Appendix "XX"

Flight Attendants and Stewards Association of the Philippines versus Philippine Airlines

REVISITING RULES ON RETRENCHMENT ANDTERMINATION FOR AUTHORIZED CAUSESby Francis V. Sobrevias*

Retrenchment, an authorized cause termination of employment, is a management prerogative, a means to protect and preserve the employer's viability and ensure his survival. While our Supreme Court has always respected this prerogative during trying times, it has invariably insisted on the faithful compliance by management with the substantive and procedural requirements laid down by law and jurisprudence.

This paper will attempt to review the said requirements as they have been interpreted and continue to be clarified and elucidated by the Court in recent decisions on authorized causes for termination of employment. It will further discuss the development of the doctrine respecting the employer's legal duty to grant separation benefits to affected employees. Finally, it will examine the very recent case of Flight Attendants and Stewards Association of the Philippines (FASAP) vs. Philippine Airlines insofar as it illustrates the situations when retrenchment is permitted and when it is proscribed.

Legal Duty to Grant Separation Benefits

Under the Labor Code the employer may terminate the employment of any employee due to "the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the (Department) of Labor and Employment at least one (1) month before the intended date thereof." Pursuant to Article 283, the terminated employees are entitled to separation pay only when the closure or cessation of operations of the establishment or undertaking is due to causes other than "serious business losses or financial reverses." Otherwise, the employer is not obliged to grant separation pay to the terminated employees. This is plain from the following pertinent portion of the law, to wit: "xxx 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 at least one-half () month pay for every year of service, whichever is higher.

The fact that the foregoing legal provision makes a distinction is a clear indication of the legislative intent to circumscribe the grant of separation. pay to those employees affected by the situation specified expressly therein, i.e., "in case of closure or cessation of' operations of establishment or undertaking not due to serious business losses or financial reverses." This proposition is in accord with the rule of casus omissus pro omisso habendus est . Thus, under said rule, a person, object or being omitted from an enumeration must be held to have been omitted intentionally.

It is a well-settled rule of statutory construction that there is no better means of ascertaining the will and intention of the legislature than that which is afforded by the history of the statute. By looking at and investigating the legislative history of the statute, the court will be able to arrive at its correct interpretation. For this purpose, the court may take judicial notice of the origin and history of the statue which it is called upon to construe and apply, and of the facts which affect its derivation, validity and operation.

That the intent of Article 283 of the Labor Code is to limit the grant of separation pay only to employees who are terminated on account of the closure or cessation of operation of the establishment or undertaking due to causes other than serious business losses or financial reverses is manifest in the deliberations of the bill which was eventually passed as Batas Pambansa Bilang 130 (BP 130). It is to be noted that prior to 1981, the Labor Code mandated that in case of retrenchment to prevent losses and other similar causes, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher. This portion of the law was carried over in the original draft of BP 130. However, during the deliberations, the following transpired:

MR. ESPINA, Mr. Speaker, I have an anterior amendment 'THE PRESIDING OFFICER (Mr. Garcia, M.). The Gentleman from Manila is recognized.

MR. ESPINA. On lines 6 and 7, page 19, delete the words "and the other similar causes, and in lieu thereof, insert the following phrase: AND IN CASES OF CLOSURES OR CESSATIONS OF OPERATIONS OF THE ESTABLISHMENT NOT DUE TO SERIOUS BUSINESS LOSSES OR FINANCIAL REVERSES, so that the sentence will read as follows: In case of retrenchment to prevent losses AND IN CASES OF CLOSURES OR CESSATIONS OF OPERATIONS OF THE ESTABLISHMENT OR UNDERTAKING NOT DUE TO SERIOUS BUSINESS LOSSES OR FINANCIAL REVERSES, the separation pay shall be equivalent to one month pay or at least one-.half month pay for every year of service, whichever is higher.

MR. OPLE. Mr. Speaker.

THE PRESIDING OFFICER (Mr. Garcia, M.). The Minister of Labor, the Honorable Blas Ople, is recognized.

'MR. OPLE. The Committee gladly accepts the amendment.

'MR. ESPINA. Thank you, Mr. Speaker.

THE PRESIDING OFFICER (Mr. Garcia, M.). Is there any objection? (Silence) The Chair hears none; the amendment is approved.

In the case of Banco Filipino Savings & Mortgage Bank v. NLRC, however, the Supreme Court held that a bank closed by the government due to serious business losses or financial reverses and placed under liquidation is still legally mandated to pay its workers separation benefits. According to the Court:

The bank argues that Dizon is not entitled to separation pay citing Article 283 of the Labor Code which reads to wit:

x x x In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (I) whole year.

It is the bank's interpretation of the law that when an institution is closed due to serious business losses or financial reverses its workers are not entitled to separation pay.

We disagree.

We instead quote with approval the opinion of respondent Labor Arbiter, thus:

Article 283 (Art. 282) of the Labor Code enumerated the just causes for an employer to terminate an employee. If an employee is dismissed for just cause, he is not entitled to termination pay. However, in Article 284 (Art. 283), in case of closure of establishment, the employee is always given termination pay. The reason for the closure is taken into consideration only to determine whether to give one month or one-half month pay for every year of service. This provision is based on social justice and equity, x x x.

Not unexpectedly, therefore, Banco Filipino was almost always invoked as authority for the proposition that dismissed workers are entitled to separation pay albeit the employer closes or ceases operations by reason of serious business losses or financial reverses. But even if this ruling was not explicitly abandoned, there were subsequent decisions that modified the doctrine enunciated in that case.

In 1992, in the case of Golden Taxi Employees and Workers Union-ANGLO v. Golden Taxicab Co., the NLRC declared that the closure of a company "'DUE TO serious business losses or financial reverses. x x x exempts [said company from the usual obligation of paving separation pay. The rationale for such a provision is not beyond our reach. An employer that folds up because of serious business reverses can no longer absorb any further costs. In Golden Taxi, the NLRC held that the intent of Article 283 of the Labor Code is to limit\the grant of separation pay only to employees who are terminated on account of the closure or cessation of operations of the establishment or undertaking due to causes other than serious business losses or financial reverses.

The ruling in Golden Taxi hewed very closely to the judgment of the NLRC in National Federation of Labor Unions (NAFLU) v. Philippine Blooming Mills 'Co., Inc., wherein the Second Division of the NLRC set aside the award of separation pay, as granted by the Labor Arbiter to the employees of Philippine Blooming Mills Co., Inc. ("PBM"), on the ground that said employees were not entitled thereto since the closure of PBM was due to serious business losses or financial reverses. According to the NLRC:

"... in cases of closure or cessation of operation of establishment or undertaking due to serious business losses or financial reverses. there can be no right to separation pay. The reason is obvious:

To hold the respondent liable for separation pay would be highly oppressive. for to do so would aggravate the unfortunate situation which compelled it to close operation.' (Ricardo Crisostomo et al., vs. Balut Island Sawmill Co., Inc., NLRC Case No. 2-262-74, OP Decision No. 1795, March 29, 1976)."

The above-cited decision of the NLRC was sustained by the Supreme Court when the latter dismissed on June 20, 1984 the petition for certiorari filed by NAFLU in G.R. No. 65903 for lack of merit.

The same rule was again applied by the NLRC in another related case, namely, Pedro Ablaza, et al. v. Philippine Blooming Mills Co., Inc., 14 wherein the NLRC, in an en banc decision dated May 10, 1985, declared:

"x x x the only remaining issue properly raised by the appeal is the validity of the separation pay awarded. In this connection, it is noteworthy that, as stressed by the respondent, the Second Division of this Commission found in NLRC Case No.5-3780-82, National Federation of Labor Unions (NAFLU) vs. Philippine Blooming Mills Co., Inc., that the respondent ceased operations due to serious business losses and financial reverses and for that reason, the Commission dismissed the complaint for separation pay filed by NAFLU in behalf of its members in the respondent company. The complainants in the earlier case cited and the complainants in this case seeking payment of separation pay are similarly situated as in fact all of them predicated their claim upon the same grounds and the respondent also raised the same defense in avoidance of the claim - serious business losses and financial reverses. Under the circumstances, we cannot hold otherwise in the present case, there being no sufficient justification to deviate from the Decision in the earlier case. For, indeed, while it may be true as borne by the evidence of the complainants that the respondent realized substantial profits from 1973 to 1979, they do not dispute that it suffered losses in subsequent years. There may have been contributory causes that brought about its dismal financial state, but the fact remains that it suffered serious financial reverses such that it lacked operating capital to enable it to continue its operations. All told, we cannot sustain the award of separation pay in the instant case."

The NLRC decision in the above-cited case was upheld by the Supreme Court when it dismissed on November 18, 1987 the petition for certiorari in G.R. No, 79202, entitled "Pedro Ablaza, et at v; National Labor Relations Commission, et at.", for lack of merit. The same rule was reiterated in G.R. No. 80580, entitled "Philippine Blooming Mills Co., Inc. v. Eduardo Zurita, et al., and National Labor Relations Commission", 'wherein the Supreme Court, in its Resolution dated May 2, 1988, held:

"There is no merit in this petition. The factual findings of the NLRC are based on substantial evidence and the petitioners have failed to make out a case of reversible error on the part of the public respondent .As a matter of fact, this Court has, in various and more appropriate cases involving consortium of banks trying to recover even only a percentage of the loan extended to PBM, passed upon the issue that the petitioners are now trying to raise. The PBM was not only incurring serious losses but was in desperate straits leading to its collapse.

The NLRC ruling in NLRC-NCR Case No. 3-1250-83, which was affirmed by the Supreme Court in G .R. No. 79202, was again reiterated by the Supreme Court in an en banc decision in three consolidated cases led by State Investment House, Inc. v. Court of Appeals, wherein the High Tribunal agreed with the NLRC that separation benefits are no longer due employees of a business closed down by financial losses. Thus said the Court:

"In 1981, the PBM stopped operations due to business losses and financial reverses. On April 1, 1982, the PBM filed with the SEC a petition seeking for a declaration of a state of suspension of payments. On April 6, 1982, the SEC assumed jurisdiction over the petition. On July 9, 1982, the SEC placed the PBM under rehabilitation receivership and appointed rehabilitation receivers. The employees of PBM then filed a complaint for illegal dismissal with money claims against PBM with the National Labor Relations Commission (NLRC). The case was docketed as NCR No, 3-1250-83.

On December 28, 1983, Labor Arbiter Bienvenido Hermogenes rendered a decision in favor of the employees. The employees were granted monetary benefits, including separation pay. On appeal, the Labor Arbiter's decision was modified by the NLRC, to wit:

WHEREFORE, except for the modification dismissing the claim for separation pay for lack of merit, the Decision appealed from is hereby AFFIRMED in all other respects. The injunction issued on 15 November 1984 is lifted.' (Rollo ~G.R., No. 79202, p. 18)

In G.R. No. 79202, we affirmed the NLRC decision in a resolution dated November 18, 1987. Thus, we dismissed the petition for certiorari filed by the employees questioning the deletion of the award of separation pay resulting from serious losses by PBM.

Moreover, in the same decision, the Supreme Court re-stated and reaffirmed its ruling in G.R No. 80580, in this manner:

"In the meantime, the employees of PBM numbering 2,081 filed another complaint for illegal dismissal and money claims with the NLRC. The case was docketed as NCR Case No. 9-3296-84.

On May 28, 1987, the Labor Arbiter Bienvenido V. Hermogenes rendered a decision in favor of the employees including separation pay.

On appeal, the Labor Arbiters Decision was affirmed by the NLRC in a decision dated November 9, 1987.

x x x

On November 19, 1987, PBM filed with us a petition to review the decision of the NLRC on the ground that the November 9, 1987 decision did not take into account the fact that as found by this Court in G.R No. 71318 the NLRC had already denied claims for separation pay of the employees, x x x The petition was docketed as G.R. No. 80580.

In a resolution dated December 1, 1987, G.R. Nos. 79202 and 80580 were consolidated.

On May 2, 1988, we issued a resolution in the consolidated petitions, to wit:

x x x

In G.R. No. 80580, the Solicitor General has taken sides with the petitioner and adopted the petitioner's reply to the private respondents' comment: No explanation is given and no substantial distinctions are cited to explain why the National Labor Relations Commission should take an action in G.R. No. 80580 which is different from and conflicts with its stand in G.R. No. 79202. This being the case, the Court reiterates its ruling in G.R. No. 79202.

In Mendoza, et. al. vs. NLRC, et. al. the Supreme Court sustained the findings of the NLRC in NLRC NCR CA Case No. 00-3214-94, promulgated on April 27, 1993, holding that the closure of a business establishment due to serious losses or financial reverses negates the grant of separation pay to employees whose services are terminated . It is only when the closure is for reasons other than business reverses or losses that separated personnel are entitled to separation pay, which is computed at (1) month or one-half () month pay for every year of service, whichever is higher.

In 1994, the Supreme Court distinctly declared in Mindanao Terminal and Brokerage Service, Inc. versus Minister of Labor and Employment that the law obligates the employer to grant separation pay to the affected employees only where the closure of the employers business was not due to serious business losses or financial reverses.

Eventually, a noted commentator expressed the view that any remaining doubt or confusion on entitlement to separation benefits has been dispelled by the en banc decision of the Supreme Court in North Davao Mining Corp. v. NLRC. In that case, the corporation had to close in 1992 because in the preceding five years it had been incurring "mind-boggling" losses averaging three billion (P3,OOO,OOO,OOO,OO) pesos per year.

As of December 31, 1991 (five months before it closed), its total liabilities had exceeded its assets by over P20 billion pesos. Rejecting the demand for payment of separation benefits "for obvious reasons," the Court stressed that "Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses.

Emphasized the highest court of the land: In the instant case however, the companys practice of giving one months pay for every year of service could no longer be continued precisely because the company could not afford it anymore. It was forced to closed down an account of accumulated losses of over P 20 Billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days separation pay to each employees when it was still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely ceases operations, i.e., upon its death as a going business concerned it vital lifeblood its cash flow literally dries up. Therefore, the fact that less separation benefits were granted when the company finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.

In Alabang Country Club, Inc. versus NLRC the Court acknowledged that while the Labor Code provides for the payment of separation package in case of retrenchment to prevent losses, it does not obligate the employer to make such payment if there is closure of business due to serious losses. Moreover, the Court stated that while retrenchment and closure of a business establishment or undertaking are often used interchangeably and are interrelated, they are actually two separate and independent authorized causes for termination of employment. Thus:

"Retrenchment is the reduction of personnel for the purpose of cutting down on costs of operations in terms of salaries and wages resorted to by an employer because of losses in operation of a business occasioned by lack of work and considerable reduction in the volume of business.

Closure of a business or undertaking due to business losses is the reversal of fortune of the employer whereby there is a complete cessation of business operations to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped.

One of the prerogatives of management is the decision to close the entire establishment or to close or abolish a department or section thereof for economic reasons, such as to minimize expenses and reduce capitalization.

While the Labor Code provides for the payment of separation package in case of retrenchment to prevent losses, it does not obligate the employer for the payment thereof if there is closure of business due to serious losses.

The Court likewise held that, as in the case of retrenchment, for the closure of a business or a department due to. serious business losses to be regarded as an authorized cause for terminating employees, it must be proven that the losses incurred are substantial and actual or reasonably imminent; that the same increased through a period of time; and that the condition of the company is not likely to improve in the near future.

It is useful to quote further the Court's ruling:

"For any bonafide reason, an employer can lawfully close shop anytime. Just as no law forces anyone to go into business, no law can compel anybody to continue the same. It would be stretching the intent and spirit of the law if a court interferes with management's prerogative to close or cease its business operations just because the business is not suffering from any loss or because of the desire to provide the workers continued employment.

While petitioner did not sufficiently establish substantial losses to justify closure of its F & B Department on this ground, there is basis for its claim that the continued maintenance of said department had become more expensive through the years. An evaluation of the financial figures appearing in the audited financial statements prepared by the SGV &Co. shows that ninety one to ninety six (91 % - 96%) percent of the actual revenues earned by the F & B Department comprised the costs and expenses in maintaining the department. Petitioner's decision to place its F & B operations under a concessionaire must then be respected; absent a showing of bad faith on its part.

In fine, management's exercise of its prerogative to close a section, branch, department, plant or shop will be upheld as long as it is done in good faith to advance the employer's interest and not for the purpose of defeating or circumventing the rights of employees under the law or a valid agreement. While the closure of the F &B Department is found to be justified, petitioner is, under the above-quoted provision of Art. 283 of the Labor Code, mandated to pay separation pay computed from the time individual respondents commenced their employment until the time the department ceased operations x x x".

Later, in Espina v. Court of Appeals the Court stated that the phrase "closure or cessation not due to serious business losses or financial reverses" recognizes the right of the employer to close or cease its business operations or undertaking even in the absence of serious business losses or financial reverses, as long as he pays his employees their termination pay in the amount corresponding to their length of service.

The Court concluded:

"It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in management's prerogative to close or cease its business operations just because said business operation or undertaking is not suffering from any loss. The determination to cease operations is a prerogative of management which the State does not usually interfere with, as no business or undertaking must be required to continue operating simply because it has to maintain its workers in employment, and such act would be tantamount to a taking of property without due process of law. As long as the company's exercise of the same is in good faith to advance its interest and not for the purpose of circumventing the rights of employees under the law or a valid agreement, such exercise will be upheld.

Clearly then, the right to close an establishment or undertaking may be justified on grounds other than business losses but it cannot be an unbridled prerogative to suit the whims of the employer, x x x x x x x x x.

The ultimate test of the validity of closure or cessation of establishment or undertaking is that it must be bona fide in character. And the burden of proving such falls upon the employer.

In the newly decided case of Eastridge Golf Club, Inc. v. Eastridge Golf Club Labor Union-SUPER, the Supreme Court declared that where the closure of business is found to be in bad faith, the dismissal of the employees shall be declared illegal and the employer held liable for their reinstatement and payment of full backwages, unless reinstatement is no longer feasible, in which case the employer shall be liable for full backwages as well as separation pay. If the closure of business due to serious business losses or financial reverses is shown to be in good faith, the resultant dismissal of the employees shall be upheld, with no separation benefits due them. If the closure of business is not due to serious business losses or financial reverses but it is shown to be in good faith, the resultant dismissal of the employees will still be upheld but the latter shall be entitled to separation pay at the rate of one half month pay for every year of service or one month pay. whichever is higher.

Legal Requirements

Article 283 of the Labor Codes enumerates the authorized causes for termination, namely, installation of laborsaving devices, redundancy, retrenchment to prevent losses and the closing or cessation of operations not due to serious business losses or financial reverses. In the case of lndino v, NLRC, the Supreme Court had occasion to rule that "under the said provision of law, the right of an employer to terminate the services of any employee is predicated on the existence of any of the following causes: (1) installation of labor saving devices; (2) redundancy; (3) retrenchment to prevent losses; and (4) the closing or cessation of operation of the establishment or undertaking unless the closing is. for the purpose of circumventing the provisions of law."

Employees who are terminated on the ground of labor-saving devices or redundancy shall be entitled to separation pay equivalent to at least one (I) month pay or one (1) month pay for every year of service, whichever is higher. On the other hand, employees who are retrenched to prevent losses or in cases of closure or cessation of operation not due to serious business or financial reverses shall be entitled to separation ay equivalent to at least one (l) month pay or 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.

Article 283, Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination 'due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay for to at least one (I) 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 ~ to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (I) whole year. 29178 SCRA 168, 174-175(1989).

There are certain procedural requirements that have to be observed in effecting a retrenchment or redundancy program. Both the affected employee and the Regional Office of the Department of Labor and Employment (DOLE) should be given a written notice of the termination at least one (1) month before the intended date thereof. Notice to the DOLE is required to enable said office "to ascertain the verity of the cause for termination of employment." The required notice to the employees is necessary "to enable the employees to look for other means of employment and therefore, to ease the impact of the loss of their jobs and the corresponding income. In Revidad v. NLRC, it was explained that the purpose of this notice requirement is to enable the proper authorities to ascertain whether the closure of business is being done in good faith and is not just a pretext for evading compliance with the just obligations of the employer to the affected employees. In Sebuguero v. NLRC, it was held that the notice requirement for both the employee and the DOLE is mandatory and must be written and given at least one month before the intended date of separation. Under the rules and regulations implementing the Labor Code, the affected employee shall be entitled to termination pay based on his latest salary.34 In the case of Union of Filipino Workers (UFW) v. NLRC, the Supreme Court held that retrenchment under Article 283 is valid when the following requisites have been met: (1) it is to prevent losses; (2) written notices were served on the workers and the DOLE at least one (1) month before the effective date of the retrenchment; and (3) separation pay is paid to the affected workers. With respect to the termination on the ground of redundancy. However, the High Tribunal has held in Escareal v. NLRC. that financial losses are not necessary before redundancy is declared.

Declared the Court:

While concededly, Article 283 of the Labor Code does not require. that the employer should be suffering financial losses before he can terminate the services of the employee on the ground of redundancy, however, it does not mean either that a company which is doing well can effect such a dismissal whimsically or capriciously. The fact that a company is suffering from business losses merely provides stronger justification for the termination."

In Almodiel v. NLRC, the Supreme Court reiterated its earlier ruling in the leading case of Wiltshire File Co, Inc. vs. NLRC that redundancy, for purposes of our Labor Code, 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, said the Court, "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. The authoritative definition of the term "redundant", first enunciated in Wiltshire, was quoted and adopted in the subsequent cases of de Ocampo vs. NLRC, Escareal vs. NLRC, and Tierra International Construction Corp. v, NLRC.

In Lopez Sugar Corporation vs. Federation of Free Workers, the Supreme Court resolved that the employer may validly retrench employees to prevent losses sometime before the losses anticipated are actually sustained or realized. The employer according to the High Tribunal does not have to keep all his employees until after losses shall have been incurred.

Thus said the Court:

In its ordinary connotation, the phrase to prevent losses means that retrenchment or termination of the services of some employee 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 property from one man to give to another. This is simple enough."

Realizing the difficulty in determining when, or under what circumstances, the employer becomes legally privileged to retrench and reduce the number of his employees, the Court deemed it useful to sketch the general standards in terms of which the acts of the employer must be appraised, as follows:

"Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, the bona fide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial number of workers while continuing to dispense fat executive bonuses and perquisites or so-called 'golden parachutes,' can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection' to labor, the employer's prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means - e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. ... have been tried and found wanting.

Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination of services of employees.

In CAFFCO International, Limited v, Office of the Minister, the Supreme Court recognized the fact that because of the financial problems that businessmen face, they are pressured to adopt certain changes and programs in order to improve their profits and protect their investments. In the process, the employer may even choose to close a branch, a department, a plant, or a shop.

"When an employer decides to reduce the number of its personnel in order to prevent further losses, he is exercising his right to retrench employees to prevent losses in his business operations. On the other hand, where for purposes of economy, a company decides to reorganize its departments by imposing on employees of one department the duties performed by the employees of the other department, thus rendering unnecessary the job of the latter, the services of the employees whose functions are now being performed by the others, may be validly terminated on the ground of redundancy.

Business enterprises today are faced with the pressures of economic recession, stiff competition, and labor unrest. Thus, businessmen are always presumed to adopt certain changes and programs in order to enhance their profits and protect their investments. Such changes may take various forms. Management may even choose to close a branch, a department, a plant, or a shop (Philippine Engineering Corp. vs. CIR, 41 SCRA89 [1971]).

Hence, it has been adjudged that management can shut down its business when convenient provided it is not meant to coerce the employees or force them to submit it to its demands. Likewise, the Court has accepted in another case that there is no question as to the right of the employer to reduce his work force provided that it is not made a pretext for easing out employees on account of union activities.

In National Federation of Labor Unions V. NLRC, the Supreme Court rule that "an employer's exercise of management prerogatives, with or without reason, does not, per se, constitute unjust discrimination. Unless there is a showing of grave abuse of discretion, we cannot substitute our discretion and judgment for that which is clearly and exclusively management prerogatives. To do so, would take away from the employer what rightly belongs to him." Indeed, it has been held in Associated Labor Unions VIMCONTU v. NLRC, that in the exercise of such management prerogative, the employer may dismiss or terminate its employees.

"This flows from the well-recognized principle that it is within the employer's legitimate sphere of management control of the business to adopt economic policies or make some changes or adjustments in their organization or operations that would ensure profit to itself or project the investment of its stockholders. As in the exercise of such management prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or termination of its employees in the process."

While the employer may have the right to validly retrench or dismiss its employees, this right must not be abused. We find this judicial pronouncement in Bataan Shipyard & Engineering Co., Inc. vs NLRC.

"It is not disputed that the retrenchment undertaken by the Company is valid. However, the manner in which this prerogative is exercised should not be tainted with abuse of discretion. Labor is a person's means of livelihood. He cannot be deprived of his labor or work without due process of law. Retrenchment strikes at the very heart of one's employment. .While the right of an employer to dismiss an employee is conceded in a valid retrenchment, the right differs from and should not be confused with the manner in which such right is exercised. It should not be oppressive and abusive since it affects one's person and property. Due process of law demands nothing less.

As already mentioned, pursuant to jurisprudential policy there are three (3) basic requirements for a valid retrenchment:

1. the retrenchment is necessary to prevent or minimize losses and such losses are proven;

2. written notice is given to the employees and the DOLE at least one month before the intended date of retrenchment; and

3. separation benefits are given.

The case of Asian Alcohol Corp. vs. NLRC added two (2) more:

4. the employer exercises its prerogative to retrench employees in good faith for the advancement of its interests and not to defeat or circumvent the employee's right to security of tenure; and

5. the employer uses fair and reasonable criteria in ascertaining "who will be dismissed or retained among the employees, such as status (i.e., whether they are temporary, casual or ,regular), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

Thus, as seen in the recent case of Eastridge Golf Club, the employer's exercise of management prerogative to retrench or layoff employees will be upheld only "if compliant with [the foregoing] substantive and procedural requirements."

In a case decided in 1995, namely, Revidad v. NLRC, the Supreme Court ruled that the "financial statements audited by independent external auditors constitute the normal and reliable method of proof of the profit and loss performance of a company." In Uichangco v. NLRC, the Court affirmed the rule that to prove losses the employer must present the report of a certified public accountant or that of an independent auditor. And in Manatad v. Philippine Telegraph & Telephone Corporation it was acknowledged that the financial statements audited by an independent external auditor constitute the normal method of proving the profit and loss performance of a company. That the financial statements are audited by independent auditors safeguards the same from the manipulation of the figures therein to suit the company's needs. Moreover, the auditing of financial reports by independent external auditors are strictly governed by national and international standards and regulations for the accounting profession.

The Case of the Cabin Crew Personnel of Philippine Airlines

In June of 1998, Philippine Airlines (PAL) retrenched 5,000 of its employees, including more than 1,400 of its cabin crew personnel, to take effect in July 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 claimed to have incurred P90 billion in liabilities, while its assets stood atP85 billion.

PAL, in implementing the retrenchment scheme, adopted its so-called "Plan 14" whereby its fleet of aircraft would be reduced from 54 to 14, thus requiring the services of only 654 cabin crew personnel. PAL admitted that the retrenchment is wholly premised upon such fleet reduction and the strike staged by PAL pilots since this action also translated into a reduction of flights.

Prior to the full implementation of the retrenchment program, PAL and the Flight Attendants and Stewards Association of the Philippines (FASAP), as the exclusive bargaining representative of the cabin crew personnel, conducted a series of consultations and meetings and explored all possibilities of cushioning the impact of the impending reduction in cabin crew personnel. The parties, however, failed to agree on how the scheme would be implemented. Thus PAL unilaterally resolved to utilize the criteria set forth in their Collective Bargaining Agreement (CBA) in retrenching cabin crew personnel, namely, that retrenchment shall be, based on the individual employee's efficiency rating and seniority.

PAL determined the cabin crew personnel efficiency rating through an evaluation of the individual cabin crew member's overall performance for the year 1997 alone. Their respective performance during previous years, i.e., the whole duration of service with PAL of each cabin crew personnel, was not considered. The factors taken into account on whether the cabin crew members would be retrenched, demoted or retained were: (1) the existence of excess sick leaves; (2) the crew member's being physically overweight; (3) seniority; and (4) previous suspensions or warnings imposed.

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 made permanent and regular.

In July of 1998, PAL carried out the retrenchment of its more than 1,400 cabin crew personnel.

On September 23, 1998, PAL ceased operations and sent notices of termination to its employees. Two days after, PAL employees, through the Philippine Airlines Employees Association (PALEA) board, sought the intervention of then President Joseph 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. The Chairman and Chief Executive Officer of PAL, Lucio Tan, rejected this proposal.

In September 1998, the PALEA board again wrote President Estrada proposing, among others, that its existing CBA be suspended for 10 years, provided certain political and economic benefits are extended to the employees. This was approved by the employees in a referendum on October 2, 1998. On October 7, 1998, PAL resumed domestic operations and, soon after, international flights as well.

On June 22, 1998, FASAP filed a complaint against PAL for unfair labor practice, illegal retrenchment and other money claims. Two years later or on July 21, 2000, the Labor Arbiter rendered a decision holding that PAL illegally retrenched, 1,400 cabin attendants including flight pursers "in a despotic and whimsical manner." Consequently, the cabin attendants were ordered reinstated with backwages and damages including attorney's fees. On May 31,2004, the NLRC reversed and set aside the Labor Arbiter's decision. Its motion for reconsideration having been denied, FASAP went up to the Court of Appeals which denied FASAP's petition and affirmed the NLRC on August 23, 2006. Hence, FASAP elevated the case to the Supreme Court in a petition docketed as G.R. No. 178083, July 22, 2008, Flight Attendants and Stewards Association of the Philippine vs. Philippine Airlines.

At once, the High Tribunal announced that any claim of actual or potential business losses must satisfy the five (5) "established standards, all of which must concur, before any reduction of personnel becomes legal." It added that the resolution of the case hinges on a determination of the existence of the first, fourth and fifth elements for a valid retrenchment, to wit:

(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;

(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, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. After recalling the rule, first enunciated in Lopez Sugar Corp.. that the employer's prerogative to layoff employees is subject to certain limitations, the Court found that PAL failed to substantiate its claim of actual and imminent substantial losses which would justify the retrenchment of more than 1,400 of its cabin crew personnel. Although the Philippine economy was gravely affected by the Asian financial crisis, the Court firmly insisted that it cannot be assumed that said crisis 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 personnel.

Records show that PAL was not even aware of its actual financial position when it implemented its retrenchment program. It initially 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;

Upon reconsideration and with some optimistic prospects for operations, the Company (PAL) decided not to implement Plan 14 and instead implemented Plan 22 which would involve a fleet of 22 planes. Since Plan 14 was abandoned, the Company deemed it appropriate to recall back into employment employees it had previously retrenched. Thus, some of the employees who were initially laid off were recalled back to duty, the basis of which was passing the 1997 efficiency rating to meet the Companys operational requirements.

PAL decided to adopt Plan 14 on June 12, 1998. Three days after, or June 15, 1998, it sent notices of retrenchment to its cabin 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 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 suddenly recalled to duty 202 of the retrenched cabin crew personnel.

This only proves that PAL was not aware of the true state of its finances at the time it implemented the assailed massive retrenchment scheme. It embarked on the mass dismissal without first undertaking a well-considered study on the proposed retrenchment scheme. This view is underscored by the fact that previously, PAL terminated the services of 140 probationary cabin attendants, but rehired them almost immediately and even converted their employment into permanent and regular, even as a massive retrenchment was already looming in the horizon.

To prove that PAL was financially distressed, the Court pointed out that it could have submitted its audited financial statements but it failed to present the same to the Labor Arbiter. That PAL 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. Indeed, PAL should have presented its audited financial statements for the years immediately preceding and during the time retrenchment was carried out. But it did not.

While PAL did submit its audited financial statements when the case was already before the Court of Appeals, the Supreme Court asserted that the same were copies of the consolidated audited financial statements for the years 2002, 2003 and 2004. In addition, the Court stressed that these are not the financial statements that would have shown PALs alleged precarious position at the time it implemented the massive retrenchment scheme in 1998. PAL should have submitted its financial statements for the years 1997 up to 1999; and not for the years 2002 up to 2004 because these financial statements cover a period markedly distant to the years in question, which make them irrelevant and unacceptable . Finally, the Court averred that there is no proof that PAL engaged in cross-cutting measures other than a mere reduction in its fleet of aircraft and the retrenchment of its 5,000 employees.

Coming now to the fourth element namely, good faith, the Supreme Court recollected its previous rulings that the hiring of new employees and subsequent rehiring of retrenched employees constitute bad faith; that the failure of the employer to resort to other less drastic measures than retrenchment seriously belies its claim that retrenchment was done in good faith to avoid losses; and that the demonstrated arbitrariness in the selection of which of its employees to retrench is further proof of the illegality of the employer's retrenchment program, not to mention its bad faith. Thereafter, the Court affirmed that PAL was wanting in good faith as borne out by the following facts and circumstances.

When PAL implemented Plan 22, instead of Plan 14, which was what it had originally made known to its employees, it could not be said that it acted in a manner compatible with good faith. It offered no satisfactory explanation why it abandoned Plan 14; instead, it justified its actions of subsequently recalling to duty retrenched employees by making it appear that it was a show of good faith; that it was due to its good corporate nature that the decision to consider recalling employees was made. The truth, however, is that it was unfair for PAL to have made such a move; it was capricious and arbitrary, considering that several thousand employees who had 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 new hires, without due regard for their long years of service with the airline.

The irregularity of PALs implementation of Plan 14 becomes more apparent when it rehired 140 probationary cabin attendants whose services it had previously terminated, and yet proceeded to terminate the services of its permanent cabin crew personnel.

In sum, we find that PAL had implemented its retrenchment program in an arbitrary manner and with evident bad faith, which prejudiced the tenurial rights of the cabin crew personnel.

Moreover, the management's September 4, 1998 offer to transfer PAL shares of stock in the name of its employees in exchange for the latter's commitment to suspend all existing CBAs for 10 years; the closure of its operations when the offer was rejected; and the 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."

With respect to the fifth element, viz., the use of f air and reasonable criteria in selecting employees to be dismissed, the Court underscored the fact that this standard is of paramount importance because an employer's retrenchment program could be easily justified considering the subjective nature of 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. The Court found that the employer in this case abused its right to dismiss even as it held that, in assessing the over-all performance of each cabin crew personnel based alone on the year 1997 or only one year's worth of job performance for evaluation, PAL virtually disregarded 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. This made the evaluation of each employee's efficiency rating "capricious and prejudicial to PAL employees covered by it."

"In sum, PAL's retrenchment program is illegal because it was based on wrongful premise (Plan 14, which in reality turned out to be 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 attendant's respective service record, thereby disregarding seniority and loyalty in the evaluation of overall employee performance."

And so it was that the Supreme Court nullified the assailed decision of the Court of Appeals, which affirmed the decision of the NLRC setting aside the Labor Arbiter's findings of illegal retrenchment, and rendered a new ruling finding PAL guilty of illegal dismissal and ordering it to reinstate the cabin crew Personnel who were covered by the retrenchment and demotion scheme effective on July 15, 1998. The employees were awarded full backwages without loss of seniority rights inclusive of allowances and other monetary benefits, computed from the time of their separation up to the time of actual reinstatement. They were also awarded attorney's fees.

ABSTRACTS OF SELECTED

SUPREME COURT DECISIONS IN LABOR LAWBy Atty. Vicente B. Foz

Termination of Employment

A TALE OF A BANK OFFICER-DEPOSITOR VIOLATING BANK REGULATIONS, FALSIFYING HIS PASSBOK TO COVER UP FALSE TRANSACTION.

Philippine National Bank, Ramon Brigido L. Velasco, GR166096, Sept. 11, 2008, Reyes, R.T. J. The bank audit officer and his wife maintained a dollar savings account at PNB Escolta branch. He was charged with transacting a no-book withdrawal against his account at the bank's Ligao Albay branch and failing to present the required letter of introduction. The Ligao branch is an off-line branch, or with no network connection with other branches and the head office. The irregular inter-bank withdrawal was aggravated when the Escolta branch failed to post the withdrawal into the computer, resulting in the account balance overstatement. Presumed to be fully aware that the deposit and the withdrawal of the amount was not reflected on the passbook, he appropriated the amount for his personal benefit, free of interest, to the damage and prejudice of the bank. The bank found him guilty of grave misconduct. In view of his length of service and absence of actual loss to the bank, he was penalized with forced resignation with benefits.

Court ruling: The manager committed serious misconduct. As an audit officer, he should be the first to ensure that banking laws, policies and rules and regulations are strictly observed by its officers. The serious misconduct was aggravated when he presented a falsified passbook to make it appear that he did not commit any misdeed. He worked for the bank for 18 long years, his last position being as manager 1 of the office which examines the bank's books of account. Thus, when he violated the bank rules and regulations and tried to cover up his infractions by falsifying his passbook, he committed them not only as a depositor but also, or rather more so, as a bank officer.

Taken together, his acts render him unfit to remain in the employ of the bank.

Managerial employees like him are tasked to perform key and sensitive functions and are bound by more exacting work ethics. Indeed, not even his 18 years of service could exonerate him. But because he restituted the amount, akin to no actual loss to the bank, and served the bank for a long time, the bank imposed on him the penalty, of forced resignation with benefits, instead of dismissal. He was granted P542,110. 75 as separation benefits which was used to offset his loan in the bank, leaving an outstanding balance of P167,625.82. We find that the bank acted humanely under the circumstances.

GROSS NEGLIGENCE PLUS SERIOUS MISCONDUCT; NUMEROUS INFRACTIONS, MEMORANDA WITH WARNINGS

Marcial Aparece v. J. Marketing Corp. GR 174224, Oct. 17, 2008, Tinga, J. JMC is engaged in the wholesale and retail of home appliances and motorcycle units. Aparece, credit investigator /collector with a motorcycle. lost seven pages of the turnover sheets and 230 ledger cards and several official receipts; reported late on several occasions and would leave the office without permission in violation of company rules and regulations; unmindful of all the memoranda and warnings, he was caught sleeping while on duty several times; did not report to the office before noon break; his motorcycle unit was reported missing after he left it in front of the company office, and was only recovered after earnest efforts. Due to these numerous infractions and after several memoranda with warnings, he was administratively investigated after which he was formally terminated.

Court ruling: Employee's acts constituted gross negligence and serious misconduct warranting his dismissal. He was undoubtedly negligent and careless in handling of company property and committed a series of violations of company policies. His conduct exhibited his nonchalance and insolence, traits that have no place in the work setting.

To justify the dismissal of an employee for negligence, the act must not only be gross but also habitual, although it is not necessary that the employer show that he has incurred actual losses, damage or prejudice by reason of the employee's conduct (Department of Labor Manual, Sec. 4343.0 1(2)

Serious misconduct, on the other hand, is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. For serious misconduct to warrant the dismissal of an employee, it (1 ) must be serious; (2) must relate to the performance of the employee's duty; and (3) must show that the employee has become unfit to continue working for the employer (Roquero v. Philippine Airlines, OR 152329, April 22,2003,449 Phil 437,443).

ALL ABOUT RELEASES AND QUITCLAIMS: INTELLIGENCE, RANK, EDUCATIONAL AND PROFESSIONAL BACKGROUND AMID EMPLOYER PRESSURE: DID EMPLOYEES VOLUNTARILY RETIRE?

Universal Robina Sugar Milling Corp. (URSUMCO v. Agripino Caballeda and Alejandro Cadalin, GR 156644, July 28,2008, Nachura, J. Employer claimed the employees voluntarily retired when they filed their applications for retirement with all documentary requirements, accepted the retirement benefits and executed quitclaims in favor of the company. The employees contended they were merely forced to comply as they were no longer given any work assignment and considering that employment severance is a condition precedent for them to receive their retirement benefits.

Court ruling: The employees did not voluntarily retire but were rather forced to retire, tantamount to illegal dismissal. The employer failed to establish all the following requisites for the validity of quitclaims executed by employees: 1) the employee voluntarily executes a quitclaim, 2) no fraud or deceit on the part of the parties; 3) the quitclaim's consideration is credible and reasonable; and 4) the contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law (Sime Darby Filipinos, Inc. v. Arguilla, 143542, June 8, 2006, 490 SCRA183, 201. In exceptional cases, the Court has accepted the validity of quitclaims if the employer is able to prove the above requisites.

Generally, the law looks with disfavor on quitclaims and releases by employees who have been inveigled or pressured into signing them by unscrupulous employers seeking to evade their legal responsibilities and frustrate just claims of employees. (JMM Promotion and Management Inc, v. CA. 439 Phil. t, 11, 2002). They are frowned upon as contrary to public policy. A quitclaim is ineffective in baarring recovery of the full measure of a worker's right, and the acceptance of benefits from it does not amount to estoppels (R &E Transport Inc. V, Latag, 467 Phil. 355,369, 2004).

The reason is laid down in Lopez Corporation v. Federation of the Sugar Workers (GR 75700-01, August 30, 1990, 189 SCRA 179,193): "Employer and employees, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he had to face harsh necessities of life. He thus found himself in no position to resist money proffered. His, then, is a case of "adherence, not of choice. One thing sure, however, is that petitioners did not relent their claim. They pressed for it. They are deemed not to have waived any of their rights. Renuntiatio non praesumitur. "

Moreover, the employer, not the employee, has the burden of proving that the quitclaim was voluntarily entered into. In previous cases, we have considered, among others, the educational attainment of the employees concerned in upholding the validity of the quitclaims which they have executed in favor of their employers. In one case, we held that employee was not an unsuspecting or a gullible person. He was a University of San Carlos political science instructor. He was also at that time a university law student. In another case, we held that the employee, a lawyer, could not have reneged on the release, waiver and quitclaim he executed, since lawyers are not easily coerced into signing legal documents.

On the other hand, Becton Dickinson Phils., Inc. v. NLRC (GR 159969 & 160116, Nov. 15, 2005,475, SCRA 123,147) held that there is no connection between intelligence and even the employee's position in the company when it concerns the pressure which the employer may exert upon the employee to sign a release and quitclaim. "A lowly employee or a sales manager, as in the present case, who is confronted with the same dilemma of whether signing a release and quitclaim and accepting what the company offers him, or refusing to sign and walk out without receiving anything, may do succumb to the same pressure, being very well aware that it is going to take quite a while before he can recover whatever he is entitled to, because it is only after a protracted legal battle starting from the labor arbiter level, all the way to this Court, can he receive anything at all. The Court understands that such a risk of not receiving anything whatsoever, coupled with the probability of not immediately getting any gainful employment or means of livelihood in the meantime, constitutes enough pressure upon anyone who is asked to sign a release and quitclaim in exchange of some amount of money which may be way below what he may be entitled to based on company practice and policy or by law."

In the URSUMCO case, the respondents are rank-and-file employees. They are simple folks who rely on their work for the daily sustenance of their respective families. Without a convincing proof of voluntariness in submitting the documentary requirements and executing the quitclaim, it cannot simply be assumed that employees were not subjected to the very same pressure mentioned in Becton. Moreover, employees' filing an illegal dismissal case against petitioners completely negates the claim that they voluntarily retired. The employees vigorously pursued its case against petitioners, all the way up to this Court. Without doubt, this manifests that they had no intention of relinquishing their employment, wholly incompatible to employer's assertion that they voluntarily retired.

Unless there is a showing that the employee signed involuntarily or under duress, quitclaims and releases are upheld by this Court as the law between the parties (citing C. Pianos Commercial V. NLRC, G R 144619, Nov.11, 2005, 474 SCRA 608; Unicorn Safety Glass Inc. v. Basarte, G R 154689, Nov. 25, 2004, 444 SCRA 287; Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corp. 394 Phil. 716,2000). In such a case, it is binding on the parties and may not be later disowned simply because of a change of mind (Periquet v. NLRC, GR 91298, June 22, 1990, 186 SCRA 724).

(NOTE: However, in a different tenor, in Bay Haven Inc. vs Florentine Abuan, et al, GR 160859, July 30,2008, Austria-Martinez, the Court cited the policy laid down in AFP Mutual Benefit Association ( AFPMBAI-EU (No. L-39140, May 14,1980,97 S C R A 7 I 5 , 729 - 7 3 0) : "In labor jurisprudence, it is well established that quitclaims and/or complete releases executed by the employees do not stop them from pursuing their claims arising from the unfair labor practice of the employer. The basic reason for this is that such quitclaims are against public policy, and therefore, null and void. The acceptance termination pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts (Carino vs. ACCFA,L-19808, Sept. 29,1966,18 SCRA 163; Philippine Sugar Institute vs. CIR, L-13475, Sept. 29,1960,109 Phil. 452; Mercury Drug Co. vs. CIR, L-23357, April 30,1974, 56 SCRA 694,704}."

(Bay Haven clarified that the above principle should benefit only the employees who outrightly denied the quitclaims validity because it may be supposed that those who did not protest employer's presentation of the quitclaims in evidence have admitted the same by their silence (Rules of Court, Rule 130, Sec. 32).

ALL ABOUT SECURITY GUARDS; RELIEF AND TRANSFER ORDER: UNDATED, SIMILARLY WORDED RESIGNATION LETTERS; WHEN TERMPORARY OFF-DETAIL BECOMES PERMANENT.

Blue Angel Manpower and Security Services Inc. v. CA, GR 1611196, July 28, 2008, Velasco Jr. J. The four security guards filed a complaint for illegal deductions and other money claims against the agency. Apprised of their complaint, the employer dismissed them, prompting their filing of an illegal dismissal complaint. The security agency claimed they had pleaded to resign when told they would be investigated for insubordination, sleeping on the job, and absence without leave. And they actually resigned through two sets of resignation letters.

Court ruling: The resignations were involuntary and the termination of the four guards was illegal. The undated, similarly worded resignation letters tended to show that they were made to copy the pro-forma letters, in their own hands, to make them appear more convincing that they had voluntarily resigned. The second set letters were pre-drafted, similarly worded, and with blank spaces filled in with the effectivity dates of the resignation. The guards claimed they were forced to sign and copy the pro-forma resignation letters and quitclaims on pain that they would not get their remaining compensation. We are inclined to believe them.

It seems unlikely and improbable that two of them would voluntarily resign 15 and 12 days after they were terminated, and inconsistent and implausible that the other two guards would voluntarily resign and sign a quitclaim eight days after filing a complaint for illegal deductions from their salaries. Lastly, the agency failed to prove the charges of infractions against the guards and merely enumerated the offenses without specifying the date and place of such infractions. Neither did it present written notices, warnings, and affidavits of theofficer-in-charge to support the allegations against the guards.

That the guards filed a. complaint for illegal dismissal negates the claim that they voluntarily resigned. (Amkor Technology Philippines Inc. v. Jaunco, GR166507, Sept. 27, 2006, 503 SCRA 683). Well-entrenched is the rule that resignation is inconsistent with the filing of a complaint for illegal dismissal (Oriental Ship Management Co. v. CA, GR 153750, Jan. 25, 2006,480 SCRA 100, 110). To constitute resignation, the resignation must be unconditional with the intent to operate as such. There must be a clear intention to relinquish the position. In this case, the complaining guards actively pursued their illegal dismissal case against the agency such that they cannot be said to have voluntarily resigned from their jobs.

(Earlier, in Megqforce Security and Allied Services Inc. v. Hency Lactao and NLRC, GR 160940, July 21, 2008, Austria-Martinez, J., the Court ruling: In cases involving security guards, a relief and transfer order in itself does not sever employment relationship between a security guard and his agency. An employee has the right to security of tenure, but this does not give him a vested right to his position as would deprive the company of its prerogative to change his assignment or transfer him where his services as security guard will be most beneficial to the client (Tinio v. CA, G R 171764, June 8, 2007, 524 SCRA 533,540). Temporary "off-detail" or period of time security guards are made to wait until they are transferred or assigned to a new post or client does not constitute constructive dismissal as their assignments primarily depend on the contract entered into by the security agencies with third parties (Mobile Protective & Detective Agency v. Ompad, GR 159195, May 9, 2005, 458 SCRA 308,322-323).

(Indeed, in six earlier cases, the Court has repeatedly recognized that off-detailing is not equivalent to dismissal, so long as such status does not continue beyond a reasonable time; when such a "floating status" lasts for more than six months, the employee may be considered to have been constructively dismissed.

(In the present case, the security guard had not been given a new assignment and the temporary "off-detail" was for seven days only. The continued failure of Megaforce to offer him a new assignment during the proceedings before the labor arbiter and beyond the reasonable six-month period makes it liable for constructive dismissal. While employer claimed that the security guard was not dismissed, it failed to reinstate him or give him work assignment during the mandatory conciliation before the arbiter. Even when the writ of execution for his reinstatement was served upon Megaforce, it refused to reinstate him. Clearly, the supposed temporary "off-detail" of Lactao was meant to be a permanent one.

There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it would foreclose any choice for him except to forego his continued employment (Fuego v. Lourdes School of Mandaluyong, G R 152531, July 27, 2007, 528 SCRA 248, 256-257; The Philippine American Life and General Insurance Co. v. Gramaje, G R 156963, Nov. 11, 2004, 442 SCRA 274,290). It exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay (Duldulao v. CA, GR 164893, March 1, 2007,517 SCRA 191,199; Phil. Employ Service and Resources Inc. v. Paramio, GR 144786, April 15, 2004,427 SCRA 732,753-754).

CONSTRUCTIVE DISMISSAL: SUBSTANTIAL PAY DIMINUTION, FEELING OPPRESSED, IMPOSIBLE TO CONTINUE WORK.

Siemens Philippines v. Enrico A. Domingo, GR150488, July 28, 2008, Nachura, J. Court ruling: Domingo was constructively dismissed. His resignation was brought about by the decision of Siemens Philippines not to renew or work for the renewal of his consultancy contract with Siemens Germany which clearly resulted in the substantial diminution of his salary. It brought about a feeling of oppression compelling him to resign. The diminution in pay created an adverse working environment that rendered it impossible for him to continue working for Siemens Philippines. His resignation was in reality not his choice but a situation created by the company, thereby amounting to constructive dismissal.

Siemens Philippines was ordered to pay Domingo separation pay equivalent to one month pay for per every year of service; full backwages and other benefits from the date of constructive dismissal up to the time of the finality of the decision; moral damages of P50,000.00 and exemplary damages of P50,000.00 and attorney's fees. The case is remanded to labor arbiter for computation of the separation pay, backwages and other monetary awards due to Domingo.

(NOTE: The complainant filed the illegal dismissal case on July 6, 1995. The labor arbiter decided it on May 28, 1997 in employee's favor but the NLRC reversed it, declaring that he was not illegally dismissed. On March 11, 2001, the CA declared he was constructively dismissed. Finally, Siemens Philippines elevated the case to the Supreme Court on Dec. 13, 2001. The Supreme Court promulgated its decision on July 28, 2008. All in all, the case went through some 13 years. But the Court remanded the case to the labor arbiter for computation of the separation pay, backwages and other monetary awards due the complainant. In Megaforce Security case (cited earlier), the computation of similar monetary awards was also remanded to the labor arbiter, but with a 30-day deadline.

(In Philmare Inc. v. Benedicto Suganor, G.R. 168753, July 9, 2008, the NLRC remanded the case of a seafarer to the labor arbiter for further proceedings to determine, with the aid of either a private or public physician to be chosen or agreed upon by the parties, the degree of disability of the seafarer for entitlement to payment of benefits. The seafarer had opposed the NLRC decision which would merely delay the proceedings.

(Court ruling: "Remanding the case to the labor arbiter would only cause further delay and may frustrate speedy justice and, in any event, would be a futile exercise, as in all probability the case would eventually end up with this Court (Reyes v. Court of Appeals, GR 154448, Aug. 15, 2003, 409 SCRA 267,278, citing Femandez v. NLRC, G.R. 195892, Jan. 28, 1998,285 SCRA 149,170). Also, this Court has repeatedly ruled that delay in the settlement of labor cases cannot be countenanced. Not only does it involve the survival of an employee and his loved ones who are dependent on him for food, shelter, clothing, medicine, and education, it also wears down the meager resources of the workers (Santos vs. Velarde, G.R. 140753, April 30, 2003, 402 SCRA 321,329).

(NOTE: The Philmare decision showed that the labor arbiter originally decided the case on Oct. 30, 2002; the NLRC, April 22, 2004; the Court of Appeals April 29, 2005; the Supreme Court, July 9, 2008: about seven years in all. Were the issue remanded to the labor arbiter, it would go through the NLRC, CA and the Supreme Court for another round of litigation. )

Principle of locos parentis: class adviser's gross negligence, even if not habitual, which led to pupil's drowning, sufficient cause for dismissal.

School of the Holy Spirit of Quezon City and/or SR. Crispina A. Tolentino v. Corazon P. Taguiam, GR165565, July 14, 2008, Quisumbing, J. Taguiam was class adviser of the school's Grade 5. The principal allowed the use of the swimming pool for the class' year-end affair, Class adviser distributed parent's / guardian's permit forms to the pupils. A pupil's permit form was returned unsigned. She assumed that the pupil's mother allowed her child to join the activity by personally taking her to school with packed lunch and swimsuit. She warned those who did not know how to swim to avoid the deeper area. Two pupils sneaked out. Adviser went out to check where they went. While she was away, the pupil whose permit form was unsigned drowned. The pupil was rushed to a hospital where she died on arrival. Class adviser was dismissed for gross negligence resulting in loss of trust and confidence.

Court ruling: She had been grossly negligent. The pupil's permit form was not signed by the parent, yet she allowed her to join the activity. With many pupils present, it would be impossible for her by herself to watch each one. Those left at the pool were put at greater risk when she left them unattended. The kids who sneaked out could not have left the school premises because the gate guards would not allow them to go out.

As a teacher who stands in loco parentis to her pupils, the class adviser should have made sure that the children were protected from all harm while with her. Leaving the pupils in the swimming pool all by themselves might result in an accident A simple reminder "not to go to the deeper part of the pool" was insufficient to cast away all the serious dangers facing the kids, especially the victim who could not swim. This was a clear violation not only of the trust and confidence reposed on her by the parents of the pupils but by the school itself.

Notably, her negligence, although gross, was not habitual. In view of the considerable resultant damage, however, the cause is sufficient to dismiss her. This is not the first time that we departed from the requirement of law that neglect of duties must be both gross and habitual. Philippine Airlines Inc. vs. NLRC (Feb. 18.1991,194 SCRA 139) upheld the dismissal of an employee for gross negligence in his duties which delayed the plane's flight due to aircraft damage and other problems like hotel accommodations for passengers, re-booking, the possibility of law suits and payment of special landing fees and soaring costs of replacing aircraft parts. Fuentes vs. NLRC (No. L-75955, Oct. 28 ,1988, 166 SCRA 752) held it was unfair for Philippine Banking Corporation to continue employing its bank teller whose infraction was not habitual but a substantial amount of money was lost. The sufficiency of evidence and the resultant damage to the employer should be considered in the dismissal of the employee. In this case, the damage went as far as claiming the life of a child.

DID EMPLOYEE COMMIT SERIOUS MISCONDUCT BY OBTAINING COPIES OF HER PAYSLIP VOUCHERS?

The Peninsula Manila vs. Elaine M. Alipio, GR167310, June 17, 2008, Quisumbing, J. The employee was hired a mere reliever nurse for the company's clinic. She performed the usual work of a regular nurse since she started working. After working for four years, she inquired why she was not receiving her 13th month pay. After being paid for this 13th month pay, she also asked for the same pay for the last four years, but it was denied. During a meeting, the HRM asked her about her having several copies of her pay slip vouchers. She told the manager that she made copies of her payslip vouchers because the company did not give her copies. The manager was peeved by employee's response' because she was allegedly not entitled to get copies of her pay slip vouchers. She was also told not to report for work anymore.

Court ruling: She was illegally dismissed as a regular employee. The termination was not for cause and without due process. Her services were engaged by the hotel intermittently from 1993 up to 1989. Her services as a reliever nurse were undoubtedly necessary and desirable in the hotel's business of providing comfortable accommodations to its guests. Having rendered more than one year of intermittent service as a reliever nurse, she had become a regular employee. The hotel had earlier certified that she was "regular staff nurse" before her dismissal.

Her act of obtaining copies of her pay slips cannot be characterized as a misconduct, much less a grave misconduct. On the contrary, it is absurd that she had to resort to her own resourcefulness to get hold of these documents since it was incumbent upon the employer to give her copies of her payslips as a matter of course. Thus, the employee's dismissal was not based on a just cause. Misconduct is any forbidden act or dereliction of duty. It is willful in character and implies a wrongful intent, not a mere error in judgment. The misconduct, to be serious, must be grave and not merely trivial (Lakepue Drug, Inc. v. Belga, G. R. 166379, Oct. 20, 2005, 473 SCRA617, 623).

She is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages, allowances, and other benefits, or their monetary equivalent computed from the time compensation was withheld up to the time of actual reinstatement (Art. 279, Labor Code). Should reinstatement be no longer feasible, employee is entitled to separation pay equivalent to one month pay for every year of service in lieu of reinstatement (P.J. Lhuillier, Inc. v. NLRC, GR 158758,ApriI 29, 2005, 457 SCRA 784,799, citing Gaco v. NLRC. G.R. 104690, Feb. 23, 1994, 230 SCRA260,268).

Breach of trust: employee's inaccurate, completely false court testimony contradicting employer bank's stand.

Rolando V. Aromin v. NLRC. Bank of the Philippine Islands, GR 164824, April 30, 2008, Velasco, Jr., J. Aromin headed the bank's real property management unit. After meeting with him and BPIVP Albano, Limketkai officials offered to buy a 33, 056 sq. m. property, a BPI trust asset in Pasig City, for P33,056,000, claiming there was already a meeting of minds, thus. a perfected contract to sell. But the bank refused to sell the property. The company sued the bank and top its officials in the regional trial court. Aromin and Albano submitted a memo to the legal services division, denying the company's claim of a meeting of minds or a perfected contract Later, Aromin testified in court that he and Albano were authorized to sell the property and there was a perfected contract of sale. On the basis of Aromin's testimony, the court rendered judgment finding for the interested buyer and annulling BPI's sale of the lot to the National Book Store. BPI dismissed him for willful breach of trust arising from his court testimony.

Court ruling: We agree with the parallel factual conclusions of the labor arbiter, NLRC and CA on Aromin's false statements before the trial court. What Aromin said on the witness stand was inconsistent with or the exact opposite of what he said in his memo. He employed backhanded tactics. It is abundantly clear that Aromin indeed committed acts which formed the basis for BPI's loss of trust and confidence in him. The acts reflected on his competence, loyalty, and, integrity. Thus, it is a real case of betrayal of trust and confidence, duly substantiated, to justify the bonafide dismissal of an employee.

Aromin's testimony on the supposed meeting of minds" between BPI represented by Aromin and Albano, and interested buyer, was peremptorily belied by the, Supreme Court's decision of March 29, 1996 on BPI's appeal from the trial court's decision. We can logically say in the present case, therefore, that Aromin's testimony was inaccurate and completely false.

Breach of trust, confidence: manager's outrage, demanding: P2-million, with court suit threat

Ma. Wenelila Tinzona v. CA, Philippine EDS-Techno Service, Inc. (PET Inc.), GR169712, March 14, 2008, Chico-Nazario, J. The company's administrative manager, the top-ranking Filipino manager, acted as the liaison between Japanese management and Filipino staff. A lady employee complained that the manager humiliated her when she reported back to work after recuperating from tuberculosis. The manager insinuated in a manner loud enough to be heard from the outside, that the employee still had the disease. But the employee had a medical clearance to prove her fitness to work. Asked by PET for comment, the manager denied the accusation, saying that she only intended to inform the complainant on her legal right as a sick employee - if she planned to resign, the company could give her separation pay. The manager asked for an independent investigation and threatened to file a libel case against the complainant for allegedly destroying her reputation and credibility.

PET director Ono's memo to the manager: "management was satisfied that she did not intend to humiliate or embarrass the employee and appreciated her concern for employees. But a little more circumspection could have readily avoided the incident which undeniably caused unnecessary discomfort and hurt feelings to the employee. The matter could have been discussed in private and the employee allowed to explain instead of being preempted. As it turned out, the manager's assumption that the employee would request for leave extension was wrong for she had a medical certificate attesting to her fitness to return to work. The management deemed the matter closed. Then she was reminded of its high expectations of her position. It did not favor her notice to file legal action against the complaining employee. Employee relations are best threshed out within the company. Resorting to legal action is unlikely to solve but on the contrary only exacerbate such problems. "We trust that, after emotions have calmed down, you would still see it that way."

The manager's lawyers' letter to Ono: "Considering the position and stature of the client in the community and business circles, we are constrained to formally demand payment ofP2-miliion for damages, injured feelings, serious anxiety and besmirched reputation that she is now suffering." Management was given five days to respond, otherwise, the lawyers would file legal action to protect their client's interests. A letter to the complainant employee sought the same amount of damages for her allegedly baseless and unfounded accusations against the manager.

They claimed that Ono had concluded that the manager was guilty of the employee's charges. Her letter to management presented point by point her side and asked for an independent investigation to thresh out all issues and give her the opportunity to be heard and to confront her accuser. Her requests were all denied. As a result, the lawyers, decried, the manager's constitutional right to due process was violated and judgment was rendered on mere allegations in, employee's letter complaint. She continued pressing her demand for compensation. Later, she was dismissed for serious misconduct and breach of trust.

Court ruling: The manager has given the company more than enough reason to distrust her. The arrogance and hostility she has shown towards the company and her stubborn, uncompromising stance in almost all instances justify the company's termination of her employment. The manager had absolutely no basis for a P2 million demand, coupled with a lawsuit, if not paid within five days. Her demand was based on the company's alleged finding of her guilt. But she was never charged of any offense and was never issued a notice of disciplinary action. What was issued to her in a letter was a gentle and sound reminder to be more circumspect in handling the incident or situations like it. Instead of seeking a dialogue with the company on her felt grievance, she, through her lawyers, sent the questioned demand letter to Ono. Petitioner's act bared her animosity to the company and was definitely not a proper response of a top level manager like her to a trivial matter.

She rejected the company's appointment of its external counsel as the investigating panel's presiding officer and demanded for a panel of three employees, one each for the rank-and-file, supervisory and management levels with a Department of Labor and Employment representative. As correctly held by the NLRC and the CA, her stance was without any legal basis.

Foster Parents Plan International / Bicol v. Demetriou (226 Phil. 421,426~1986) is controlling: "The right to dismiss or otherwise impose disciplinary sanctions upon an employee for just and valid cause, as well as the authority to determine the existence of said cause in accordance with the norms of due process, belongs in the first place to the employer. In the very nature of things, any investigation of the employee will have to be conducted by the employer himself or his duly designated representative; and the investigation cannot be thwarted or null