Finding that there is no substantial evidence of the imputed immoral acts, it follows that the alleged

1 violation of Code of Ethics governing school teachers would have no basis. Private respondent utterly
failed to show that petitioner took advantage of her position to court her student. The deviation of the
Landmark Case: CHUA – QUA vs. CLAVE G.R. No. L- circumstances of their marriage from the usual societal pattern cannot be considered as a defiance of
contemporary social mores.
49549 August 30, 1990 (Case Digest)
A truly remarkable case wherein the Supreme Court ruled in favor of “love”. The setting of the case was
in when marriage between minors was still legal, way before the Family Code. In this case, a 30 year
old teacher had married her student which prompted the school to terminate her. And against all odds
the Supreme Court Ruled in favor of her, hence, creating this Landmark Case. “truism that the heart
has reasons of its own which reason does not know.”

CHUA – QUA vs. CLAVE G.R. No. L-49549 August 30, 1990
Digested Case

A Landmark Case

FACTS:

This would have been just another illegal dismissal case were it not for the controversial and unique
situation that the marriage of herein petitioner, then a classroom teacher, to her student who was fourteen
(14) years her junior, was considered by the school authorities as sufficient basis for terminating her
services.

The case was about an affair and marriage of 30 years old teacher Evelyn Chua in Tay Tung High School
in Bacolod City to her 16 years old student. The petitioner teacher was suspended without pay and was
terminated of his employment “for Abusive and Unethical Conduct Unbecoming of a Dignified School
Teacher” which was filed by a public respondent as a clearance for termination.

ISSUE:

Was her dismissal valid?

Whether or not there is substantial evidence to prove that the antecedent facts which culminated in the
marriage between petitioner and her student constitute immorality and or grave misconduct?

RULING:

The Supreme Court declared the dismissal illegal saying:

“Private respondent [the school] utterly failed to show that petitioner [30-year old lady teacher] took
advantage of her position to court her student [16-year old]. If the two eventually fell in love, despite
the disparity in their ages and academic levels, this only lends substance to the truism that the
heart has reasons of its own which reason does not know. But, definitely, yielding to this gentle and
universal emotion is not to be so casually equated with immorality. The deviation of the circumstances
of their marriage from the usual societal pattern cannot be considered as a defiance of contemporary
social mores.”
2 Jose S. Santos v. NLRC et al. case brief summary In addition, Section 94, Manual of Regulations for Private Schools, paragraph E, lists
“disgraceful or immoral conduct” as ground for termination. Furthermore, the Court ruled
that Art. 68 of the Family Code enjoins the husband and wife to live together, observe
Jose S. Santos v. NLRC et al. case brief summary mutual love, respect and fidelity, and render mutual help and support.” As a teacher, one
stands in loco parentis to his students and must therefore act with a high standard of
G.R. No. 115795, March 6, 1998 integrity and honesty. It is settled therefore that a teacher who engages in extra marital
affairs, when both are married, amounts to gross immorality justifying termination from
employment.
FACTS: Petitioner is a married man and is employed as a teacher by private respondent
Hagonoy Institute Inc. from June 1980 until his dismissal on June 1, 1991. Petitioner and Petition is dismissed, NLRC decision is affirmed with modification, deleting financial
Mrs. Arlene T. Martin, also a teacher employed at Hagonoy Institute, fell in love and had an assistance.
affair. Private respondent, upon hearing of circulating rumors among faculty and school
officials, of the illicit relationship of petitioner and Mrs. Martin, advised the latter to take a
leave of absence, Mrs. Martin ignored such notice and was henceforth prevented from
entering the campus of private respondent, effectively dismissing her from work. Private
respondent set-up a committee to investigate the veracity of the rumors, after two weeks of
investigation, the illicit relationship of petitioner and Mrs. Martin was confirmed. Petitioner
was charged administratively for immorality and asked to present his side, on May 1991,
petitioner was dismissed effective June 1, 1991. Petitioner filed a complaint for illegal
dismissal with the NLRC Regional Arbitration Branch No. III, San Fernando, Pampanga and
petitioner’s complaint was dismissed but awarded financial assistance of PHP 13,750. On
appeal, the NLRC affirmed the decision of the labor arbiter.

ISSUE: Can the illicit relationship between the petitioner and Mrs. Martin be considered
immoral as to constitute a cause for termination under Art. 282 of the Labor Code?

RULING: Court reiterates that to constitute a valid dismissal, two requisites must concur: (a)
it must be for any offense expressed in Art. 282 of the Labor Code, (b) employee must be
accorded due process, that is, the opportunity to be heard and to defend oneself. Art. 282 of
the Labor Code lists the following just causes to terminate an employee: (1) serious
misconduct or willful disobedience by employee of lawful orders of the employer or his
representative in connection with his work, (2) gross and habitual neglect by employee of
his duties; (3) fraud or willful breach, (4) commission of crime or offense of the person of his
employer or his family or his authorized representative, (5) other courses analogous to the
foregoing.
3 ROMEO LAGATIC, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, CITYLAND DEVELOPMENT CORPORATION,
STEPHEN ROXAS, JESUS GO, GRACE LIUSON, and ANDREW LIUSON, respondents
G.R. No. 121004
January 28, 1998
Facts:
Petitioner Romeo Lagatic was employed in May 1986 by Cityland, first as a probationary
sales agent, and later on as a marketing specialist. He was tasked with soliciting sales for the
company, with the corresponding duties of accepting call-ins, referrals, and making client
calls and cold calls. Cold calls refer to the practice of prospecting for clients through the
telephone directory. Cityland, believing that the same is an effective and cost-efficient
method of finding clients, requires all its marketing specialists to make cold calls. The
number of cold calls depends on the sales generated by each: more sales mean less cold
calls. Likewise, in order to assess cold calls made by the sales staff, as well as to determine
the results thereof, Cityland requires the submission of daily progress reports on the same.
On October 22, 1991, Cityland issued a written reprimand to petitioner for his failure to
submit cold call reports for September 10, October 1 and 10, 1991. This notwithstanding,
petitioner again failed to submit cold call reports for September 2, 5, 8, 10, 11, 12, 15, 17,
18, 19, 20, 22, and 28, as well as for October 6, 8, 9, 10, 12, 13 and 14, 1992. Petitioner was
required to explain his inaction, with a warning that further non-compliance would result in
his termination from the company. In a reply dated October 18, 1992, petitioner claimed
that the same was an honest omission brought about by his concentration on other aspects
of his job. Cityland found said excuse inadequate and, on November 9, 1992, suspended him
for three days, with a similar warning.
Notwithstanding the aforesaid suspension and warning, petitioner again failed to submit
cold call reports for February 5, 6, 8, 10 and 12, 1993. He was verbally reminded to submit
the same and was even given up to February 17, 1993 to do so. Instead of complying with
said directive, petitioner, on February 16, 1993, wrote a note, "TO HELL WITH COLD CALLS!
WHO CARES?" and exhibited the same to his co-employees. To worsen matters, he left the
same lying on his desk where everyone could see it.
On February 23, 1993, petitioner received a memorandum requiring him to explain why
Cityland should not make good its previous warning for his failure to submit cold call
reports, as well as for issuing the written statement aforementioned. On February 24, 1993,
he sent a letter-reply alleging that his failure to submit cold call reports should trot be
deemed as gross insubordination. He denied any knowledge of the damaging statement,
"TO HELL WITH COLD CALLS!"
Finding petitioner guilty of gross insubordination, Cityland served a notice of dismissal upon
him on February 26, 1993. Aggrieved by such dismissal, petitioner filed a complaint against
Cityland for illegal dismissal, illegal deduction, underpayment, overtime and rest day pay,
damages and attorney's fees. The labor arbiter dismissed the petition for lack of merit. On
appeal, the same was affirmed by the NLRC; hence the present recourse.
Issue:
W/N NLRC gravely abused its discretion in not finding that petitioner was illegally dismissed?
Held:
The petition lacks merit.
To constitute a valid dismissal from employment, two requisites must be met, namely: (1)
the employee must be afforded due process, and (2) the dismissal must be for a valid cause.

Employers may, thus, make reasonable rules and regulations for the government of their
employees, and when employees, with knowledge of an established rule, enter the service,
the rule becomes a part of the contract of employment. It is also generally recognized that
company policies and regulations, unless shown to be grossly oppressive or contrary to law,
are generally valid and binding on the parties and must be complied with. Corollarily, an
employee may be validly dismissed for violation of a reasonable company rule or regulation
adopted for the conduct of the company business. An employer cannot rationally be
expected to retain the employment of a person whose . . . lack of regard for his employer's
rules . . . has so plainly and completely been bared." 5 Petitioner's continued infraction of
company policy requiring cold call reports, as evidenced by the 28 instances of non-
submission of aforesaid reports, justifies his dismissal.

With the finding that petitioner's dismissal was for a just and valid cause, his claims for
moral and exemplary damages, as well as attorney's fees, must fail.

Resolution is AFFIRMED and this petition is hereby DISMISSED for lack of merit. Costs against
petitioner.

SO ORDERED.
 4 [G.R. No. 122178. February 25, 1999]
DANILO DIMABAYAO, petitioner, vs. NATIONAL LABOR RELATIONS
COMMISSION, ISLAND BISCUIT INC. and CHENG SUY EH,
respondents.
BELLOSILLO, J.:
FACTS:
DANILO DIMABAYAO seeks to set aside through this petition for certiorari
under Rule 65 of the 1997 Rules of Civil Procedure the 15 March 1995 Decision
and 23 June 1995 Resolution of the National Labor Relations Commission
(NLRC) which modified the Decision of the Labor Arbiter finding private
respondents guilty of having illegally dismissed petitioner from their employ.
Private respondent Island Biscuit, Inc., is engaged in the manufacture of
biscuits with private respondent Cheng Suy Eh as its General Manager. On 5
April 1983 it employed petitioner with the specific task of operating the roller,
cutting biscuits, sorting out rejects, mashing flour and feeding the flour mass
into its thinning machine.
On 30 July 1992, while petitioner was assigned to sort out rejects, with prior
permission first obtained from his checker, he went to the comfort room to
answer the call of nature and relieve himself, afterwhich he returned to his
work place. But private respondent Cheng Suy Eh was unhappy seeing
petitioner away from his work station and immediately demanded from him a
written explanation allegedly for abandoning his work. As a matter of policy,
respondent company discourages its employees from going to the comfort
room during working hours for sanitary or hygienic purposes as the company
is engaged in the food business.[1]
The following day, 31 July 1992, Marcela Lok, respondent company's Personnel
Manager, handed petitioner a letter asking him to explain in writing why he
left his work station on 17 and 30 July 1992. Petitioner verbally explained that
he never left his station on 17 July while on 30 July he only went to the comfort
room for a short while to answer the call of nature.[2] Believing that this denial
was enough he did not anymore submit any written explanation. But, for his
inability to submit a written explanation, petitioner was suspended for fifteen
(15) days which he contested before the Arbitration Branch of the NLRC.
On 20 October 1992 petitioner requested a fellow worker to replace him in his
work station so he could go to the comfort room to relieve himself. Again
private respondent Cheng Suy Eh noticed petitioner's brief absence and so,
upon his return, his manager berated him again and required him to submit
once more a written explanation for allegedly abandoning his work. Petitioner
complied.
Finding petitioner's explanation not satisfactory, respondent company through
its Personnel Officer Marcela Lok served petitioner a notice of termination.
Petitioner thereafter amended his complaint before the NLRC to include illegal
dismissal among his causes of action in view of his termination from the
service.
On 21 September 1994 the Labor Arbiter declared the suspension of petitioner
valid and legal not because he left his production area to relieve himself but for
his utter disregard of the directive of the manager to submit his written
explanation. His dismissal however was found illegal, but because of the
strained relationship between the parties, the Labor Arbiter further held that
reinstatement was no longer feasible and thereafter awarded petitioner a
limited back wages for six (6) months without reinstatement. Thus private
respondents were in addition required to pay petitioner service incentive leave
pay of P615.00, proportionate thirteenth month pay of P2,132.00, separation
pay of P14,391.00, and 10% attorney's fees of P3,632.60.
ISSUE:

Whether or not the acts of Dimabayao constitute willful neglect of duties.
RULING:
No. While it may be true that complainant has been leaving his work area
without permission, this Arbitration Board finds that complainant's habit of
going to the toilet in the morning during production is merely a call of nature
and by force of habit he had to relieve himself. Whether or not the complainant
relieved himself is not the issue. The call of nature is a reasonable reason for
him to leave his work area. Although complainant is not entirely without fault
since he has been leaving his workplace without permission from his
supervisor and his disrespect towards his superiors as borne out by the reports
of his supervisor and guards, the infraction committed by the complainant is
not so grave that would warrant the ultimate penalty of dismissal . . .
The Labor Arbiter, in effect, opined that a grave injustice would be committed
against the employee if the penalty imposed was grossly disproportionate to
the wrong he committed.[12] At most, a 7-day suspension without pay - for not
asking permission from his supervisor before answering a call of nature, if that
be considered an infraction at all! - should have been sufficient penalty for
petitioner.
further justify his dismissal. To refer to those alleged earlier violations as
further grounds for dismissal is undoubtedly prejudicial to petitioner.
Significantly, it would also be doubly prejudicial to him to penalize him for
those committed on 17 and 30 July 1992 as he was already suspended for fifteen
(15) days for those infractions. This, obviously, denied petitioner procedural
due process and deprived him of his right to be heard, to refute and present
evidence to controvert such accusations prior to his actual dismissal from
employment.
As a consequence, petitioner is entitled to reinstatement.[13] The postulate
advanced by the Labor Arbiter that there existed "strained relationship"
between the parties, thus barring reinstatement of petitioner, does not hold
water. Strained relationship may be invoked only against employees whose
positions demand trust and confidence, or whose differences with their
employer are of such nature or degree as to preclude reinstatement. In the
instant case, however, the relationship between petitioner, an ordinary
employee, and management was clearly on an impersonal level. Petitioner did
not occupy such a sensitive position as would require complete trust and
confidence, and where personal ill will would foreclose his reinstatement.[14]
But, interestingly, petitioner himself was praying for his reinstatement.

The NLRC also endeavored to justify its decision by taking into account
offenses allegedly committed by petitioner way back in 1990. These offenses
as enumerated in the NLRC decision were infractions imputed to petitioner
prior to the 17 July, 30 July and 20 October 1992 incidents. As such, they should
have been outrightly ignored by the NLRC in determining and upholding the
validity of petitioner's dismissal since, as may be gleaned from the termination
letter, petitioner's dismissal was based merely on the 17 July, 30 July and 20
October 1992 alleged incidents, without reference to any infraction committed
before then. This only shows that the offenses attributed to petitioner before
17 July 1992 were mere afterthoughts conceived in the course of the trial to
 5 [G.R. No. 124617. April 28, 2000]
PHILIPPINE AEOLUS AUTOMOTIVE UNITED CORPORATION and/or
FRANCIS CHUA, petitioners, vs. NATIONAL LABOR RELATIONS
COMMISSION and ROSALINDA C. CORTEZ, respondents.
BELLOSILLO, J.:
FACTS:
Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a
corporation duly organized and existing under Philippine laws, petitioner
Francis Chua is its President while private respondent Rosalinda C. Cortez was
a company nurse[1] of petitioner corporation until her termination on 7
November 1994. Jlexj
On 5 October 1994 a memorandum was issued by Ms. Myrna Palomares,
Personnel Manager of petitioner corporation, addressed to private respondent
Rosalinda C. Cortez requiring her to explain within forty-eight (48) hours why
no disciplinary action should be taken against her (a) for throwing a stapler at
Plant Manager William Chua, her superior, and uttering invectives against him
on 2 August 1994; (b) for losing the amount of P1,488.00 entrusted to her by
Plant Manager Chua to be given to Mr. Fang of the CLMC Department on 23
August 1994; and, (c) for asking a co-employee to punch-in her time card thus
making it appear that she was in the office in the morning of 6 September 1994
when in fact she was not. The memorandum however was refused by private
respondent although it was read to her and discussed with her by a co-
employee. She did not also submit the required explanation, so that while her
case was pending investigation the company placed her under preventive
suspension for thirty (30) days effective 9 October 1994 to 7 November 1994.
Lexjuris
On 20 October 1994, while Cortez was still under preventive suspension,
another memorandum was issued by petitioner corporation giving her
seventy-two (72) hours to explain why no disciplinary action should be taken
against her for allegedly failing to process the ATM applications of her nine (9)
co-employees with the Allied Banking Corporation. On 21 October 1994 private
respondent also refused to receive the second memorandum although it was
read to her by a co-employee. A copy of the memorandum was also sent by the
Personnel Manager to private respondent at her last known address by
registered mail. Jurismis
Meanwhile, private respondent submitted a written explanation with respect
to the loss of the P1,488.00 and the punching-in of her time card by a co-
employee.
On 3 November 1994 a third memorandum was issued to private respondent,
this time informing her of her termination from the service effective 7
November 1994 on grounds of gross and habitual neglect of duties, serious
misconduct and fraud or willful breach of trust.
ISSUE:
Whether or not Rosalinda Cortez was sexually harassed?
RULING:
We are not persuaded. The gravamen of the offense in sexual harassment is not
the violation of the employee's sexuality but the abuse of power by the
employer. Any employee, male or female, may rightfully cry "foul" provided
the claim is well substantiated. Strictly speaking, there is no time period within
which he or she is expected to complain through the proper channels. The time
to do so may vary depending upon the needs, circumstances, and more
importantly, the emotional threshold of the employee. Esmsoâ
Private respondent admittedly allowed four (4) years to pass before finally
coming out with her employer's sexual impositions. Not many women,
especially in this country, are made of the stuff that can endure the agony and
trauma of a public, even corporate, scandal. If petitioner corporation had not
issued the third memorandum that terminated the services of private
respondent, we could only speculate how much longer she would keep her
silence. Moreover, few persons are privileged indeed to transfer from one
employer to another. The dearth of quality employment has become a daily
"monster" roaming the streets that one may not be expected to give up one's
employment easily but to hang on to it, so to speak, by all tolerable means.
Perhaps, to private respondent's mind, for as long as she could outwit her
employer's ploys she would continue on her job and consider them as mere
occupational hazards. This uneasiness in her place of work thrived in an
atmosphere of tolerance for four (4) years, and one could only imagine the
prevailing anxiety and resentment, if not bitterness, that beset her all that time.
But William Chua faced reality soon enough. Since he had no place in private
respondent's heart, so must she have no place in his office. So, he provoked her,
harassed her, and finally dislodged her; and for finally venting her pent-up
anger for years, he "found" the perfect reason to terminate her. Mseä sm

In determining entitlement to moral and exemplary damages, we restate the

bases therefor. In moral damages, it suffices to prove that the claimant has
suffered anxiety, sleepless nights, besmirched reputation and social
humiliation by reason of the act complained of.[22] Exemplary damages, on the
other hand, are granted in addition to, inter alia, moral damages "by way of
example or correction for the public good"[23] if the employer "acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner."
6 Flight Attendants and Stewards Association of the Philippines (FASAP) v.
PAL G.R. No. 178083, July 22, 2008
Facts: Petitioner FASAP is the duly certified collective bargaining
representative of PAL flight attendants and stewards, or collectively known as
PAL cabin crew personnel. Respondent PAL is a domestic corporation
organized and existing under the laws of the Republic of the Philippines,
operating as a common carrier transporting passengers and cargo through
aircraft. On June 15, 1998, PAL retrenched 5,000 of its employees, including
more than 1,400 of its cabin crew personnel, to take effect on July 15, 1998. PAL
adopted the retrenchment scheme allegedly to cut costs and mitigate huge
financial losses as a result of a downturn in the airline industry brought about
by the Asian financial crisis. During said period, PAL claims to have incurred
P90 billion in liabilities, while its assets stood at P85 billion. In implementing
the retrenchment scheme, PAL adopted its so-called “Plan 14” whereby PAL’s
fleet of aircraft would be reduced from 54 to 14, thus requiring the services of
only 654 cabin crew personnel. PAL admits that the retrenchment is wholly
premised upon such reduction in fleet, and to “the strike staged by PAL pilots
since this action also translated into a reduction of flights.” PAL claims that the
scheme resulted in “savings x x x amounting to approximately P24 million per
month – savings that would greatly alleviate PAL’s financial crisis.” Prior to
the full implementation of the assailed retrenchment program, FASAP and
PAL conducted a series of consultations and meetings and explored all
possibilities of cushioning the impact of the impending reduction in cabin crew
personnel. However, the parties failed to agree on how the scheme would be
implemented. Thus PAL unilaterally resolved to utilize the criteria set forth in
Section 112 of the PAL-FASAP Collective Bargaining Agreement (CBA) in
retrenching cabin crew personnel: that is, that retrenchment shall be based on
the individual employee’s efficiency rating and seniority. While consultations
between FASAP and PAL were ongoing, the latter began implementing its
retrenchment program by initially terminating the services of 140 probationary
cabin attendants only to rehire them in April 1998. Moreover, their
employment was made permanent and regular.
Issue: Was the termination valid due to retrenchment?
Ruling: The burden clearly falls upon the employer to prove economic or
business losses with sufficient supporting evidence. Its failure to prove these
reverses or losses necessarily means that the employee’s dismissal was not
justified. Any claim of actual or potential business losses must satisfy certain
established standards, all of which must concur, before any reduction of
personnel becomes legal. These are: (1) That retrenchment is reasonably
necessary and likely to prevent business losses which, if already incurred, are
not merely de minimis, but substantial, serious, actual and real, or if only
expected, are reasonably imminent as perceived objectively and in good faith
by the employer; (2) That the employer served written notice both to the
employees and to the Department of Labor and Employment at least one
month prior to the intended date of retrenchment; (3) That the employer pays
the retrenched employees separation pay equivalent to one (1) month pay or at
least one-half (½) month pay for every year of service, whichever is higher; (4)
That the employer exercises its prerogative to retrench employees in good faith
for the advancement of its interest and not to defeat or circumvent the
employees’ right to security of tenure; and, (5) That the employer used fair and
reasonable criteria in ascertaining who would be dismissed and who would be
retained among the employees, such as status, efficiency, seniority, physical
fitness, age, and financial hardship for certain workers. In view of the facts and
the issues raised, the resolution of the instant petition hinges on a
determination of the existence of the first, fourth and the fifth elements set forth
above, as well as compliance therewith by PAL, taking to mind that the burden
of proof in retrenchment cases lies with the employer in showing valid cause
for dismissal; that legitimate business reasons exist to justify retrenchment.
Meaning of “retrenchment to prevent losses”
 Yrasuegui vs. Phil Airlines, G.R. No. 168081, Oct. 17, 2008
Facts:
Armando G. Yrasuegui was a former international flight steward of Philippine
Airlines, Inc. (PAL). He stands five feet and eight inches (5‘8‖) with a large body
frame. The proper weight for a man of his height and body structure is from
147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the
Cabin and Crew Administration Manual of PAL. His weight problem dates
back to 1984 when PAL advised him to go on an extended vacation leave from
December 29, 1984 to March 4, 1985 to address his weight concerns. For failure
to meet the weight standards another leave without pay from March 5, 1985 to
November 1985 was imposed. He met the required weight and was allowed to
work but his weight problem recurred, thus another leave without pay from
October 17, 1988 to February 1989. From 1989 to 1992 his weight fluctuated
from 209lb, 215lb, 217lb, 212lb, and 205. During that period he was requested
to lose weight and to report for weight checks which he constantly failed to do.
In the meantime his status was ―off-duty.‖ Finally in 1993, petitioner was
formally informed by PAL that due to his inability to attain his ideal weight,
―and considering the utmost leniency‖ extended to him ―which spanned a
period covering a total of almost five (5) years,‖ his services were considered
terminated ―effective immediately.‖ He then filed a complaint for illegal
dismissal against PAL. The Labor Arbiter ruled that he was illegally dismissed
and entitles to reinstatement, backwages and attorney‘s fees. The NLRC
affirmed the LA. The CA reversed the NLRC.
Issue:
Whether or not petitioner was illegally dismissed.
Ruling:
The obesity of petitioner is a ground for dismissal under Article 282(e) of the
Labor Code. The weight standards of PAL constitute a continuing qualification
of an employee in order to keep the job. Tersely put, an employee may be
dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal would fall under Article
282(e) of the Labor Code. As explained by the CA:
x x x [T]he standards violated in this case were not mere ―orders‖ of the
employer; they were the ―prescribed weights‖ that a cabin crew must maintain
in order to qualify for and keep his or her position in the company. In other
words, they were standards that establish continuing qualifications for an
employee‘s position. … The failure to meet the employer‘s qualifying
standards is in fact a ground that does not squarely fall under grounds (a) to
(d) and is therefore one that falls under Article 282(e) – the ―other causes
analogous to the foregoing.‖
By its nature, these ―qualifying standards‖ are norms that apply prior to and
after an employee is hired. x x x
We hold that the obesity of petitioner, when placed in the context of his work
as flight attendant, becomes an analogous cause under Article 282(e) of the
Labor Code that justifies his dismissal from the service. His obesity may not be
unintended, but is nonetheless voluntary.
8 VALDEZ VS NLRC
Petitioner Reynaldo Valdez was hired on commission basis by private respondent NELBUSCO, Inc. as a
bus driver.
 hired sometime Dec 1986
 average earning of P6K a month
Feb 28, 1993 - When the air-conditioning unit of the bus which petitioner was driving suffered a
mechanical breakdown, respondent company told him to wait until the unit is repaired. No other bus
was assigned to petitioner to keep him gainfully employed.
Petitioner continued reporting to employer’s office but each time he found out that the aircon unit
still wasn’t repaired. Several months have elapsed but he was never called by respondent company to
report for work. Petitioner found out that the bus formerly driven by him was plying an assigned
route with a newly-hired driver.
June 15, 1993 - Petitioner filed a complaint against private respondent for illegal dismissal, money
claims and other benefits.
Private respondent admitted that it told petitioner to wait till the air-conditioning unit of the bus was
repaired BUT he alleged that after the bus broke down, petitioner stopped reporting for work and
then voluntarily informed management later that he was voluntarily resigning from employment.
The Labor Arbiter rendered a decision declaring the petitioner illegally dismissed and ordered
respondent to pay petitioner full backwages, separation pay in lieu of reinstatement and refund of
cash bond and tire deposit.
On appeal, the NLRC set aside the order and entered a new one directing respondent to reinstate the
petitioner but without backwages, or payment of separation pay in lieu of reinstatement. Petitioner
filed a motion for reconsideration but was denied.
Hence, the present petition raising the issues of (1) whether or not petitioner was illegally dismissed,
and (2) whether or not petitioner is entitled to back wages and separation pay.
The Supreme Court ruled that public respondent committed grave abuse of discretion in holding
that petitioner was not illegally dismissed and in deleting the award of backwages.
Under Article 286 of the Labor Code, the bona fide suspension of the operation of a business or
undertaking for a period not exceeding six months shall not terminate employment. Consequently,
when the bona fide suspension of the operation of a business or undertaking exceeds six months,
then the employment of the employee shall be deemed terminated. By the same token and applying
said rule by analogy, if the employee was forced to remain without work or assignment for a period
exceeding six months, then he is in effect constructively dismissed.
The so-called "floating status'' of an employee should last only for a legally prescribed period of time.
When that "floating status'' of an employee lasts for more than six months, he may be considered to
have been illegally dismissed from the service. Thus, he is entitled to the corresponding benefits for
his separation, and this would apply to the two types of work suspension heretofore noted, that is,
either of the entire business or of a specific component thereof.
APPLICATION TO THE CASE:
While it’s true that since PR operated a fleet of buses, its entire business was not suspended – but the
principle underlying that provision which puts 6 months as a defining cut-off period can be used as a
consonant basis in determining the reasonableness of the length of time when P could be deprived of
work for causes imputable to PR.
The Court held that petitioner was in effect constructively dismissed when he was deprived of work
due to causes imputable to private respondent. The reason for the stoppage of operation of the bus
assigned to petitioner was the breakdown of the air-conditioning unit, which is a valid reason for the
suspension of its operation. However, such suspension regarding that particular bus should likewise
last for a reasonable period of time. The Court observed that private respondent could have easily
remedied the defect.
The period of six months was more than enough for it to cause the repair thereof. Beyond that
period, the stoppage of its operation was already legally unreasonable and economically prejudicial
to herein petitioner who was not given a substitute vehicle to drive. Since petitioner was considered
to have illegally dismissed from the service, he is entitled to the corresponding benefits of his
separation and to his full backwages and other monetary benefits under Article 279 of the Labor
Code.

Petition granted.
9 G.R. No. 125887 March 11, 1998 10. Johnny Mosquero 30,000.00 1,872.00
11. Nonalito Nicolas 47,658.00 1,833.00
SOMERVILLE STAINLESS STEEL CORPORATION, petitioner, 12. Mario Clet 44,658.00 1,846.00
vs. 13. Jeanne Esteves 37,620.00 2,090.00
NATIONAL LABOR RELATIONS COMMISSION AND JERRY MACANDOG, 14. Rosalinda Ramos 74,240.00 2,320.00
REYNALDO MIRANDA, ROBERTO TAGALA, ET AL., respondents. 15. Marilou Libres 14,960.00 1,870.00
16. Ruby dela Cruz 10,770.00 1,795.00
PANGANIBAN, J.: 17. Amando Baldevia 34,040.00 2,127.50
18. Rolando Eusebio 33,720.00 2,107.50
19. Rectolino Esteves 21,060.00 1,755.00
Not every loss incurred or expected to be incurred by an employer can justify
20. Reynato Nicerio 26,180.00 1,870.00
retrenchment. The employer must prove, among others, that the losses are substantial
21. Roberto Goce 45,100.00 2,050.00
and that the retrenchment is reasonably necessary to avert such losses.
22. Renato Yape 17,160.00 1,716.00
23. Almer Arboleda 17,160.00 1,716.00
Statement of the Case
WHEREFORE, judgment is hereby rendered ordering the
This principle is applied by this Court in resolving this petition for certiorari under Rule 65 respondent company and its owners to pay each complainant the
of the Rules of Court assailing the Resolutions of the National Labor Relations sum of Thirty Thousand Pesos (P30,000.00) as backwages and
Commission 1 (NLRC) promulgated on May 9, 1996. 2 and on July 18, 1996 3 in NLRC damages. In addition, the respondent company and its owners are
NCR CA No. 008064-94. 4 Public respondent's assailed Decision affirmed Labor Arbiter also ordered to pay complainants separation pay and 13th month
Cornelio L. Linsangan's decision 5 dated November 14, 1994, but deleted the award in pay as indicated above.
favor of Amando Baldevia, Rolando Eusebia, Ma Rosita. Paradero-Arevara and
Marilou Libres, who withdrew their complaints and waived all claims against the
SO ORDERED.7
petitioner, Somerville Stainless Steel Corporation (SSSC). 6 The labor arbiter, in his
decision, disposed as follows:
The public respondent, in its assailed July 17, 1996 Resolution denied petitioner's
motion for reconsideration for lack of merit.
The separation pay and proportionate 13th-month due the
complainants as per computation of the Research and Information
Office, this Arbitration Branch, which computation is hereby The Facts
approved and adopted as Annex "A" of this Decision, are as
follows: The facts, as borne by the records, are narrated by the labor arbiter as follows:

Name of Complainants Separation Proportionate Somerville Stainless Steel Corporation, the company for brevity, is
13th month pay engaged in the business of manufacturing stainless steel kitchen
equipments [sic]. On different dates, the complainants were
1. Jerry Macandog P58,870.00 P2,102.50 employed by the respondent company.
2. Reynaldo Miranda 17,030.00 1,703.00
3. Roberto Tagala 13,520.00 1,690.00 The present controversy was triggered by the inability of the
4. Johnny Mirano 44,928.00 1,872.00 respondent company to pay its workers certain benefits stipulated
5. Antonio Decasiro 30,000.00 1,534.00 in their collective bargaining agreement starting 16 March 1993. The
6. Domingo Sumigaya 17,030.00 1,703.00 CBA benefits that were withheld by management are rice subsidy,
7. Ma. Rosita Paradero 23,400.00 1,950.00 incentive leave pay, hospitalization, t-shirts and safety shoes and
8. Reynaldo Nevado 10,200.00 1,700.00 incentive bonus.
9. Albert Parafina 10,770.00 1,795.00
Complainants allege that on 09 April 1993 their union, represented
by their president and vice-president, communicated with
respondents for a renegotiation of their CBA but the same was
rejected by the latter. They aver that on 19 April 1993 their union
filed a notice of strike with the Department of Labor and
Employment for unfair labor practice. Complainants claim that on
the pay day of 31 May 1994 Jerry Macandog, Antonio de Castro, Jr.,
Ma. Rosita Paradero, Reynaldo Nevado, Roberto Tagala, Johnny
Miranda, Domingo Sumigaya, Nonalito Nicolas, Mario Clet, Johnny
Mosquera, Renato Yape, among others, were surprised to receive a
notice of retrenchment which was inserted in their pay envelopes.
Complainants contend that most of the retrenched employees were
union officers. They explain that only the union secretary was not
terminated. Complainants stress that their dismissal was without
just cause and in utter disregard of their right to due process. They
assert that the true intention of management was to bust their union
which was very insistent on the renegotiation and renewal of their
CBA with the respondent company. Complainants explain further
that while the notice of their retrenchment specifically states that its
effectivity is 30 June 1993, the retrenched employees were no
longer allowed to enter the company premises starting 16 June
1993, thus forcing the retrenched employees to stage a picket in
front of the company premises.
Stressing further their charges of unfair labor practice,
complainants state that the respondents, led by Messrs. Prigg and
Dante Reyes, caused the removal of company equipments [sic], files
and other movable properties and transferred them to another site.
Complainants likewise claim that management never discussed with
their union their retrenchment and that there was no retrenchment
program presented to them. Moreover, they allege that they were
never advised of the basis or criteria as to who were to be
retrenched.
Respondents reiterated their contention in their motion to dismiss
in that individual respondents Leigh Anthony Prigg and Dante
Reyes are not parties in interest and therefore the complaint should
be dismissed insofar as they are concerned.
The foregoing contention is partly correct. There is no clear
showing that respondent Prigg is the president of respondent
company. It does not also appear that he had a hand in the
termination or retrenchment of complainants. With regard to
respondent Dante Reyes, it is admitted that he was designated
officer-in-charge of the respondent company. Among the powers
given him is the power to administer the affairs of the respondent
company. Contrary to the pretensions of respondents, the power of
respondent Dante Reyes is not limited but very broad. In any case,
the complaint against him can not likewise be given to do [sic] with
the retrenchment of complainants. It was former general of the
company William Doland, Jr. who retrenched the complainants. 8
Adopting the labor arbiter's factual findings, the NLRC adds:
Contravening the allegations of the complainants, the respondent
company avers that it was experiencing serious business losses
due to the effects of the economic and power crisis which the nation
was then experiencing. The company alleges that Mr. William
Donald Somerville met with the company's employees and informed
them of the difficulties it was undergoing and that the withdrawal of
employee benefits was to be only temporary until the company
recovers from its financial debacle. The respondent explains that
the union sought to be more adversarial rather than conciliatory
which only added to the further deterioration of the company's
financial condition. This, the respondent claims, served as the
impetus for its undertaking the disputed retrenchment program. The
respondent recounts that the union declared a strike and conducted
a picket at midnight of 15 June 1993.9
As earlier stated, the NLRC substantially affirmed the labor arbiter's decision.
Undaunted, petitioner lodged this petition with this Court. 10
The Issues
The petitioner presents the following issues:
A. Whether the retrenchment undertaken is valid.
B. Whether the retrenchment is attended with good faith.
C. Whether the finding of facts is contrary to the evidence in record.
D. Whether private respondent Roberto Goce should be included in
the award judgment. 11
In the main, these issues boil down to this question: Was petitioner's
retrenchment of private respondents justified?
The Court's Ruling
The petition is not meritorious.
Main Issue:
Retrenchment Unjustified
Retrenchment is one of the "authorized" causes for the dismissal of employees.
Resorted to by an employer to avoid or minimize business losses, 12 it is
recognized under Art. 283 of the Labor Code:
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 worker 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 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 year of
service, whichever is higher. A fraction of at least six (6) months
shall be considered as one (1) whole year.
To justify retrenchment, the "loss" referred to in Art. 283 cannot be just any kind or
amount of loss; otherwise, a company could easily feign excuses to suit its whims
and prejudices or to rid itself of unwanted employees. To guard against this
possibility of abuse, the Court has laid down the following standard which a
company must meet to justify retrenchment:
. . . Firstly, the losses expected should be substantial and not
merely de minimis in extent. If the loss purportedly sought to be
forestalled by retrenchment is clearly shown to be insubstantial and
inconsequential in character, the bonafide nature of the
retrenchment would appear to be seriously in question. Secondly,
the substantial loss apprehended must be reasonably imminent, as
such imminence can be perceived objectively and in good faith by
the employer. There should, in other words, be a certain degree of
urgency for the retrenchment, which is after all a drastic recourse
with serious consequences for the livelihood of the employees
retired or otherwise laid off. Because of the consequential nature of
retrenchment, it must, thirdly, be reasonably necessary and likely to
effectively prevent the expected losses. The employer should have
taken other measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs other than labor costs. An employer
who, for instance, lays off substantial numbers of workers while
continuing to dispense fat executive bonuses and perquisites or so-
called "golden parachutes," can scarcely claim to be retrenching in
good faith avoid losses. To impart operational meaning to the
constitutional policy of providing "full protection" to labor, the
employer's prerogative to bring down labor costs by retrenching
must be exercised essentially as a measure of last resort, after less
drastic means — e.g., reduction of both management and rank-and-
file- bonuses and salaries, going reduced time, improving
manufacturing efficiencies, trimming of marketing and advertising
costs, etc. — have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already
realized, and the expected imminent losses sought to be forestalled,
must be proved by sufficient and convincing evidence. The reason
for requiring this quantum of proof is readily apparent: any less
exacting standard of proof would render too easy the abuse of this
ground for termination of services of employees. . . . 13
In a nutshell, the law recognizes a company's right to retrench employees when
"made necessary or compelled by economic factors that would otherwise
endanger its stability or existence." 14 Unarguably, retrenchment is only "a
measure of last resort when other less drastic means have been tried and found to
be inadequate." 15
Petitioner SSSC contends that the retrenchment it carried out, which resulted in
the private respondents' termination from employment, measures up to this
standard. Petitioner claims that it "did not only expect substantial losses but had
already and have [sic] actually suffered the same." 16 It points out that, as of
December 31, 1992, it has accumulated losses amounting to P392,996.36, which
constitutes 98.25 percent of the stockholder's equity of P400,000. 17 Hence,
petitioner bewails the public respondent's finding that, for the fiscal year 1992, its
loss of P106,641.67 was "not substantial to impair its operation," 18 and that "said
loss [was] not substantial" 19 compared to its income of P7,451,981.35 in the same
year. In the main, petitioner argues that the NLRC "acted capriciously and
whimsically in disregarding the evidence on record and rendering [the decision]
that the retrenchment [was] invalid." 20
The Court is not persuaded. Considering the severe consequences occasioned by
retrenchment on the livelihood of the employee(s) to be dismissed, and the
avowed policy of the State — under Sec. 3, Art. XIII of the Constitution, and Art. 3
of the Labor Code — to afford full protection to labor and to assure the employee's
right to enjoy security of tenure, the Court reiterates that "not every loss incurred
or expected to be incurred by a company will justify retrenchment. The losses
must be substantial and the retrenchment must be reasonably necessary to avert
such losses." 21 Settled is the rule that the employer bears the burden of proving
this allegation of the existence or imminence of substantial losses, which by its
nature is an affirmative defense. It is the duty of the employer to prove with clear
and satisfactory evidence that legitimate business reasons exist to justify
retrenchment. 22 Failure to do so "inevitably results in a finding that the dismissal
is unjustified." 23 And the determination of whether an employer has sufficiently
and successfully discharged this burden of proof
"is essentially a question of fact for the Labor Arbiter and the NLRC to determine."
24
In the case at bar, the Court notes that both the labor arbiter and the NLRC, which
possess administrative expertise in the specific matter of labor law, found the
retrenchment effected by the SSSC unnecessary, for petitioner has not incurred
any substantial loss(es) or exhausted all other less drastic economic measures to
avert business losses. 25 These concurring factual findings and conclusions are
entitled not only to respect but even finality on review before this Court, unless the
public respondent's decision is found tainted with grave abuse of discretion. 26
Thus, petitioner must prove that the NLRC "acted capriciously and whimsically in
total disregard of evidence material to or even decisive of the controversy, in order
that the extraordinary writ of certiorari will lie." 27
After a thorough review of the case, we find that the NLRC's assailed decision was
based on the extant evidence. It was not tainted with abuse of discretion; much
less, grave abuse of discretion. Clearly, petitioner failed to discharge its burden of
proving (1) substantial losses and (2) the reasonable necessity of retrenchment.
Insufficient Proof of
Substantial Losses
To prove its loss, petitioner presented only its financial statements for the fiscal
year that ended on December 31, 1992. 28 These financial statements show that the
petitioner's gross income was P7,451,981.35 and — deducting therefrom the cost
of goods sold, which was P4,843,787.87, and the operating expenses of
P2,714,835.15 — the net loss was P106,641.67. This net loss plus the deficit as of
January 1, 1992, which was P286,354.71, resulted in the total loss of P392,996.38
as of the end of 1992.
These, however, fall far short of the stringent requirement of the law that the
employer prove sufficiently and convincingly its allegation of substantial losses.
The failure of petitioner to show its income or loss for the immediately preceding
years or to prove that it expected no abatement of such losses in the coming years
bespeaks the weakness of its cause. The financial statement for 1992, by itself,
does not sufficiently prove petitioner's allegation that it "already suffered actual
serious losses," 29 because it does not show whether its losses increased or
decreased. Although petitioner posted a loss for 1992, it is also possible that such
loss was considerably less than those previously incurred, thereby indicating the
company's improving condition. 30
Hence, in AG & P, 31 the employer sufficiently proved its case when it presented
proof that its income continuously decreased from P205 million in 1984, P175
million in 1985, to P101 million in 1986 and, eventually, to a loss of P34 million in
1987 prior to the retrenchment it effected in 1988. Afterwards, it submitted to the
NLRC further evidence showing that it incurred a loss of P176 million in 1990. All
these proofs showed that its losses were substantial and urgent enough to justify
retrenchment. In North Davao Mining Corporation, 32 the employer presented proof
that it suffered net losses averaging three billion pesos (P3,000,000,000) a year for
five years prior to its closure. In the instant case, petitioner insists that its total
deficit or accumulated losses as of December 31, 1992 were exactly 98.25% of the
stockholder's equity for the same year. This percentage by itself does not
conclusively prove that the petitioner could have avoided substantial losses only
through retrenchment.
Indeed, in the analysis of financial statements, "(o)ne particular percentage or
relationship may not be too significant in itself"; that is, it may not suffice to point
out those unfavorable characteristics of the company that would require
immediate or even drastic action. 33 In view of petitioner's failure to prove that its
alleged losses were substantial, continuing and without any immediate prospect of
abating, the bona fide nature of the retrenchment appears to be seriously in
question. 34
No Reasonable Necessity
for Retrenchment
The retrenchment is likewise unjustified because petitioner failed to show its
reasonable necessity. Significantly, petitioner admits that it "could have continued
its operation despite the losses it suffered." 35 It stated, however, that the notice of
strike filed by private respondents indicated that they were unwilling to help save
the business. 36 It assumed that the planned strike would result in substantial
losses, necessitating retrenchment. For this reason alone, petitioner concluded
that it "cannot afford to continue operating and suffer more losses." Thus, it
decided to undertake "the disputed retrenchment measure." 37
We emphasize, however, that petitioner's mere speculation about the impact on its
income of the notice of strike — or even the strike itself — is neither a proof that it
actually sustained substantial losses nor an indication of the reasonable necessity
of retrenchment. In Guerrero, 38 the Court rejected the "company's contention that
it was not necessary to present proof of severity of losses it sustained since [the
dismissed employees] were aware of the strike and its adverse effects on the
company."
Neither do the alleged losses occasioned by the power crisis hounding the
country at the time show the reasonable necessity of retrenchment. On the
contrary, petitioner had already implemented a response to the energy crisis by
adjusting the company's work schedule to 11:00 a.m. to 7:00 p.m., to avoid the
scheduled power failure from 4:00 a.m. to 10:00 a.m. 39 It has not demonstrated the
inadequacy of this response. In any event, it failed to show the futility of resorting
to less drastic measures — for example, cost reduction, faster collection on
customer accounts, and reducing investment on raw materials — to avoid serious
financial and economic problems. As aptly found and stated by the labor arbiter:
In the instant case, it appears that the respondent company failed to
observe fair and reasonable standards in effecting the dismissal of
complainants. In fact, the respondents had no program of
retrenchment setting the standards to be observed in selecting
those to be retrenched.
It likewise appears that respondents failed to show that it first
instituted cost production measures in other areas of production. It
will be observed that based from [sic] the statement of loss for the
year 1992 submitted by respondents (Annex "2-C", supplemental
position paper), cost production measures could have easily been
instituted by management to avoid incurring losses. It will be noted
that for the year 1992 the company allegedly incurred a net loss of
P106,641.67. This loss could have been easily avoided by reducing
some of the operating expenses enumerated in the statement of
loss. For instance, the transportation and travelling expenses and
the meal allowances alone already total P204,770.16 (P106,973.60 +
P97,796.56) [. A] perusal of the statement of loss reveals that there
are other operating expenses that could admit little adjustments.
This Office is not impressed by the contention of respondents that
the retrenchment under consideration was done by them in good
faith for the evidence shows that it was effected after a notice of
strike was filed by the complainants in view of the respondents[,]
failure to pay them certain benefits in pursuance of their CBA. 40
Clearly, petitioner had no legal basis to dismiss the private respondents as it was
not able to prove the urgency and reasonable necessity of retrenchment. Indeed,
the inevitable conclusion is that private respondents were illegally dismissed. 41
Incidental Matters
Petitioner points to other cases, i.e., NLRC Case Nos. 00-09-05985-93, 00-06-04513-
94, and 00-09-06029-93, which involved the same factual backdrop as that of the
present case, and which were decided in favor of the employers. 42 The petitioner is
clutching at straws. The only material consideration in this appeal is whether the
NLRC committed grave abuse of discretion in rendering its assailed decision.
Based on the foregoing discussion, it is ineludible that, in this case, Public
Respondent NLRC's decision was not arbitrarily or despotically rendered, but was
based on the extant evidence. In so deciding, it did not commit grave abuse of
discretion, and its factual findings are perforce accorded deference and finality by
this Court. We reiterate that the NLRC's evaluation of the evidence, specially that
involving the factual issue of whether petitioner sufficiently proved the essential
requisites of retrenchment in the case before us, is beyond the scope of our
review under Rule 65 of the Rules of Court.
Finally, both parties concur that the name of Private Respondent Roberto Goce
does not appear on the list of employees and, thus, is not entitled to an award. 43
However, the solicitor general points out that, as in Goce's case, the names of
Private Respondents Renato Yape and Almer Arboleda were not included in the
computation of claims filed by counsel for the complainants, but that petitioner
admitted that the two were its employees and, as such, included in the said list of
its employees. The solicitor general further finds the following to be insufficient for
determining the employment of Goce with petitioner: Goce's complaint against the
petitioner, his claim to be the latter's messenger, his eventual inclusion in the
computation made by the Research and Information Office of the Arbitration
Branch and the grant to him of the "fourth highest award." Hence, the solicitor
general recommends that Goce's case be remanded to the labor arbiter for the
purpose of determining this question. 44 We agree. Justice demands that this
factual question be finally threshed out in a remand of the case to the labor arbiter
to finally give petitioner and Private Respondent Roberto Goce their due.
WHEREFORE, the petition is DISMISSED and the assailed Resolution is hereby
AFFIRMED, with the MODIFICATION that Roberto Goce's name be deleted from the
award and that his complaint be remanded to the labor arbiter. Costs against
petitioner.
SO ORDERED.
10 King of Kings Transport, Inc., v. Mamac G.R. No. 166208, June 29, 2007
Facts: Petitioner KKTI is a corporation engaged in public transportation and
managed by Claire Dela Fuente and Melissa Lim. Respondent Mamac was
hired as bus conductor of Don Mariano Transit Corporation (DMTC) on April
29, 1999. The KKTI employees later organized the Kaisahan ng mga Kawani sa
King of Kings (KKKK) which was registered with DOLE. Respondent was
elected KKKK president. Respondent was required to accomplish a
“Conductor’s Trip Report” and submit it to the company after each trip. As a
background, this report indicates the ticket opening and closing for the
particular day of duty. After submission, the company audits the reports. Once
an irregularity is discovered, the company issues an “Irregularity Report”
against the employee, indicating the nature and details of the irregularity.
Thereafter, the concerned employee is asked to explain the incident by making
a written statement or counter-affidavit at the back of the same Irregularity
Report. After considering the explanation of the employee, the company then
makes a determination of whether to accept the explanation or impose upon
the employee a penalty for committing an infraction. That decision shall be
stated on said Irregularity Report and will be furnished to the employee. Upon
audit of the October 28, 2001 Conductor’s Report of respondent, KKTI noted
an irregularity. It discovered that respondent declared several sold tickets as
returned tickets causing KKTI to lose an income of eight hundred and ninety
pesos. While no irregularity report was prepared on the October 28, 2001
incident, KKTI nevertheless asked respondent to explain the discrepancy. In
his letter,[3] respondent said that the erroneous declaration in his October 28,
2001 Trip Report was unintentional. He explained that during that day’s trip,
the windshield of the bus assigned to them was smashed; and they had to cut
short the trip in order to immediately report the matter to the police. As a result
of the incident, he got confused in making the trip report. On November 26,
2001, respondent received a letter terminating his employment effective
November 29, 2001. The dismissal letter alleged that the October 28, 2001
irregularity was an act of fraud against the company.
Issue: Was there compliance with the procedural due process for dismissal?
Ruling: None. First, respondent was not issued a written notice charging him
of committing an infraction. The law is clear on the matter. A verbal appraisal
of the charges against an employee does not comply with the first notice
requirement. In Pepsi Cola Bottling Co. v. NLRC, the Court held that
consultations or conferences are not a substitute for the actual observance of
notice and hearing. Also, in Loadstar Shipping Co., Inc. v. Mesano, the Court,
sanctioning the employer for disregarding the due process requirements, held
that the employee’s written explanation did not excuse the fact that there was
a complete absence of the first notice. Second, even assuming that petitioner
KKTI was able to furnish respondent an Irregularity Report notifying him of
his offense, such would not comply with the requirements of the law. We
observe from the irregularity reports against respondent for his other offenses
that such contained merely a general description of the charges against him.
The reports did not even state a company rule or policy that the employee had
allegedly violated. Likewise, there is no mention of any of the grounds for
termination of employment under Art. 282 of the Labor Code. Thus, KKTI’s
“standard” charge sheet is not sufficient notice to the employee. Third, no
hearing was conducted. Regardless of respondent’s written explanation, a
hearing was still necessary in order for him to clarify and present evidence in
support of his defense. Moreover, respondent made the letter merely to explain
the circumstances relating to the irregularity in his October 28, 2001
Conductor’s Trip Report. He was unaware that a dismissal proceeding was
already being effected. Thus, he was surprised to receive the November 26,
2001 termination letter indicating as grounds, not only his October 28, 2001
infraction, but also his previous infractions.

11 Asian Alcohol Corporation v. NLRC
G.R. No. 131108, March 25, 1999
Facts: In September, 1991, the Parsons family, who originally owned the
controlling stocks in Asian Alcohol, were driven by mounting business losses
to sell their majority rights to prior Holdings, Inc. (hereinafter referred to as
Prior Holdings). The next month, Prior Holdings took over its management
and operation. To thwart further losses, Prior Holdings implemented a
reorganizational plan and other cost-saving measures. Some one hundred
seventeen (117) employees out of a total workforce of three hundred sixty (360)
were separated. Seventy two (72) of them occupied redundant positions that
were abolished. Of these positions, twenty one (21) were held by union
members and fifty one (51) by non-union members. The six (6) private
respondents are among those union members whose positions were abolished
due to redundancy. Private respondents Carias, Martinez, and Sendon were
water pump tenders; Amacio was a machine shop mechanic; Verayo was a
briquetting plant operator while Tormo was a plant helper under him. They
were all assigned at the Repair and Maintenance Section of the Pulupandan
plant. In October, 1992, they received individual notices of termination
effective November 30, 1992.
Issue: Was the termination valid due to redundancy?
Ruling: In the case at bar, Prior Holdings took over the operations of Asian
Alcohol in October 1991. Plain to see, the last quarter losses in 1991 were
already incurred under the new management. There were no signs that these
losses would abate. Irrefutable was the fact that losses have bled Asian Alcohol
incessantly over a span of several years. They were incurred under the
management of the Parsons family and continued to be suffered under the new
management of Prior Holdings. Ultimately, it is Prior Holding that will absorb
all the losses, including those incurred under the former owners of the
company. The law gives the new management every right to undertake
measures to save the company from bankruptcy. We find that the
reorganizational plan and comprehensive cost-saving program to turn the
business around were nor designed to bust the union of the private respondent.
Retrenched were one hundred seventeen (117) employees. Seventy two (72) of
them including private respondent were separated because their positions had
become redundant. In this context, what may technically be considered as
redundancy may verily be considered as retrenchment measures. Their
positions had to be declared redundant to cut losses. Redundancy exists when
the service capability of the work is in excess of what is reasonably needed to
meet the demands on the enterprise. A redundant position is one rendered
superfluous by any number of factors, such as overhiring of workers,
decreased volume of business, dropping of a particular product line previously
manufactured by the company or phasing out of a service activity priorly
undertaken by the business. Under these conditions, the employer has no legal
obligation to keep in its payroll more employees than are necessary for the
operation of its business. For the implementation of a redundancy program to
be valid, the employer must comply with the following requisites: (1) written
notice served on both the employees and the Department of Labor and
Employment at least one moth prior to the intended date of retrenchment; (2)
payment of separation pay equivalent to at least one month pay or at least one
month pay for every year of service whichever is higher; (3) good faith in
abolishing the redundant positions; and (4) fair and reasonable criteria in
ascertaining what positions are to be declared redundant and accordingly
abolished.