plan" of PAL and appointed a permanent
4. Ten (10%) per cent of the total monetary award as and by way of attorneys fees.
rehabilitation receiver for the latter.21

SO ORDERED.34
On June 7, 1999, the SEC issued an Order confirming its approval of the "Amended and Restated Rehabilitation Plan" of PAL. In
said order, the cash infusion of US$200 million made by Lucio Tan on June 4, 1999 was acknowledged. 22
Respondents appealed to the NLRC. Meanwhile, FASAP moved for the implementation of the reinstatement aspect of the Labor
23 Arbiters decision. Despite respondents opposition, the Labor Arbiter issued a writ of execution with respect to the reinstatement
On October 4, 2007, PAL officially exited receivership; thus, our ruling in Philippine Air Lines v. Kurangking no longer applies.
directive in his decision. Respondents moved to quash the writ, but the Labor Arbiter denied the same. Again, respondents took issue
with the NLRC.
On June 22, 1998, FASAP filed a Complaint24 against PAL and Patria T. Chiong25 (Chiong) for unfair labor practice, illegal
retrenchment with claims for reinstatement and payment of salaries, allowances and backwages of affected FASAP members, actual,
Meanwhile, on May 31, 2004, the NLRC issued its Decision35 in the appeal with respect to the Labor Arbiters July 21, 2000 decision.
moral and exemplary damages with a prayer to enjoin the retrenchment program then being implemented. Instead of a position
The dispositive portion thereof reads:
paper, respondents filed a Motion to Dismiss and/or Consolidation with NCMB Case No. NS 12-514-97 pending with the Office of the
Secretary of the Department of Labor and Employment and/or Suspension and Referral of Claims to the interim rehabilitation
proceedings (motion to dismiss).26 WHEREFORE, premises considered, the Decision dated July 21, 2000 is hereby SET ASIDE and a new one entered DISMISSING
the consolidated cases for lack of merit.
On July 6, 1998, FASAP filed its Comment to respondents motion to dismiss. On July 23, 1998, the Labor Arbiter issued an
Order27 denying respondents motion to dismiss; granting a writ of preliminary injunction against PALs implementation of its With respect to complainant Ms. Begonia Blanco, her demotion is hereby declared illegal and respondent PAL is ordered to pay her
retrenchment program with respect to FASAP members; setting aside the respective notices of retrenchment addressed to the cabin salary differential covering the period from the time she was downgraded in July 1998 up to the time she resigned in October 1999.
crew; directing respondents to restore the said retrenched cabin crew to their positions and PALs payroll until final determination of
the case; and directing respondents to file their position paper.
Respondent PAL is likewise ordered to pay the separation benefits to those complainants who have not received their separation pay
and to pay the balance to those who have received partial separation pay.
Respondents appealed to the NLRC which reversed the decision of the Labor Arbiter. The NLRC directed the lifting of the writ of
injunction and to vacate the directive setting aside the notices of retrenchment and reinstating the dismissed cabin crew to their
respective positions and in the PAL payroll.28 The Order of the Labor Arbiter dated April 6, 2000 is also SET ASIDE and the Writ of Execution dated November 13, 2000 is hereby
quashed.

FASAP filed its Position Paper29 on September 28, 1999. On November 8, 1999, respondents filed their Position Paper30 with
counterclaims against FASAP, to which FASAP filed its Reply.31 Thereafter, the parties were directed to file their respective Annexes "A" and "B" are considered part of this Decision.
Memoranda.32
SO ORDERED.36
Meanwhile, instead of being dismissed in accordance with the Kurangking case, the FASAP case (NLRC-NCR Case No. 06-05100-
98) was consolidated with the following cases: FASAP moved for reconsideration but it was denied; hence it filed an appeal to the Court of Appeals which was denied in the herein
assailed Decision.
1. Ramon and Marian Joy Camahort v. PAL, et al. (NLRC-NCR Case No. 00-07-05854-98);
FASAPs motion for reconsideration was likewise denied; hence, the instant petition raising the following issues:
2. Erlinda Arevalo and Chonas Santos v. PAL, et al. (NLRC-NCR Case No. 00-07-09793-98); and
WHETHER OR NOT THE COURT OF APPEALS DECIDED THE CASE A QUO IN A WAY CONTRARY TO LAW AND/OR
3. Victor Lanza v. PAL, et al. (NLRC-NCR Case No.00-04-04254-99). APPLICABLE JURISPRUDENCE WHEN IT DENIED FASAPS PETITION FOR CERTIORARI UNDER RULE 65 AND
EFFECTIVELY VALIDATED THE RETRENCHMENT EXERCISED BY RESPONDENT PAL WHICH WAS INITIALLY DECLARED AS
ILLEGAL BY THE LABOR ARBITER A QUO SINCE:
On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a Decision, 33 the dispositive portion of which reads, as follows:
FIRST, the record shows that PAL failed or neglected to adopt less drastic cost-cutting measures before resorting to retrenchment.
WHEREFORE, premises considered, this Office renders judgment declaring that Philippine Airlines, Inc., illegally retrenched One No less than the Supreme Court held that resort to less drastic cost-cutting measures is an indispensable requirement for a valid
Thousand Four Hundred (1,400) cabin attendants including flight pursers for effecting the retrenchment program in a despotic and retrenchment x x x.
whimsical manner. Philippine Airlines, Inc. is likewise hereby ordered to:
SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a reference in its alleged assessment of employee efficiency.
1. Reinstate the cabin attendants retrenched and/or demoted to their previous positions; With this, it totally disregarded the employees performance during the years prior to 1997. This resulted in the unreasonable and
30

unfair retrenchment or demotion of several flight pursers and attendants who showed impeccable service records during the years (1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not
prior to 1997. 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;
THIRD, seniority was totally disregarded in the selection of employees to be retrenched, which is a clear and willful violation of the
CBA. (2) That the employer served written notice both to the employees and to the Department of Labor and Employment at
least one month prior to the intended date of retrenchment;
FOURTH, PAL maliciously represented in the proceedings below that it could only operate on a fleet of fourteen (14) planes in order
to justify the retrenchment scheme. Yet, the evidence on record revealed that PAL operated a fleet of twenty two (22) planes. In fact, (3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half
after having illegally retrenched the unfortunate flight attendants and pursers, PAL rehired those who were capriciously dismissed () month pay for every year of service, whichever is higher;
and even hired from the outside just to fulfill their manning requirements.
(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and
FIFTH, PAL did not use any fair and reasonable criteria in effecting retrenchment. If there really was any, the same was applied not to defeat or circumvent the employees right to security of tenure; and,
arbitrarily, if not discriminatorily.
(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained
FINALLY, and perhaps the worst transgression of FASAPs rights, PAL used retrenchment to veil its union-busting motives and among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain
struck at the heart of FASAP when it retrenched seven (7) of its twelve (12) officers and demoted three (3) others.37 (Emphasis workers.45
supplied)
In view of the facts and the issues raised, the resolution of the instant petition hinges on a determination of the existence of the first,
These issues boil down to the question of whether PALs retrenchment scheme was justified. fourth and the fifth elements set forth above, as well as compliance therewith by PAL, taking to mind that the burden of proof in
retrenchment cases lies with the employer in showing valid cause for dismissal; 46that legitimate business reasons exist to justify
retrenchment.47
It is a settled rule that in the exercise of the Supreme Courts power of review, the Court is not a trier of facts and does not normally
undertake the re-examination of the evidence presented by the contending parties during trial. However, there are several exceptions
to this rule38 such as when the factual findings of the Labor Arbiter differ from those of the NLRC, as in the instant case, which opens FIRST ELEMENT: That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are
the door to a review by this Court.39 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.
Under the Labor Code, retrenchment or reduction of employees is authorized as follows:
The employers prerogative to layoff employees is subject to certain limitations. In Lopez Sugar Corporation v. Federation of Free
Workers,48 we held that:
ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee
due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of
the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled
written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would
case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence
separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise
not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one- laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively
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) prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses,
whole year. 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 employers
The law recognizes the right of every business entity to reduce its work force if the same is made necessary by compelling economic
prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic
factors which would endanger its existence or stability.40 Where appropriate and where conditions are in accord with law and
means - e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving
jurisprudence, the Court has authorized valid reductions in the work force to forestall business losses, the hemorrhaging of capital, or
manufacturing efficiencies, trimming of marketing and advertising costs, etc. - have been tried and found wanting.
even to recognize an obvious reduction in the volume of business which has rendered certain employees redundant. 41

Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be
Nevertheless, while it is true that the exercise of this right is a prerogative of management, there must be faithful compliance with
forestalled, must be proved by sufficient and convincing evidence.
substantive and procedural requirements of the law and jurisprudence, for retrenchment strikes at the very heart of the workers
employment, the lifeblood upon which he and his family owe their survival. Retrenchment is only a measure of last resort, when other
less drastic means have been tried and found to be inadequate.42 The law speaks of serious business losses or financial reverses. Sliding incomes or decreasing gross revenues are not necessarily
losses, much less serious business losses within the meaning of the law. The fact that an employer may have sustained a net loss,
such loss, per se, absent any other evidence on its impact on the business, nor on expected losses that would have been incurred
The burden clearly falls upon the employer to prove economic or business losses with sufficient supporting evidence. Its failure to
had operations been continued, may not amount to serious business losses mentioned in the law. The employer must show that its
prove these reverses or losses necessarily means that the employees dismissal was not justified.43 Any claim of actual or potential
losses increased through a period of time and that the condition of the company will not likely improve in the near future, 49 or that it
business losses must satisfy certain established standards, all of which must concur, before any reduction of personnel becomes
legal.44 These are:
31

expected no abatement of its losses in the coming years.50 Put simply, not every loss incurred or expected to be incurred by a Records show that PAL was not even aware of its actual financial position when it implemented its retrenchment program. It initially
company will justify retrenchment.51 decided to cut its fleet size to only 14 ("Plan 14") and based on said plan, it retrenched more than 1,400 of its cabin crew personnel.
Later on, however, it abandoned its "Plan 14" and decided to retain 22 units of aircraft ("Plan 22"). Unfortunately, it has retrenched
more than what was necessary. PAL admits that:
The employer must also exhaust all other means to avoid further losses without retrenching its employees. 52Retrenchment is a
means of last resort; it is justified only when all other less drastic means have been tried and found insufficient. 53 Even assuming that
the employer has actually incurred losses by reason of the Asian economic crisis, the retrenchment is not completely justified if there [U]pon reconsideration and with some optimistic prospects for operations, the Company (PAL) decided not to implement "Plan 14"
is no showing that the retrenchment was the last recourse resorted to. 54 Where the only less drastic measure that the employer and instead implemented "Plan 22," which would involve a fleet of 22 planes. Since "Plan 14" was abandoned, the Company deemed
undertook was the rotation work scheme, or the three-day-work-per-employee-per-week schedule, and it did not endeavor at other it appropriate to recall back into employment employees it had previously retrenched. Thus, some of the employees who were initially
measures, such as cost reduction, lesser investment on raw materials, adjustment of the work routine to avoid scheduled power laid off were recalled back to duty, the basis of which was passing the 1997 efficiency rating to meet the Companys operational
failure, reduction of the bonuses and salaries of both management and rank-and-file, improvement of manufacturing efficiency, and requirements.68
trimming of marketing and advertising costs, the claim that retrenchment was done in good faith to avoid losses is belied. 55
PAL decided to adopt "Plan 14" on June 12, 1998. Three days after, or on June 15, 1998, it sent notices of retrenchment to its cabin
Alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and crew personnel to take effect on July 15, 1998. However, after allegedly realizing that it was going to retain 22 of its aircraft instead of
convincing evidence. The reason for requiring this is readily apparent: any less exacting standard of proof would render too easy the 14, and after more than 1,400 of its cabin crew have been fired during the period from November 30, 1998 to December 15, 1998, it
abuse of this ground for termination of services of employees; scheming employers might be merely feigning business losses or suddenly recalled to duty 202 of the retrenched cabin crew personnel. 69
reverses in order to ease out employees.56
This only proves that PAL was not aware of the true state of its finances at the time it implemented the assailed massive
In establishing a unilateral claim of actual or potential losses, financial statements audited by independent external auditors constitute retrenchment scheme. It embarked on the mass dismissal without first undertaking a well-considered study on the proposed
the normal method of proof of profit and loss performance of a company.57 The condition of business losses justifying retrenchment is retrenchment scheme. This view is underscored by the fact that previously, PAL terminated the services of 140 probationary cabin
normally shown by audited financial documents like yearly balance sheets and profit and loss statements as well as annual income attendants, but rehired them almost immediately and even converted their employment into permanent and regular, even as a
tax returns. Financial statements must be prepared and signed by independent auditors; otherwise, they may be assailed as self- massive retrenchment was already looming in the horizon.
serving.58 A Statement of Profit and Loss submitted to prove alleged losses, without the accompanying signature of a certified public
accountant or audited by an independent auditor, is nothing but a self-serving document which ought to be treated as a mere scrap of
To prove that PAL was financially distressed, it could have submitted its audited financial statements but it failed to present the same
paper devoid of any probative value.59
with the Labor Arbiter. Instead, it narrated a litany of woes without offering any evidence to show that they translated into specific and
substantial losses that would necessitate retrenchment, thus:
The audited financial statements should be presented before the Labor Arbiter who is in the position to evaluate evidence. They may
not be submitted belatedly with the Court of Appeals, because the admission of evidence is outside the sphere of the appellate
1. It is a matter of public knowledge that PAL had been suffering severe financial losses that reached its most critical condition in
courts certiorari jurisdiction. Neither can this Court admit in evidence audited financial statements, or make a ruling on the question
1998 when its liabilities amounted to about P90,642,933,919.00, while its assets amounted to only about P85,109,075,351.00. The
of whether the employer incurred substantial losses justifying retrenchment on the basis thereof, as this Court is not a trier of
precarious situation prompted PAL to adopt cost-cutting measures to prevent it from becoming totally bankrupt, including the
facts.60 Even so, this Court may not be compelled to accept the contents of said documents blindly and without thinking. 61
reduction of its flight fleet from 56 to 14 aircrafts and the retrenchment of unneeded employees.

The requirement of evidentiary substantiation dictates that not even the affidavit of the Assistant to the General Manager is
xxxx
admissible to prove losses, as the same is self-serving.62 Thus, in Central Azucarera de la Carlota v. National Labor Relations
Commission,63 the Court ruled that the mere citation by the employer of the economic setback suffered by the sugar industry as a
whole cannot, in the absence of adequate, credible and persuasive evidence, justify its retrenchment program, 64 thus: 26. To save its business, PAL had every right to undergo a retrenchment program immediately. PAL did not need, by law, to justify or
explain to FASAP the reasons for the retrenchment before it could implement it. Proof of actual financial losses incurred by the
company is not a condition sine qua non for retrenchment. 70
A litany of woes, from a labor strike way back in 1982 to the various crises endured by the sugar industry, droughts, the 1983
assassination of former Senator Benigno Aquino, Jr., high crop loan interests, spiraling prices of fertilizers and spare parts, the
depression of sugar prices in the world market, cutback in the U.S. sugar quota, abandonment of productive areas because of the This bare and unilateral claim does not suffice. The Labor Arbiters finding that PAL "amply satisfied the rules imposed by law and
insurgency problem and the absence of fair and consistent government policies may have contributed to the unprecedented decline jurisprudence that sustain retrenchment," is without basis, absent the presentation of documentary evidence to that effect. In Saballa
in sugar production in the country, but there is no solid evidence that they translated into specific and substantial losses that would v. National Labor Relations Commission,71 we ruled that where the decision of the Labor Arbiter did not indicate the specific bases for
necessitate retrenchment. Just exactly what negative effects were borne by petitioner as a result, petitioner failed to underscore.65 such crucial finding that the employer was suffering business reverses, the same was arbitrary. We ratiocinated therein that since the
employer insisted that its critical financial condition was the central and pivotal reason for its retrenchment, there was no reason why
it should have neglected or refused to submit its audited financial statements.
In Anino v. National Labor Relations Commission,66 the Court also held that the employers claim that retrenchment was undertaken
as a measure of self-preservation to prevent losses brought about by the continuing decline of nickel prices and export volume in the
mining industry, as well as its allegation that the reduction of excise taxes on mining from 5% to 1% on a graduated basis as provided PALs assertion that its finances were gravely compromised as a result of the 1997 Asian financial crisis and the pilots strike
under Republic Act No. 7729 was a clear recognition by the government of the industrys worsening economic difficulties was a lacks basis due to the non-presentation of its audited financial statements to prove actual or imminent losses. Also, the fact that PAL
bare claim in the absence of evidence of actual losses in its business operations.67 was placed under receivership did not excuse it from submitting to the labor authorities copies of its audited financial statements to
prove the urgency, necessity and extent, of its retrenchment program. PAL should have presented its audited financial statements for
the years immediately preceding and during which the retrenchment was carried out. Law and jurisprudence require that alleged
In the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would justify the retrenchment
losses or expected imminent losses must be proved by sufficient and convincing evidence.
of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely affected by the Asian financial crisis,
however, it cannot be assumed that it has likewise brought PAL to the brink of bankruptcy. Likewise, the fact that PAL underwent
corporate rehabilitation does not automatically justify the retrenchment of its cabin crew personnel.
32

Likewise, PAL has not shown to the Courts satisfaction that the pilots strike had gravely affected its operations. It offered no proof to presentation of proof of financial difficulties through the required documents, preferably audited financial statements prepared by
show the correlation between the pilots strike and its alleged financial difficulties. In Guerrero v. National Labor Relations independent auditors, may not summarily be done away with.
Commission,72 the Court held that where the employer failed to prove its claim with competent evidence that the employees strike
paralyzed its operations and resulted in the withdrawal of its clients orders, the retrenchment of its employees must be declared
That FASAP admitted and took for granted the existence of PALs financial woes cannot excuse the latter from proving to the Courts
illegal.73
satisfaction that indeed it was bleeding financially. It was the airlines obligation to prove that it was in such financial distress; that it
was necessary to implement an appropriate retrenchment scheme; that it had to undergo a retrenchment program in proportion to or
Moreover, as the Court ruled in the case of EMCO Plywood Corporation, 74 it must be shown that the employer resorted to other commensurate with the extent of its financial distress; and that, it was carrying out the scheme in good faith and without undermining
means but these proved to be insufficient or inadequate, such as cost reduction, lesser investment on raw materials, adjustment of the security of tenure of its employees. The Court is mindful that the characterization of an employees services as no longer
the work routine to avoid scheduled power failure, reduction of the bonuses and salaries of both management and rank-and-file, necessary or sustainable, and therefore, properly terminable, is an exercise of business judgment on the part of the employer, and
improvement of manufacturing efficiency, and trimming of marketing and advertising costs. In the instant case, there is no proof that that the wisdom or soundness of such characterization or decision is not subject to discretionary review, provided of course that
PAL engaged in cost-cutting measures other than a mere reduction in its fleet of aircraft and the retrenchment of 5,000 of its violation of law or arbitrary or malicious action is not shown.82
personnel.
The foregoing principle holds true with respect to PALs claim in its Comment that the only issue is the manner by which its
The only manifestation of PALs attempt at exhausting other possible measures besides retrenchment was when it conducted retrenchment scheme was carried out because the validity of the scheme has been settled in its favor.83Respondents might have
negotiations and consultations with FASAP which, however, ended nowhere. None of the plans and suggestions taken up during the confused the right to retrench with its actual retrenchment program, treating them as one and the same. The first, no doubt, is a valid
meetings was implemented. On the other hand, PALs September 4, 1998 offer of shares of stock to its employees was adopted prerogative of management; it is a right that exists for all employers. As to the second, it is always subject to scrutiny in regard to
belatedly, or only after its more than 1,400 cabin crew personnel were retrenched. Besides, this offer can hardly be considered to be faithful compliance with substantive and procedural requirements which the law and jurisprudence have laid down. The right of an
borne of good faith, considering that it was premised on the condition that, if accepted, all existing CBAs between PAL and its employer to dismiss an employee differs from and should not be confused with the manner in which such right is exercised. 84
employees would have to be suspended for 10 years. When the offer was rejected by the employees, PAL ceased its operations on
September 23, 1998. It only resumed business when the CBA suspension clause was ratified by the employees in a referendum
FOURTH ELEMENT: That the employer exercises its prerogative to retrench employees in good faith for the advancement of its
subsequently conducted.75 Moreover, this stock distribution scheme does not do away with PALs expenditures or liabilities, since it
interest and not to defeat or circumvent the employees right to security of tenure.
has for its sole consideration the commitment to suspend CBAs with its employees for 10 years. It did not improve the financial
standing of PAL, nor did it result in corporate savings, vis--vis the financial difficulties it was suffering at the time.
Concededly, retrenchment to prevent losses is an authorized cause for terminating employment and the decision whether to resort to
such move or not is a management prerogative. However, the right of an employer to dismiss an employee differs from and should
Also, the claim that PAL saved P24 million monthly due to the implementation of the retrenchment program does not prove anything;
not be confused with the manner in which such right is exercised. It must not be oppressive and abusive since it affects one's person
it has not been shown to what extent or degree such savings benefited PAL, vis--vis its total expenditures or its overall financial
and property.85
position. Likewise, its claim that its liabilities reached P90 billion, while its assets amounted to P85 billion only or a debt to asset
ratio of more than 1:1 may not readily be believed, considering that it did not submit its audited financial statements. All these
allegations are self-serving evidence. In Indino v. National Labor Relations Commission,86 the Court held that it is almost an inflexible rule that employers who contemplate
terminating the services of their workers cannot be so arbitrary and ruthless as to find flimsy excuses for their decisions. This must be
so considering that the dismissal of an employee from work involves not only the loss of his position but more important, his means of
Interestingly, PAL submitted its audited financial statements only when the case was the subject of certiorari proceedings in the Court
livelihood. Applying this caveat, it is therefore incumbent for the employer, before putting into effect any retrenchment process on its
of Appeals by attaching in its Comment76 a copy of its consolidated audited financial statements for the years 2002, 2003 and
work force, to show by convincing evidence that it was being wrecked by serious financial problems. Simply declaring its state of
2004.77 However, these are not the financial statements that would have shown PALs alleged precarious position at the time it
insolvency or its impending doom will not be sufficient. To do so would render the security of tenure of workers and employees
implemented the massive retrenchment scheme in 1998. PAL should have submitted its financial statements for the years 1997 up to
illusory. Any employer desirous of ridding itself of its employees could then easily do so without need to adduce proof in support of its
1999; and not for the years 2002 up to 2004 because these financial statements cover a period markedly distant to the years in
action. We can not countenance this. Security of tenure is a right guaranteed to employees and workers by the Constitution and
question, which make them irrelevant and unacceptable.
should not be denied on the basis of mere speculation.

Neither could PAL claim to suffer from imminent or resultant losses had it not implemented the retrenchment scheme in 1998. It could
On the requirement that the prerogative to retrench must be exercised in good faith, we have ruled that the hiring of new employees
not have proved that retrenchment was necessary to prevent further losses, because immediately thereafter or in February
and subsequent rehiring of "retrenched" employees constitute bad faith;87 that the failure of the employer to resort to other less
199978 PAL was on the road to recovery; this is the airlines bare admission in its Comment to the instant petition.79 During that
drastic measures than retrenchment seriously belies its claim that retrenchment was done in good faith to avoid losses;88 and that the
period, it was recalling to duty cabin crew it had previously retrenched. In March 2000, PAL declared a net income of P44.2 million. In
demonstrated arbitrariness in the selection of which of its employees to retrench is further proof of the illegality of the employers
March 2001, it reported a profit of P419 million. In March 2003, it again registered a net income of P295 million. 80 All these facts are
retrenchment program, not to mention its bad faith.89
anathema to a finding of financial difficulties.

When PAL implemented Plan 22, instead of Plan 14, which was what it had originally made known to its employees, it could not be
Finally, what further belied PALs allegation that it was suffering from substantial actual and imminent losses was the fact that in
said that it acted in a manner compatible with good faith. It offered no satisfactory explanation why it abandoned Plan 14; instead, it
December 1998, PAL submitted a "stand-alone" rehabilitation plan to the SEC, and on June 4, 1999, or less than a year after the
justified its actions of subsequently recalling to duty retrenched employees by making it appear that it was a show of good faith; that it
retrenchment, the amount of US$200 million was invested directly into PAL by way of additional capital infusion for its
was due to its good corporate nature that the decision to consider recalling employees was made. The truth, however, is that it was
operations.81 These facts betray PALs claim that it was in dire financial straits. By submitting a "stand-alone" rehabilitation plan, PAL
unfair for PAL to have made such a move; it was capricious and arbitrary, considering that several thousand employees who had
acknowledged that it could undertake recovery on its own and that it possessed enough resources to weather the financial storm, if
long been working for PAL had lost their jobs, only to be recalled but assigned to lower positions (i.e., demoted), and, worse, some as
any.
new hires, without due regard for their long years of service with the airline.

Thus said, it was grave error for the Labor Arbiter, the NLRC and the Court of Appeals, to have simply assumed that PAL was in
The irregularity of PALs implementation of Plan 14 becomes more apparent when it rehired 140 probationary cabin attendants
grievous financial state, without requiring the latter to substantiate such claim. It bears stressing that in retrenchment cases, the
whose services it had previously terminated, and yet proceeded to terminate the services of its permanent cabin crew personnel.
33

In sum, we find that PAL had implemented its retrenchment program in an arbitrary manner and with evident bad faith, which 2. Number of employees retrenched due to excess sick leaves -- 299
prejudiced the tenurial rights of the cabin crew personnel.
3. Number of employees who were retrenched due to excess sick leave and other reasons -- 61
Moreover, the managements September 4, 1998 offer to transfer PAL shares of stock in the name of its employees in exchange for
the latters commitment to suspend all existing CBAs for 10 years; the closure of its operations when the offer was rejected; and the
4. Number of employees who were retrenched due to other reasons -- 107
resumption of its business after the employees relented; all indicate that PAL had not acted in earnest in regard to relations with its
employees at the time.
5. Number of employees who were demoted -- 552
FIFTH ELEMENT: 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. Total -- 1,473.94

In selecting employees to be dismissed, fair and reasonable criteria must be used, such as but not limited to: (a) less preferred status Prominent from the above data is the retrenchment of cabin crew personnel due to "other reasons" which, however, are not
(e.g., temporary employee), (b) efficiency and (c) seniority.90 specifically stated and shown to be for a valid cause. This is not allowed because it has no basis in fact and in law.

In Villena v. National Labor Relations Commission,91 the Court considered seniority an important aspect for the validity of a Moreover, in assessing the overall performance of each cabin crew personnel, PAL only considered the year 1997. This makes the
retrenchment program. In Philippine Tuberculosis Society, Inc. v. National Labor Union, 92 the Court held that the implementation of a evaluation of each cabin attendants efficiency rating capricious and prejudicial to PAL employees covered by it. By discarding the
retrenchment scheme without taking seniority into account rendered the retrenchment invalid, even as against factors such as cabin crew personnels previous years of service and taking into consideration only one years worth of job performance for
dependability, adaptability, trainability, job performance, discipline, and attitude towards work. evaluation, PAL virtually did away with the concept of seniority, loyalty and past efficiency, and treated all cabin attendants as if they
were on equal footing, with no one more senior than the other.
In the implementation of its retrenchment scheme, PAL evaluated the cabin crew personnels performance during the year preceding
the retrenchment (1997), based on the following set of criteria or rating variables found in the Performance Evaluation Form of the In sum, PALs retrenchment program is illegal because it was based on wrongful premise (Plan 14, which in reality turned out to be
cabin crew personnels Grooming and Appearance Handbook: Plan 22, resulting in retrenchment of more cabin attendants than was necessary) and in a set of criteria or rating variables that is
unfair and unreasonable when implemented. It failed to take into account each cabin attendants respective service record, thereby
disregarding seniority and loyalty in the evaluation of overall employee performance.
A. INFLIGHT PROFICIENCY EVALUATION 30%
B. JOB PERFORMANCE 35%
Special Award +5 Anent the claim of unfair labor practices committed against petitioner, we find the same to be without basis. Article 261 of the Labor
Commendations +2 Code provides that violations of a CBA, except those which are gross in character, shall no longer be treated as unfair labor practice
Appreciation +1 and shall be resolved as grievances under the parties CBA. Moreover, "gross violations of CBA" under the same Article referred to
Disciplinary Actions Reminder (-3), Warning/Admonition & Reprimands (-5), Suspension (-20), Passenger flagrant and/or malicious refusal to comply with the economic provisions of such agreement, which is not the issue in the instant
Complaints (-30), Appearance (-10) case.1avvphi1
C. ATTENDANCE 35%
Perfect Attendance +2
Missed Assignment -30 Also, we fail to see any specific instance of union busting, oppression or harassment and similar acts of FASAPs officers. The fact
that majority of FASAPs officers were either retrenched or demoted does not prove restraint or coercion in their right to organize.
Sick Leaves in excess of allotment and other leaves in excess of allotment -20
Tardiness -10 93 Instead, we see a simple retrenchment scheme gone wrong for failure to abide by the stringent rules prescribed by law, and a failure
The appellate court held that there was no need for PAL to consult with FASAP regarding standards or criteria that the airline would to discharge the employers burden of proof in such cases.
utilize in the implementation of the retrenchment program; and that the criteria actually used which was unilaterally formulated by PAL
using its Performance Evaluation Form in its Grooming and Appearance Handbook was reasonable and fair. Indeed, PAL was not Quitclaims executed as a result of PALs illegal retrenchment program are likewise annulled and set aside because they were not
obligated to consult FASAP regarding the standards it would use in evaluating the performance of the each cabin crew. However, we voluntarily entered into by the retrenched employees; their consent was obtained by fraud or mistake, as volition was clouded by a
do not agree with the findings of the appellate court that the criteria utilized by PAL in the actual retrenchment were reasonable and retrenchment program that was, at its inception, made without basis. The law looks with disfavor upon quitclaims and releases by
fair. employees pressured into signing by unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release or
quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their
dismissal. The acceptance of those benefits would not amount to estoppel. The amounts already received by the retrenched
This Court has repeatedly enjoined employers to adopt and observe fair and reasonable standards to effect retrenchment. This is of
paramount importance because an employers retrenchment program could be easily justified considering the subjective nature of employees as consideration for signing the quitclaims should, however, be deducted from their respective monetary awards.95
this requirement. The adoption and implementation of unfair and unreasonable criteria could not easily be detected especially in the
retrenchment of large numbers of employees, and in this aspect, abuse is a very distinct and real possibility. This is where labor In Trendline Employees Association-Southern Philippines Federation of Labor v. NLRC,96 we held that where the employer led its
tribunals should exercise more diligence; this aspect is where they should concentrate when placed in a position of having to judge employees to believe that the employer was suffering losses and as a result thereof accept retrenchment by executing quitclaims and
an employers retrenchment program. waivers, there was evident bad faith on the part of the employer justifying the setting aside of the quitclaims and waivers executed.

Indeed, the NLRC made a detailed listing of the retrenchment scheme based on the ICCD Masterank and Seniority 1997 Ratings. It As to PALs recall and rehire process (of retrenched cabin crew employees), the same is likewise defective. Considering the illegality
found the following: of the retrenchment, it follows that the subsequent recall and rehire process is likewise invalid and without effect.

1. Number of employees retrenched due to inverse seniority rule and other reasons -- 454
34

A corporate officer is not personally liable for the money claims of discharged corporate employees unless he acted with evident
malice and bad faith in terminating their employment.97 We do not see how respondent Patria Chiong may be held personally liable
together with PAL, it appearing that she was merely acting in accordance with what her duties required under the circumstances.
Being an Assistant Vice President for Cabin Services of PAL, she takes direct orders from superiors, or those who are charged with
the formulation of the policies to be implemented.

With respect to moral damages, we have time and again held that as a general rule, a corporation cannot suffer nor be entitled to
moral damages. A corporation, being an artificial person and having existence only in legal contemplation, has no feelings, no
emotions, no senses; therefore, it cannot experience physical suffering and mental anguish. Mental suffering can be experienced
only by one having a nervous system and it flows from real ills, sorrows, and griefs of life all of which cannot be suffered by an
artificial, juridical person.98 The Labor Arbiters award of moral damages was therefore improper.

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87956 dated
August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiters findings of illegal retrenchment and its
Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Air Lines, Inc. to reinstate the cabin crew personnel who were covered by the retrenchment and
demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority rights and other privileges,
and to pay them full backwages, inclusive of allowances and other monetary benefits computed from the time of their
separation up to the time of their actual reinstatement, provided that with respect to those who had received their
respective separation pay, the amounts of payments shall be deducted from their backwages. Where reinstatement is no
longer feasible because the positions previously held no longer exist, respondent Corporation shall pay backwages plus, in
lieu of reinstatement, separation pay equal to one (1) month pay for every year of service;

3. ORDERING Philippine Airlines, Inc. to pay attorneys fees equivalent to ten percent (10%) of the total monetary award.

Costs against respondent PAL.

SO ORDERED.

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