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G.R. No.

106107

June 2, 1994

AGUSTIN CHU, petitioner,


vs.
NATIONAL LABOR RELATIONS COMMISSION and VICTORIAS MILLING
COMPANY, INC. respondents.

FACTS:
Petitioner retired from the service of private respondent upon reaching the age of sixty
under its regular retirement program. He was granted an extention of service by the
Board of Directors of private respondent under a "Special Contract of Employment." The
contract provided, inter alia, that its term was for a period of one year. Petitioner was
employed as Head of the Warehousing, Sugar, Shipping and Marine Department.
Private respondent issued two Memorandums, both providing for a rotation of the
personnel and other organizational changes. Pursuant to the memoranda, petitioner
was transferred to the Sugar Sales Department. Petitioner protested his transfer and
requested a reconsideration
but was denied. Consequently, petitioner filed a complaint for illegal dismissal,
contending that he was constructively dismissed from his employment.
The Labor Arbiter said that petitioners transfer was without change in rank or salary;
petitioners designation in either department was the same; the personnel rotation was
pursuant to organizational changes done in the valid exercise of management
prerogatives; there was no bad faith in the transfer of petitioner, as other employees
similarly situated as he were likewise affected; and petitioner failed to show that he was
prejudiced by the changes or transferred to a demeaning or humiliating position.
Petitioner appealed to the NLRC which affirmed the Labor Arbiters decision. The NLRC
also denied petitioners motion for reconsideration.
Petitioner contends that there was no valid exercise of management prerogative
because said transfer was unreasonable and caused inconvenience to him. Petitioner

argues that private respondents prerogative to transfer him was limited by the "Special
Contract of Employment," which was the "law" between the parties.

ISSUE:
Whether petitioner was illegally dismissed from his employment.

HELD:
No. An owner of a business enterprise is given considerable leeway in managing his
business because it is deemed important to society as a whole that he should succeed.
Our law, therefore, recognizes certain rights as inherent in the management of business
enterprises. These rights are collectively called management prerogatives or acts by
which one directing a business is able to control the variables thereof so as to enhance
the chances of making a profit. "Together, they may be taken as the freedom to
administer the affairs of a business enterprise such that the costs of running it would be
below the expected earnings or receipts. In short, the elbow room in the quest for
profits". One of the prerogatives of management, and a very important one at that, is the
right to transfer employees in their work station.
It is the employers prerogative, based on its assessment and perception of its
employees qualifications, aptitudes, and competence to move them around in the
various areas of its business operations in order to ascertain where they will function
with maximum benefit to the company.
An employees right to security of tenure does not give him such a vested right in his
position as would deprive the company of its prerogative to change his assignment or
transfer him where he will be most useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a
diminution of his salaries, benefits, and other privileges, the employee may not complain
that it amounts to a constructive dismissal. This is a function associated with the
employers inherent right to control and manage effectively its enterprise. Even as 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. Petitioners bare assertion that the transfer was unreasonable and caused him
inconvenience cannot override the fact, as found by the Labor Arbiter and respondent

Commission, that the rotation was made in good faith and was not discriminatory, and
that there was no demotion in rank or a diminution of his salary, benefits and privileges.

G.R. No. L-53515

February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner,


vs.
HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION,
respondents.

FACTS:
A collective bargaining agreement was entered into by petitioner San Miguel
Corporation Sales Force Union (PTGWO), and the private respondent, San Miguel
Corporation, Section 1, of Article IV. Subsequently, the company introduced a marketing
scheme known as the "Complementary Distribution System" (CDS) whereby its beer
products were offered for sale directly to wholesalers through San Miguel's sales
offices. The labor union (herein petitioner) filed a complaint for unfair labor practice in
the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to
the existing marketing scheme. It was alleged that the new marketing scheme violates
Section 1, Article IV of the collective bargaining agreement because the introduction of
the CDS would reduce the take-home pay of the salesmen and their truck helpers for
the company would be unfairly competing with them.

ISSUE:
Whether the CDS violates the collective bargaining agreement and an indirect way of
busting the union.

HELD:
No. The Minister of Labor held that, their is nothing in the record as to suggest that the
unilateral action of the employer in inaugurating the new sales scheme was designed to
discourage union organization or diminish its influence, but rather it is undisputable that
the establishment of such scheme was part of its overall plan to improve efficiency and
economy and at the same time gain profit to the highest. Public respondent was correct
in holding that the CDS is a valid exercise of management prerogatives. Except as
limited by special laws, an employer is free to regulate, according to his own discretion
and judgment, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of work.
Every business enterprise endeavors to increase its profits. In the process, it may adopt
or devise means designed towards that goal.
Even as the law is solicitous of the welfare of the 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.
So long as a company's management prerogatives are exercised in good faith for the
advancement of the employer's interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements, this Court will uphold them. San Miguel Corporation's offer to compensate
the members of its sales force who will be adversely affected by the implementation of
the CDS by paying them a so-called "back adjustment commission" to make up for the
commissions they might lose as a result of the CDS proves the company's good faith
and lack of intention to bust their union.

G.R. No. 185814

October 13, 2010

PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN,

and HINRICH JOHANN SCHUMACHER,


Petitioners,

- versus -

MANUEL F. DIAZ, Respondent.

FACTS:
Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business
Development on probationary status from July 18, 2005 to January 18, 2006, with a
monthly salary of P100,000.00. Respondents duties, responsibilities, and work hours
were described in the Contract of Probationary Employment. In addition to the
responsibilities laid in the contract, respondent was also instructed by Hartmannshenn
to report to the SHS office and plant at least two (2) days every work week to observe
technical processes involved in the manufacturing of perforated materials, and to learn
about the products of the company, which respondent was hired to market and sell.
During respondents employment, Hartmannshenn was often abroad and, because of
business exigencies, his instructions to respondent were either sent by electronic mail
or relayed through telephone or mobile phone. When he would be in the Philippines, he
and the respondent held meetings. As to respondents work, there was no close
supervision by him. During meetings with the respondent, Hartmannshenn expressed
his dissatisfaction over respondents poor performance. Respondent allegedly failed to
make any concrete business proposal or implement any specific measure to improve
the productivity of the SHS office and plant or deliver sales except for a meagre
P2,500.00 for a sample product.
Hartmannshenn then instructed Taguiang not to release respondents salary. Later that
afternoon, respondent called and inquired about his salary. Taguiang informed him that
it was being withheld and that he had to immediately communicate with
Hartmannshenn.
The next day, on November 30, 2005, respondent served on SHS a demand letter and
a resignation letter.

Petitioners averred that respondent was unable to give a proper explanation for his
behavior. Hartmannshenn then accepted respondents resignation and informed him that
his salary would be released upon explanation of his failure to report to work, and proof
that he did, in fact, work for the period in question. He demanded that respondent
surrender all company property and information in his possession. Respondent agreed
to these exit conditions through electronic mail. Instead of complying with the said
conditions, however, respondent sent another electronic mail message to
Hartmannshenn and Schumacher on December 1, 2005, appealing for the release of
his salary.
After which, respondent filed a Complaint against the petitioners for illegal dismissal;
non-payment of salaries/wages and 13th month pay with prayer for reinstatement and
full backwages; exemplary damages, and attorneys fees, costs of suit, and legal
interest.
The Labor Arbiter rendered his decision stating that respondent was constructively
dismissed because the withholding of his salary was contrary to Article 116 of the Labor
Code as it was not one of the exceptions for allowable wage deduction by the employer
under Article 113 of the Labor Code. He had no other alternative but to resign because
he could not be expected to continue working for an employer who withheld wages
without valid cause. The LA also held that respondents probationary employment was
deemed regularized because petitioners failed to conduct a prior evaluation of his
performance and to give notice two days prior to his termination as required by the
Probationary Contract of Employment and Article 281 of the Labor Code. Petitioners
contention that they lost trust and confidence in respondent as a managerial employee
was not given credence for lack of notice to explain the supposed loss of trust and
confidence and absence of an evaluation of respondents performance. Petitioners are
jointly and severally liable to respondent for backwages including 13th month pay as
there was no showing in the salary vouchers presented that such was integrated in the
salary; for moral and exemplary damages for having in bad faith harassed respondent
into resigning; and for attorneys fees.
On appeal, the NLRC reversed the decision of the Labor Arbiter. The NLRC explained
that the withholding of respondents salary was a valid exercise of management
prerogative. The act was deemed justified as it was reasonable to demand an
explanation for failure to report to work and to account for his work accomplishments.
Respondent filed a motion for reconsideration but the NLRC subsequently denied it for
lack of merit. Upon appeal, the CA reversed the NLRC resolutions in its decision.
CA held that withholding respondents salary was not a valid exercise of management
prerogative as there is no such thing as a management prerogative to withhold wages

temporarily. Petitioners averments of respondents failure to report to work were found to


be unsubstantiated allegations not corroborated by any other evidence, insufficient to
justify said withholding and lacking in probative value. The malicious withholding of
respondents salary made it impossible or unacceptable for respondent to continue
working, thus, compelling him to resign. The respondents immediate filing of a
complaint for illegal dismissal could only mean that his resignation was not voluntary. As
a probationary employee entitled to security of tenure, respondent was illegally
dismissed. The CA ruled out actual reinstatement, however, reasoning out that
antagonism had caused a severe strain in their relationship. It was of the view that
separation pay equivalent to at least one month pay would be a more equitable
disposition.
The petitioners went to the Supreme Court praying for the reversal and setting aside of
the subject CA decision. Hence, this petition.

ISSUE:
Whether or not the temporary withholding of respondents salary/wages by petitioners
was a valid exercise of management prerogative.
Whether or not respondent voluntarily resigned.

HELD:
(1) Management prerogative refers to the right of an employer to regulate all aspects of
employment, such as the freedom to prescribe work assignments, working methods,
processes to be followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of work.[12] Although
management prerogative refers to the right to regulate all aspects of employment, it
cannot be understood to include the right to temporarily withhold salary/wages without
the consent of the employee. To sanction such an interpretation would be contrary to
Article 116 of the Labor Code.

The Court finds petitioners evidence insufficient to prove that respondent did not work
from November 16 to November 30, 2005. The nature of respondents job did not allow
close supervision and monitoring by petitioners.
Although it cannot be determined with certainty whether respondent worked for the
entire period from November 16 to November 30, 2005, the consistent rule is that if
doubt exists between the evidence presented by the employer and that by the
employee, the scales of justice must be tilted in favor of the latter in line with the policy
mandated by Articles 2 and 3 of the Labor Code to afford protection to labor and
construe doubts in favor of labor.

(2) Petitioners contend that respondent could not have been constructively dismissed
because he voluntarily resigned as evidenced by his resignation letter. The Court
agrees with the LA and the CA that respondent was forced to resign and was, thus,
constructively dismissed. There is constructive dismissal if an act of clear discrimination,
insensibility, or disdain by an employer becomes so unbearable on the part of the
employee that it would foreclose any choice by him except to forego his continued
employment. It exists where there is cessation of work because continued employment
is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in
rank and a diminution in pay.

What made it impossible, unreasonable or unlikely for respondent to continue working


for SHS was the unlawful withholding of his salary. For said reason, he was forced to
resign. It would be absurd to require respondent to tolerate the unlawful withholding of
his salary for a longer period before his employment can be considered as so
impossible, unreasonable or unlikely as to constitute constructive dismissal. Even
granting that the withholding of respondents salary, would not constitute an unlawful act,
the continued refusal to release his salary after the payroll period was clearly unlawful.

Respondent was constructively dismissed and, therefore, illegally dismissed. Although


respondent was a probationary employee, he was still entitled to security of tenure.
Section 3 (2) Article 13 of the Constitution guarantees the right of all workers to security
of tenure. In using the expression all workers, the Constitution puts no distinction
between a probationary and a permanent or regular employee. This means that

probationary employees cannot be dismissed except for cause or for failure to qualify as
regular employees.

Respondents reinstatement, however, is no longer feasible as antagonism has caused a


severe strain in their working relationship. Under the doctrine of strained relations, the
payment of separation pay is considered an acceptable alternative to reinstatement
when the latter option is no longer desirable or viable. Payment liberates the employee
from what could be a highly oppressive work environment, and at the same time
releases the employer from the obligation of keeping in its employ a worker it no longer
trusts. Therefore, a more equitable disposition would be an award of separation pay
equivalent to at least one month pay, in addition to his full backwages, allowances and
other benefits.

ALFREDO S. PAGUIO, petitioner, vs. PHILIPPINE LONG DISTANCE TELEPHONE


CO., INC., ENRIQUE D. PEREZ, RICARDO P. ZARATE, ISABELO FERIDO, and
RODOLFO R. SANTOS, respondents.

FACTS:
Petitioner Alfredo S. Paguio was appointed Head of PLDTs Garnet Exchange. PLDT
implemented the Greater Metro Manila Network Performance Assessment program
covering 27 exchanges of the 5 centers. Petitioner wrote respondent Santos a
memorandum criticizing the 1994 performance ranking of the GMM Exchanges.
Petitioner again sent a memorandum to respondent Santos criticizing the 1995 East
Exchanges performance ranking for being based only on the attainment of objectives,
without considering other relevant factors that contributed to the attainment of the same.
Petitioner again wrote respondent Santos requesting reconsideration, claiming that the
scheme was not fair to an old exchange like Garnet. Respondent Santos denied
petitioners request and instructed petitioner to submit the rebalancing schedules.
Petitioner again, wrote respondent Santos, complaining that the rating and ranking of
the Exchanges were unfair.
Respondent Santos then issued a memorandum reassigning petitioner to a position in
the Office of the GMM East Center Head for Special Assignments. Protesting the said
transfer, petitioner asked respondent Ferido for a formal hearing on the charges against
him and for the deferment of his re-assignment pending resolution of the charges.
Petitioner then filed a complaint for illegal demotion and damages against respondents
because of inaction from the management. The Labor Arbiter dismissed the complaint
on the ground that petitioners transfer was an exercise of a management prerogative
and there was no showing that the same amounted to a demotion in rank and
privileges.
Petitioner appealed to the NLRC, which reversed the decision of the Labor Arbiter. His
transfer involves a diminution of his salary, benefits and other privileges. On account of
his transfer, he was assigned a functionless position. As a consequence, he was
deprived of the opportunity to get promoted or to be entitled to wage increase equivalent
to sixteen percent (16%) of his salary, as he could not have any performance to speak
of in his present designation there being no work assigned to him. Respondent PLDT
then filed a special civil action for certiorari in the Court of Appeals, seeking a reversal of

the decision of the NLRC. The appeals court upheld the NLRC decision that petitioners
transfer was not justified by the circumstances. It noted that petitioner was well
intentioned in criticizing the management of the company and that even as he criticized
the management decisions petitioner nevertheless complied with them. While it is true
that private respondents re-assignment did not involve a diminution of salary, however,
petitioners have not disputed that he was actually placed on a frozen status, as he was
assigned to a functionless position, with no office and staff, and without any opportunity
to get any promotion or wage increase as he does not have any performance to speak
of because there is no work assigned to him.
Petitioner moved for reconsideration, but the Court of Appeals denied his motion.
Petitioner now seeks review of the decision of the Court of Appeals, insofar as it deleted
the original award of P384,000.00 to him representing his salary increase.

ISSUE:
Whether the reassignment of the petitioner to other position is covered under the
management prerogative of the employer.

HELD:
No. The Supreme Court held that, notwithstanding the foregoing, we hold that petitioner
is entitled to damages. Under Article 21 of the Civil Code, any person who wilfully
causes loss or injury to another in a manner that is contrary to morals, good customs or
public policy shall compensate the latter for the damage. The illegal transfer of petitioner
to a functionless office was clearly an abuse by respondent PLDT of its right to control
the structure of its organization. The right to transfer or reassign an employee is
decidedly an employers exclusive right and prerogative. In several cases, however, we
have ruled that such managerial prerogative 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 with the manner by which such right is to be exercised. As
found by both the NLRC and the Court of Appeals, there is no clear justification for the
transfer of petitioner except that it was done as a result of petitioners disagreement with
his superiors with regard to company policies.

With the finding that the transfer was illegal, petitioner is entitled to be reinstated to his
former, or a substantially equivalent, position without loss of seniority rights.
Reinstatement contemplates a restoration to a position from which one has been
removed or separated so that the employee concerned may resume the functions of the
position he already held.[26] This position would be Senior Manager Level 2, the
position he occupied before he was illegally transferred.
Reinstatement, to which petitioner is lawfully entitled, must be given full effect and must
restore petitioner to his rightful place in the present organizational structure of
respondent company approximating his status before he was illegally transferred. As the
position no longer exists, petitioner should be restored to an equivalent position.

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