LABREL | CASE DIGEST | ART 283

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SPI TechnologiesInc.v. Mapua
G.R. No. 191154
April 7, 2014
Reyes,J

Case Doctrine:
It is not the job title but the actual work that the employee
performs. Also, change in the job title is not synonymous to a change
in the functions. A position cannot be abolished by a mere change of
job title. In cases of redundancy, the management should adduce
evidence and prove that a position which was created in place of a
previous one should pertain to functions which are dissimilar and
incongruous to the abolished office.

Facts:
Victoria K. Mapua (Mapua) was the Corporate Developments
Research/Business Intelligence Unit Head and Manager InSPI
Technologies,Ic. (SPI). Sometime in October 2006, the hard disk on
Mapuas laptop crashed, causing her to lose files and data. Mapua
informed Nolan,her supervisor and her colleagues that she was
working on recovering the lost data and asked for their patience for
any possible delay on her part in meeting deadlines. On November
13, 2006 Mapua retrieved the lost data with the assistance of
National Bureau of Investigation Anti-Fraud and Computer Crimes
Division. Yet, Nolan informed Mapua that she was realigning Mapuas
position to become a subordinate of co-manager Sameer Raina
(Raina) due to her missing a work deadline.
On February 28, 2007, Mapua allegedly saw the new table of
organization of the Corporate Development Division which would be
renamed as the Marketing Division. The new structure showed that
Mapuas level will be again downgraded because a new manager will
be hired and positioned between her rank and Rainas. On March 21,
2007, Raina informed Mapua over the phone that her position was
considered redundant and that she is terminated from employment
effective immediately. Villanueva notified Mapua that she should
cease reporting for work the next day. Her laptop computer and
company mobile phone were taken right away and her office phone
ceased to function.
In her Reply and Rejoinder, Mapua submitted an affidavit and alleged
that on July 16, 2007, Prime Manpower Resources Development
(Prime Manpower) posted an advertisement on the website of
Jobstreet Philippines for the employment of a Corporate
Development Manager in an unnamed Business Process
Outsourcing (BPO) company located in Paraaque City. Mapua
suspected that this advertisement was for SPI because the writing
style used was similar to Rainas. She also claimed that SPI is the
only BPO office in Paraaque City at that time. Thereafter, she
applied for the position under the pseudonym of "Jeanne Tesoro". On
the day of her interview with Prime Manpowers consultant, Ms. Portia
Dimatulac (Dimatulac), the latter allegedly revealed to Mapua that
SPI contracted Prime Manpowers services to search for applicants
for the Corporate Development Manager position. Because of these
developments, Mapua was convinced that her former position is not
redundant.
The Labor arbiter rendered a decision stating that there was illegal
dismissal. But the NLRC reversed the said decision. While the CA on
the other hand, reinstated LAs decision and set aside the NLRCs
decision. Thus, SPI filed a petition for certiorari regarding the said
decision.
Issue:
Whether or not Mapua was validly separated from service on the
ground of redundancy?
Ruling:
No. ART. 283. Closure of establishment and reduction of personnel.
The employer may also terminate the employment of any employee
due to installation of labor-saving devices, redundancy, retrenchment
to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of
circumventing the provisions of this Title, by serving a written notice
on the worker and the Department of Labor and Employment at least
one (1) month before the intended date thereof. In case of termination
due to installation of labor-saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent to at
least one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to
prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses and
financial reverses, the separation pay shall be equivalent to one (1)
month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall
be considered as one (1) whole year. (Emphasis ours)
Anent the first requirement which is written notice served on both the
employee and the DOLE at least one month prior to the intended date
of termination, SPI had discharged the burden of proving that it
submitted a notice to the DOLE on March 21, 2007, stating therein
that the effective date of termination is on April 21, 2007. It is,
however, quite peculiar that two kinds of notices were served to
Mapua. One termination letter stated that its date of effectivity is on
the same day, March 21, 2007. The other termination letter sent
through mail to Mapuas residence stated that the effective date of
her termination is on April 21, 2007. Explaining the discrepancy, SPI
alleged that the company served a notice to Mapua on March 21,
2007, which stated that the effective date of termination is on April 21,
2007. However she refused to acknowledge or accept the letter. Later
on, Mapua requested for a copy of the said letter but due to
inadvertence and oversight, a draft of the termination letter bearing a
wrong effectivity date was given to her. To correct the oversight, a
copy of the original letter was sent to her through mail. Our question
is, after Mapua initially refused to accept the letter, why did SPI make
a new letter instead of just giving her the first one which the Court
notes was already signed and witnessed by other employees?
Curiously, there was neither allegation nor proof that the original letter
was misplaced or lost which would necessitate the drafting of a new
one. SPI did not even explain in the second letter that the same was
being sent in lieu of the one given to her. Hence, SPI must shoulder
the consequence of causing the confusion brought by the variations
of termination letters given to Mapua.
On the matter of separation pay, there is no question that SPI indeed
offered separation pay to Mapua, but the offer must be accompanied
with good faith in the abolishment of the redundant position and fair
and reasonable criteria in ascertaining the redundant position. It is
insignificant that the amount offered to Mapua is higher than what the
law requires because the Court has previously noted that "a job is
more than the salary that it carries. There is a psychological effect or
a stigma in immediately finding ones self laid off from work."
As to the evidence negating redundancy was SPIs publication of job
vacancies after Mapua was terminated from employment. SPI
maintained that the CA erred when it considered Mapuas self-serving
affidavit as regards the Prime Manpower advertisement because the
allegations therein were based on Mapuas unfounded suspicions.
Also, the failure of Mapua to present a sworn statement of Dimatulac
renders the formers statements hearsay. Even if we disregard
Mapuas affidavit as regards the Prime Manpower advertisement, SPI
admitted that it caused the Inquirer advertisement for a Marketing
Communications Manager position. Mapua alleged that this
advertisement belied the claim of SPI that her position is redundant
because the Corporate Development division was only renamed to
Marketing division. Instead of explaining how the functions of a
Marketing Communications Manager differ from a Corporate
Development Manager, SPI hardly disputed Mapua when it stated
that, "judging from the titles or designation of the positions, it is
obvious that the functions of one are entirely different from that of the
other." SPI, being the employer, has possession of valuable
information concerning the functions of the offices within its
organization. Nevertheless, it did not even bother to differentiate the
two positions.
It is not the job title but the actual work that the employee
performs. Also, change in the job title is not synonymous to a change
in the functions. A position cannot be abolished by a mere change of
job title. In cases of redundancy, the management should adduce
evidence and prove that a position which was created in place of a
previous one should pertain to functions which are dissimilar and
incongruous to the abolished office. #GANGAN
LABREL | CASE DIGEST | ART 283
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EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C.
FUNTANOZ, GERARDO F. PUNZALAN, FREDDIE M. MENDOZA,
EMILIO B. BELEN, VIOLETA C. DIUMANO and MB FINANCE
EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF
FREE WORKERS), Petitioners, vs. JARDINE PACIFIC FINANCE,
INC. (FORMERLY MB FINANCE), Respondent.
FACTS:
Petitioners were former regular employees of respondent Jardine
Pacific Finance, Inc. (formerly MB Finance) (Jardine). The petitioners
were also officers and members of MB Finance Employees
Association-FFW Chapter (the Union), a legitimate labor union and
the sole exclusive bargaining agent of the employees of Jardine.
On the claim of financial losses, Jardine decided to reorganize and
implement a redundancy program among its employees. The
petitioners were among those affected by the redundancy program.
Jardine thereafter hired contractual employees to undertake the
functions these employees used to perform.
The Union filed a notice of strike with the National Conciliation and
Mediation Board (NCMB), questioning the termination of employment
of the petitioners who were also union officers. The Union alleged
unfair labor practice on the part of Jardine, as well as discrimination
in the dismissal of its officers and members.
Negotiations ensued between the Union and Jardine under the
auspices of the NCMB, and both parties eventually reached an
amicable settlement. In the settlement, the petitioners accepted their
redundancy pay without prejudice to their right to question the legality
of their dismissal with the NLRC. Jardine paid the petitioners a
separation package composed of their severance pay, plus their
grossed up transportation allowance.
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On June 1, 1999, the petitioners and the Union filed a complaint
against Jardine with the NLRC for illegal dismissal and unfair labor
practice.
The LA ruled in the PETITIONERS favor. In its decision the LA held
that the hiring of contractual employees to replace the petitioners
directly contradicts the concept of redundancy which involves the
trimming down of the workforce because a task is being carried out
by too many people.


The LA further held that it was not enough for Jardine to simply focus
on its losses. According to the LA, it was error for Jardine to simply
lump together the seven petitioners as employees whose positions
have become redundant without explaining why their respective
positions became superfluous in relation to the other positions and
employees of the company.
On the petitioners allegation of unfair labor practice, the LA held that
not enough evidence was presented to prove the claim against
Jardine.
Both parties appealed the LAs decision to the NLRC. The NLRC
DISMISSED the appeals and affirmed the LAs decision in its entirety.
Jardine moved for the reconsideration of the NLRCs decision, which
motion the NLRC also denied in its resolution of July 21, 2005.
Jardine thereafter sought recourse with the CA via a petition for
certiorari under Rule 65.
The CA reversed the LAs and the NLRCs rulings, and granted
Jardines petition for certiorari.
The CA found that Jardines act of hiring contractual employees in
replacement of the petitioners does not run counter to the argument
that their positions are already superfluous.

According to the CA, the
hiring of contractual employees is a management prerogative that
Jardine has the right to exercise. In the absence of any showing of
malice or arbitrariness on the part of Jardine in implementing its
redundancy program, the courts must not interfere with the
companys exercise of a bona fide management decision.
The company merely exercised its business judgment or
management prerogative. And in the absence of any proof that the
management abused its discretion or acted in a malicious or arbitrary
manner, the court will not interfere with the exercise of such
prerogative.
The CA further held that Jardine successfully established that for the
years 1996 to 1998, the company incurred serious losses.
34
The
appellate court also observed that the reduction in the number of
workers, made necessary by the introduction of the services of an
independent contractor, is justified when undertaken to implement
more economic and efficient methods of production.
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ISSUE:
Whether or not the CA correctly rule that the NLRC committed grave
abuse of discretion when it found that Jardine validly terminated the
petitioners employment because of redundancy?
Redundancy in contrast with retrenchment
We cannot accept Jardines shallow understanding of the concepts of
redundancy and retrenchment in determining the validity of the
severance of an employer-employee relationship. The fact that they
are found together in just one provision does not necessarily give rise
to the conclusion that the difference between them is immaterial. This
Court has already ruled before that retrenchment and redundancy are
two different concepts; they are not synonymous; thus, they should
not be used interchangeably. The clear distinction between these two
concepts was discussed in Andrada, et al., v. NLRC,

citing the case
of Sebuguero v. NLRC, where this Court clarified:
Redundancy exists where the services of an employee are in excess
of what is reasonably demanded by the actual requirements of the
enterprise. A position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number
of factors, such as over hiring of workers, decreased volume of
business, or dropping of a particular product line or service activity
previously manufactured or undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the
term "lay-off." It is the termination of employment initiated by the
employer through no fault of the employees and without prejudice to
the latter, resorted to by management during periods of business
recession, industrial depression, or seasonal fluctuations, or during
lulls occasioned by lack of orders, shortage of materials, conversion
of the plant for a new production program or the introduction of new
methods or more efficient machinery, or of automation. Simply put, it
is an act of the employer of dismissing employees because of losses
in the operation of a business, lack of work, and considerable
reduction on the volume of his business, a right consistently
recognized and affirmed by this Court.
LABREL | CASE DIGEST | ART 283
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These rulings appropriately clarify that redundancy does not need to
be always triggered by a decline in the business. Primarily, employers
resort to redundancy when the functions of an employee have
already become superfluous or in excess of what the business
requires. Thus, even if a business is doing well, an employer can still
validly dismiss an employee from the service due to redundancy if
that employees position has already become in excess of what the
employers enterprise requires.
From this perspective, it is illogical for Jardine to terminate the
petitioners employment and replace them with contractual
employees. The replacement effectively belies Jardines claim that
the petitioners positions were abolished due to superfluity.
Redundancy could have been justified if the functions of the
petitioners were transferred to other existing employees of the
company.
To dismiss the petitioners and hire new contractual employees as
replacements necessarily give rise to the sound conclusion that the
petitioners services have not really become in excess of what
Jardines business requires. To replace the petitioners who were all
regular employees with contractual ones would amount to a violation
of their right to security of tenure.
Guidelines in implementing redundancy
We recognize that management has the prerogative to characterize
an employees services as no longer necessary or sustainable, and
therefore properly terminable.
The CA also correctly cited De Ocampo, et al., v. NLRC

when it
discussed that Jardines decision to hire contractual employees as
replacements is a management prerogative which the company has
the right to undertake to implement a more economic and efficient
operation of its business.
The employers exercise of its management prerogative, however, is
not an unbridled right that cannot be subjected to this Courts
scrutiny. The exercise of management prerogative is subject to the
caveat that it should not performed in violation of any law and that it is
not tainted by any arbitrary or malicious motive on the part of the
employer.
This Court, in several cases, sufficiently explained that the employer
must follow certain guidelines to dismiss employees due to
redundancy. These guidelines aim to ensure that the dismissal is not
implemented arbitrarily and is not tainted with bad faith against the
dismissed employees.
In Golden Thread Knitting Industries, Inc. v. NLRC, this Court laid
down the principle that the employer must use fair and reasonable
criteria in the selection of employees who will be dismissed from
employment due to redundancy. Such fair and reasonable criteria
may include the following, but are not limited to: (a) less preferred
status (e.g. temporary employee); (b) efficiency; and (c) seniority. The
presence of these criteria used by the employer shows good faith on
its part and is evidence that the implementation of redundancy was
painstakingly done by the employer in order to properly justify the
termination from the service of its employees.
As the petitioners pointed out, the records are bereft of indications
that Jardine employed clear criteria when it decided who among its
employees, who held similar positions as the petitioners, should be
removed from their posts because of redundancy. Jardine never
bothered to explain how and why the petitioners were the ones
dismissed. Jardines acts became more suspect given that the
petitioners were all union officers and some of them were panel
members in the scheduled CBA negotiations between Jardine and
the Union.
Aside from the guidelines for the selection of employees who will be
terminated, the Court, in Asian Alcohol Corp. v. NLRC, also laid down
guidelines for redundancy to be characterized as validly undertaken
by the employer. The Court ruled:
For the implementation of a redundancy program to be valid, the
employer must comply with the following requisites: (1) written notice
served on both the employees and the Department of Labor and
Employment at least one month prior to the intended date of
retrenchment; (2) payment of separation pay equivalent to at least
one month pay or at least one month pay for every year of service,
whichever is higher; (3) good faith in abolishing the redundant
positions; and (4) fair and reasonable criteria in ascertaining what
positions are to be declared redundant and accordingly abolished.
Jardine was never able to explain in any of its pleadings why the
petitioners positions were redundant. It never even attempted to
discuss the attendant facts and circumstances that led to the
conclusion that the petitioners positions had become superfluous and
unnecessary to Jardines business requirements. Thus, we can only
speculate on what actually happened.
To sum up, based on the guidelines set by the Court in the cases of
Golden Thread and Asian Alcohol, we find that at two levels, Jardine
failed to set the required fair and reasonable criteria in the termination
of the petitioners employment, leading to the conclusion that the
termination from the service was arbitrary and in bad faith.
Notably, the LA and the NLRC also arrived at the same conclusion
that the redundancy program was not valid because Jardine hired
contractual employees as replacements, thus, contradicting
underlying reasons of redundancy. The CA significantly chose to
disregard these coherent labor findings without fully justifying its
move. At the very least, this was an indicator that something was
wrong somewhere in these dismissals. It was clear legal error for the
CA to recognize grave abuse of discretion when none occurred.
WHEREFORE, we hereby GRANT the petition. We REVERSE the
decision dated March 23, 2007 and the resolution dated February 11,
2008 of the Court of Appeals in CA G.R. SP No. 91952, and uphold
the decision dated December 1, 2004 and the resolution dated July
21, 2005 of the National Labor Relations Commission which affirmed
in its entirety the September 29, 2000 decision of the Labor Arbiter.

PHILIPPINE CARPET MANUFACTURING CORPORATION, ET
AL., vs. IGNACIO B. TAGYAMON, ET AL.
G.R. No. 191475 December 11, 2013

DOCTRINE:
The illegality of the basis of the implementation of both voluntary
retirement and retrenchment programs of petitioners had been
thoroughly ruled upon by the Court in the Philcea case. It discussed
the requisites of both retrenchment and redundancy as authorized
causes of termination and that the petitioners failed to substantiate
them.

KEYWORDS:
Closure of Establishment and Reduction of Personnel, Carpet,
Retrenchment

FACTS:
LABREL | CASE DIGEST | ART 283
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Petitioner Philippine Carpet Manufacturing Corporation (PCMC) is a
corporation registered in the Philippines engaged in the business of
manufacturing wool and yarn carpets and rugs. Respondents were its
regular and permanent employees, but were affected by petitioners
retrenchment and voluntary retirement programs.

Tagyamon, Luna, Badayos, Dela Cruz, and Comandao received a
uniformly worded Memorandum of dismissal informing them that in
view of a slump in the market demand for our products due to the un-
competitiveness of our price, the company is constrained to reduce
the number of its workforce; that PCMC is implementing a
retrenchment program in accordance with Article 283 of the Labor
Code of the Philippines, as amended, and its implementing rules and
regulations.

Claiming that they were aggrieved by PCMCs decision to terminate
their employment, respondents filed separate complaints for illegal
dismissal against PCMC, Pacific Carpet Manufacturing Corporation,
Mr. Patricio Lim and Mr. David Lim. These cases were later
consolidated..

PETITIONERS CONTENTION:
PCMC, for its part, defended its decision to terminate the services of
respondents being a necessary management prerogative. It pointed
out that as an employer, it had no obligation to keep in its employ
more workers than are necessary for the operation of his business.
Thus, there was an authorized cause for dismissal. Petitioners also
stressed that respondents belatedly filed their complaint as they
allowed almost three years to pass making the principle of laches
applicable. Considering that respondents accepted their separation
pay and voluntarily executed deeds of release, waiver and quitclaim,
PCMC invoked the principle of estoppel on the part of respondents to
question their separation from the service. Finally, as to Marcos, Ilao
and Nemis, PCMC emphasized that they were not dismissed from
employment, but in fact they voluntarily retired from employment to
take advantage of the companys program.

RESPONDENTS CONTENTION:
Respondents primarily relied on the Supreme Courts decision in
Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto.
Tomas as to the validity of the companys retrenchment program.
They further explained that PCMC did not, in fact, suffer losses
shown by its acts prior to and subsequent to their termination. They
also insisted that their acceptance of separation pay and signing of
quitclaim is not a bar to the pursuit of illegal dismissal case.

RULING OF THE LA:
Labor Arbiter dismissed the complaint for lack of merit and found no
flaw in respondents termination as they voluntarily opted to retire and
were subsequently re-employed on a contractual basis then
regularized, terminated from employment and were paid separation
benefits. In view of respondents belated filing of the complaint, the
LA concluded that such action is a mere afterthought designed
primarily for respondents to collect more money, taking advantage of
the 2006 Supreme Court decision.

RULING OF THE NLRC:
The NLRC sustained the LA decision and emphasized the application
of the principle of laches for respondents inaction for an
unreasonable period.

RULING OF THE CA:
The CA refused to apply the principle of laches, because the case
was instituted prior to the expiration of the prescriptive period set by
law which is four years. It stressed that said principle cannot be
invoked earlier than the expiration of the prescriptive period. Citing
the Courts decision in the Philcea case, the CA applied the doctrine
of stare decisis, in view of the similar factual circumstances of the
cases. As to Ilao, Nemis and Marcos, while acknowledging their
voluntary resignation, the CA found the same not a bar to the illegal
dismissal case because they did so on the mistaken belief that PCMC
was losing money. With the foregoing findings, the CA ordered that
respondents be reinstated with full backwages less the amounts they
received as separation pay. In case of impossibility of reinstatement,
the CA ordered PCMC to pay respondents backwages and in lieu of
reinstatement, separation pay equal to one month pay or month
pay for every year of service whichever is higher, plus moral
damages.

ISSUE:
Is the dismissal valid?

RULING:
NO. This case and the Philcea case involve the same period which is
March to April 2004; the issuance of Memorandum to employees
informing them of the implementation of the cost reduction program;
the implementation of the voluntary retirement program and
retrenchment program, except that this case involves different
employees; the execution of deeds of release, waiver, and quitclaim,
and the acceptance of separation pay by the affected employees.

The illegality of the basis of the implementation of both voluntary
retirement and retrenchment programs of petitioners had been
thoroughly ruled upon by the Court in the Philcea case. It discussed
the requisites of both retrenchment and redundancy as authorized
causes of termination and that the petitioners failed to substantiate
them. In ascertaining the bases of the termination of employees, it
took into consideration petitioners claim of business losses; the
purchase of machinery and equipment after the termination, the
declaration of cash dividends to stockholders, the hiring of 100 new
employees after the retrenchment, and the authorization of full blast
overtime work for six hours daily. These, said the Court, are
inconsistent with petitioners claim that there was a slump in the
demand for its products which compelled them to implement the
termination programs. In arriving at its conclusions, the Court took
note of petitioners net sales, gross and net profits, as well as net
income. The Court, thus, reached the conclusion that the
retrenchment effected by PCMC is invalid due to a substantive
defect.

Just like the union members in the Philcea case, respondents
Tagyamon, Luna, Badayos, Dela Cruz, and Comandao received
similarly worded memorandum of dismissal effective April 15, 2004
based on the same ground of slump in the market demand for the
companys products. As such, they are similarly situated in all
aspects as the union members. With respect to respondents Marcos,
Nemis and Ilao, although they applied for voluntary retirement, the
same was not accepted by petitioner. Instead, it issued notice of
termination dated March 6, 2004 to these same employees. And
while it is true that petitioner paid them separation pay, the payment
was in the nature of separation and not retirement pay. In other
words, payment was made because of the implementation of the
retrenchment program and not because of retirement. As their
application for availing of the companys voluntary retirement program
was based on the wrong premise, the intent to retire was not clearly
established, or rather that the retirement is involuntary. Thus, they
shall be considered discharged from employment. Consequently,
they shall be treated as if they are in the same footing as the other
respondents herein and the union members in the Philcea case.

ADDITIONAL INFO (from the Philcea case which was used by the
Court to decide the above case):
Retrenchment is defined as the termination of
employment initiated by the employer through no fault of
the employee and without prejudice to the latter, resorted
by management during periods of business recession,
industrial depression or seasonal fluctuations or during
lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to
minimize business losses incurred in the operation of
its business.

Explaining the import of the phrase to prevent losses,
this Court held in Lopez Sugar Corporation v. Federation
of Free Workers, thus:

In its ordinary connotation, the phrase to
prevent losses means that retrenchment or
termination of the services of some
employees is authorized to be undertaken by
the employer sometime before the losses
anticipated are actually sustained or realized.
It is not, in other words, the intention of the
lawmaker to compel the employer to stay his
hand and keep all his employees until
sometime after losses shall have, in fact,
materialized; if such an intent were expressly
written into the law, that law may well be
vulnerable to constitutional attack as taking
LABREL | CASE DIGEST | ART 283
5
property from one man to give to another.
This is simple enough.

The prerogative of an employer to retrench its employees
must be exercised only as a last resort, considering that it
will lead to the loss of the employees livelihood. It is
justified only when all other less drastic means have been
tried and found insufficient or inadequate.[48] Moreover,
the employer must prove the requirements for a valid
retrenchment by clear and convincing evidence;
otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might
be merely feigning losses or reverses in their business
ventures in order to ease out employees. The
requirements are:

xxx (1) that the retrenchment is
reasonably necessary and likely to prevent
business losses which, if already incurred,
are not merely de minimis, but substantial,
serious, actual and real, or if only expected,
are reasonably imminent as perceived
objectively and in good faith by the employer;
(2) that the employer served written notice
both to the employees and to the Department
of Labor and Employment at least one month
prior to the intended date of retrenchment; (3)
that the employer pays the retrenched
employees separation pay equivalent to one
month pay or at least month pay for every
year of service, whichever is higher; (4) that
the employer exercises its 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; and (5) that the employer used fair
and reasonable criteria in ascertaining who
would be dismissed and who would be
retained among the employees, such as
status (i.e., whether they are temporary,
casual, regular or managerial employees),
efficiency, seniority, physical fitness, age, and
financial hardship for certain workers

SANOH FULTON PHILS., INC. V. BERNARDO
Case doctrine: Closure should be done in good faith, and it rests
upon the employer to prove that it had done so.
Facts:
Sanoh is a domestic corporation engaged in the manufacture
of automotive parts and wire condensers for home appliances.
Emmanuel Bernardo and Samuel Taghoy, the respondents, belonged
to the Wire Condenser department. In view of job order cancellations
relating to the manufacture of wire condensers by Matsushita, Sanyo
and National Panasonic, Sanoh decided to phase out the Wire
Condenser Department. On January 2004, 17 employees were
retrenched, informing them of the following grounds for such: lack of
local market, competition from imported products, and phasing out of
Wire Condenser department.

Conciliation conferences were held, but the parties failed
to reach an amicable settlement. Complaints for illegal dismissal were
filed, however, ultimately, 15 employees executed quitclaims leaving
only the two respondents to continue with the complaint. Labor
Arbiter dismissed the complaint. NLRC affirmed the decision of Labor
Arbiter, stating that retrenchment was a valid exercise of
management prerogative. CA overturned findings of LA and NLRC,
and ruled that Sanoh failed to prove existence of substantial losses
that would justify a valid retrenchment.
Issue: Whether or not the retrenchment was valid.
Held: Using Art. 283, SC stated that retrenchment to prevent
losses and closure not due to serious business losses are two
separate authorized causes for terminating the services of an
employee.
For retrenchment, the three (3) basic requirements are: (a)
proof that the retrenchment is necessary to prevent losses or
impending losses; (b) service of written notices to the employees and
to the Department of Labor and Employment at least one (1) month
prior to the intended date of retrenchment; and (c) payment of
separation pay equivalent to one (1) month pay, or at least one-half
(1/2) month pay for every year of service, whichever is higher. In
addition, jurisprudence has set the standards for losses which may
justify retrenchment, thus: (1) the losses incurred are substantial and
not de minimis; (2) the losses are actual or reasonably imminent; (3)
the retrenchment is reasonably necessary and is likely to be effective
in preventing the expected losses; and (4) the alleged losses, if
already incurred, or the expected imminent losses sought to be
forestalled, are proven by sufficient and convincing evidence.
Upon the other hand, in termination, the law authorizes
termination of employment due to business closure, regardless of the
underlying reasons and motivations therefor, be it financial losses or
not. However, to put a stamp to its validity, the closure/cessation of
business must be bona fide, i.e., its purpose is to advance the
interest of the employer and not to defeat or circumvent the rights of
employees under the law or a valid agreement.
In this case, there was no valid retrenchment. Nor was there a
closure of business. The losses must be supported by sufficient and
convincing evidence and the normal method of discharging this is by
the submission of financial statements duly audited by independent
external auditors. It was aptly observed by the appellate court that no
financial statements or documents were presented to substantiate
Sanohs claim of loss of P7 million per month.1wphi1And a business
lull caused by lack of orders which could have justified retrenchment
was not shown by petitioner. As observed once more by the Court of
Appeals, petitioner failed to present proof of the extent of the reduced
order and its contribution to the sustainability of its business.
On the other hand, respondents refutations of the
employers reason for retrenchment were supported by documentary
evidence. Respondents explained that Matsushita had four (4)
outstanding orders of condensers of refrigerators: Model 17-20,
Model 1404, Model 802 and Model 602. It was only in March 2004
that Model 17-20 and Model 1404 were phased out and only in July
2004 that Model 802 was phased out. However, Model 602 remained
and the order of Matsushita had been increased from 500 to 1600
units monthly from July 2004. With respect to the Sanyo account,
respondent assert that Sanyo had sufficient stocks for three (3)
months which explained why it did not order from Sanyo. However,
beginning February 2004, Sanyo resumed making orders.
Respondents added that despite the cancellation of some orders by
Matsushita and Sanyo, the additional orders made by Concepcion
Industries and Uni-Magma more than compensated the losses
incurred on the cancelled orders.
As already stated, the burden of proving that the
closure was bona fide, rests upon the employer. Sanoh made a
categorical statement that the Wire Condenser Department was
totally closed. The documentary evidence presented by
respondents, however, negate Sanohs statement. In other
words, Sanoh lacked bona fides even in its assertion that Wire
Condenser Department had closed down. Respondents disclose
that this department had gone full blast in its operations, even with
substantial overtime operations immediately after their dismissal was
effected. To substantiate, respondents submitted the time sheets of
the Wire Condenser Department for the months of January up to July
2004 which showed that some of the employees had been rendering
LABREL | CASE DIGEST | ART 283
6
overtime work after retrenchment was effected presumably to
compensate the lack of manpower in that department.
As the Wire Condenser Department is still in operation
and no business losses were proven by Sanoh, the dismissal of
respondents was unlawful. Respondents are awarded backwages
from the time of dismissal up to finality of this judgment, with interest
at the rate of six percent (6%) per annum which shall he increased to
twelve percent (12%) after the finality of this judgment and separation
pay equivalent to one-half (1/2) month pay for every year of service.
There was a separate concurring opinion by J. Carpio,
where he disagreed that the losses must have been supported by
financial statements in this case. He stated that impending, expected
or future losses which employers seek to prevent through
retrenchment could not yet be reflected in the financial statements
because they have not yet occurred. In fact, if the retrenchment does
indeed prevent the impending losses as it is supposed to do, then
such losses would never be reflected in the financial statements. It
would be unreasonable and unfair to require employers conducting
retrenchment to prevent impending, expected or future losses to
submit as proof of such losses financial statements. However, with
all the other facts presented, he agrees that there was illegal
retrenchment.
RUBEN L. ANDRADA vs. NLRC, SUBIC LEGEND RESORTS AND
CASINO, INC
G.R. No. 173231 December 28, 2007


Keywords: Retrenchment, Redundancy, Lay-off

Doctrine: The employer bears the burden of proving the cause or
causes for termination. Its failure to do so would necessarily lead to a
judgment of illegal dismissal.
Ponente: VELASCO, JR., J .
Facts: Petitioners Ruben Andrada, et al were hired on various dates
from 1995 up to 1997 and worked in the Subic Legend Resorts and
Casino, Inc. (Legend) Project Development Division on various
projects.
On January 6, 1998, Legend sent notice to the Department of Labor
and Employment of its intention to retrench and terminate the
employment of thirty-four (34) of its employees, on a last-in-first-out
basis on the strength of the updated status report of its Project
Development Division.
The following day, Legend sent the 34 employees their respective
notices of retrenchment, stating the same reasons for their
retrenchment.
On the same day, the Labor and Employment Center of the Subic
Bay Metropolitan Authority advertised that Legend International
Resorts, Inc. was in need of employees for positions similar to those
vacated by petitioners.
14 of the 34 retrenched employees filed before the Regional
Arbitration Branch of the NLRC a complaint for illegal dismissal and
money claims.
Complainants alleged that they were illegally dismissed because
Legend, after giving retrenchment as the reason for their termination,
created new positions similar to those they had just vacated. Legend,
on the other hand, invoked management prerogative when it
terminated the retrenched employees.
Labor Arbiter: Legend was adjudged guilty of Illegal dismissal, and
they are ordered to immediately reinstate the complainants. The
documents submitted by Legend to justify the retrenchment of its
personnel were insufficient because the documents failed to show
that Legend was suffering from actual losses or that there was
redundancy in the positions occupied by petitioners. The Labor
Arbiter also attributed bad faith on the part of Legend when it
advertised openings for positions similar to those occupied by the
retrenched employees at the same time the retrenchment program
was being implemented.
NLRC: Reversed the Labor Arbiter. The NLRC held that the Labor
Arbiter erred when he failed to consider the numerous documents
presented and submitted by Legend to prove that it was suffering
from actual losses, and that there was redundancy in the work of the
retrenched employees. The NLRC also gave credence to Legends
claim that it was Yap Yuen Khong, and not Legend, who asked for
Subic Bay Metropolitan Authoritys help in recruiting personnel for
Gaehin International Inc. (Gaehin) as the sub-contractor for the
construction of the Grand Legenda Hotel and Casino. The NLRC
observed that Gaehin was an entity distinct and separate from
Legend.
CA: affirmed NLRC
Issue: Was there a valid cause for dismissal?
Held: There was no valid cause.
As to retrenchment:
Legend glaringly failed to show its financial condition prior
to and at the time it enforced its retrenchment program. It failed to
submit audited financial statements regarding its alleged financial
losses. Though Legend complied with the notice requirements and
the payment of separation benefits to the retrenched employees, its
failure to establish the basis for the retrenchment of its employees
constrains us to declare the retrenchment illegal.
As to redundancy:
It is not enough for a company to merely declare that positions have
become redundant. It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees. The
following evidence may be proffered to substantiate redundancy: "the
new staffing pattern, feasibility studies/proposal, on the viability of the
newly created positions, job description and the approval by the
management of the restructuring." In another case, it was held that
the company sufficiently established the fact of redundancy through
"affidavits executed by the officers of the respondent PLDT,
explaining the reasons and necessities for the implementation of the
redundancy program."
The pieces of evidence submitted by Legend are mere allegations
and conclusions not supported by other evidence. Legend did not
even bother to illustrate or explain in detail how and why it considered
petitioners positions superfluous or unnecessary.
BONIFACIO ASUFRIN, JR., petitioner, vs. SAN MIGUEL
CORPORATION and the COURT OF APPEALS, respondents.
FACTS:Coca Cola Plant, then a department of respondent San
Miguel Beer Corporation (SMC), hired petitioner as a
utility/miscellaneous worker in February 1972. On November 1, 1973,
he became a regular employee paid on daily basis as a Forklift
Operator. On November 16, 1981, he became a monthly paid
employee promoted as Stock Clerk.
Sometime in 1984, the sales office and operations at the Sum-ag,
Bacolod City Sales Office were reorganized. Several positions were
LABREL | CASE DIGEST | ART 283
7
abolished including petitioners position as Stock Clerk. After
reviewing petitioners qualifications, he was designated warehouse
checker at the Sum-ag Sales Office. On April 1, 1996, respondent
SMC implemented a new marketing system known as the "pre-selling
scheme" at the Sum-ag Beer Sales Office. As a consequence, all
positions of route sales and warehouse personnel were declared
redundant.
Thereafter, the employees of Sum-ag sales force were informed that
they can avail of respondents early retirement package pursuant to
the retrenchment program, while those who will not avail of early
retirement would be redeployed or absorbed at the Brewery or other
sales offices. Petitioner opted to remain and manifested to Acting
Personnel Manager Salvador Abadesco his willingness to be
assigned to any job, considering that he had three children in college.
Petitioner was surprised when he was informed by the Acting
Personnel Manager that his name was included in the list of
employees who availed of the early retirement package. Petitioners
request that he be given an assignment in the company was ignored
by the Acting Personnel Manager.
Petitioner thus filed a complaint for illegal dismissal. The Labor
Arbiter dismissed then complaint. NLRC set aside the LA's decision
and ordered reinstatement of petitioner. CA reversed the ruling of the
NLRC.
ISSUE:Whether or not petitioner was terminated validly
HELD:Petitioner's termination is not valid. Petitioner was terminated
for redunduncy which is one of the authorized causes for dismissal.
However, it is not enough for a company to merely declare that it has
become overmanned. It must produce adequate proof that such is the
actual situation to justify the dismissal of the affected employees for
redundancy.
The court is not convinced with respondent's proof. First, of the 14
employees who did not accept the retirement package, only petitioner
was not accepted back to work. The others, who did not even bother
to inform the manager, were redeployed to the Sta. Fe Brewery or
other offices or outlets in Bacolod city. Petitioner was even willing to
be demoted just to remain working in the company.

Second, petitioner was in the payroll of the Sta. Fe Brewery and
assigned to the Materials Section, Logistics Department, although he
was actually posted at the Sum-ag Warehouse.15 Thus, even
assuming that his position in the Sum-ag Warehouse became
redundant, he should have been returned to the Sta. Fe Brewery
where he was actually assigned and where there were vacant
positions to accommodate him.

Third, it appears that despite respondents allegation that it ceased
and closed down its warehousing operations at the Sum-ag Sales
Office, actually it is still used for warehousing activities and as a
transit point where buyers and dealers get their stocks.

Fourth, in selecting employees to be dismissed, a fair and reasonable
criteria must be used, such as but not limited to (a) less preferred
status, e.g. temporary employee; (b) efficiency; and (c) seniority.17 In
the case at bar, no criterion whatsoever was adopted by respondent
in dismissing petitioner.

In a similar case, it was stated:
Even if private respondents were given the option to retire, be
retrenched or dismissed, they were made to understand that they had
no choice but to leave the company. More bluntly stated, they were
forced to swallow the bitter pill of dismissal but afforded a chance to
sweeten their separation from employment. They either had to
voluntarily retire, be retrenched with benefits or be dismissed without
receiving any benefit at all.

What was the true nature of petitioners offer to private respondents?
It was in reality a Hobsons choice.21 All that the private respondents
were offered was a choice on the means or method of terminating
their services but never as to the status of their employment. In short,
they were never asked if they wanted to work for petitioner.

In the case at bar, petitioner is similarly situated. It bears stressing
that whether it be by redundancy or retrenchment or any of the other
authorized causes, no employee may be dismissed without
observance of the fundamentals of good faith.