b.

Annual performance incentive of 30% of her annual gross salary

9. SMART COMMUNICATIONS v. LABORER c. Group life and hospitalization insurance coverage
G.R. Nos. 148132, 151079, 151372, January 28, 2008 d. Car plan in the amount of Php 455k
Jon de Guia 3. SMART launched an organizational realignment to achieve more efficient operations;
part of which was to outsource its sales and marketing work to SNMI
NATURE Illegal dismissal + replevin of the company car 4. SNMI stands for SMART-NTT Multimedia Incorporated, the product of a joint ven-
Petitioner Smart Communications ture agreement SMART had with NTT of Japan
Respondent Regina M. Laborer 5. With SNMI now in charge of sales and marketing, SMART abolished Laborers divi-
Ponente J. Nachura sion for redundancy
6. SNMI, though, agreed to absorb personnel recommended by SMART but Laborer
ranked last in the performance evaluation; thus, SMART did not endorse her
RECIT READY DIGEST
7. Instead, SMART offered her a supervisory position in the Customer Care Department,
Regina Astorga worked for SMART as a District Sales Manager in SMARTs sales and which she declined due to a lower salary rank and rate
marketing division. SMART entered into a joint venture agreement with NTT and the product of 8. SMART later issued a memorandum notifying Laborer of her termination, effective
such agreement, SNMI, now handled sales and marketing and so, Astorgas division was roughly two weeks after her receipt of the same2
abolished; thus, Astorga was terminated. The case actually revolved around illegal dismissal, 9. Note, however, that, as SMART will argue later on, SMARTs employees were made
ordinary courts jurisdiction over replevin cases, the one-month notice rule (before effective aware of the companys reorganization over a month3 before effectivity of Laborers
date of termination), and did not discuss Independent Contractors and Labor-Only Contractors termination
which SNMI appears to be. Only LA ruled in Astorgas favor regarding the illegal dismissal, 10. There were two cases filed:
but NLRC, CA, and SC said her dismissal was valid since the reorganization was an honest a. Laborer sued SMART for illegal dismissal, nonpayment of wages and other
effort to make SMARTs sales and marketing departments more efficient and competitive. benefits, as well as moral and exemplary damages
b. SMART, during the pendency of the illegal dismissal action, sued Laborer
via replevin to recovery its company car or to collect a sum of money equiv-
alent to the cars value
DOCTRINE. 11. Case Escalation of the two cases:
The characterization of an employees services as superfluous or no longer necessary and,
therefore, properly terminable, is an exercise of business judgment on the part of the em- Illegal Dismissal case
ployer.
a. LA: Favored Laborer; she was illegally dismissed; SNMI is an in-house
We agree with the CA that The determination to outsource was, to Our mind, a sound agency4 and Sec. 7(e), Rule VIII-A (Book No. is not specified) of the Rules
business judgment based on relevant criteria and is therefore a legitimate exercise of manage- Implementing the Labor Code5 says that contracting out the functions per-
ment prerogative. formed by Laborer to an in-house agency is illegal
b. NLRC: Favored SMART; she was NOT illegally dismissed; contracting,
subcontracting, etc. are allowed under the law and her dismissal due to re-
dundancy is valid; SNMI is NOT an in-house agencyLA lacked legal ba-
sis in saying that it was an in-house agency
FACTS. c. CA: Favored SMART still BUT found SMART liable for to pay indemnity
1. Respondent Laborer Regina Astorga (Laborer) was Petitioner Smart Communica- for non-compliance with the one-month notice requirement; she was NOT
tions (SMART) District Sales Manager of SMARTs sales and marketing division1 illegally dismissed; SMARTs abolition of Laborers division is legitimate
2. Laborer received exercise of management prerogative
a. Monthly salary of Php 33k

1
Said division was called the Corporate Sales Marketing Group / Fixed Service Division or 4
In-house agencyrefers to a contractor which is owned, managed, or controlled directly or
CSMG/FSD indirectly by the principal or one where the principal owns/represents any share of stock, and
2
She received the memo on March 16, 1998 (although the memo was actually issued on March which operates solely or mainly for the principal
3) and her termination was effective on April 3, 1998 5
Scoured the internet for this Section 7(e); cant find it, and the case didnt footnote it either;
3
The reorganization was made known to the employees on February 27, 1998; Laborer was ter- however, Dept. Order 174-17, series of 2017 (assigned reading) states, in Section 7 thereof: the
minated on April 3, 1998 following are hereby declared prohibited for being contrary to the law or public policy Contract-
ing out of job or work through an in-house agency, with in-house agency being defined in the
previous footnote
LABOR LAW 1 | DIGEST GROUP NAME | PROFESSOR
 Replevin case
a. RTC: Case NOT dismissed (its response to Astorgas MTD) since it has
jurisdiction over replevin suits
b. CA: Case dismissed for lack of jurisdiction since the car subject of the re-
plevin is a benefit arising out of an employer-employee relationship
ISSUE/S and RULING.
W/N RTC has jurisdiction over the replevin actionYES.
SMARTs demand for payment of the value of the car or, in the alternative, the cars return, is
a civil dispute involving debtor-creditor relations instead of employee-employer relations. SC
quoted Basaya, Jr. v. Militante: The labor dispute involved is not intertwined with the issue in
the Replevin Case. The respective issues raised in each forum can be resolved independently
[of] the other.
W/N Astorga was validly dismissedYES.
The characterization of an employees services as superfluous or no longer necessary and, there-
fore, properly terminable, is an exercise of business judgment on the part of the employer.
Also, no proof that reorganization was done in bad faith; in fact, SMART even offered her an-
other position, which she declined.
An employer is not precluded from adopting a new policy conducive to a more economical and
effective management even if it is not experiencing economic reverses.
We agree with the CA that [by] transferring the duties of CSMG/FSD to SNMI, SMART
has created a more competent and specialized organization to perform the work required for
corporate accounts The determination to outsource was, to Our mind, a sound business
judgment based on relevant criteria and is therefore a legitimate exercise of management pre-
rogative.
W/N SMART bears liability for not complying with the one-month notice requirementYES,
but this does NOT render the termination of Laborers employment illegal.
Article 283 of the Labor Code6 provides that employers may terminate the employment due to
redundancy by serving a written notice on the workers and the Ministry of Labor and Employ-
ment at least one month before the intended date thereof.
6
Art. 283 (in 2008). Closure of establishment and reduction of personnel. The em-
ployer 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
LABOR LAW 1 | DIGEST GROUP NAME | PROFESSOR
Here, Astorga barely had two weeks before effectivity date prior to termination. SMART cannot
exculpate itself from liability by invoking the notice it made to all employees of the organiza-
tional realignment over a month before Astorgas effective date of termination. Actual
knowledge does not replace the formal and written notice required by law.
Under Art. 283, Labor Code, Laborer is entitled to separation pay equivalent to at least one
month salary or at least one months pay for every year of service, whichever is higher.
W/N SMART is liable for non-payment of wages claimed by AstorgaYES.
No proof of payment was presented by SMART to disprove the allegation.
W/N SMART is liable for backwages to Astorga pending resolution of the illegal dismissal
caseNO.
Backwages is a relief given to an illegally dismissed employee. Since Astorgas dismissal is for
an authorized cause, she is not entitled to backwages.
DECISION.
1. Petition as to illegal dismissal case is DENIED. SMART (Respondent in illegal
dismissal case) WON.
2. Petition as to the replevin case is GRANTED. SMART (Petition in replevin case)
won and RTC Makati is directed to proceed.
NOTES.
The case doesnt do a very good job at illustrating the syllabus-topic, which is Independent
Contractors and Labor-Only Contractors. I checked the provisions in the syllabus, hindi parin. I
suppose, though, hell likely ask whether or not SNMI is an in-house agency. My answer to that
would be that the facts are not conclusive. While it may seem that SMART has control over
SNMI, the facts are insufficient to show that SNMI operates solely or mainly for SMART.
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 be-
fore the intended date thereof