Labor r Mngt Prerogative Cases

7/24/2019 Labor r Mngt Prerogative Cases

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THIRD DIVISION

BISIG MANGGAGAWA SA TRYCO and/or

FRANCISCO SIQUIG, as Union President,JOSELITO LARIO, VIVENCIO B. BARTE,

SATURNINO EGERA and SIMPLICIO AYA-AY,

Petitioners,

- versus -

NATIONAL LABOR RELATIONS

COMMISSION, TRYCO PHARMA

CORPORATION, and/or WILFREDO C.

RIVERA,Respondents.

G.R. No. 151309

Present:

PUNO,C.J.,*

YNARES-SANTIAGO,J.,

Chairperson,

CHICO-NAZARIO,

NACHURA, and

REYES,JJ.

Promulgated:

October 15, 2008

x------------------------------------------------------------------------------------x

DECISION

NACHURA,J.:

This petition seeks a review of the Decision[1]of the Court of Appeals (CA) dated

July 24, 2001 and Resolution dated December 20, 2001, which affirmed the finding of

the National Labor Relations Commission (NLRC) that the petitioners transfer to

another workplace did not amount to a constructive dismissal and an unfair labor

practice.

The pertinent factual antecedents are as follows:
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Tryco Pharma Corporation (Tryco) is a manufacturer of veterinary medicines

and its principal office is located in Caloocan City. Petitioners Joselito Lario, Vivencio

Barte, Saturnino Egera and Simplicio Aya-ay are its regular employees, occupying the

positions of helper, shipment helper and factory workers, respectively, assigned to the

Production Department. They are members of Bisig Manggagawa sa Tryco (BMT), the

exclusive bargaining representative of the rank-and-file employees.

Tryco and the petitioners signed separate Memorand[a] of Agreement[2](MOA),

providing for a compressed workweek schedule to be implemented in the company

effective May 20, 1996. The MOA was entered into pursuant to Department of Labor

and Employment Department Order (D.O.) No. 21, Series of 1990,Guidelines on the

Implementation of Compressed Workweek.As provided in the MOA, 8:00 a.m. to 6:12

p.m., from Monday to Friday, shall be considered as the regular working hours, and no

overtime pay shall be due and payable to the employee for work rendered during those

hours. The MOA specifically stated that the employee waives the right to claim

overtime pay for work rendered after 5:00 p.m. until 6:12 p.m. from Monday to Friday

considering that the compressed workweek schedule is adopted in lieu of the regular

workweek schedule which also consists of 46 hours. However, should an employee be

permitted or required to work beyond 6:12 p.m., such employee shall be entitled to

overtime pay.

Tryco informed the Bureau of Working Conditions of the Department of Labor

and Employment of the implementation of a compressed workweek in the company.[3]


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In January 1997, BMT and Tryco negotiated for the renewal of their collective

bargaining agreement (CBA) but failed to arrive at a new agreement.

Meantime, Tryco received the Letter dated March 26, 1997 from the Bureau of

Animal Industry of the Department of Agriculture reminding it that its production

should be conducted in San Rafael, Bulacan, not in Caloocan City:

MR. WILFREDO C. RIVERA

President, Tryco Pharma Corporation

San Rafael, Bulacan

Subject: LTO as VDAP Manufacturer at San Rafael, Bulacan

Dear Mr. Rivera:

This is to remind you that your License to Operate as Veterinary Drug

and Product Manufacturer is addressed at San Rafael, Bulacan, and so,

therefore, your production should be done at the above mentioned

address only. Further, production of a drug includes propagation,

processing, compounding, finishing, filling, repacking, labeling,

advertising, storage, distribution or sale of the veterinary drug product.

In no instance, therefore, should any of the above be done at your

business office at 117 M. Ponce St., EDSA, Caloocan City.

Please be guided accordingly.

Thank you.

Very truly yours,

(sgd.)

EDNA ZENAIDA V. VILLACORTE, D.V.M.

Chief, Animal Feeds Standard Division[4]
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Accordingly, Tryco issued a Memorandum[5]dated April 7, 1997 which directed

petitioner Aya-ay to report to the companys plant site in Bulacan. When petitioner Aya-

ay refused to obey, Tryco reiterated the order on April 18, 1997.[6]Subsequently,

through a Memorandum[7]dated May 9, 1997, Tryco also directed petitioners Egera,

Lario and Barte to report to the companys plant site in Bulacan.

BMT opposed the transfer of its members to San Rafael, Bulacan, contending

that it constitutes unfair labor practice. In protest, BMT declared a strike on May 26,

1997.

In August 1997, petitioners filed their separate complaints[8]for illegal dismissal,

underpayment of wages, nonpayment of overtime pay and service incentive leave, and

refusal to bargain against Tryco and its President, Wilfredo C. Rivera. In their Position

Paper,[9]petitioners alleged that the company acted in bad faith during the CBA

negotiations because it sent representatives without authority to bind the company,

and this was the reason why the negotiations failed. They added that the management

transferred petitioners Lario, Barte, Egera and Aya-ay from Caloocan to San Rafael,

Bulacan to paralyze the union. They prayed for the company to pay them their salaries

fromMay 26 to 31, 1997, service incentive leave, and overtime pay, and to implement

Wage Order No. 4.

In their defense, respondents averred that the petitioners were not dismissed

but they refused to comply with the managements directive for them to report to the

companys plant in San Rafael, Bulacan. They denied the allegation that they

negotiated in bad faith, stating that, in fact, they sent the Executive Vice-President
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and Legal Counsel as the companys representatives to the CBA negotiations. They

claim that the failure to arrive at an agreement was due to the stubbornness of the

union panel.

Respondents further averred that, long before the start of the negotiations, the

company had already been planning to decongest the Caloocan office to comply with

the government policy to shift the concentration of manufacturing activities from the

metropolis to the countryside. The decision to transfer the companys production

activities to San Rafael, Bulacan was precipitated by the letter-reminder of the Bureau

of Animal Industry.

On February 27, 1998, the Labor Arbiter dismissed the case for lack of merit.

[10]The Labor Arbiter held that the transfer of the petitioners would not paralyze or

render the union ineffective for the following reasons: (1) complainants are not

members of the negotiating panel; and (2) the transfer was made pursuant to the

directive of the Department of Agriculture.

The Labor Arbiter also denied the money claims, ratiocinating that the

nonpayment of wages was justified because the petitioners did not render work from

May 26 to 31, 1997; overtime pay is not due because of the compressed workweek

agreement between the union and management; and service incentive leave pay cannot

be claimed by the complainants because they are already enjoying vacation leave with

pay for at least five days. As for the claim of noncompliance with Wage Order No. 4, the

Labor Arbiter held that the issue should be left to the grievance machinery or

voluntary arbitrator.


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On October 29, 1999, the NLRC affirmed the Labor Arbiters Decision,

dismissing the case, thus:

PREMISES CONSIDERED, the Decision of February 27, 1998 is

hereby AFFIRMED and complainants appeal therefrom DISMISSED for

lack of merit. Complainants Joselito Lario, Vivencio Barte, Saturnino

Egera and Simplicio Aya-ay are directed to report to work at respondents

San Rafael Plant, Bulacan but without backwages. Respondents are

directed to accept the complainants back to work.

SO ORDERED.[11]

On December 22, 1999, the NLRC denied the petitioners motion for

reconsideration for lack of merit.[12]

Left with no recourse, petitioners filed a petition forcertiorariwith the CA.

On July 24, 2001, the CA dismissed the petition forcertiorariand ruled that the

transfer order was a management prerogative not amounting to a constructive

dismissal or an unfair labor practice. The CA further sustained the enforceability of

the MOA, particularly the waiver of overtime pay in light of this Courts rulings

upholding a waiver of benefits in exchange of other valuable privileges. The dispositive

portion of the said CA decision reads:

WHEREFORE, the instant petition is DISMISSED. The Decision ofthe Labor Arbiter dated February 27, 1998 and the Decision and

Resolution of the NLRC promulgated on October 29, 1999 and December

22, 1999, respectively, in NLRC-NCR Case Nos. 08-05715-97, 08-06115-

97 and 08-05920-97, are AFFIRMED.

SO ORDERED.[13]
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The CA denied the petitioners motion for reconsideration on December 20, 2001.[14]

Dissatisfied, petitioners filed this petition for review raising the following issues:

-A-

THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE

PATENTLY ERRONEOUS RULING OF THE LABOR ARBITER AND THE

COMMISSION THAT THERE WAS NO DISMISSAL, MUCH LESS ILLEGAL

DISMISSAL, OF THE INDIVIDUAL PETITIONERS.

-B-

THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING AND

CONCLUDING THAT PRIVATE RESPONDENTS COMMITTED ACTS OF

UNFAIR LABOR PRACTICE.

-C-

THE COURT OF APPEALS ERRED IN NOT FINDING AND CONCLUDING

THAT PETITIONERS ARE ENTITLED TO THEIR MONEY CLAIMS AND TO

DAMAGES, AS WELL AS LITIGATION COSTS AND ATTORNEYS FEES.[15]

The petition has no merit.

We have no reason to deviate from the well-entrenched rule that findings of

fact of labor officials, who are deemed to have acquired expertise in matters within

their respective jurisdiction, are generally accorded not only respect but even finality,

and bind us when supported by substantial evidence.[16]This is particularly true when

the findings of the Labor Arbiter, the NLRC and the CA are in absolute agreement.[17]In

this case, the Labor Arbiter, the NLRC, and the CA uniformly agreed that the

petitioners were not constructively dismissed and that the transfer orders did not
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amount to an unfair labor practice. But if only to disabuse the minds of the petitioners

who have persistently pursued this case on the mistaken belief that the labor

tribunals and the appellate court committed grievous errors, this Court will go over

the issues raised in this petition.

Petitioners mainly contend that the transfer orders amount to a constructive

dismissal. They maintain that the letter of the Bureau of Animal Industry is not

credible because it is not authenticated; it is only a ploy, solicited by respondents to

give them an excuse to effect a massive transfer of employees. They point out that

the Caloocan City office is still engaged in production activities until now and

respondents even hired new employees to replace them.

We do not agree.

We refuse to accept the petitioners wild and reckless imputation that the

Bureau of Animal Industry conspired with the respondents just to effect the transfer

of the petitioners. There is not an iota of proof to support this outlandish

claim. Absent any evidence, the allegation is not only highly irresponsible but is

grossly unfair to the government agency concerned. Even as this Court has given

litigants and counsel a relatively wide latitude to present arguments in support of their

cause, we will not tolerate outright misrepresentation or baseless accusation. Let this

be fair warning to counsel for the petitioners.

Furthermore, Trycos decision to transfer its production activities to San Rafael,

Bulacan, regardless of whether it was made pursuant to the letter of the Bureau of


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Animal Industry, was within the scope of its inherent right to control and manage its

enterprise effectively. While the law is solicitous of the welfare of employees, it must

also protect the right of an employer to exercise what are clearly management

prerogatives. The free will of management to conduct its own business affairs to

achieve its purpose cannot be denied.[18]

This prerogative extends to the managements right to regulate, according to its

own discretion and judgment, all aspects of employment, including the freedom to

transferand reassign employees according to the requirements of its business.

[19]Managements prerogative of transferring and reassigning employees from one area

of operation to another in order to meet the requirements of the business is, therefore,

generally not constitutive of constructive dismissal.[20]Thus, the consequent transfer of

Trycos personnel, assigned to the Production Department was well within the scope of

its management prerogative.

When the transfer is not unreasonable, or inconvenient, or prejudicial to the

employee, and it does not involve a demotion in rank or diminution of salaries,

benefits, and other privileges, the employee may not complain that it amounts to a

constructive dismissal.[21]However, the employer has the burden of proving that the

transfer of an employee is for valid and legitimate grounds. The employer must show

that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor

does it involve a demotion in rank or a diminution of his salaries, privileges and other

benefits.[22]


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Indisputably, in the instant case, the transfer orders do not entail a demotion in

rank or diminution of salaries, benefits and other privileges of the petitioners.

Petitioners, therefore, anchor their objection solely on the ground that it would cause

them great inconvenience since they are all residents of Metro Manila and they would

incur additional expenses to travel daily from Manila to Bulacan.

The Court has previously declared that mere incidental inconvenience is not

sufficient to warrant a claim of constructive dismissal.[23]Objection to a transfer that is

grounded solely upon the personal inconvenience or hardship that will be caused to

the employee by reason of the transfer is not a valid reason to disobey an order of

transfer.[24]

Incidentally, petitioners citeEscobin v. NLRC[25]where the Court held that the transfer

of the employees therein was unreasonable. However, the distance of the workplace to

which the employees were being transferred can hardly compare to that of the present

case. In that case, the employees were being transferred from Basilan to Manila;

hence, the Court noted that the transfer would have entailed the separation of the

employees from their families who were residing in Basilan and accrual of additional

expenses for living accommodations in Manila. In contrast, the distance

from Caloocan to San Rafael, Bulacan is not considerably great so as to compel

petitioners to seek living accommodations in the area and prevent them from

commuting to Metro Manila daily to be with their families.
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Petitioners, however, went further and argued that the transfer orders

amounted to unfair labor practice because it would paralyze and render the union

ineffective.

To begin with, we cannot see how the mere transfer of its members can paralyze

the union. The union was not deprived of the membership of the petitioners whose

work assignments were only transferred to another location.

More importantly, there was no showing or any indication that the transfer

orders were motivated by an intention to interfere with the petitioners right to

organize. Unfair labor practice refers to acts that violate the workers right to organize.

With the exception of Article 248(f) of the Labor Code of the Philippines, the prohibited

acts are related to the workers right to self-organization and to the observance of a

CBA. Without that element, the acts, no matter how unfair, are not unfair labor

practices.[26]

Finally, we do not agree with the petitioners assertion that the MOA is not

enforceable as it is contrary to law. The MOA is enforceable and binding against the

petitioners. Where it is shown that the person making the waiver did so voluntarily,

with full understanding of what he was doing, and the consideration for the quitclaim

is credible and reasonable, the transaction must be recognized as a valid and binding

undertaking.[27]


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D.O. No. 21 sanctions the waiver of overtime pay in consideration of the benefits

that the employees will derive from the adoption of a compressed workweek scheme,

thus:

The compressed workweek scheme was originally conceived for

establishments wishing to save on energy costs, promote greater work

efficiency and lower the rate of employee absenteeism, among others.

Workers favor the scheme considering that it would mean savings on the

increasing cost of transportation fares for at least one (1) day a week;

savings on meal and snack expenses; longer weekends, or an additional

52 off-days a year, that can be devoted to rest, leisure, family

responsibilities, studies and other personal matters, and that it will

spare them for at least another day in a week from certaininconveniences that are the normal incidents of employment, such as

commuting to and from the workplace, travel time spent, exposure to

dust and motor vehicle fumes, dressing up for work, etc. Thus, under

this scheme, the generally observed workweek of six (6) days is shortened

to five (5) days but prolonging the working hours from Monday to Friday

without the employer being obliged for pay overtime premium

compensation for work performed in excess of eight (8) hours on

weekdays, in exchange for the benefits abovecited that will accrue to the

employees.

Moreover, the adoption of a compressed workweek scheme in the company will

help temper any inconvenience that will be caused the petitioners by their transfer to a

farther workplace.

Notably, the MOA complied with the following conditions set by the DOLE,

under D.O. No. 21, to protect the interest of the employees in the implementation of a

compressed workweek scheme:

1. The employees voluntarily agree to work more than eight (8)

hours a day the total in a week of which shall not exceed their


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normal weekly hours of work prior to adoption of the compressed

workweek arrangement;

2. There will not be any diminution whatsoever in the weekly

or monthly take-home pay and fringe benefits of the employees;

3. If an employee is permitted or required to work in excess of

his normal weekly hours of work prior to the adoption of the

compressed workweek scheme, all such excess hours shall be

considered overtime work and shall be compensated in accordance

with the provisions of the Labor Code or applicable Collective

Bargaining Agreement (CBA);

4. Appropriate waivers with respect to overtime premium pay

for work performed in excess of eight (8) hours a day may be

devised by the parties to the agreement.

5. The effectivity and implementation of the new working time

arrangement shall be by agreement of the parties.

PESALA v. NLRC,[28]cited by the petitioners,is not applicable to the present

case. In that case, an employment contract provided that the workday consists of 12

hours and the employee will be paid a fixed monthly salary rate that was above the

legal minimum wage. However, unlike the present MOA which specifically states that

the employee waives his right to claim overtime pay for work rendered beyond eight

hours, the employment contract in that case was silent on whether overtime pay was

included in the payment of the fixed monthly salary. This necessitated the

interpretation by the Court as to whether the fixed monthly rate provided under the

employment contract included overtime pay. The Court noted that if the employee is

paid only the minimum wage but with overtime pay, the amount is still greater than

the fixed monthly rate as provided in the employment contract. It, therefore, held that

overtime pay was not included in the agreed fixed monthly rate.


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Considering that the MOA clearly states that the employee waives the payment

of overtime pay in exchange of a five-day workweek, there is no room for interpretation

and its terms should be implemented as they are written.

WHEREFORE, the petition isDENIED. The Court of Appeals Decision

dated July 24, 2001 and Resolution dated December 20, 2001 areAFFIRMED.

SO ORDERED.

MANILA JOCKEY CLUB G.R. No. 167760

EMPLOYEES LABOR UNION-PTGWO,

Petitioner, Present:

PUNO,C.J.,Chairperson,

SANDOVAL-GUTIERREZ,

- versus -CORONA,

AZCUNA, and

GARCIA,JJ.

MANILA JOCKEY CLUB, INC.,Promulgated:

Respondent. March 7, 2007

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D E C I S I O N

GARCIA,J.:

Challenged in this petition for review under Rule 45 of the Rules of Court is the

decision[1]dated December 17, 2004 of the Court of Appeals (CA), as reiterated in its

resolution[2]of April 4, 2005, dismissing the petition for review of herein petitioner

inCA-G.R. SP No. 69240,entitledManila Jockey Club Employees Labor Union- PTGWO

v. Manila Jockey Club, Inc.
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The facts:

Petitioner Manila Jockey Club Employees Labor Union-PTGWO and respondent Manila

Jockey Club, Inc., a corporation with a legislative franchise to conduct, operate and

maintain horse races, entered into a Collective Bargaining Agreement (CBA)

effective January 1, 1996 to December 31, 2000. The CBA governed the economic

rights and obligations of respondents regular monthly paid rank-and-file employees.

[3]In the CBA, the parties agreed to a 7-hour work schedule from 9:00

a.m. to 12:00 noon and from1:00 p.m. to 5:00 p.m. on a work week of Monday to

Saturday, as contained under Section 1, Article IV,[4]of the same CBA, to wit:

Section 1. Both parties to this Agreement agree to observe the seven-

hour work schedule herewith scheduled to be from 9:00

a.m. to 12:00 noon and 1:00 p.m. to 5 p.m. on work week of Monday to

Saturday. All work performed in excess of seven (7) hours work schedule

and on days not included within the work week shall be considered

overtime and paid as such. Except those monthly compensation which

includes work performed during Saturday, Sunday, and Holiday when

races are held at the Club.

xxx xxx xxx

Accordingly, overtime on an ordinary working day shall be remunerated

in an amount equivalent to the worker's regular basic wage plus twenty

five percent (25%) thereof. Where the employee is permitted or suffered

to work on legally mandated holidays or on his designated rest day

which is not a legally mandated holiday, thirty percent (30%) shall be

added to his basic wage for a seven hour work; while work rendered in

excess of seven hours on legally mandated holidays and rest days not

falling within the aforestated categories day shall be additionally

compensated for the overtime work equivalent to his rate for the first

seven hours on a legally mandated holiday or rest day plus thirtypercent (30%) thereof.

The CBA likewise reserved in respondent certain management prerogatives, including

the determination of the work schedule, as provided under Section 2, Article XI:
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Section 2. The COMPANY shall have exclusive control in the

management of the offices and direction of the employees. This shall

include, but shall not be limited to, the right to plan, direct and control

office operations, to hire, assign and transfer employees from one job to

another or from one department to another; to promote, demote,

discipline, suspend, discharge or terminate employees for proper causeand/or in accordance with law, to relieve employees from duty because

of lack of work or for other legitimate reasons; or to introduce new or

improved methods or facilities; or to change existing methods or facilities

to change the schedules of work; and to make and enforce rules and

regulations to carry out the functions of management, provided,

however, that the COMPANY will not use these rights for the purpose of

discrimination against any employee because of his membership in the

UNION. Provided, further, that the prerogatives provided for under this

Section shall be subject to, and in accordance with pertinent directives,

proclamations and their implementing rules and regulations.

On April 3, 1999, respondent issued an inter-office memorandum declaring

that, effective April 20, 1999, the hours of work of regular monthly-paid employees

shall be from 1:00 p.m. to 8:00 p.m. when horse races are held, that is, every Tuesday

and Thursday. The memorandum, however, maintained the 9:00 a.m. to 5:00

p.m. schedule for non-race days.

On October 12, 1999, petitioner and respondent entered into an Amended and

Supplemental CBA retaining Section 1 of Article IV and Section 2 of Article

XI,supra,and clarified that any conflict arising therefrom shall be referred to a

voluntary arbitrator for resolution.

Subsequently, before a panel of voluntary arbitrators of the National

Conciliation and Mediation Board (NCMB), petitioner questioned the above office

memorandum as violative of the prohibition against non-diminution of wages and

benefits guaranteed under Section 1, Article IV, of the CBA which specified the work

schedule of respondent's employees to be from 9:00 a.m. to 5:00 p.m. Petitioner

claimed that as a result of the memorandum, the employees are precluded from

rendering their usual overtime work from 5:00 p.m. to 9:00 p.m.


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The NCMBs panel of voluntary arbitrators, in a decision dated October 18,

2001, upheld respondent's prerogative to change the work schedule of regular

monthly-paid employees under Section 2, Article XI, of the CBA. Petitioner moved for

reconsideration but the panel denied the motion.

Dissatisfied, petitioner then appealed the panels decision to the CA inCA-G.R.

SP No. 69240.In the herein assailed decision of December 17, 2004, the CA upheld

that of the panel and denied petitioners subsequent motion for reconsiderationviaits

equally challenged resolution of April 4, 2005.

Hence, petitioners present recourse, raising the following issues:

I

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT RESPONDENT MJCI DID NOT RELINQUISH PART OF

ITS MANAGEMENT PREROGATIVE WHEN IT STIPULATED A WORK

SCHEDULE IN THE CBA.

II

WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN

HOLDING THAT RESPONDENT MJCI DID NOT VIOLATE THE NON-

DIMINUTION PROVISION CONTAINED IN ARTICLE 100 OF THE LABOR

CODE.

WeDENY.

Respondent, as employer, cites the change in the program of horse races as

reason for the adjustment of the employees work schedule. It rationalizes that when

the CBA was signed, the horse races started at 10:00 a.m. When the races weremoved to 2:00 p.m., there was no other choice for management but to change the

employees' work schedule as there was no work to be done in the morning. Evidently,

the adjustment in the work schedule of the employees is justified.


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We are not unmindful that every business enterprise endeavors to increase

profits. As it is, the Court will not interfere with the business judgment of an employer

in the exercise of its prerogative to devise means to improve its operation, provided

that it does not violate the law, CBAs, and the general principles of justice and fair

play. We have thus held that management is free to regulate, according to its own

discretion and judgment, all aspects of employment, including hiring, work

assignments, working methods,time, place and manner of work, processes to be

followed, supervision of workers, working regulations, transfer of employees, work

supervision, layoff of workers and discipline, dismissal, and recall of workers.[5]

While it is true that Section 1, Article IV of the CBA provides for a 7-hour work

schedule from 9:00 a.m. to 12:00 noon and from 1:00 p.m. to 5:00 p.m. from

Mondays to Saturdays, Section 2, Article XI, however, expressly reserves on

respondent the prerogative to change existing methods or facilities to change the

schedules of work. As aptly ruled by the CA:

x x x. Such exact language lends no other meaning but that while

respondent may have allowed the initial determination of the work

schedule to be done through collective bargaining, it expressly retained

the prerogative to change it.

Moreover, it cannot be said that in agreeing to Section 1 of Article

IV, respondent already waived that customary prerogative of

management to set the work schedule. Had that been the intention,

Section 2 of Article XI would not have made any reference at all to the

retention by respondent of that prerogative. The CBA would have instead

expressly prohibited respondent from exercising it. x x x As it were,

however, the CBA expressly recognized in respondent the prerogative to

change the work schedule. This effectively rules out any notion of waiver

on the part of respondent of its prerogative to change the work schedule.

The same provision of the CBA also grants respondent the prerogative to relieve

employees from duty because of lack of work. Petitioners argument, therefore, that the

change in work schedule violates Article 100 of the Labor Code because it resulted in

the diminution of the benefit enjoyed by regular monthly-paid employees of rendering
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overtime work with pay, is untenable. Section 1, Article IV, of the CBA does not

guarantee overtime work for all the employees but merely provides that "all work

performed in excess of seven (7) hours work schedule and on days not included within

the work week shall be considered overtime and paid as such."

Respondent was not obliged to allow all its employees to render

overtime work everyday for the whole year, but only those employees

whose services were needed after theirregular working hours and only

upon the instructions of management. The overtime pay was not

given to each employee consistently, deliberately and unconditionally,

but as acompensation for additional services rendered. Thus, overtime

pay does not fall within the definition of benefits under Article 100 of the Labor Code

on prohibition against elimination or diminution of benefits.

While the Constitution is committed to the policy of social justice and the protection

of the working class, it should not be presumed that every labor dispute will be

automatically decided in favor of labor. The partiality for labor has not in any way

diminished our belief that justice in every case is for the deserving, to be dispensed in

the light of the established facts and the applicable law and doctrine.[6]

WHEREFORE, the instant petition isDENIEDand the assailed decision and

resolution of the CA areAFFIRMED.

Costs against petitioner.

SO ORDERED.

CAPITOL MEDICAL CENTER, INC.

and DR. THELMA

NAVARETTE-CLEMENTE,

Petitioners,

G.R. No. 155098

Present:
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- versus -

DR. CESAR E. MERIS,

Respondent.

PANGANIBAN,Chairman,

SANDOVAL- GUTIERREZ,

CORONA,

CARPIO MORALES, and

GARCIA,JJ.

Promulgated:

September 16, 2005

xx - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -xx

D E C I S I O N

CARPIO MORALES,J.:

Subject of the present appeal is the Court of Appeals Decision[1]dated February 15,

2002 reversing the NLRC Resolution[2]dated January 19, 1999 and Labor Arbiter

Decision[3]dated April 28, 1998 which both held that the closure of the Industrial

Service Unit of the
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Capitol Medical Center, Inc., resulting to the termination of the services of herein

respondent Dr. Cesar Meris as Chief thereof, was valid.

On January 16, 1974, petitioner Capitol Medical Center, Inc. (Capitol) hired Dr. Cesar

Meris (Dr. Meris),[4]one of its stockholders,[5]as in charge of its Industrial Service Unit

(ISU) at a monthly salary of P10,270.00.

Until the closure of the ISU on April 30, 1992,[6]Dr. Meris performed dual functions of

providing medical services to Capitols more than 500 employees and health workers as

well as to employees and workers of companies having retainer contracts with it.[7]

On March 31, 1992, Dr. Meris received from Capitols president and chairman of the

board, Dr. Thelma Navarette-Clemente (Dr. Clemente), a notice advising him of the

managements decision to close or abolish the ISU and the consequent termination of

his services as Chief thereof, effective April 30, 1992.[8]The notice reads as follows:
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March 31, 1992

Dr. Cesar E. Meris

Chief, Industrial Service Unit

Capitol Medical Center

Dear Dr. Meris:

Greetings!

Please be formally advised that the hospital management has decided

toabolish CMCs Industrial Service Unit as of April 30, 1992 in view

of the almost extinct demand for direct medical services by the

private and semi-government corporations in providing health care

for their employees.Such a decision was arrived at, after

considering the existing trend of industrial companies allocating

their health care requirements to Health Maintenance Organizations

(HMOs) or thru a tripartite arrangement with medical insurance

carriers and designated hospitals.

As a consequence thereof, all positions in the unit will be

decommissioned at the same time industrial services [are] deactivated. In

that event,you shall be entitled to return to your private practice as

a consultant staff of the institution and will become eligible to

receive your retirement benefits as a former hospital employee. MissJane Telan on the other hand will be transferred back to Nursing Service

for reassignment at the CSR.


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We wish to thank you for your long and faithful service to the institution

and hope that our partnership in health care delivery to our people will

continue throughout the future. Best regards.

Very truly yours,

(SGD.) DR. THELMA NAVARETTE-CLEMENTE[9](Emphasis and

underscoring supplied)

Dr. Meris, doubting the reason behind the managements decision to close the ISU and

believing that the ISU was not in fact abolished as it continued to operate and offer

services to the client companies with Dr. Clemente as its head and the notice of

closure was a mere ploy for his ouster in view of his refusal to retire despite Dr.

Clementes previous prodding for him to do so,[10]sought his reinstatement but it was

unheeded.

Dr. Meris thus filed on September 7, 1992 a complaint against Capitol and Dr.

Clemente for illegal dismissal and reinstatement with claims for backwages, moral and

exemplary damages, plus attorneys fees.[11]

Finding for Capitol and Dr. Clemente, the Labor Arbiter held that the abolition of the

ISU was a valid and lawful exercise of management prerogatives and there was


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convincing evidence to show that ISU was being operated at a loss.[12]The decretal text

of the decision reads:

WHEREFORE, judgment is hereby rendered dismissing the complaint.

Respondents are however ordered to pay complainant all sums due him

under thehospital retirement plan.

SO ORDERED.[13](Emphasis supplied)

On appeal by Dr. Meris, the National Labor Relations Commission (NLRC) modified the

Labor Arbiters decision. It held that in the exercise of Capitols management

prerogatives, it had the right to close the ISU even if it was not suffering business

losses in light of Article 283 of the Labor Code and jurisprudence.[14]

And the NLRC set aside the Labor Arbiters directive for the payment of retirement

benefits to Dr. Meris because he did not retire. Instead, it ordered the payment of

separation pay as provided under Article 283 as he was discharged due to closure of

ISU, to be charged against the retirement fund.[15]

Undaunted, Dr. Meris elevated the case to the Court of Appeals via petition for

review[16]which, in the interest of substantial justice, was treated as one for certiorari.

[17]
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Discrediting Capitols assertion that the ISU was operating at a loss as the evidence

showed a continuous trend of increase in its revenue for three years immediately

preceding Dr. Meriss dismissal on April 30, 1992,[18]and finding that the ISUs Analysis

of Income and Expenses which was prepared long after Dr. Meriss dismissal, hence,

not yet available, on or before April 1992, was tainted with irregular entries, the

appellate court held that Capitols evidence failed to meet the standard of a sufficient

and adequate proof of loss necessary to justify the abolition of the ISU.[19]

The appellate court went on to hold that the ISU was not in fact abolished, its

operation and management having merely changed hands from Dr. Meris to Dr.

Clemente; and that there was a procedural lapse in terminating the services of Dr.

Meris, no written notice to the Department of Labor and Employment (DOLE) of the

ISU abolition having been made, thereby violating the requirement embodied in Article

283.[20]

The appellate court, concluding that Capitol failed to strictly comply with both

procedural and substantive due process, a conditionsine qua nonfor the validity of a

case of termination,[21]held that Dr. Meris was illegally dismissed. It accordingly

reversed the NLRC Resolution and disposed as follows:

IN VIEW OF ALL THE FOREGOING, the assailed resolutions of the NLRC

are hereby set aside, and another one entered
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1 declaring illegal the dismissal of petitioner as Chief of the Industrial

Service Unit of respondent Medical Center;

2 ordering respondents to pay petitioner

a) backwages from the date of his separation in April 1992 until this

decision has attained finality;

b) separation pay in lieu of reinstatement computed at the rate of one (1)

month salary for every year of service with a fraction of at least six (6)

months being considered as one year;

c) other benefits due him or their money equivalent;

d) moral damages in the sum of P50,000.00;

e) exemplary damages in the sum of P50,000.00; and

f) attorneys fees of 10% of the total monetary award payable to petitioner.

SO ORDERED.[22]

Hence, the present petition for review assigning to the appellate court the following

errors:

I
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. . . IN OVERTURNING THE FACTUAL FINDINGS AND CONCLUSIONS OF

BOTH THE NATIONAL LABOR RELATIONS COMMISSION (NLRC) AND

THE LABOR ARBITER.

II

. . . IN HOLDING, CONTRARY TO THE FINDINGS OF BOTH THE LABOR

ARBITER AND THE NATIONAL LABOR RELATIONS COMMISSION, THAT

THE INDUSTRIAL UNIT (ISU) WAS NOT INCURRING LOSSES AND THAT

IT WAS NOT IN FACT ABOLISHED.

III

. . . IN NOT UPHOLDING PETITIONERS MANAGEMENT PREROGATIVE

TO ABOLISH THE INDUSTRIAL SERVICE UNIT (ISU).

IV

. . . IN REQUIRING PETITIONERS TO PAY RESPONDENT BACKWAGES

AS WELL AS DAMAGES AND ATTORNEYS FEES.[23]

Capitol questions the appellate courts deciding of the petition of Dr. Meris on the

merits, instead of merely determining whether the administrative bodies acted with

grave abuse of discretion amounting to lack or excess of jurisdiction.


28/86

The province of a special civil action for certiorari under Rule 65, no doubt the

appropriate mode of review by the Court of Appeals of the NLRC decision,[24]is limited

only to correct errors of jurisdiction or grave abuse of discretion amounting to lack or

excess of jurisdiction.[25]In light of the merits of Dr. Meris claim, however, the

relaxation by the appellate court of procedural technicality to give way to a substantive

determination of a case, as this Court has held in several cases,[26]to subserve the

interest of justice, is in order.

Capitol argues that the factual findings of the NLRC, particularly when they coincide

with those of the Labor Arbiter, as in the present case, should be accorded respect,

even finality.[27]

For factual findings of the NLRC which affirm those of the Labor Arbiter to be accorded

respect, if not finality, however, the same must be sufficiently supported by evidence

on record.[28]Where there is a showing that such findings are devoid of support, or that

the judgment is based on a misapprehension of facts,[29]the lower tribunals factual

findings will not be upheld.

As will be reflected in the following discussions, this Court finds that the Labor Arbiter

and the NLRC overlooked some material facts decisive of the instant controversy.
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Capitol further argues that the appellate courts conclusion that the ISU was not

incurring losses is arbitrary as it was based solely on the supposed increase in

revenues of the unit from 1989-1991, without taking into account the Analysis of

Income and Expenses of ISU from July 1, 1990 to July 1, 1991 which shows that the

unit operated at a loss;[30]and that the demand for the services of ISU became almost

extinct in view of the affiliation of industrial establishments with HMOs such as

Fortunecare, Maxicare, Health Maintenance, Inc. and Philamcare and of tripartite

arrangements with medical insurance carriers and designated hospitals,[31]and the

trend resulted in losses in the operation of the ISU.

Besides, Capitol stresses, the health care needs of the hospital employees had been

taken over by other units without added expense to it;[32]the appellate courts decision

is at best an undue interference with, and curtailment of, the exercise by an employer

of its management prerogatives;[33]at the time of the closure of the ISU, Dr. Meris was

already eligible for retirement under the Capitols retirement plan; and the appellate

court adverted to the alleged lack of notice to the DOLE regarding Dr. Meriss dismissal

but the latter never raised such issue in his appeal to the NLRC or even in his petition

for review before the Court of Appeals, hence, the latter did not have authority to pass

on the matter.[34]

Work is a necessity that has economic significance deserving legal protection. The

social justice and protection to labor provisions in the Constitution dictate so.


30/86

Employers are also accorded rights and privileges to assure their self-determination

and independence and reasonable return of capital. This mass of privileges comprises

the so-called management prerogatives. Although they may be broad and unlimited in

scope, the State has the right to determine whether an employers privilege is exercised

in a manner that complies with the legal requirements and does not offend the

protected rights of labor. One of the rights accorded an employer is the right to close

an establishment or undertaking.

The right to close the operation of an establishment or undertaking is explicitly

recognized under the Labor Code as one of the authorized causes in terminating

employment of workers, the only limitation being thatthe closure must not be for the

purpose of circumventing the provisions on termination of employment embodied in the

Labor Code.


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ART. 283.Closure of establishment and reduction of personnel. The

employer may also terminate the employment of any employee due to the

installation of labor saving devices, redundancy, retrenchment to prevent

losses orthe 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 shall be entitled to a separation pay equivalent to at least his one

(1) month pay or to at least one (1) month pay for every year of service,

whichever is higher. In case 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 atleast six (6) months shall be considered one (1) whole year. (Emphasis

and underscoring supplied)

The phrase closures or cessation of operations of establishment or undertaking

includes a partial or total closure or cessation.[35]

x x x Ordinarily, the closing of a warehouse facility and the termination

of the services of employees there assigned is a matter that is left to the

determination of the employer in the good faith exercise of its

management prerogatives. The applicable law in such a case is Article

283 of the Labor Code which permits closure or cessation of operation of

an establishment or undertaking not due to serious business losses or

financial reverses, which, in our reading includesboth the complete

cessation of operations and the cessation of only part of a companys

business.(Emphasis supplied)

And the phrase closures or cessation x x x not due to serious business losses or

financial reverses recognizes the right of the employer to close or cease his business


32/86

operations or undertaking even if he is not suffering from 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.[36]

It would indeed be stretching the intent and spirit of the law if a court were to unjustly

interfere in managements prerogative to close or cease its business operations just

because said business operation or undertaking is not suffering from any loss.[37]As

long as the companys exercise of the same isin good faith to advance its interest

and not for the purpose of defeating or circumventing the rights of employees

under the law or a valid agreement,such exercise will be upheld.[38]

Clearly then, the right to close an establishment or undertaking may be justifiedon

grounds other than business lossesbut it cannot be an unbridled prerogative to suit

the whims of the employer.

The ultimate test of the validity of closure or cessation of establishment or

undertaking is that it must bebona fidein character.[39]And the burden of proving

such falls upon the employer.[40]


33/86

In the case at bar, Capitol failed to sufficiently prove its good faith in closing the ISU.


34/86

From the letter of Dr. Clemente to Dr. Meris, it is gathered that the abolition of the ISU

was due to the almost extinct demand for direct medical service by the private and

semi-government corporations in providing health care for their employees;and that

such extinct demand was brought about by the existing trend of industrial companies

allocating their health care requirements to Health Maintenance Organizations (HMOs)

or thru a tripartite arrangement with medical insurance carriers and designated

hospitals.

The records of the case, however, fail to impress that there was indeed extinct demand

for the medical services rendered by the ISU. The ISUs Annual Report for the fiscal

years 1986 to 1991, submitted by Dr. Meris to Dr. Clemente, anduncontrovertedby

Capitol, shows the following:

Fiscal Year No. of Industrial No of No. of Capitol

Patients Companies Employees

1986-1987 466 11 1445

1987-1988 580 17 1707

1988-1989 676 14 1888

1989-1990 571 16 2731

1990-1991 759 18 2320[41]

If there was extinct demand for the ISU medical services as what Capitol and Dr.

Clemente purport to convey, why the number of client companies of the ISU increased


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from 11 to 18 from 1986 to 1991, as well as the number of patients from both

industrial corporations and Capitol employees, they did not explain.


36/86

The Analysis of Income and Expenses adduced by Capitol showing that the ISU

incurred losses from July 1990 to February 1992, to wit:

July 1, 1990 to July 1, 1991 to

June 30, 1991 February 29, 1992

INCOME P16, 772.00 P35, 236.00

TOTAL EXPENSES P225, 583.70 P169,244.34

NET LOSS P(208,811.70) P(134,008.34),[42]

was prepared by its internal auditor Vicenta Fernandez,[43]a relative of Dr. Clemente,

and not by an independent external auditor, hence, not beyond doubt. It is the

financial statements audited by independent external auditors which constitute the

normal method of proof of the profit and loss performance of a company.[44]

At all events, the claimed losses are contradicted by the accounting records of Capitol

itself which show that ISU had increasing revenue from 1989 to 1991.

Year In-Patient Out-Patient Total Income

1989 P230,316.38 P 79,477.50 P309,793.88

1990 P278,438.10 P124,256.65 P402,694.75


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1991 P305,126.35 P152,920.15 P458,046.50[45]

The foregoing disquisition notwithstanding, as reflected above, the existence of

business losses is not required to justify the closure or cessation of establishment or

undertaking as a ground to terminate employment of employees. Even if the ISU were

not incurring losses, its abolition or closure could be justified on other grounds like

that proffered by Capitol extinct demand. Capitol failed, however, to present sufficient

and convincing evidence to support such claim of extinct demand. In fact, the

employees of Capitol submitted a petition[46]dated April 21, 1992 addressed to Dr.

Clemente opposing the abolition of the ISU.

The closure of ISU then surfaces to be contrary to the provisions of the Labor Code on

termination of employment.

The termination of the services of Dr. Meris not having been premised on a just or

authorized cause, he is entitled to either reinstatement or separation pay if

reinstatement is no longer viable, and to backwages.

Reinstatement, however, is not feasible in case of a strained employer-employee

relationship or when the work or position formerly held by the dismissed employee no

longer exists, as in the instant case.[47]Dr. Meris is thus entitled to payment of

separation pay at the rate of one (1) month salary for every year of his employment,

with a fraction of at least six (6) months being considered as one(1) year,[48]and full


38/86

backwages from the time of his dismissal from April 30, 1992 until the expiration of

his term as Chief of ISU or his mandatory retirement, whichever comes first.

The award by the appellate court of moral damages,[49]however, cannot be sustained,

solely upon the premise that the employer fired his employee without just cause or due

process. Additional facts must be pleaded and proven to warrant the grant of moral

damages under the Civil Code, such as that the act of dismissal was attended by bad

faith or fraud, or was oppressive to labor, or done in a manner contrary to morals,

good customs, or public policy; and of course, that social humiliation, wounded

feelings, grave anxiety, etc., resulted therefrom.[50]Such circumstances, however, do not

obtain in the instant case. More specifically on bad faith, lack of it is mirrored in Dr.

Clementes offer to Dr. Meris to be a consultant of Capitol, despite the abolition of the

ISU.

There being no moral damages, the award of exemplary damages does not lie.[51]

The award for attorneys fees, however, remains.[52]

WHEREFORE, the decision of the Court of Appeals dated February 15, 2002 is

herebyAFFIRMEDwithMODIFICATION. As modified, judgment is hereby rendered

ordering Capitol Medical Center, Inc. to pay Dr. Cesar Meris separation pay at the rate

of One (1) Month salary for every year of his employment, with a fraction of at least Six

(6) Months being considered as One (1) Year, full backwages from the time of his

dismissal from April 30, 1992 until the expiration of his term as Chief of the ISU or his


39/86

mandatory retirement, whichever comes first; other benefits due him or their money

equivalent; and attorneys fees.

Costs against petitioners.

SO ORDERED.

ELEMENTS FOR A VALID EXERCISE

SAN MIGUEL CORPORATION, ANDRES

SORIANO III,

FRANCISCO C. EIZMENDI, JR., and

FAUSTINO F. GALANG,

Petitioners,

-versus-

NUMERIANO LAYOC, JR., CARLOS

APONESTO, PAULINO BALDUGO,

QUEZON BARIT, BONIFACIO BOTOR,

HERMINIO CALINA, DANILO CAMINGAL,JUAN DE MESA, REYNOLD

DESEMBRANA, BERNARDITO DEUS,

EDUARDO FILLARTA, MAXIMIANO

FRANCISCO, MARIO MARILIM,

DEMETRIO MATEO, FILOMENO

MENDOZA, CONRADO NIEVA,

FRANCISCO PALINES, FELIPE

POLINTAN, MALCOLM SATORRE, and

ALEJANDRO TORRES,

Respondents.

G.R. No. 149640

Present:

QUISUMBING,J.,Chairperson,

CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR.,JJ.

Promulgated:

October 19, 2007

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D E C I S I O N

CARPIO,J.:

The Case

This is a petition for review[1]of the decision[2]promulgated on

29 August 2001 by the Court of Appeals (appellate court) in CA-G.R. SP No.

55838. The appellate courts decision set aside the decision[3]in NLRC NCR Case No.

00-12-08656-94 dated 23 March 1998, the decision[4]dated 27 November 1998, and

the resolution[5]dated 31 August 1999 in NLRC CA No. 015710-98. The appellate court

ordered San Miguel Corporation (SMC), Andres Soriano III, Francisco C. Eizmendi, Jr.,

and Faustino F. Galang (collectively, petitioners) to pay respondent Numeriano Layoc,

Jr. (Layoc) P125,000, representing overtime pay for services that he could have

rendered from January 1993 up to his retirement on 30 June 1997, and respondents

Carlos Aponesto,Paulino Baldugo, Quezon Barit, Bonifacio Botor, Herminio Calina, Da

nilo Camingal, Juan de Mesa, Reynold Desembrana, Bernardito Deus,

Eduardo Fillarta, MaximianoFrancisco,

Mario Marilim, Demetrio Mateo, Filomeno Mendoza, Conrado Nieva, Francisco Palines,

Felipe Polintan, Malcolm Satorre, and Alejandro Torres (collectively,

respondents) P10,000 each as nominal damages.

The Facts


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The appellate court stated the facts as follows:

[Respondents] were among the Supervisory Security Guards of the Beer

Division of the San Miguel Corporation (p. 10, Rollo), a domestic

corporation duly organized and existing under and by virtue of the laws

of the Republic of the Philippines with offices at No. 40 San Miguel

Avenue, Mandaluyong City. They started working as guards with

the petitioner San Miguel Corporationassigned to the Beer Division on

different dates until such time that they were promoted as supervising

security guards. The dates of their employment commenced as follows

(Ibid., pp. 87-89):

As guards As supervising

guards

a. Aponesto, Carlos June 1970 February 1983

b. Baldugo, Paulino November 1978 May 1984

c. Barit, Quezon January 1969 May 1984

d. Botor, Bonifacio April 1980 January 1987

e. De Mesa, Juan November 1977 May 1984

f. Calina, Herminio February 1976 May 1984

g. Desembrana, Reynold November 1976 April 1983

h. Camingal, Danilo December 1975 December 1985

i. Deus, Bernardito July 1976 May 1983

j. Fillarta, Eduardo January 1979 May 1989

k. Francisco, Maximian

o

October 1977 May 1984

l. Layoc, Numeriano June 1974 January 1982

m. Marilim, Mario December 1977 June 1984

n. Mateo, Demetrio November 1976 March 1984

o. Mendoza, Filomena March 1980 May 1983

p. Palines, Francisco May 1979 May 1985

q. Nieva, Conrado January 1977 June 1987

r. Polintan, Felipe June 1972 May 1983

s. Satorre, Malcolm September 1970May 1984

t. Torres, Alejandro January 1974 May 1984


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As supervising security guards, the private respondents were performing the

following functions (Ibid., pp. 202-204):

1. Supervises the facility security force under his shift;

2. Inspects all company-owned firearms and ammunition andpromptly submits report as regards to discrepancy and/or state of

doubtful/suspected serviceability;

3. Receives and transfers from outgoing to incoming supervising

security guard all company property, all official papers,

documents and/or cases investigated including pieces of evidence

properly labeled and secured;

4. Physically checks and accounts for all company property within

his area of responsibility immediately upon assumption of duty;

5. Updates compilation of local security rules, policies and

regulations and ensures that all his guards are posted thereon;

6. Conducts regular and irregular inspection to determine his

guards compliance with all guard force instructions, corporate

security standards and procedures;

7. Passes on all official communications, requests, applications of

leaves, etc. and makes his comments and/or recommendations to

his superior;

8. Systematically and continuously screens the good performers

from the marginal or poor among his guards; concentrates on

teaching and guiding the latter; determines further what training

and/or skills that should be learned and submits appropriate

report to superior;

9. Corrects, on the spot, all deficiencies noted and institutes

corrective measures within his authority; recommends

commendations for those guards who deserves [sic] recognition forgood work;

10. Conducts an investigation of all cases coming to his attention

and promptly submits appropriate report to his superiors;

11. Evaluates individual guard performance and renders efficiency

reports in accordance with standing instructions;


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12. Ensures that all his guards are courteous, respectful and

accommodating at all times;

13. Ensures that even those who have been found violating the

facilitys policies, rules and procedures are professionally treated

with courtesy and understanding to preclude embarrassment andhumiliation;

14. Ensures the maintenance of [a] logbook of all incidents,

communications, personnel and materials movements;

15. Responds to all calls for assistance;

16. Conducts continuing physical checks of the facilitys critical and

vulnerable areas;

17. Obtains critical security information and passes it on to his

superiors;

18. Assesses the need for extra guard service requirements;

19. Continuously monitors the personal needs and problems of his

men to his superiors;

20. Acts as Detachment Commander in the latters absence;

21. Responds to emergencies and activates the Corporate Security

Alerting System as appropriate; and

22. Performs such other duties as may be required by his

Detachment Commander/Plant Security Officer.

From the commencement of their employment, the private respondentswere required to punch their time cards for purposes of determining the

time they would come in and out of the companys work place. Corollary

[sic], the private respondents were availing the benefits for overtime,

holiday and night premium duty through time card punching (Rollo, p.

89). However, in the early 1990s, the San Miguel Corporation embarked

on a Decentralization Program aimed at enabling the separate divisions


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of the San Miguel Corporation to pursue a more efficient and effective

management of their respective operations (Ibid., p. 99).

As a result of the Decentralization Program, the Beer Division of the San

Miguel Corporation implemented on January 1, 1993 a no time card

policy whereby the Supervisory I and II composing of the supervisingsecurity guards of the Beer Division were no longer required to punch

their time cards (Ibid., p. 100). Consequently, on January 16, 1993,

without prior consultation with the private respondents, the time cards

were ordered confiscated and the latter were no longer allowed to render

overtime work (Ibid., p. 117).

However, in lieu of the overtime pay and the premium pay, the personnel

of the Beer Division of the petitioner San Miguel Corporation affected by

the No Time Card Policy were given a 10% across-the-board increase on

their basic pay while the supervisors who were assigned in the night shift(6:00 p.m. to 6:00 a.m.) were given night shift allowance ranging

from P2,000.00 toP2,500.00 a month (Rollo, p. 12).[6]

On 1 December 1994, respondents filed a complaint for unfair labor practice, violation

of Article 100 of the Labor Code of the Philippines, and violation of the equal

protection clause and due process of law in relation to paragraphs 6 and 8 of Article

32 of the New Civil Code of the Philippines. Respondents prayed for actual damages for

two years (1993-1994), moral damages, exemplary damages, and overtime, holiday,

and night premium pay.

In their position paper dated 28 February 1995, respondents stated that the Beer

Division of SMC maliciously and fraudulently refused payment of their overtime,

holiday, and night premium pay from 1 to 15 January 1993 because of the no time

card policy. Moreover, petitioners had no written authority to stop respondents from

punching their time cards because the alleged memorandum authorizing such


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stoppage did not include supervisory security guards. Thus, the respondents suffered

a diminution of benefits, making petitioners liable for non-payment of overtime,

holiday, and night premium pay.

In their position paper dated 23 February 1995, petitioners maintained that

respondents were supervisory security guards who were exempt from the provisions of

the Labor Code on hours of work, weekly rest periods, and rest days. The no time card

policy did not just prevent respondents from punching their time cards, but it also

granted respondents an across-the-board increase of 10% of basic salary and either

a P2,000 or P2,500 night shift allowance on top of their yearly merit

increase. Petitioners further asserted that the no time card policy was a valid exercise

of management prerogative and that all supervisors in the Beer Division were covered

by the no time card policy, which classification was distinct and separate from the

other divisions within SMC.

Respondents filed their reply dated 15 March 1995 to petitioners position

paper. Petitioners, on the other hand, filed their rejoinder dated 27 March 1995 to

respondents reply.Respondents filed a request for admission dated 2 May 1995 to

which petitioners filed their reply dated 15 May 1995.

The Ruling of the Labor Arbiter

In his decision dated 23 March 1998, Labor Arbiter Potenciano S. Canizares, Jr.

(Arbiter Canizares) stated that the principal issue is whether petitioners can, in their


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no time card policy, remove the benefits that respondents have obtained through

overtime services. Arbiter Canizares then stated that the facts and the evidence are in

respondents favor.Arbiter Canizares ruled that rendering services beyond the regular

eight-hour work day has become company practice. Moreover, petitioners failed to

show good faith in the exercise of their management prerogative in altering company

practice because petitioners changed the terms and conditions of employment from

hours of work rendered to result only with respect to respondents and not with other

supervisors in other departments. The dispositive portion of Arbiter Canizares decision

reads:

WHEREFORE, the [petitioners] are hereby ordered to restore to the

[respondents] their right to earn for overtime services rendered as

enjoyed by the other employees.

The [petitioners] are further ordered to indemnify the [respondents] for

lost earnings after their terms and conditions of employment have been

unilaterally altered by the [petitioners], namely in the amount

of P500,000.00 each as computed by the [respondents], and the

[petitioners] failed to refute.

[Petitioners] are furthermore ordered to pay the

[respondents] P100,000.00 each as moral and exemplary damages.

All other claims are hereby dismissed for lack of evidence.

SO ORDERED.[7]

On 26 May 1998, petitioners filed their notice of appeal and memorandum of appeal

with the National Labor Relations Commission (NLRC).

The Ruling of the NLRC


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On 27 November 1998, the NLRC affirmed with modification the ruling of

Arbiter Canizares that respondents suffered a diminution of benefits as a result of the

adoption of the no time card policy. The NLRC cited a well-established rule that

employees have a vested right over existing benefits voluntarily granted to them by

their employer, who may not unilaterally withdraw, eliminate, or diminish such

benefits. In the present case, there was a company practice which allowed the

enjoyment of substantial additional remuneration.Furthermore, there is no rule

excluding managerial employees from the coverage of the principle of non-diminution

of benefits.

The NLRC ruled thus:

WHEREFORE, the decision appealed from is hereby AFFIRMED, with

slight modification deleting the award of moral and exemplary damages.

SO ORDERED.

[8]

Both petitioners and respondents filed their respective motions for

reconsideration. Petitioners stated that the NLRC erred in sustaining the award of

overtime pay despite its finding that respondents were managerial

personnel. Furthermore, there was no evidence that respondents rendered overtime

work and respondents admitted that they never or seldom rendered overtime

work. The award of overtime pay was thus contrary to the principle of no work, no

pay. For their part, respondents stated that the NLRC erred in deleting the award of

moral and exemplary damages. The implementation of the no time card policy, the

discrimination against them vis-a-vis the supervising security officers in other


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divisions of SMC, and the execution of quitclaims and releases during the pendency of

the case were all attended with bad faith, thus warranting the award of moral and

exemplary damages.

On 31 August 1999, the NLRC further modified Arbiter Canizares decision. The NLRC

ruled thus:

WHEREFORE, the November 27, 1998 Decision of this Commission is

hereby REITERATED with a slight modification to the effect that the

computation of the [respondents] withdrawn benefits at P125,000.00

yearly from 1993 should terminate in 1996 or the date of eachcomplainants retirement, whichever came first.

SO ORDERED.[9]

Petitioners then filed their petition for certiorari before the appellate court on 16

November 1999.

The Ruling of the Appellate Court

On 29 August 2001, the appellate court set aside the ruling of the NLRC and entered a

new judgment in favor of respondents. The appellate court stated that there is no legal

issue that respondents, being the supervisory security guards of the Beer Division of

SMC, were performing duties and responsibilities being performed by those who were

considered as officers or members of the managerial staff as defined under Section 2,

paragraph (c), Rule 1, Book III of the Implementing Rules of the Labor Code.[10]The


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appellate court ruled that while the implementation of the no time card policy was a

valid exercise of management prerogative, the rendering of overtime work by

respondents was a long-accepted practice in SMC which could not be peremptorily

withdrawn without running afoul with the principles of justice and equity. The

appellate court affirmed the deletion of the award of actual, moral, and exemplary

damages. With the exception of Layoc, respondents did not present proof of previous

earnings from overtime work and were not awarded with actual damages. Moreover,

the appellate court did not find that the implementation of the no time card policy

caused any physical suffering, moral shock, social humiliation, besmirched

reputation, and similar injury to respondents to justify the award of moral and

exemplary damages. Nonetheless, in the absence of competent proof on the specific

amounts of actual damages suffered by respondents, the appellate court awarded

them nominal damages.

The dispositive portion of the appellate courts decision reads thus:

WHEREFORE, foregoing considered, the instant petition is hereby GIVEN

DUE COURSE and is GRANTED. The Decision issued in NLRC NCR

CASE No. 00-12-08656-94 dated March 23, 1998, the Decision issued in

NLRC CA No. 015710-98 dated November 27, 1998 and the Resolution

dated August 31, 1999, are hereby ANNULLED and SET ASIDE, and a

new judgment is hereby entered ordering the petitioners to pay as

follows:

1) the private respondent Numeriano Layoc, Jr., the amount of One

Hundred Twenty-Five Thous

Documents

Labor r Mngt Prerogative Cases