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Lunch break will be between:

12:00 NN 1:00 P.M. (Monday to Friday).

Excluded from the above schedule are the Warehouse and QAemployees who are on shifting. Their work and break time scheduleswill be maintained as it is now . [1]

Since private respondent felt affected adversely by the change in the work scheduleand discontinuance of the 30- minute paid on call lunch break, it fil ed on behalf of itsmembers a complaint with the Labor Arbiter for unfair labor practice, discrimination andevasion of liability pursuant to the resolution of this Court in Sime Darby InternationalTire Co., Inc. v. NLRC .[2] However, the Labor Arbiter dismissed the complaint on theground that the change in the work schedule and the elimination of the 30-minute paidlunch break of the factory workers constituted a valid exercise of managementprerogative and that the new work schedule, break time and one-hour lunch break did

not have the effect of diminishing the benefits granted to factory workers as the workingtime did not exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be justly enriched ifthey continued to be paid during their lunch break even if they were no longer on callor required to work during the break. He also ruled that the decision in the earlier SimeDarby case [3] was not applicable to the instant case because the former involveddiscrimination of certain employees who were not paid for their 30-minute lunch breakwhile the rest of the factory workers were paid; hence, this Court ordered that thediscriminated employees be similarly paid the additional compensation for their lunchbreak.

Private respondent appealed to respondent National Labor Relations Commission(NLRC) which sustained the Labor Arbiter and dismissed the appeal . [4] However, uponmotion for reconsideration by private respondent, the NLRC, this time with two (2) newcommissioners replacing those who earlier retired, reversed its arlier decision of 20 April1994 as well as the decision of the Labor Arbiter . [5] The NLRC considered the decisionof this Court in the Sime Darby case of 1990 as the law of the case wherein petitionerwas ordered to pay the money value of these covered employees deprived of lunchand/or working time breaks. The public respondent declared that the new workschedule deprived the employees of the benefits of time-honored company practice ofproviding its employees a 30-minute paid lunch break resulting in an unjust diminutionof company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence,

this petition alleging that public respondent committed grave abuse of discretionamounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfairlabor practice in the implementation of the change in the work schedule of itsemployees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunchbreak from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefitswhen the 30-minute paid lunch break was eliminated; (c) in failing to consider that in theearlier Sime Darby case affirming the decision of the NLRC, petitioner was authorized todiscontinue the practice of having a 30-minute paid lunch break should it decide to do
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so; and (d) in ignoring petitioners inhere nt management prerogative of determining andfixing the work schedule of its employees which is expressly recognized in the collectivebargaining agreement between petitioner and private respondent.

The Office of the Solicitor General filed in lieu of comment a manifestation andmotion recommending that the petition be granted, alleging that the 14 August 1992memorandum which contained the new work schedule was not discriminatory of theunion members nor did it constitute unfair labor practice on the part of petitioner.

We agree, hence, we sustain petitioner. The right to fix the work schedules of theemployees rests principally on their employer. In the instant case petitioner, as theemployer, cites as reason for the adjustment the efficient conduct of its businessoperations and its improved production . [6] It rationalizes that while the old work scheduleincluded a 30-minute paid lunch break, the employees could be called upon to do jobsduring that period as they were on call. Even if denominated as lunch break, thisperiod could very well be considered as working time because the factory employeeswere required to work if necessary and were paid accordingly for working. With the new

work schedule, the employees are now given a one-hour lunch break without anyinterruption from their employer. For a full one-hour undisturbed lunch break, theemployees can freely and effectively use this hour not only for eating but also for theirrest and comfort which are conducive to more efficiency and better performance in theirwork. Since the employees are no longer required to work during this one-hour lunchbreak, there is no more need for them to be compensated for this period. We agreewith the Labor Arbiter that the new work schedule fully complies with the daily workperiod of eight (8) hours without violating the Labor Code . [7] Besides, the new scheduleapplies to all employees in the factory similarly situated whether they are unionmembers or not .[8]

Consequently, it was grave abuse of discretion for public respondent to equate theearlier Sime Darby case [9] with the facts obtaining in this case. That ruling in the formercase is not applicable here. The issue in that case involved the matter of granting lunchbreaks to certain employees while depriving the other employees of such breaks. ThisCourt affirmed in that case the NLRCs finding that such act of manageme nt wasdiscriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination ofemployees but only the issue of whether the change of work schedule, whichmanagement deems necessary to increase production, constitutes unfair laborpractice. As shown by the records, the change effected by management with regard toworking time is made to apply to all factory employees engaged in the same line of work

whether or not they are members of private respondent union. Hence, it cannot be saidthat the new scheme adopted by management prejudices the right of private respondentto self-organization.

Every business enterprise endeavors to increase its profits. In the process, it maydevise means to attain that goal. Even as the law is solicitous of the welfare of theemployees, it must also protect the right of an employer to exercise what are clearlymanagement prerogatives . [10] Thus, management is free to regulate, according to itsown discretion and judgment, all aspects of employment, including hiring, work
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assignments, working methods, time, place and manner of work, processes to befollowed, supervision of workers, working regulations, transfer of employees, worksupervision, lay off of workers and discipline, dismissal and recall of workers . [11] Further,management retains the prerogative, whenever exigencies of the service so require, tochange the working hours of its employees. So long as such prerogative is exercised in

good faith for the advancement of the employers interest and not for the purpose ofdefeating or circumventing the rights of the employees under special laws or under validagreements, this Court will uphold such exercise . [12]

While the Constitution is committed to the policy of social justice and the protectionof the working class, it should not be supposed that every dispute will be automaticallydecided in favor of labor. Management also has right which, as such, are entitled torespect and enforcement in the interest of simple fair play. Although this Court hasinclined more often than not toward the worker and has upheld his cause in his conflictswith the employer, such as favoritism has not blinded the Court to the rule that justice isin every case for the deserving, to be dispensed in the light of the established facts andthe applicable law and doctrine . [13]

WHEREFORE, the Petition is GRANTED. The Resolution of the National LaborRelations Commission dated 29 November 1994 is SET ASIDE and the decision of theLabor Arbiter dated 26 November 1993 dismissing the complaint against petitioner forunfair labor practice is AFFIRMED.

SO ORDERED.

Davide, Jr., (Chairman), Vitug, Panganiban, and Quisumbing, JJ., concur .
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Branch, to pay complainants the total amount of [s]ixty [t]housand [o]ne [h]undred[t]welve [p]esos and 50/100 (P60,112.50) in the concept of 13 th month pay and serviceincentive leave benefits as computed by our Labor Arbitration Associate whosecomputation is hereto attached and forming part thereof. [3]

On appeal, the NLRC modified the labor arbiters Decision. The dispositive portion of the NLRC Decision [4]r eads:

WHEREFORE, the assailed Decision is hereby MODIFIED in so far as the award of13 th month pay for the previous years which is hereby excluded. Further, xxx SentinelSecurity Agency, Inc. is hereby ORDERED to pay complainants separation pay at therate of month pay for every year of service and for both xxx Philippine AmericanLife Insurance, Inc. and Sentinel Security Agency, Inc. and/or Daniel Iway to pay tothe [complainants] jointly and severally their backwages from January 16, 1994 toJanuary 15, 1995 and the corresponding 13 th month pay for the said year. The

monetary awards hereby granted are broken down as follows [into separation pay, back wages, 13 th month pay and service incentive leave pay]:

x x x x x x x x x. [5]

The challenged Resolution denied reconside ration for lack of merit. [6]

The Facts

The undisputed factual backdrop is narrated by Respondent Commission as follows :[7]

The complainants were employees of Sentinel [Security Agency, Inc. hereafterreferred to as the Agency] since March 1, 1966 in the case of Veronico Zambo;October 27, 1975 in the case of Helcias Arroyo; September 20, 1985 in the case ofAdriano Cabano; February 1, 1990 in the case of Maximo Ortiz; and Ortiz and

November 1, 1967 in the case of Rustico Andoy. They were assigned to render guardduty at the premises of [Philippine American Life Insurance Company] at JonesAvenue, Cebu City. On December 16, 1993 Philippine American Life InsuranceCompany [the Client, for brevity], through Carlos De Pano, Jr., sent notice to allconcerned that the [Agency] was again awarded the contract of [s]ecurity [s]ervicestogether with a request to replace all the security guards in the companys offices atthe cities of Cebu, Bacolod, Cagayan de Oro, Dipolog and Ilagan. In compliancetherewith, [the Agency] issued on January 12, 1994, a Relief and Transfer Orderreplacing the complainants as guards [of the Client] and for then to be re-assigned [to]other clients effective January 16, 1994. As ordered, the complainants reported butwere never given new assignments but inste ad they were told in the vernacular, gui-ilisa mo kay mga tigulang naman mo which when translated means, you were
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replace[d] because you are already old. Precisely, the complainants lost no time butfiled the subject illegal dismissal cases on January 18, January 26 and February 4,1994 and prayed for payment of separation pay and other labor standard benefits.

[The Client and the Agency] maintained there was no dismissal on the part of thecomplainants, constructive or otherwise, as they were protected by the contract ofsecurity services which allows the recall of security guards from their assigned postsat the will of either party. It also advanced that the complainants prematurely filed thesubject cases without giving the [Agency] a chance to give them some assignments.

On the part of [the Client], it averred further that there [was] no employer -employeerelationship between it and the complainants as the latter were merely assigned to itsCebu Branch under a job contract; that [the Agency] ha[d] its own separate corporate

personality apart from that of [the Client]. Besides, it pointed out that the functions ofthe complainants in providing security services to [the Clients] property [were] notnecessary and desirable to the usual business or trade of [the Client], as it could stilloperate and engage in its life insurance business without the security guards. In fine,[the Client] maintains that the complainants have no cause of action against it.

Ruling of Respondent Commission

Respondent C ommission ruled that the complainants were constructively dismissed, as therecall of the complainants from their long time post[s] at [the premises of the Client] without anygood reason is a scheme to justify or camouflage illegal dismissal.

It ruled Superstar Security Agency, Inc. vs. National Labor Relations Commission [8] and APrime Security Services, Inc. vs. national Labor Relations Commission [9] were not applicable to the case at bar. Inthe former, the security guard was placed on temporary off -detail due to his poor performance and lack ofelementary courtesy and tact, and to the cost-cutting program of the agency. In the latter, the relief of the securityguard was due to his sleeping while on duty and his repeated refusal to resume work despite notice.

In the present case, the complainants case, the complainants were told by the Agency thatthey lost their assignment at the Clients premises because they were already old, and not

because they had committed any infraction or irregularity. The NLRC applied RA 7641 ,[10] whichgives retirement benefits of one-half month pay per year of service to retirable employees, viz.:

xxx As stated earlier xxx, the complainants were in the service of [the Client] fornearly twenty (20) years in the cases of Helcias Arroyo and for more than twenty (20)years in the cases of Veronico Zambo and Rustico Andoy, which long years of service[appear] on record to be unblemished. The complainants were then confronted withan impending sudden loss of earning for while the order of [the Agency] toimmediately report for reassignment momentarily gave them hope, there was in factno immediate reinstatement. While it could have been prudent for the complainants towait, they were set unstable and were actually threatened by the statement of the
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personnel in charge of [the Agency] that they were already old, that was why theywere replaced.

Against these glaring facts is the new Retirement Law, R.A. 7641 which took effecton January 7, 1993 giving retirement benefits of month pay per year of service to anemployee upon reaching retirement age to be paid by the employer, in this case atquiet a sizeable amount and in not so long due time as some of the complainants weredescri bed as already old.

As complainants were illegally dismissed, the NLRC ruled that they were entitled to thetwin remedies of back wages for one (1) year from the time of their dismissal on January 15,1994, payable by both the Client and the Agency, and separation pay one-half month pay forevery year of service payable only by the Agency. Reinstatement was not granted due to theresulting antipathy and resentment among the complainants, the Agency and the Client.

Hence, this petition .[11]

The Issues

In their memoranda, the Agency poses this question :[12]

xxx [W]hether xxx Sentinel is guilty of illegal dismissal[,]

On the other hand, the Client raises the following issues :[13]

Whether xxx [the complainants] were illegally di smissed by their employer, SentinelSecurity Agency, Inc., and in holding petitioner to be equally liable therefor.

Whether xxx petitioner is jointly and severally liable with Sentinel Security Agency,Inc., in the latters payment of backwages, 13 th month pay and service incentive leave

pay to its employees xxx.

In sum, the resolution of these consolidated petitions hinges on (1) whether the complainantswere illegally dismissed, and (2) whether the Client is jointly and severally liable for theirthirteenth-month and service incentive leave pays.

The Courts Ruling

The petition is partly meritorious.

First Issue: I ll egal Di smissal
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The private respondents transfer, according to Respondent Commission, was affected tocircumvent the mandate of Republic Act 7641 (New Retirement Law), which by then hadalready taken effect, in view of the fact that the complainants had worked for both the Client andthe Agency for 10 to 20 years and were nearing retirement age. With this premise, the NLRCconcluded that the guards were illegally dismissed. The complainants add that the findings of

the Commission match the remarks of the personnel manager of the Agency, FelicianoMarticion; that is, that they were being replaced because they were already old. They insist thattheir service records are unblemished; hence, they could not have been dismissed by reason ofany just cause.

We agree that the security guards were illegally dismissed, but not for the reasons given bythe public respondent. The aforecited contentions of the NLRC are speculative and unsupported

by the evidence on record. As the solicitor general said in his Manifestation in Lieu ofComment, the relief and transfer order was akin to placing private respondents on temporaryoff -detail.

Being sidelined temporarily is a standard stipulation in employment contracts, as the

availability of assignment for security guards is primarily dependent on the contracts entered into by the agency with third parties. Most contracts for security services, as in this case, stipulatethat the client may request the replacement of the guards assigned to it. In security agency

parlance, being placed off detail or on floating status means waiting to be posted. [14] Thiscircumstance is not equivalent to dismissal, so long as such status does not continue beyondreasonable time .[15]

In the case at bar, the relief and transfer order per se did not sever the employmentrelationship between the complainants and the Agency. Thus, despite the fact that complainantswere no longer assigned to the Client, Article 287 of the Labor Code, as amended by RA 7641,still binds the Agency to provide them upon their reaching the retirement age of sixty to sixty-five years retirement pay or whatever else was established in the collective bargainingagreement or in any other applicable employment contract. On the other hand, the Client is notliable to the complainants for their retirement pay because of the absence of an employer-employee relationship between them.

However, the Agency claims that the complainants, after being placed off-detail, abandonedtheir employ. The solicitor general, siding with the Agency and the labor arbiter, contends thatwhile abandonment of employment is inconsistent with the filing of a complaint for illegaldismissal, such rule is not applicable where [the complainant] expressly rejects this relief andasks for separation pay instead.

The Court disagrees. Abandonment, as a just and valid cause for termination, requires adeliberate and unjustified refusal of an employee to resume his work, coupled with a clearabsence of any intention of returning to his or her work .[16] That complainants did not pray forreinstatement is not sufficient proof of abandonment. A strong indication of the intention ofcomplainants to resume work is their allegation that on several dates they reported to the Agencyfor reassignment, but were not given any. In fact, the contention of complainant is that theAgency constructively dismissed them. Abandonment has recently been ruled to beincompatible with constructive dismissal. We, thus, rule that complainants did not abandon their

jobs .[17] We will now demonstrate why we believe complainants were illegally dismissed.
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In several cases, the Court has recognized the prerogative of management to transfer anemployee from one office to another within the same business establishment, as the exigency ofthe business may require, provided that the said transfer does not result in a demotion in rank ora diminution in salary, benefits and other privileges of the employee ;[18] or is not unreasonable,inconvenient or prejudicial to the latter ;[19] or is not used as a subterfuge by the employer to rid himself of anundesirable worker .[20]

A transfer means a movement (1) from one position to another of equivalent rank, level orsalary, without a break in the service ;[21] and (2) from one office to another within the same businessestablishment .[22] It is distinguished from a promotion in the sense that it involves a lateral change as opposed to ascalar ascent .[23]

In this case, transfer of the complainants implied more than a relief from duty to give themtime to rest a mere changing of the guards. Rather, their transfer connoted a reshuffling orexchange of their posts, or their reassignment to other posts, such that no security guard would

be without an assignment.

However, this legally recognized concept of transfer was not implemented. The agencyhired new security guards to replace the complainants, resulting in a lack of posts to which thecomplainants could have been reassigned. Thus, it refused to reassign Complainant Andoy whenhe reported for duty on February 2, 4 and 7, 1994; and merely told the other complainants onvarious dates from January 25 to 27, 1994 that they were already too old to be posted anywhere.

The Agency now explains that since, under the law, the Agency is given a period of notmore than six months to retain the complainants on floating status, the complaint for illegaldismissal is premature. This contention is incorrect.

A floating status requires the dire exigency of the employers bona fide suspension ofoperation, business or undertaking. In security services, this happens when the clients that do notrenew their contracts with a security agency are more than those that do and the new ones thatthe agency gets. However, in the case at bar, the Agency was awarded a new contract by theClient. There was no surplus of security guards over available assignments. If there were, it was

because the Agency hired new security guards. Thus, there was no suspension of operation, business or undertaking, bona fide or not, that would have justified placing the complainants off-detail and making them wait for a period of six months. If indeed they were merely transferred,there would have been no need to make them wait for six months.

The only logical conclusion from the foregoing discussion is that the Agency illegallydismissed the complainants. Hence, as a necessary consequence, the complainants are entitled toreinstatement and back wages .[24] However, reinstatement is no longer feasible in this case. The Agencycannot reassign them to the Client, as the former has recruited new security guards; the complainants, on the otherhand, refuse to accept other assignments. Verily, complainants do not pray for reinstatement; in fact, they refused to

be reinstated. Such refusal is indicative of strained relations .[25] Thus, separation pay is awarded in lieu ofreinstatement .[26]

Second Issue: Clients Liability
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The Client did not, as it could not, illegally dismiss the complainants. Thus, it should not beheld liable for separation pay and back wages. But even if the Client is not responsible for theillegal dismissal of the complainants, it is jointly and severally liable with the Agency for thecomplainants service incentive leave pay. In Rosewood Processing, Inc. vs. National LaborRelations Commission ,[27] the Court explained that, notwithstanding the service contract between

the client and the security agency, the two are solidarily liable for the proper wages prescribed bythe Labor Code, pursuant to Article 106, 107 and 109 thereof, which we quote hereunder:

ART. 106. Contractor or subcontractor. Whenever an employer enters into acontract with another person for the performance of the former [s] work, theemployees of the contractor and of the latter[s] subcontractor, if any, shall be paid inaccordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of hisemployees in accordance with this Code, the employer shall be jointly and severallyliable with his contractor or subcontractor to such employees to the extent of the work

performed under the contract, in the same manner and extent that he is liable toemployees directly employed by him.

The Secretary of Labor may, by appropriate regulations, restrict or prohibit thecontracting out of labor to protect the rights of workers established under thisCode. In so prohibiting or restricting, he may make appropriate distinctions betweenlabor-only contracting and job contracting as well as differentiations within thesetypes of contracting and determine who among the parties involved shall beconsidered the employer for purposes of this Code, to prevent any violation or

circumvention of any provision of this Code.xxx In such cases [labor -only contracting], the person or intermediary shall beconsidered merely as an agent of the employer who shall be responsible to theworkers in the same manner and extent as if the latter were directly employed by him.

ART. 107. Indirect employer. The provisions of the immediately precedingArticle shall likewise apply to any person, partnership, association or corporationwhich, not being an employer, contracts with an independent contractor for the

performance of any work, task, job or project.

ART. 109. Solidary liability. The provisions of existing laws to the contrarynotwithstanding, every employer or indirect employer shall be held responsible withhis contractor or subcontractor for any violation of any provision of this Code. For

purpose of determining the extent of their civil liability under this Chapter, they shall be considered as direct employers.
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Under these provisions, the indirect employer, who is the Client in the case at bar, is jointlyand severally liable with the contractor for the workers wages, in the same manner and extentthat it is liable to its direct employees. This liability of the Client covers the payment of theservice incentive leave pay of the complainants during the time they were posted at the Cebu

branch of the Client. As service had been rendered, the liability accrued, even if the

complainants were eventually transferred or reassigned. The service incentive leave is expressly granted by these pertinent provisions of the Labor

Code:

ART. 95. Right to service incentive leave. (a) Every employee who has renderedat least one year of service shall be entitled to a yearly service incentive leave of fivedays with pay.

(b) This provision shall not apply to those who are already enjoying the benefit herein provided, those enjoying vacation leave with pay of at least five days and those

employed in establishments regularly employing less than ten employees or inestablishments exempted from granting this benefit by the Secretary of Labor afterconsidering the viability or financial condition of such establishment.

(c) The grant of benefit in excess of that provided herein shall not be made a subjectof arbitration or any court [or] admnistrative action.

Under the Implementing Rules and Regulations of the Labor Code, an unused serviceincentive leave is commutable to its money equivalent, viz.:

Sec. 5. Treatment of Banefit. - The service incentive leave shall be commutable to itsmoney equivale nt if not used or exhausted at the end of the year.

The award of the thirteenth-month pay is deleted in view of the evidence presented by theAgency that such claim has already been paid to the complainants. Obviously then, theaward of such benefit in the dispositive portion of the assailed Decision is merely an oversight,considering that Respondent Commission itself deleted it from the main body of the saidDecision.

WHEREFORE , the petition is DISMISSED and the assailed Decision and Resolution arehereby AFFIRMED , but the award of the thirteenth-month pay is DELETED . Costs against

petitioners.

SO ORDERED.

Davide, Jr., (Chairman), Bellosillo, Vitug, and Quisumbing, JJ., concur .


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[G.R. No. 155421. July 7, 2004]

ELMER M. MENDOZA, pet i t ioner, vs . RURAL BANK OF

LUCBAN, re sponden t .D E C I S I O N

PANGANIBAN, J .:

The law protects both the welfare of employees and the prerogatives ofmanagement. Courts will not interfere with business judgments of employers,provided they do not violate the law, collective bargaining agreements, andgeneral principles of fair play and justice. The transfer of personnel from onearea of operation to another is inherently a managerial prerogative that shall

be upheld if exercised in good faith -- for the purpose of advancing businessinterests, not of defeating or circumventing the rights of employees.

The Case

The Court applies these principles in resolving the instant Petition forReview [1] under Rule 45 of the Rules of Court , assailing the June 14, 2002Decision [2] and September 25, 2002 Resolution [3] of the Court of Appeals (CA)

in CA-GR SP No. 68030. The assailed Decision disposed as follows:WHEREFORE , the petition for certiorari is hereby DISMISSED for lack ofmerit. [4]

The challenged Resolution denied petitioners Motion for Reconsideration.

The Facts

On April 25, 1999, the Board of Directors of the Rural Bank of Lucban,Inc., issued Board Resolution Nos. 99-52 and 99-53, which read:

Board Res. No. 99 -52

RESOLVED AS IT IS HEREBY RESOLVED that in line with the policy of the bank to familiarize bank employees with the various phases of bank operations and
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further strengthen the existing internal control system[,] all officers and employees aresubject to reshuffle of assignments. Moreover, this resolution does not preclude thetransfer of assignment of bank officers and employees from the branch office to thehead office and vice- versa.

Board Res. No. 95 -53

Pursuant to Resolution No. 99 -52, the following branch employees are herebyreshuffled to their new assignments without changes in their compensation and other

benefits.

NAME OF EMPLOYEES PRESENT ASSIGNMENT NEW ASSIGNMENT

JOYCE V. ZETA Bank Teller C/A TellerCLODUALDO ZAGALA C/A Clerk Actg. AppraiserELMER L. MENDOZA Appraiser Clerk-MeralcoCollectionCHONA R. MENDOZA Clerk-Meralco Bank Teller [5]

Collection

In a letter dated April 30, 1999, Alejo B. Daya, the banks board chairman,directed Briccio V. Cada, the manager of the banks Tayabas branch, toimplement the reshuffle . [6] The new assignments were to be effective on May1, 1999 without changes in salary, allowances, and other benefits received bythe aforementioned employees. [7]

On May 3, 1999, in an undated letter addressed to Daya, PetitionerElmer Mendoza expressed his opinion on the reshuffle, as follows:

RE: The recent reshuffle of employees as per

Board Resolution dated April 25, 1999

Dear Sir:

This is in connection with the aforementioned subject matter and which theundersigned received on April 25, 1999.

Needless to state, the reshuffling of the undersigned from the present position asAppraiser to Clerk-Meralco Collection is deemed to be a demotion without any legal

basis. Before this action on your part[,] the undersigned has been besieged byintrigues due to [the] malicious machination of a certain public official who is bruitedto be your good friend. These malicious insinuations were baseless and despite the
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fact that I have been on my job as Appraiser for the past six (6) years in good standingand never involved in any anomalous conduct, my being reshuffled to [C]lerk-[M]eralco [C]ollection is a blatant harassment on your part as a prelude to mytermination in due time. This will constitute an unfair labor practice.

Meanwhile, may I beseech your good office that I may remain in my position asAppraiser until the reason [for] my being reshuffled is made clear.

Your kind consideration on this request will be highly appreciated. [8]

On May 10, 1999, Daya replied:

Dear Mr. Mendoza,

Anent your undated letter expressing your resentment/comments on the recent

managements decision to reshuffle the duties of bank employees, please be informedthat it was never the intention (of management) to downgrade your position in the

bank considering that your due compensation as Bank Appraiser is maintained and nofuture reduction was intended.

Aside from giving bank employees a wider experience in various banking operations,the reshuffle will also afford management an effective tool in providing the bank asound internal control system/check and balance and a basis in evaluating the

performance of each employee. A continuing bankwide reshuffle of employees shall be made at the discretion of management which may include bank officers, if

necessary as expressed in Board Resolution No. 99-53, dated April 25,1999. Management merely shifted the duties of employees, their position title [may

be] retained if requested formally.

Being a standard procedure in maintaining an e ffective internal control systemrecommended by the Bangko Sentral ng Pilipinas, we believe that the conduct ofreshuffle is also a prerogative of bank management. [9]

On June 7, 1999, petitioner submitted to the banks Tayabas branchmanager a letter in which he applied for a leave of absence from work:

Dear Sir:

I wish I could continue working but due to the ailment that I always feel every nowand then, I have the honor to apply for at least ten (10) days sick leave effective June7, 1999.
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Hoping that this request [merits] your favorable and kind consideration andunderstanding. [10]

On June 21, 1999, petitioner again submitted a letter asking for anotherleave of absence for twenty days effective on the same date . [11]

On June 24, 1999, while on his second leave of absence, petitioner filed aComplaint before Arbitration Branch No. IV of the National Labor RelationsCommission (NLRC). The Complaint -- for illegal dismissal, underpayment,separation pay and damages -- was filed against the Rural Bank of Lucbanand/or its president, Alejo B. Daya; and its Tayabas branch manager, BriccioV. Cada. The case was docketed as NLRC Case SRAB-IV-6-5862-99-Q . [12]

The labor arbiters June 14, 2000 Decision upheld petitioners claims asfollows:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Declaring respondents guilty of illegal dismissal.

2. Ordering respondents to reinstate complainant to his former position withoutloss of seniority rights with full backwages from date of dismissal to actualreinstatement in the amount of P55,000.00 as of June 30, 2000.

3. Ordering the payment of separation pay if reinstatement is not possible in theamount of P30,000.00 in addition to 13 th month pay of P5,000.00 and theusual P10,000.00 annual bonus afforded the employees.

4. Ordering the payment of unpaid salary for the period covering July 1-30,1999 in the amount of P5,000.00

5. Ordering the payment of moral damages in the amount of P50,000.00.

6. Ordering the payment of exemplary damages in the amount of P25,000.00

7. Ordering the paym ent of Attorneys fees in the amount of P18,000.00 which

is 10% of the monetary award.[13]

On appeal, the NLRC reversed the labor arbiter . [14] In its July 18, 2001Resolution, it held:

We can conceive of no reason to ascribe bad faith or malice to the respondent bankfor its implementation of its Board Resolution directing the reshuffle of employees at
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Chairman of the banks board of directors to Mendoza s letter protesting thereshuffle. There is, therefore, no cause to doubt the reasons which the bank

propounded in support of its move to reshuffle its employees, viz:

1. to familiarize bank employees with the various phases of bank operations,and

2. to further strengthen the existing internal control system of the bank.

The reshuffling of its employees was done in good faith and cannot be made the basis of a finding of constructive dismissal.

The fact that Mendoza was no longe r included in the banks payroll for July 1 to 15,1999 does not signify that the bank has dismissed the former from itsemploy. Mendoza separated himself from the banks employ when, on June 24, 1999,while on leave, he filed the illegal dismissal case against his employer for no apparentreason at all. [18]

Hence, this Petition . [19]

The Issues

Petitioner raises the following issues for our consideration:

I. Whether or not the petitioner is deemed to have voluntarily separated himselffrom the service and/or abandoned his job when he filed his Complaint forconstructive and consequently illegal dismissal;

II. Whether or not the reshuffling of private respondent[s] employees was done ingood faith and cannot be made as the basis of a finding of constructive dismissal, evenas the [petitioners] demotion in rank is admitted by both parties;

III. Whether or not the ruling in the landmark case of Ruben Serrano vs. NLRC [and Isetann Department Store (323 SCRA 445)] is applicable to the case at bar;

IV. Whether or not the Court of Appeals erred in dismissing the petitionersmoney claims, damages, and unpaid salaries for the period July 1-30, 1999, althoughthis was not disputed by the private respondent; and
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V. Whether or not the entire proceedings before the Honorable Court ofAppeals and the NLRC are a nullity since the appeal filed by private respondent

before the NLRC on August 5, 2000 was on the 15 th day or five (5) days beyond thereglem[e]ntary period of ten (10) days as provided for by law and the NLRC Rules ofProcedure . [20]

In short, the main issue is whether petitioner was constructively dismissedfrom his employment.

The Courts Ruling

The Petition has no merit.

Main Issue:Construct ive Dismissal

Constructive dismissal is defined as an involuntary resignation resorted towhen continued employment is rendered impossible, unreasonable orunlikely; when there is a demotion in rank or a diminution of pay; or when aclear discrimination, insensibility or disdain by an employer becomesunbearable to the employee . [21] Petitioner argues that he was compelled to filean action for constructive dismissal, because he had been demoted from

appraiser to clerk and not given any work to do, while his table had beenplaced near the toilet and eventually removed . [22] He adds that the reshufflingof employees was done in bad faith, because it was designed primarily toforce him to resign . [23]

Management Prerog ative to Transfer Emp loyees

Jurisprudence recognizes the exercise of management prerogatives. Forthis reason, courts often decline to interfere in legitimate business decisions ofemployers . [24] Indeed, labor laws discourage interference in employers

judgments concerning the conduct of their business . [25] The law must protectnot only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interest, management has theprerogative to transfer or assign employees from one office or area of
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operation to another -- provided there is no demotion in rank or diminution ofsalary, benefits, and other privileges; and the action is not motivated bydiscrimination, made in bad faith, or effected as a form of punishment ordemotion without sufficient cause . [26] This privilege is inherent in the right ofemployers to control and manage their enterprise effectively . [27] The right ofemployees to security of tenure does not give them vested rights to theirpositions to the extent of depriving management of its prerogative to changetheir assignments or to transfer them . [28]

Managerial prerogatives, however, are subject to limitations provided bylaw, collective bargaining agreements, and general principles of fair play and

justice . [29] The test for determining the validity of the transfer of employees wasexplained in Blue Dairy Corporation v. NLRC [30] as follows:

[L]ike other rights, there are limits thereto. The managerial prerogative to transfer

personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused withthe manner in which that right is exercised. Thus, it cannot be used as a subterfuge bythe employer to rid himself of an undesirable worker. In particular, the employermust be able to show that the transfer is not unreasonable, inconvenient or prejudicialto the employee; nor does it involve a demotion in rank or a diminution of his salaries,

privileges and other benefits. Should the employer fail to overcome this burden of proof, the employees transfer shall be tantamount to constructive dismissal, whichhas been defined as a quitting because continued employment is rendered impossible,unreasonable or unlikely; as an offer involving a demotion in rank and diminution in

pay. Likewise, constructive dismissal exists when an act of clear discrimination,insensibility or disdain by an employer has become so unbearable to the employeeleaving him with no option but to forego with his contin ued employment. [31]

Petitioners Transfer Lawful

The employer bears the burden of proving that the transfer of theemployee has complied with the foregoing test. In the instant case, we find noreason to disturb the conclusion of the NLRC and the CA that there was noconstructive dismissal. Their finding is supported by substantial evidence --that amount of relevant evidence that a reasonable mind might accept as

justification for a conclusion . [32]

Petitioners transfer was made in pursuit of respondents policy tofamiliarize bank employees with the variou s phases of bank operations andfurther strengthen the existing internal control system [33] of all officers and
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Petitioner argues that the proceedings before the NLRC and the CA werevoid, si nce respondents appeal before the NLRC had allegedly been filedbeyond the reglementary period . [41] A careful scrutiny of his Petition forReview [42] with the appellate court shows that this issue was not raisedthere. Inasmuch as the instant Petition challenges the Decision of the CA, wecannot rule on arguments that were not brought before it. This ruling isconsistent with the due-process requirement that no question shall beentertained on appeal, unless it has been raised in the court below . [43]

WHEREFORE , this Petition is DENIED, and the June 14, 2002 Decisionand the September 25, 2002 Resolution of the Court of Appealsare AFFIRMED . Costs against petitioner.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna,

JJ., concur
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[G.R. No. 122468. November 16, 1998]

SENTINEL SECURITY AGENCY, INC., petitioner, vs. NATIONAL

LABOR RELATIONS COMMISSION, ADRIANO CABANO JR.,VERONICO C. ZAMBO, HELCIAS ARROYO, RUSTICO ANDOY,and MAXIMO ORTIZ, respondents .

[G.R. No. 122716. November 16, 1998]

PHILIPPINE AMERICAN LIFE INSURANCE COMPANY, petitioner,vs. NATIONAL LABOR RELATIONS COMMISSION, VERONICOZAMBO, HELCIAS ARROYO, ADRIANO CABANO, MAXIMOORTIZ, and RUSTICO ANDOY, respondents .

R E S O L U T I O NPANGANIBAN, J .:

Separately filed before us by Petitioners Sentinel Security Agency, Inc. and PhilippineAmerican Life Insurance Company (hereafter referred to as the Agency and the Client,respectively) are two Motions for Reconsideration of this Courts September 3, 1998 Decision inGR Nos. 122468 and 122716.

Petitioner Agency, in its Motion for Reconsideration, merely reiterates the same basic issuesand arguments already submitted to the Court, which has sufficiently passed upon them in theassailed Decision. Thus, they cannot warrant a modification, much less a reversal, of ourdispositions therein.

On the other hand, Petitioner Client requests a clarification of its own liability. That thecomplainants illegal dismissa l was the sole responsibility of the Agency was clearly stated bythe Court in the assailed Decision, which we quote hereunder:

xxx [T]here was no suspension of operation, business or undertaking, bona fide ornot, that would have justified placing the complainants off-detail and making themwait for a period of six months. xxx The only logical conclusion from the foregoingdiscussion is that the Agency illegally dismissed the complainants. Hence, as anecessary consequence, the complainants are entitled to xxx back wages. xxxx. [1]

Relevant to this controversy is the recent pronouncement of the Court in Rosewood v. National Labor Relations Commission : [2]
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xxx [A]n order to pay back wages and separation pay is invested with a punitivecharacter, such that an indirect employer should not be made liable without a findingthat it had committed or conspired in the illegal dismissal.

In the present case, the Court held that the Client was not responsible for the illegal

dismissal of the complainants and, thus, not liable for the payment of back wages and separation pay, viz.:

The Client did not, as it could not, illegally dismiss the complainants. Thus, itshould not be held liable for separation pay and back wages. [3]

In sum, while the exoneration of the Client from the payment of separation pay and backwages was clearly stated in the body of our Decision, such fact was not included in thedispositive portion. In this sense, the Motion for Reconsideration has merit.

However, the Decision did not completely exonerate the Client which, as an indirect

employer, is solidarily liable with Petitioner Agency for the complainants unpaid serviceincentive leave, pursuant to Articles 106, 107 and 109 of the Code. As clarified by the Courtin Rosewood :

xxx Under these cited provisions of the Labor Code, should the contractor fail to paythe wages of its employees in accordance with law, the indirect employer (the

petitioner in this case), is jointly and severally liable with the contractor, but suchresponsibility should be understood to be limited to the extent of the work performedunder the contract, in the same manner and extent that he is liable to the employeesdirectly employed by him. This liability of petitioner covers the payment of the

workers performance of any work, task, job or project. So long as the work, task, jobor project has been performed for petitioners benefit or on its behalf, the liabilityaccrues for such period even if, later on, the employees are eventually transferred orreassigned elsewhere.

The complainants service incentive leave pay accrued to them during the years 1991 -1993;that is, before they were illegally dismissed by the Agency on January 16, 1994, as clearly shownin the labor arbiters computation ( see last page of Annex A to the Petition; rollo , p. 31).

WHEREFORE , the Motion for Reconsideration filed by the Agency ishereby DENIED , as it (1) raises the same basic issues already sufficiently passed upon in theCourts Decision and (2) fails to sub mit any substantial argument to warrant reversal ormodification thereof insofar as its liabilities are concerned. The Motion for Reconsiderationfiled by the Client is GRANTED IN PART. We hereby CLARIFY that for complainants backwages and separation pay, Philippine American Life Insurance Company is ABSOLVED fromliability; but for complainants service incentive leave pay, its solidary liability with the Agencyis REITERATED .

SO ORDERED.
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Davide, Jr. (Chairman), Bellosillo,Vitug and Quisumbing JJ., concur

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