THIRD DIVISION

G.R. No. 82249

February 7, 1991

WILTSHIRE FILE CO., INC., petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION and VICENTE
T. ONG, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Jose R. Millares & Associates for private respondent.

FELICIANO, J.:
Private respondent Vicente T. Ong was the Sales Manager of
petitioner Wiltshire File Co., Inc. ("Wiltshire") from 16 March 1981 up
to 18 June 1985. As such, he received a monthly salary of P14,375.00
excluding commissions from sales which averaged P5,000.00 a
month. He also enjoyed vacation leave with pay equivalent to
P7,187,50 per year, as well as hospitalization privileges to the extent
of P10,000.00 per year.
On 13 June 1985, upon private respondent's return from a business
and pleasure trip abroad, he was informed by the President of
petitioner Wiltshire that his services were being terminated. Private
respondent maintains that he tried to get an explanation from
management of his dismissal but to no avail. On 18 June 1985, when
private respondent again tried to speak with the President of Wiltshire,
the company's security guard handed him a letter which formally
informed him that his services were being terminated upon the ground
of redundancy.
Private respondent filed, on 21 October 1985, a complaint before the
Labor Arbiter for illegal dismissal alleging that his position could not
possibly be redundant because nobody (save himself) in the company

was then performing the same duties. Private respondent further

contended that retrenching him could not prevent further losses
because it was in fact through his remarkable performance as Sales
Manager that the Company had an unprecedented increase in
domestic market share the preceding year. For that accomplishment,
he continued, he was promoted to Marketing Manager and was
authorized by the President to hire four (4) Sales Executives five (5)
months prior to his termination.
In its answer, petitioner company alleged that the termination of
respondent's services was a cost-cutting measure: that in December
1984, the company had experienced an unusually low volume of
orders: and that it was in fact forced to rotate its employees in order to
save the company. Despite the rotation of employees, petitioner
alleged; it continued to experience financial losses and private
respondent's position, Sales Manager of the company, became
redundant.
On 2 December 1986, during the proceedings before the Labor
Arbiter, petitioner, in a letter addressed to the Regional Director of the
then Ministry of Labor and Employment, notified that official that
effective 2 January 1987, petitioner would close its doors permanently
due to substantial business losses.
1

In a decision dated 11 March 1987, the Labor Arbiter declared the

termination of private respondent's services illegal and ordered
petitioner to pay private respondent backwages in the amount of
P299,000.00, unpaid salaries in the amount of P22,352.11,
accumulated sick and vacation leaves in the amount of P12,543.91,
hospitalization benefit package in the amount of P10,000.00, unpaid
commission in the amount of P57,500,00, moral damages in the
amount of P100,000.00 and attorney's fees in the amount of
P51,639.60.
On appeal by petitioner Wiltshire, the National Labor Relations
Commission ("NLRC") affirmed in toto on 9 February 1988 the
decision of the Labor Arbiter. The NLRC held that:

The termination letter clearly spelled out that the main reason in
terminating the services of complainant isREDUNDANT and not
retrenchment.
The supposed duplication of work of herein complainant and Mr.
Deliva, the Vice-President is absent that would justify
redundancy. . . .
On the claim for moral damages, the NLRC pointed out that the
effective date of private respondent's termination was 18 July 1985,
although it was only 18 June 1985 that he received the letter of
termination, and concluded that he was not given any opportunity to
explain his position on the matter. The NLRC held that the termination
was attended by malice and bad faith on the part of petitioner,
considering the manner of private respondent was ordered by the
President to pack up and remove his personal belongings from the
office. Private respondent was said to have been embarrassed before
his immediate family and other acquaintance due to his inability to
explain the reasons behind the termination of his services.
In this Petition for Certiorari, it is submitted that private respondent's
dismissal was justified and not illegal. Petitioner maintains that it had
been incurring business losses beginning 1984 and that it was
compelled to reduce the size of its personnel force. Petitioner also
contends that redundancy as a cause for termination does not
necessarily mean duplication of work but a "situation where the
services of an employee are in excess of what is demanded by the
needs of an undertaking . . ."
Having reviewed the record of this case, the Court has satisfied itself
that indeed petitioner had serious financial difficulties before, during
and after the termination of the services of private respondent. For
one thing, the audited financial statements of the petitioner for its fiscal
year ending on 31 July 1985 prepared by a firm of independent
auditors, showed a net loss in the amount of P4,431,321.00 and a
total deficit or capital impairment at the end of year of P6,776,493.00.
2

In the preceding fiscal year (1983-1984), while the company showed a

net after tax income of P843,506.00, it actually suffered a deficit or
capital impairment of P2,345,172.00. Most importantly, petitioner
Wiltshire finally closed its doors and terminated all operations in the
Philippines on January 1987, barely two (2) years after the termination
of private respondent's employment. We consider that finally shutting
down business operations constitutes strong confirmatory evidence of
petitioner's previous financial distress. The Court finds it very difficult
to suppose that petitioner Wiltshire would take the final and
irrevocable step of closing down its operations in the Philippines
simply for the sole purpose of easing out a particular officer or
employee, such as the private respondent.
Turning to the legality of the termination of private respondent's
employment, we find merit in petitioner's basic argument. We are
unable to sustain public respondent NLRC's holding that private
respondent's dismissal was not justified by redundancy and hence
illegal. In the first place, we note that while the letter informing private
respondent of the termination of his services used the word
"redundant", that letter also referred to the company having "incur[red]
financial losses which [in] fact has compelled [it] to resort to
retrenchment to prevent further losses".
3

Thus, what the letter was in effect saying was that because of financial
losses, retrenchment was necessary, which retrenchment in turn
resulted in the redundancy of private respondent's position.
In the second place, we do not believe that redundancy in an
employer's personnel force necessarily or even ordinarily refers to
duplication of work. That no other person was holding the same
position that private respondent held prior to the termination of his
services, does not show that his position had not become redundant.
Indeed, in any well-organized business enterprise, it would be
surprising to find duplication of work and two (2) or more people doing
the work of one person. We believe that redundancy, for purposes of
our Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of
the enterprise. Succinctly put, a position is redundant where it is

superfluous, and superfluity of a position or positions may be the

outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line
or service activity previously manufactured or undertaken by the
enterprise.
4

The employer has no legal obligation to keep in its payroll more

employees than are necessarily for the operation of its business.
In the third place, in the case at bar, petitioner Wiltshire, in view of the
contraction of its volume of sales and in order to cut down its
operating expenses, effected some changes in its organization by
abolishing some positions and thereby effecting a reduction of its
personnel. Thus, the position of Sales Manager was abolished and the
duties previously discharged by the Sales Manager simply added to
the duties of the General Manager, to whom the Sales Manager used
to report.
It is of no legal moment that the financial troubles of the company
were not of private respondent's making. Private respondent cannot
insist on the retention of his position upon the ground that he had not
contributed to the financial problems of Wiltshire. The characterization
of private respondent's services as no longer necessary or
sustainable, and therefore properly terminable, was an exercise of
business judgment on the part of petitioner company. The wisdom or
soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC
so long, of course, as violation of law or merely arbitrary and malicious
action is not shown. It should also be noted that the position held by
private respondent, Sales Manager, was clearly managerial in
character. In D.M. Consunji, Inc. v. National Labor Relations
Commission, the Court held:
5

An employer has a much wider discretion in terminating the

employment relationship of managerial personnel as compared
to rank and file employees. However, such prerogative of
management to dismiss or lay off an employee must be made
without abuse of discretion, for what is at stake is not only the

private respondent's position but also his means of livelihood . . .

.
6

The determination of the continuing necessity of a particular officer or

position in a business corporation is management's prerogative, and
the courts will not interfere with the exercise of such so long as no
abuse of discretion or merely arbitrary or malicious action on the part
of management is shown.
7

On the issue of moral damages, petitioner assails the finding of the

NLRC that the dismissal was done in bad faith. Petitioner argues that
it had complied with the one-month notice required by law; that there
was no need for private respondent to be heard in his own defense
considering that the termination of his services was for a statutory or
authorized cause; and that whatever humiliation might have been
suffered by private respondent arose from a lawful cause and hence
could not be the basis of an award of moral damages.
Termination of an employee's services because of retrenchment to
prevent further losses or redundancy, is governed by Article 283 of the
Labor Code which provides as follows:
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 or the closing or
cessation of operation of the establishment or undertaking
unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers
and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. In case of termination due to
the installation of labor saving devices or redundancy, the worker
affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay
for every year of service, whichever is higher. In case of
retrenchment to prevent losses and in cases of closures or
cessation of operations of establishment or undertaking not due
to serious business losses 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 of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1)
whole year.
Termination of services for any of the above described causes should
be distinguished from termination of employment by reason of some
blameworthy act or omission on the part of the employee, in which
case the applicable provision is Article 282 of the Labor Code which
provides as follows:
Art. 282. Termination by employer. An employer may
terminate an employment for any of the following causes:
(a) Serious misconduct or willful disobedience by the
employee of the lawful orders of his employer or
representative in connection with his work;
(b) Gross and habitual neglect by the employee of his
duties;
(c) Fraud or willful breach by the employee of the trust
reposed in him by his employer or duly authorized
representative;
(d) Commission of a crime or offense by the employee
against the person of his employer or any immediate
member of his family or his duly authorized representative;
and
(e) Other causes analogous to the foregoing.
Sections 2 and 5 of Rule XIV entitled "Termination of Employment:" of
the "Rules to Implement the Labor Code" read as follows:
Sec. 2. Notice of dismissal. Any employer who seeks to
dismiss a worker shall furnish him a written notice stating the
particular acts or omission constituting the grounds for his

dismissal. In cases of abandonment of work, the notice shall be

served at the worker's last known address.
xxx

xxx

xxx

Sec. 5. Answer and hearing. The worker may answer the

allegations stated against him in the notice of dismissal within a
reasonable period from receipt of such notice. The employer
shall afford the worker ample opportunity to be heard and to
defend himself with the assistance of his representative if he so
desires. (emphasis supplied)
We note that Section 2 of Rule XIV quoted above requires the notice
to specify "the particular acts or omissions constituting the ground for
his dismissal", a requirement which is obviously applicable where the
ground for dismissal is the commission of some act or omission falling
within Article 282 of the Labor Code. Again, Section 5 gives the
employee the right to answer and to defend himself against "the
allegations stated against him in the notice of dismissal". It is such
allegations by the employer and any counter-allegations that the
employee may wish to make that need to be heard before dismissal is
effected. Thus, Section 5 may be seen to envisage charges against an
employee constituting one or more of the just causes for dismissal
listed in Article 282 of the Labor Code. Where, as in the instant case,
the ground for dismissal or termination of services does not relate to a
blameworthy act or omission on the part of the employee, there
appears to us no need for an investigation and hearing to be
conducted by the employer who does not, to begin with, allege any
malfeasance or non-feasance on the part of the employee. In such
case, there are no allegations which the employee should refute and
defend himself from. Thus, to require petitioner Wiltshire to hold a
hearing, at which private respondent would have had the right to be
present, on the business and financial circumstances compelling
retrenchment and resulting in redundancy, would be to impose upon
the employer an unnecessary and inutile hearing as a condition for
legality of termination.

This is not to say that the employee may not contest the reality or
good faith character of the retrenchment or redundancy asserted as
grounds for termination of services. The appropriate forum for such
controversion would, however, be the Department of Labor and
Employment and not an investigation or hearing to be held by the
employer itself. It is precisely for this reason that an employer seeking
to terminate services of an employee or employees because of
"closure of establishment and reduction of personnel", is legally
required to give a written notice not only to the employee but also to
the Department of Labor and Employment at least one month before
effectivity date of the termination. In the instant case, private
respondent did controvert before the appropriate labor authorities the
grounds for termination of services set out in petitioner's letter to him
dated 17 June 1985.
We hold, therefore, that the NLRC's finding that private respondent
had not been accorded due process, is bereft of factual and legal
bases. The award of moral damages that rests on such ground must
accordingly fall.
While private respondent may well have suffered personal
embarrassment by reason of termination of his services, such fact
alone cannot justify the award of moral damages. Moral damages are
simply a species of damages awarded to compensate one for injuries
brought about by a wrongful act. As discussed above, the termination
of private respondent's services was not a wrongful act. There is in
this case no clear and convincing evidence of record showing that the
termination of private respondent's services, while due to an
authorized or statutory cause, had been carried out in an arbitrary,
capricious and malicious manner, with evident personal ill-will.
Embarrassment, even humiliation, that is not proximately caused by a
wrongful act does not constitute a basis for an award of moral
damages.
8

Private respondent is, of course, entitled to separation pay and other

benefits under Act 283 of the Labor Code and petitioner's letter dated
17 June 1985.

ACCORDINGLY, the Court Resolved to GRANT due course to the

Petition for Certiorari. The Resolutions of the National Labor Relations
Commission dated 9 February 1988 and 7 March 1988 are hereby
SET ASIDE and NULLIFIED. The Temporary Restraining Order issued
by this Court on 21 March 1988 is hereby made PERMANENT. No
pronouncement as to costs.
SO ORDERED.
[G.R. No. 139013. September 17, 2002]

ZEL T. ZAFRA and EDWIN B. ECARMA, petitioners, vs. HON. COURT

OF APPEALS, PHILIPPINE LONG DISTANCE TELEPHONE CO.,
INC.,
AUGUSTO
COTELO,
and
ERIBERTO
MELLIZA, respondents.
DECISION
QUISUMBING, J.:

For review on certiorari is the decision of the Court of Appeals dated December 22,
1998, in CA-G.R. SP. No. 48578, reversing that of the voluntary arbitrator which ordered
respondent Philippine Long Distance Telephone Co. (PLDT) to reinstate
petitioners. Also impugned is the resolution dated May 24, 1999, denying petitioners
motion for reconsideration.
[1]

The undisputed facts, as set forth in the decision of the Court of Appeals, are as
follows:
Petitioner Zel T. Zafra was hired by PLDT on October 1, 1984 as Operations Analyst
II with a monthly salary of P14,382 while co-petitioner Edwin B. Ecarma was hired as
Junior Operations Analyst I on September 16, 1987 at a monthly rate of P12,032. Both
were regular rank-and-file employees assigned at the Regional Operations and
Maintenance Control Center (ROMCC) of PLDTs Cebu Provincial Division. They were
tasked to maintain the operations and maintenance of the telephone exchanges in the
Visayas and Mindanao areas.
[2]

In March 1995, petitioners were chosen for the OMC Specialist and System
Software Acceptance Training Program in Germany in preparation for ALCATEL 1000
S12, a World Bank-financed PLDT project in line with its Zero Backlog Program.
ALCATEL, the foreign supplier, shouldered the cost of their training and travel
expenses. Petitioners left for Germany on April 10, 1995 and stayed there until July 21,
1995.
[3]

On July 12, 1995, while petitioners were in Germany, a certain Mr. R. Relucio,
SwitchNet Division Manager, requested advice, through an inter-office memorandum,
from the Cebu and Davao Provincial Managers if any of the training participants were
interested to transfer to the Sampaloc ROMCC to address the operational requirements
therein. The transfer was to be made before the ALCATEL exchanges and operations
and maintenance center in Sampaloc would become operational.
Upon petitioners return from Germany, a certain Mr. W.P. Acantillado, Senior
Manager of the PLDT Cebu Plant, informed them about the memorandum. They balked
at the idea, but PLDT, through an inter-office memorandum dated December 21, 1995,
proceeded to transfer petitioners to the Sampaloc ROMCC effective January 3, 1996.
[4]

Petitioners left Cebu for Manila on December 27, 1995 to air their grievance to
PLDT and to seek assistance from their union head office in Mandaluyong. PLDT
ordered petitioners to report for work on January 16, 1996, but they asked for a
deferment to February 1, 1996. Petitioners reported for work at the Sampaloc office on
January 29, 1996. Meanwhile PLDT moved the effectivity date of their transfer to March
1, 1996. On March 13, 1996, petitioners again appealed to PLDT to no avail. And,
because all their appeals fell on deaf ears, petitioners, while in Manila, tendered their
resignation letters on March 21, 1996. Consequently, the expenses for their training in
Germany were deducted from petitioners final pay.
On September 11, 1996, petitioners filed a complaint with the National Labor
Relations Commission Regional Arbitration Branch No. 7 for alleged constructive
dismissal and non-payment of benefits under the Collective Bargaining Agreement. In
an order dated November 10, 1996, the presiding labor arbiter referred the complaint to
the National Conciliation and Mediation Board, Cebu City, for appropriate action. On
January 17, 1997, the parties agreed to designate lawyer Rolando M. Lim as their
voluntary arbitrator.
[5]

[6]

[7]

In their complaint, petitioners prayed that their dismissal from employment be

declared illegal. They also asked for reinstatement with full backwages, refund of
unauthorized deductions from their final pay, including damages, costs of litigation, and
attorneys fees.
[8]

Respondent PLDT, for its part, averred that petitioners agreed to accept any
assignment within PLDT in their application for employment and also in the
undertaking they executed prior to their training in Germany. It prayed that petitioners
complaint be dismissed.
[9]

[10]

After submission of their respective position papers and admission of facts, the case
was set for hearing. Petitioners presented their witnesses and made their formal offer of
documentary evidence. PLDT, however, requested for a re-setting of the hearing from
October 9 and 10, 1997 to November 10 and 11, 1997. But on those dates PLDT did
not appear.Nor did it file any notice of postponement or motion to cancel the hearings.
[11]

[12]

Upon petitioners motion and pursuant to Article 262-A of the Labor Code, the
voluntary arbitrator issued an order admitting all documentary exhibits offered in
evidence by petitioners and submitting the case for resolution. In said order, PLDT was
[13]

[14]

declared to have waived its right to present evidence on account of its unjustified failure
to appear in the November 10 to 11 hearings.
On December 1, 1997, the voluntary arbitrator issued a decision which reads:

IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, judgment is hereby

rendered in the above case, in favor of complainants Zel Zafra and Edwin Ecarma and
against respondent PLDT, as follows:
1. Declaring that complainants were illegally dismissed by reason of the forced
resignations or constructive discharge from their respective employment with
PLDT;
2. Ordering the reinstatement of complainants without loss of seniority rights and
other privileges, and granting the award of full backwages from April 22, 1996,
inclusive of allowances granted in the CBA or their monetary equivalent
computed from the time complainants compensation were withheld up to the time
of their actual reinstatement, or in lieu thereof, ordering the payment of
separation pay with full backwages;
3. Ordering the refund of P35,721.81 to complainant Zafra and P24,186.67 to
complainant Ecarma, which amounts constitute as unauthorized deductions from
their final pay;
4. Ordering payment of P50,000.00 as moral damages; P20,000.00 as exemplary
damages and P20,000.00 as refund for litigation expenses;
5. Ordering payment of 10% Attorneys Fees computed on all adjudicated claims.

SO ORDERED.

[15]

PLDTs motion for reconsideration of the above decision was denied on July 10,
1998. On August 7, 1998, PLDT initiated a special civil action for certiorari with the
Court of Appeals, which was treated as a petition for review. On December 22, 1998,
the CA ruled in favor of PLDT and reversed the voluntary arbitrators decision, in this
wise:
[16]

[17]

[18]

WHEREFORE, the instant petition is hereby given due course. Accordingly, the
assailed Order is hereby REVERSED with the exception of the refund, which is
hereby ordered, of the amount of P35,721.81 to respondent Zafra and P24,186.67 to
respondent Ecarma representing unauthorized deductions from their final pay.
SO ORDERED.

[19]

Zafra and Ecarma as respondents below moved for reconsideration of the CA

decision which, however, was denied on May 24, 1999.
[20]

Petitioners now anchor their petition on the following grounds:

I. THE COURT OF APPEALS HAS DECIDED A QUESTION OF SUBSTANCE

IN THE RESPONDENTS PETITION IN A WAY PROBABLY NOT IN
ACCORD WITH THE LAW OR THE APPLICABLE DECISIONS OF THE
SUPREME COURT.
A. THE COURT A QUO, INSTEAD OF RESOLVING ERRORS OF
JURISDICTION ALLEGED IN THE RESPONDENTS PETITION
ERRED IN RENDERING THE DECISION ON ITS MERITS, IN
EFFECT NOT ACCORDING RESPECT AND SETTING ASIDE THE
VOLUNTARY ARBITRATORS EVALUATION OF THE EVIDENCE
AND FACTUAL FINDINGS BASED THEREON.
B. THE COURT A QUO, IN GIVING DUE COURSE TO THE
RESPONDENTS PETITION ERRED IN PROCEEDING TO RESOLVE
THE SAME ON THE MERITS, WITHOUT FIRST REVIEWING THE
ENTIRE RECORD OF THE PROCEEDINGS OF THE VOLUNTARY
ARBITRATOR.
II. THE COURT OF APPEALS HAS DEPARTED FROM THE ACCEPTED
AND USUAL COURSE OF JUDICIAL PROCEEDINGS, AS TO CALL FOR
AN EXERCISE OF THE HONORABLE SUPREME COURTS
SUPERVISION.
A. THE COURT A QUO COMMITTED GRAVE ABUSE OF DISCRETION
IN RENDERING THE DECISION THROUGH ITS UTTER
DISREGARD OF THE APPROPRIATE MODE OF APPEAL TO BE
TAKEN BY THE RESPONDENTS FROM THE JUDGMENT OF THE
VOLUNTARY ARBITRATOR.
B. THE COURT A QUO COMMITTED GRAVE ABUSE OF ITS
DISCRETION IN TREATING JOINTLY THE RESPONDENTS
PETITION EITHER AS AN APPEAL UNDER RULE 43, OR IN THE
ALTERNATIVE, A SPECIAL CIVIL ACTION FOR CERTIORARI
UNDER RULE 65.
C. THE COURT A QUO COMMITTED GRAVE ABUSE OF ITS
DISCRETION IN FAILING TO DISMISS THE RESPONDENTS
PETITION FOR CERTIORARI OUTRIGHTLY FOR FAILURE TO
COMPLY WITH THE STRICT REQUIREMENTS IN THE FILING
THEREOF.
[21]

Briefly, the issues in this case may be restated as follows: (1) whether or not the CA
erred in treating the special civil action for certiorari filed by respondent as a petition for
review, and (2) whether or not the CA erred in its appreciation of facts and the decision
it rendered.
Petitioners invoke Luzon Development Bank vs. Association of Luzon Development
Bank Employees, et al. and Rule 43 of the 1997 Rules of Civil Procedure in arguing
that an appeal and not a petition for certiorari should be the proper remedy to question
the decision or award of the voluntary arbitrator. Even assuming that Rule 65 applies,
petitioners argue that PLDT, nevertheless, erred in not including the voluntary arbitrator
as one of the respondents in the petition and in not serving him a copy thereof. These
procedural flaws, they aver, merit the outright dismissal by the CA of the petition.
[22]

[23]

[24]

[25]

A perusal of the petition before the CA shows that the mode chosen by PLDT was a
petition for review under Rule 43 and not a special civil action for certiorari under Rule
65. While it was captioned as a petition for certiorari, it is not the caption of the pleading
but the allegations therein that determine the nature of the action. The appellate court
was not precluded from granting relief as warranted by PLDTs allegations in the petition
and the evidence it had presented to support the petition.
[26]

A perusal of the petition before the CA discloses the following: First, under the
heading Nature of the Action, the PLDT averred it was a petition for review on
certiorari of the Decision dated December 1, 1997 and Order dated July 10, 1998 of
Voluntary Arbitrator Atty. Rolando M. Lim. Second, while the assigned errors alleged
that the voluntary arbitrator acted with grave abuse of discretion, nevertheless, the issue
set forth was whether or not there existed sufficient evidence to show that
complainants [herein petitioners] were constructively dismissed, and whether
they were entitled to reinstatement, back wages and other monetary awards.
Clearly, the issue was factual and not limited to questions of jurisdiction and grave
abuse of discretion. Third, the petition was filed within the 15-day period to perfect
an appeal and did not implead the voluntary arbitrator as a respondent. All of
these indicate that the petition below was indeed one for review.
[27]

[28]

Moreover, contrary to petitioners contention that the voluntary arbitrator was not
furnished a copy of the petition, the records reveal otherwise. Attached to the petition
filed before the appellate court was a registry receipt of the copy sent to the voluntary
arbitrator.
[29]

Coming now to the substantive merits of the petition before us. Considering that the
CAs findings of fact clash with those of the voluntary arbitrator, with contradictory
results, this Court is compelled to go over the records of the case as well as the
submissions of the parties. Having done so carefully, we are not convinced that the
voluntary arbitrator erred in his factual conclusions so as to justify reversal thereof by
the appellate court. We are persuaded to rule in favor of the complaining workers,
herein petitioners, following the well-established doctrine in labor-management relations
that in case of doubt, labor should prevail.

The fact that petitioners, in their application for employment, agreed to be

transferred or assigned to any branch should not be taken in isolation, but rather in
conjunction with the established company practice in PLDT.
[30]

[31]

The standard operating procedure in PLDT is to inform personnel regarding the

nature and location of their future assignments after training abroad. This prevailing
company practice is evidenced by the inter-office memorandum of a certain PLDTs
First Vice President (Reyes), dated May 3, 1996 to PLDTs Chief Operating Officer
(Perez), duly-acknowledged by private respondents:
[32]

xxx
To : Atty. E.D. Perez, SEVP & COO
Thru : J.P. de Jesus, EVP - Meet Demand Group
From : FVP - Program Planning & Engineering Sector
Subject: NON-ASSIGNABLE TRAINED PERSONNEL
=====================================================
During the Group Heads Meeting on 03 April 1996, Mr. R.R. Zarate reported on the
case of some provincial personnel who had foreign training for functions intended for
Manila Operations but refused to be relocated and assigned to Manila, and who
eventually resigned on account of the said transfer. In view of this situation, two (2)
issues were raised as follows:
1. Network Services to be involved in the planning of facilities, specially when
this involves trainees from Network.
2. Actual training to be undertaken only after the sites where such training will be
utilized have been determined.
xxx
A total of 53 slots (for the Exchange O&M, System Software/Acceptance Engineering
and OMC Specialist Courses) were allocated to Network Services by the Steering
Committee composed of representatives from ProgPlan and TechTrain. The O&M
slots were equally distributed to Provincial Operations on the basis where Alcatel
switches will be geographically installed. With regards to NSC, since the contract has
defined its location to be in Sampaloc and considering that its monitoring function
would focus on provincial exchanges, slots were opened both for Provincial and
Metro Manila Operations. Please note that all these relevant informations were
disseminated to concerned parties as inputs, to enable them to recommend the
appropriate training participants.

The choice of trainees were made by Network and, therefore, it is incumbent upon
them to brief the participants or trainees they selected on the nature and assignment of
their employment after training.
To prevent similar instances in the future, we strongly recommend the following:
1. Prior to the training, all concerned groups should conform with the standard
practice of informing personnel regarding the nature and/or location of their
future assignments after the training.
2. The contractual obligation of the trainees should include a provision on their
willingness and commitment to perform the related training functionalities
required by the company.
x x x (Underscoring supplied.)
The want of notice of transfer to petitioners was the subject of another inter-office
memorandum dated November 24, 1995, from one Mr. Relucio, SwitchNet Division
Manager, to a certain Mr. Albania, First Vice President-Regional & Toll Network. It
states:

As the cheaper option is to relocate personnel who have attended the training already,
we have solicited the desire of the Cebu and Davao-based provincial personnel to
transfer to SwitchNet Sampaloc ROMCC which they declined, x x x We should note
that these personnel were not made aware prior to start of training, that they will be
transferred to Manila.
[33]

A third inter-office memorandum dated November 29, 1995 confirmed this

procedural flaw, thus:

Alternative 1: Require the four Jones and Davao ROMCC personnel to transfer [to]
the Sampaloc ROMCC, as service requirement. This is the least cost alternative. x x
x We should note however, that these personnel were not aware that they would
relocate after training.
[34]

Under these circumstances, the need for the dissemination of notice of transfer to
employees before sending them abroad for training should be deemed necessary and
later to have ripened into a company practice or policy that could no longer be
peremptorily withdrawn, discontinued, or eliminated by the employer. Fairness at the
workplace and settled expectations among employees require that we honor this
practice and commend this policy.
The appellate courts justification that petitioners transfer was a management
prerogative did not quite square with the preceding evidence on record, which are not

disputed. To say that petitioners were not constructively dismissed inasmuch as the
transfer was effected without demotion in rank or diminution of salary benefits is, to our
mind, inaccurate. It is well to remember that constructive dismissal does not always
involve forthright dismissal or diminution in rank, compensation, benefits, and privileges.
For an act of clear discrimination,insensibility, or disdain by an employer may become
so unbearable on the part of the employee that it could foreclose any choice by him
except to forego his continued employment. The insensibility of private respondents is
at once deducible from the foregoing circumstances.
[35]

Despite their knowledge that the lone operations and maintenance center of the 33
ALCATEL 1000 S12 Exchanges would be homed in Sampaloc, PLDT officials
neglected to disclose this vital piece of information to petitioners before they acceded to
be trained abroad. On arriving home, they did not give complaining workers any other
option but placed them in an either/or straightjacket, that appeared too oppressive for
those concerned.
[36]

As pointed out in the abovementioned inter-office memorandum by Mr. Reyes:

All sites where training will be utilized are already pre-determined and pinpointed in
the contract documents and technical protocols signed by PLDT and the contractor.
Hence, there should be no reason or cause for the misappointment of the training
participants.
[37]

Needless to say, had they known about their pre-planned reassignments, petitioners
could have declined the foreign training intended for personnel assigned to the Manila
office. The lure of a foreign trip is fleeting while a reassignment from Cebu to Manila
entails major and permanent readjustments for petitioners and their families.
We are not unaware that the transfer of an employee ordinarily lies within the ambit
of management prerogatives. However, a transfer amounts to constructive dismissal
when the transfer is unreasonable, inconvenient, or prejudicial to the employee, and
involves a demotion in rank or diminution of salaries, benefits, and other privileges. In
the present case, petitioners were unceremoniously transferred, necessitating their
families relocation from Cebu to Manila. This act of management appears to be arbitrary
without the usual notice that should have been done even prior to their training
abroad. From the employees viewpoint, such action affecting their families are
burdensome, economically and emotionally. It is no exaggeration to say that their forced
transfer is not only unreasonable, inconvenient, and prejudicial, but to our mind, also in
defiance of basic due process and fair play in employment relations.
[38]

WHEREFORE, this petition for review is GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 48578, dated December 22, 1998, is REVERSED and SET
ASIDE. The decision of the Voluntary Arbitrator dated December 1, 1997, is
REINSTATED. No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Austria-Martinez, and Callejo, Sr., JJ., concur.

G.R. No. 188747

January 29, 2014

MANILA WATER COMPANY, Petitioner,

vs.
CARLITO DEL ROSARIO, Respondent.
DECISION
PEREZ, J.:
This is a Petition for Review on Certiorari filed pursuant to Rule 45 of
the Revised Rules of Court, assailing the 31 March 2009
Decision rendered by the Fifth Division of the Court of Appeals in CAG.R. SP No. 925 83. In its assailed decision, the appellate court: ( 1)
reversed as grave abuse of discretion the Resolution of the National
Labor Relations Commission (NLRC) which dismissed the petition of
Manila Water Company (Manila Water) on technical grounds; and (2)
proceeded to affirm with modification the ruling of the Labor Arbiter.
Manila Water was ordered to pay respondent Carlito Del Rosario (Del
Rosario) separation pay to be computed from 1 August 1997 up to
June 2000.
1

In a Resolution dated 7 July 2009, the appellate court refused to

reconsider its earlier decision.
3

The Facts
On 22 October 1979, Del Rosario was employed as Instrument
Technician by Metropolitan Waterworks and Sewerage System
(MWSS). Sometime in 1996, MWSS was reorganized pursuant to
Republic Act No. 8041 or the National Water Crisis Act of 1995, and its
implementing guidelines Executive Order No. 286. Because of the
reorganization, Manila Water absorbed some employees of MWSS
including Del Rosario. On 1 August 1997, Del Rosario officially
became an employee of Manila Water.

Sometime in May 2000, Manila Water discovered that 24 water meters

were missing in its stockroom. Upon initial investigation, it appeared
that Del Rosario and his co-employee, a certain Danilo Manguera,
were involved in the pilferage and the sale of water meters to the
companys contractor. Consequently, Manila Water issued a
Memorandum dated 23 June 2000, directing Del Rosario to explain in
writing within 72 hours why he should not be dealt with
administratively for the loss of the said water meters. In his letterexplanation, Del Rosario confessed his involvement in the act
charged and pleaded for forgiveness, promising not to commit similar
acts in the future.
4

On 29 June 2000, Manila Water conducted a hearing to afford Del

Rosario the opportunity to personally defend himself and to explain
and clarify his defenses to the charge against him. During the formal
investigation Del Rosario was found responsible for the loss of the
water meters and therefore liable for violating Section 11.1 of the
Companys Code of Conduct. Manila Water proceeded to dismiss Del
Rosario from employment on 3 July 2000.
6

This prompted Del Rosario to file an action for illegal dismissal

claiming that his severance from employment is without just cause. In
his Position Paper submitted before the labor officer, Del Rosario
averred that his admission to the misconduct charged was not
voluntary but was coerced by the company. Such admission therefore,
made without the assistance of a counsel, could not be made basis in
terminating his employment.
Refuting the allegations of Del Rosario, Manila Water pointed out that
he was indeed involved in the taking of the water meters from the
companys stock room and of selling these to a private contractor for
personal gain. Invoking Section 11.1 of the Companys Code of
Conduct, Manila Water averred that such act of stealing the
companys property is punishable by dismissal. The company invited
the attention of this Court to the fact that Del Rosario himself
confessed his involvement to the loss of the water meters not only in
his letter-explanation, but also during the formal investigation, and in
both instances, pleaded for his employers forgiveness.
8

After weighing the positions taken by the opposing parties, including

the evidence adduced in support of their respective cases, the Labor
Arbiter issued a Decision dated 30 May 2002 dismissing for lack of
merit the complaint filed by Del Rosario who was, however, awarded
separation pay. According to the Labor Arbiter, Del Rosarios length of
service for 21 years, without previous derogatory record, warrants the
award of separation pay. The decretal portion of the decision reads:
9

WHEREFORE, viewed from the foregoing, judgment is hereby

rendered DISMISSING the complaint for illegal dismissal for lack of
merit.
[Manila Water] is hereby ordered to pay complainant separation pay
equivalent to one-half (1/2) months salary for every year of service
based on his basic salary (Php 11,244.00) at the time of his dismissal.
This shall be computed from [1 August 1997] up to June 2000, the
total amount of which is ONE HUNDRED EIGHTEEN THOUSAND
SIXTY-TWO (Php 118,062.00) PESOS.
10

In a Resolution dated 30 September 2003, the NLRC dismissed the

appeal interposed by Manila Water for its failure to append a
certification against forum shopping in its Memorandum of Appeal.
11

Similarly ill-fated was Manila Waters Motion for Reconsideration

which was denied by the NLRC in a Resolution dated 28 April 2005.
12

On Certiorari, the Court of Appeals in its Decision dated 31 March

2009, reversed the NLRC Resolution and held that it committed a
grave abuse of discretion when it dismissed Manila Waters appeal on
mere technicality. The appellate court, however, proceeded to affirm
the decision of the Labor Arbiter awarding separation pay to Del
Rosario. Considering that Del Rosario rendered 21 years of service to
the company without previous derogatory record, the appellate court
considered the granting of separation pay by the labor officer justified.
The fallo of the assailed Court of Appeals Decision reads:
WHEREFORE, the petition is partly granted. The assailed Resolutions
dated September 30, 2003 and [April 28, 2005] of public respondent

NLRC are set aside. The Decision dated May 30, 2002 of the [L]abor
[A]rbiter is reinstated, subject to the modification that the computation
of the award of separation pay [to] private respondent shall be
counted from August 1, 1997 x x x up to June 2000.
13

In a Resolution dated 7 July 2009, the Court of Appeals refused to

reconsider its earlier decision.
14

Unrelenting, Manila Water filed the instant Petition for Review on

Certiorari assailing the foregoing Court of Appeals Decision and
Resolution on the sole ground that:
THE [COURT OF APPEALS] SERIOUSLY ERRED IN ISSUING THE
QUESTIONED DECISION AND RESOLUTION WHICH DIRECTLY
CONTRAVENE BOOK VI, RULE 1, AND SECTION 7 OF THE
OMNIBUS RULES IMPLEMENTING THE LABOR CODE AND
PREVAILING JURISPRUDENCE WHICH CATEGORICALLY
PROVIDE THAT AN EMPLOYEE SEPARATED FROM SERIOUS
MISCONDUCT IS NOT ENTITLED TO TERMINATION
(SEPARATION) PAY.
15

The Courts Ruling

In the instant petition, Manila Water essentially questions the award of
separation pay to respondent who was dismissed for stealing the
companys property which amounted to gross misconduct. It argues
that separation pay or financial assistance is not awarded to
employees guilty of gross misconduct or for cause reflecting on his
moral character.
16

Del Rosario for his part maintains that there is no legal ground to
justify his termination from employment. He insists that his admission
pertaining to his involvement in the loss of the water meters was
merely coerced by the company. Since his dismissal was without valid
or just cause, Del Rosario avers that Manila Water is guilty of illegal
dismissal rendering it liable for the payment of backwages and
separation pay.
17

It must be stressed at the outset that the correctness of the Labor

Arbiters pronouncement on the legality of Del Rosarios dismissal is
no longer an issue and is beyond modification. While Manila Water
timely appealed the ruling of the Labor Arbiter awarding separation
pay to Del Rosario, the latter did not question the dismissal of his
illegal termination case. It is settled in our jurisprudence that a party
who has not appealed cannot obtain from the appellate court any
affirmative relief other than the ones granted in the appealed
decision. Due process prevents the grant of additional awards to
parties who did not appeal. Having said that, this Court will no longer
dwell on the issue of whether or not Del Rosario was illegally
dismissed from employment. Included in the closed aspect of the case
is respondents argument that the absence of his counsel when he
admitted the charge against him diminished the evidentiary value of
such admission. Nonetheless, it may be mentioned that the
constitutional right to counsel is available only during custodial
investigation. If the investigation is merely administrative conducted by
the employer and not a criminal investigation, the admission made
during such investigation may be used as evidence to justify
dismissal.
18

19

20

21

Our focus will be on the propriety of the award for separation pay.
As a general rule, an employee who has been dismissed for any of the
just causes enumerated under Article 282 of the Labor Code is not
entitled to a separation pay. Section 7, Rule I, Book VI of the
Omnibus Rules implementing the Labor Code provides:
22

23

Sec. 7. Termination of employment by employer. The just causes

for terminating the services of an employee shall be those provided in
Article 282 of the Code. The separation from work of an employee for
a just cause does not entitle him to the termination pay provided in the
Code, without prejudice, however, to whatever rights, benefits and
privileges he may have under the applicable individual or collective
agreement with the employer or voluntary employer policy or practice.
In exceptional cases, however, the Court has granted separation pay
to a legally dismissed employee as an act of "social justice" or on

"equitable grounds." In both instances, it is required that the dismissal

(1) was not for serious misconduct; and (2) did not reflect on the moral
character of the employee.
24

25

In the leading case of Philippine Long Distance Telephone Company

v. NLRC, we laid down the rule that separation pay shall be allowed
as a measure of social justice only in the instances where the
employee is validly dismissed for causes other than serious
misconduct reflecting his moral character. We clarified that:
26

We hold that henceforth separation pay shall be allowed as a measure

of social justice only in those instances where the employee is validly
dismissed for causes other than serious misconduct or those reflecting
on his moral character. Where the reason for the valid dismissal is, for
example, habitual intoxication or an offense involving moral turpitude,
like theft or illicit sexual relations with a fellow worker, the employer
may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the
ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the
effect, of rewarding rather than punishing the erring employee for his
offense. And we do not agree that the punishment is his dismissal only
and that the separation pay has nothing to do with the wrong he has
committed. Of course it has. Indeed, if the employee who steals from
the company is granted separation pay even as he is validly
dismissed, it is not unlikely that he will commit a similar offense in his
next employment because he thinks he can expect a like leniency if he
is again found out. This kind of misplaced compassion is not going to
do labor in general any good as it will encourage the infiltration of its
ranks by those who do not deserve the protection and concern of the
Constitution.
The policy of social justice is not intended to countenance wrongdoing
simply because it is committed by the underprivileged. At best[,] it may
mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but
only when the recipient is not a rascal claiming an undeserved

privilege. Social justice cannot be permitted to be refuge of scoundrels

any more than can equity be an impediment to the punishment of the
guilty. Those who invoke social justice may do so only if their hands
are clean and their motives blameless and not simply because they
happen to be poor. This great policy of our Constitution is not meant
for the protection of those who have proved they are not worthy of it,
like the workers who have tainted the cause of labor with the
blemishes of their own character.
27

In the subsequent case of Toyota Motor Phils. Corp. Workers

Association (TMPCWA) v. National Labor Relations Commission, we
expanded the exclusions and elucidated that separation pay shall be
allowed as a measure of social justice only in instances where the
employee is validly dismissed for causes other than serious
misconduct, willful disobedience, gross and habitual neglect of duty,
fraud or willful breach of trust, commission of a crime against the
employer or his family, or those reflecting on his moral character. In
the same case, we instructed the labor officials that they must be most
judicious and circumspect in awarding separation pay or financial
assistance as the constitutional policy to provide full protection to labor
is not meant to be an instrument to oppress the employers. The
commitment of the court to the cause of the labor should not
embarrass us from sustaining the employers when they are right, as
here. In fine, we should be more cautious in awarding financial
assistance to the undeserving and those who are unworthy of liberality
of the law.
28

29

30

Guided by the foregoing rules, we have carefully treaded the path of

compassionate justice in the subsequent cases so as not to slip and
favor labor at the expense of management.
In Tirazona v. Phillippine EDS Techno-Service, Inc. (PET, Inc.), we
denied the award of separation pay to an employee who was
dismissed from employment due to loss of trust and confidence.
31

While [this] Court commiserates with the plight of Tirazona, who has
recently manifested that she has since been suffering from her poor
health condition, the Court cannot grant her plea for the award of

financial benefits based solely on this unfortunate circumstance. For

all its conceded merit, equity is available only in the absence of law
and not as its replacement. Equity as an exceptional extenuating
circumstance does not favor, nor may it be used to reward, the
indolent or the wrongdoer for that matter. This Court will not allow a
party, in guise of equity, to benefit from its own fault. (Emphasis
supplied).
32

The attendant circumstances in the present case considered, we are

constrained to deny Del Rosario separation pay since the admitted
cause of his dismissal amounts to serious misconduct. He is not only
responsible for the loss of the water meters in flagrant violation of the
companys policy but his act is in utter disregard of his partnership
with his employer in the pursuit of mutual benefits.
In the recent case of Daabay v. Coca-Cola Bottlers, this Court
reiterated our ruling in Toyota and disallowed the payment of
separation pay to an employee who was found guilty of stealing the
companys property. We repeated that an award of separation pay in
such an instance is misplaced compassion for the undeserving who
may find their way back and weaken the fiber of labor.
33

That Del Rosario rendered 21 years of service to the company will not
save the day for him. To this case, Central Pangasinan Electric
Cooperative, Inc. v. National Labor Relations Commission is on all
fours, thus:
1wphi1

Although long years of service might generally be considered for the

award of separation benefits or some form of financial assistance to
mitigate the effects of termination, this case is not the appropriate
instance for generosity under the Labor Code nor under our prior
decisions. The fact that private respondent served petitioner for more
than twenty years with no negative record prior to his dismissal, in our
view of this case, does not call for such award of benefits, since his
violation reflects a regrettable lack of loyalty and worse, betrayal of the
company. If an employee's length of service is to be regarded as a
justification for moderating the penalty of dismissal, such gesture will
actually become a prize for disloyalty, distorting the meaning of social

justice and undermining the efforts of labor to cleanse its ranks of

undesirables.
(Emphasis supplied).
34

Indubitably, the appellate court erred in awarding separation pay to

Del Rosario without taking into consideration that the transgression he
committed constitutes a serious offense. The grant of separation pay
to a dismissed employee is determined by the cause of the dismissal.
The years of service may determine how much separation pay may be
awarded. It is, however, not the reason why such pay should be
granted at all.
In sum, we hold that the award of separation pay or any other kind of
financial assistance to Del Rosario, under the nomenclature of
compassionate justice, is not warranted in the instant case. A contrary
rule would have the effect of rewarding rather than punishing an erring
employee, disturbing the noble concept of social justice.
WHEREFORE, premises considered, the petition is GRANTED. The
assailed Decision and Resolution of the Court of Appeals are hereby
REVERSED and SET ASIDE.
SO ORDERED.
DANNIE M. PANTOJA,
Petitioner,

G.R. No. 163554

Present:

- versus -

CARPIO, J., Chairperson,

DEL CASTILLO,
ABAD,
PEREZ, and
MENDOZA, JJ.

SCA HYGIENE PRODUCTS

CORPORATION,
Promulgated:
Respondent.
April 23, 2010
x-------------------------------------------------------------x

DECISION

DEL CASTILLO, J.:

Once again, we uphold the employers exercise of its management prerogative because it
was done for the advancement of its interest and not for the purpose of defeating the
lawful rights of an employee.

This petition for review on certiorari[1] assails the Decision[2] dated January 30,
2004 and Resolution[3] dated May 13, 2004 of the Court of Appeals (CA) in CA-G.R. SP
No. 73076, which affirmed the May 30, 2002 Decision[4] of the National Labor Relations
Commission (NLRC) and reinstated the Labor Arbiters dismissal of the illegal dismissal
complaint filed by petitioner Dannie M. Pantoja against respondent SCA Hygiene
Products Corporation.
Factual Antecedents

Respondent, a corporation engaged in the manufacture, sale and distribution of industrial

paper and tissue products, employed petitioner as a utility man on March 15, 1987.
Petitioner was eventually assigned at respondents Paper Mill No. 4, the section which
manufactures the companys industrial paper products, as a back tender in charge of the
proper operation of the sections machineries.

In a Notice of Transfer dated March 27, 1999,[5] respondent informed petitioner of its
reorganization plan and offered him a position at Paper Mill No. 5 under the same terms
and conditions of employment in anticipation of the eventual closure and permanent
shutdown of Paper Mill No. 4 effective May 5, 1999. The closure and concomitant
reorganization is in line with respondents decision to streamline and phase out the

companys industrial paper manufacturing operations due to financial difficulties brought

about by the low volume of sales and orders for industrial paper products.

However, petitioner rejected respondents offer for his transfer. Thus, a notice of
termination[6] of employment effective May 5, 1999 was sent to petitioner as his position
was declared redundant by the closure of Paper Mill No. 4. He then received his
separation pay equivalent to two months pay for every year of service in the amount
of P356,335.20 and thereafter executed a release and quitclaim[7] in favor of respondent.
On April 5, 1999, respondent informed the Department of Labor and Employment
(DOLE) of its reorganization and partial closure by submitting with the said office an
Establishment Termination Report[8] together with the list[9] of 31 terminated employees.

On June 20, 2000, petitioner filed a complaint for illegal dismissal against respondent
assailing his termination as without any valid cause. He averred that the alleged
redundancy never occurred as there was no permanent shutdown of Paper Mill No. 4 due
to its continuous operation since his termination. A co-employee, Nestor Agtang,
confirmed this fact and further attested that several contractual workers were employed to
operate Paper Mill No. 4.[10] Petitioner also presented in evidence documents pertaining
to the actual and continuous operation of Paper Mill No. 4 such as the Paper Mill
Personnel Schedule for July 2-8, 2000[11] and 23-29, 2000[12] and Paper Machine No. 4
Production Report and Operating Data dated April 28, 2000[13]and May 18, 2000.[14]

In its defense, respondent refuted petitioners claim of illegal dismissal. It argued that
petitioner has voluntarily separated himself from service by opting to avail of the
separation benefits of the company instead of accepting reassignment/transfer to another

position of equal rank and pay. According to respondent, petitioners discussion on the
alleged resumption of operation of Paper Mill No. 4 is rendered moot by the fact of
petitioners voluntary separation.

Ruling of the Labor Arbiter

On March 23, 2001, the Labor Arbiter rendered a Decision[15]

dismissing petitioners complaint for lack of merit. The Labor Arbiter ruled that inasmuch
as petitioner rejected the position offered to him, opted to receive separation pay and
executed a release and quitclaim releasing the company from any claim or demand in
connection with his employment, petitioners claim that he was illegally dismissed must
perforce fail.

Ruling of the National Labor Relations Commission

Upon appeal by petitioner, the NLRC reversed the Labor Arbiters Decision by finding
petitioners separation from employment illegal. The NLRC gave credence to petitioners
evidence of Paper Mill No. 4s continuous operation and consequently opined that the
feigned shutdown of operations renders respondents redundancy program legally infirm.
According to the NLRC, petitioners refusal to be transferred to an equal post in Paper
Mill No. 5 is of no consequence since he would not have had the need to make a choice
where the situation, in the first place, never called for it. The NLRC further disregarded
the validity of the quitclaim because its execution cannot be considered as having been
done voluntarily by petitioner there being fraud and misrepresentation on the part of
respondent. The dispositive portion of the NLRC Decision reads:

WHEREFORE, premises considered, the decision under review is hereby

REVERSED and SET ASIDE, and another entered, declaring complainants
dismissal from employment as ILLEGAL.
Accordingly, respondent is ordered to REINSTATE the complainant to his
former position without loss of seniority rights and pay him FULL
BACKWAGES in the amount corresponding to the period when he was
actually dismissed until actual reinstatement, less the sum of THREE
HUNDRED FIFTY SIX THOUSAND THREE HUNDRED THIRTY FIVE
& 20/100 Pesos (P356,335.20) representing his separation pay.
Respondent is further ordered to pay the complainant, by way of attorneys
fees, ten percent (10%) of the total net amount due as backwages.
SO ORDERED.[16]

Respondent sought reconsideration of the NLRCs ruling. It denied the fact that Paper
Mill No. 4 continued to be fully operational in 1999. Respondent asseverated that when
Paper Mill No. 4 was shut down in 1999 due to its low production output as certified in
an affidavit[17] executed by SCAs VP-Tissue Manufacturing Director, there was a
necessity to occasionally run from time to time the machines in Paper Mill No. 4 only for
the purpose of maintaining and preserving the same and does not mean that Paper Mill
No. 4 continued to be operational. It was only in 2000 that Paper Mill No. 4 was
subsequently reopened due to a more favorable business climate, which decision is
recognized as a rightful exercise of management prerogative. Moreover, respondent
maintained that this is a case of voluntary separation and not illegal dismissal.

In a Resolution[18] dated August 22, 2002, respondents motion was denied.

Ruling of the Court of Appeals

Aggrieved, respondent filed a petition for certiorari with the CA. On January 30, 2004,
the CA reversed the NLRCs Decision and reinstated the Labor Arbiters Decision
dismissing the compliant. It ruled that there was no illegal dismissal as the act of
petitioner in rejecting the transfer and accepting the separation pay constitutes a valid
basis for the separation from employment. Respondents Motion to Annul the NLRCs
Entry of Judgment was granted by the CA.

Petitioner filed a motion for reconsideration but it was denied.

Issue

The lone issue in this petition for review on certiorari is whether or not respondent is
guilty of illegal dismissal.

Petitioner contends that respondents streamlining of operations which resulted in the

reduction of personnel was a mere scheme to get rid of regular employees whose security
of tenure is protected by law. As there was evident bad faith in the implementation of a
flawed retrenchment program, petitioner argued that his separation from employment due
to his decision to accept separation pay is illegal since respondent has no valid basis to
give him an option either to be transferred or be separated. Further, neither can the
quitclaim he executed stamp legality to his precipitate separation.

Our Ruling

The petition lacks merit.

Respondents right of management prerogative was

exercised in good faith.

Respondent presented evidence of the low volume of sales and orders for the production
of industrial paper in 1999 which inevitably resulted to the companys decision to
streamline its operations. This fact was corroborated by respondents VP-Tissue
Manufacturing Director and was not disputed by petitioner. Exercising its management
prerogative and sound business judgment, respondent decided to cut down on operational
costs by shutting down one of its paper mill. As held in International Harvester
Macleod, Inc. v. Intermediate Appellate Court,[19]the determination of the need to phase
out a particular department and consequent reduction of personnel and reorganization as
a labor and cost saving device is a recognized management prerogative which the courts
will not generally interfere with.

In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business
judgment arrived at in the face of the low demand for the production of industrial paper at
the time. Despite an apparent reason to implement a retrenchment program as a costcutting measure, respondent, however, did not outrightly dismiss the workers affected by
the closure of Paper Mill No. 4 but gave them an option to be transferred to posts of equal
rank and pay. As can be seen, retrenchment was utilized by respondent only as an
available option in case the affected employee would not want to be
transferred. Respondent did not proceed directly to retrench. This, to our mind, is an
indication of good faith on respondents part as it exhausted other possible measures other
than retrenchment. Besides, the employers prerogative to bring down labor costs by

retrenching must be exercised essentially as a measure of last resort, after less drastic
means have been tried and found wanting. Giving the workers an option to be transferred
without any diminution in rank and pay specifically belie petitioners allegation that the
alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the
absence of bad faith. Apparently, respondent implemented its streamlining or
reorganization plan with good faith, not in an arbitrary manner and without prejudicing
the tenurial rights of its employees.
Petitioner harps on the fact that there was no actual shutdown of Paper Mill No. 4
but that it continued to be operational. No evidence, however, was presented to prove that
there was continuous operation after the shutdown in the year 1999. What the records
reveal is that Paper Mill No. 4 resumed its operation in 2000 due to a more favorable
business climate. The resumption of its industrial paper manufacturing operations does
not, however, make respondents streamlining/reorganization plan illegal because, again,
the abolishment of Paper Mill No. 4 in 1999 was a business judgment arrived at to
prevent a possible financial drain at that time. As long as no arbitrary or malicious action
on the part of an employer is shown, the wisdom of a business judgment to implement a
cost saving device is beyond this courts determination. After all, the free will of
management to conduct its own business affairs to achieve its purpose cannot be denied.
[20]

Petitioners voluntary separation from employment

renders his claim of illegal dismissal unfounded and
baseless.

Petitioner claims that he had no choice but to resign on the belief that Paper Mill
No. 4 will be permanently closed as misrepresented by respondent and thus can
invalidate the release and quitclaim executed by him.

We find this contention untenable.

We held that work reassignment of an employee as a genuine business necessity is

a valid management prerogative.[21] After being given an option to be transferred,
petitioner rejected the offer for reassignment to Paper Mill No. 5 even though such
transfer would not involve any diminution of rank and pay. Instead, he opted and
preferred to be separated by executing a release and quitclaim in consideration of which
he received separation pay in the amount of P356,335.20 equal to two months pay for
every year of service plus other accrued benefits. Clearly, petitioner freely and voluntarily
consented to the execution of the release and quitclaim. Having done so apart from the
fact that the consideration for the quitclaim is credible and reasonable, the waiver
represents a valid and binding undertaking. [22] As aptly concluded by the CA, the
quitclaim was not executed under force or duress and that petitioner was given a
separation pay more than what the law requires from respondent.

WHEREFORE,

the

petition

is DENIED. The

assailed January

30,

2004 Decision of the Court of Appeals in CA-G.R. SP No. 73076 dismissing petitioner
Dannie M. Pantojas complaint for illegal dismissal and the May 13, 2004 Resolution
denying the Motion for Reconsideration are AFFIRMED.

SO ORDERED.