TEMIC AUTOMOTIVE PHILIPPINES, INC.

, vs TEMIC AUTOMOTIVE
PHILIPPINES, INC. EMPLOYEES UNION-FFW

Facts: Petitioner is a corporation engaged in the manufacture of electronic brake systems and
comfort body electronics for automotive vehicles. Respondent Temic Automotive Philippines,
Inc. Employees Union-FFW (union) is the exclusive bargaining agent of the petitioner's rank-
and-file employees.

The warehouse department consists of two warehouses - the electronic braking system and the
comfort body electronics. These warehouses are further divided into four sections - receiving
section, raw materials warehouse section, indirect warehouse section and finished goods
section. The union members are regular rank-and-file employees working in these sections as
clerks, material handlers, system encoders and general clerks. Their functions are interrelated
and include: receiving and recording of incoming deliveries, raw materials and spare parts;
checking and booking-in deliveries, raw materials and spare parts with the use of the petitioner's
system application processing; generating bar codes and sticking these on boxes and automotive
parts; and issuing or releasing spare parts and materials as may be needed at the production
area, and piling them up by means of the company's equipment (forklift or jacklift).

The petitioner contracts out some of the work in the warehouse department, specifically those in
the receiving and finished goods sections, to three independent service providers or forwarders
(forwarders), namely: Diversified Cargo Services, Inc. (Diversified), Airfreight 2100
(Airfreight) and Kuehne & Nagel, Inc. (KNI). These forwarders also have their own employees
who hold the positions of clerk, material handler, system encoder and general clerk. The regular
employees of the petitioner and those of the forwarders share the same work area and use the
same equipment, tools and computers all belonging to the petitioner.

This outsourcing arrangement gave rise to a union grievance on the issue of the scope and
coverage of the collective bargaining unit, specifically to the question of "whether or not the
functions of the forwarders' employees are functions being performed by the regular rank-
and-file employees covered by the bargaining unit."5 The union thus demanded that the
forwarders' employees be absorbed into the petitioner's regular employee force and be given
positions within the bargaining unit.

Issue: Whether or not the company validly contracted out or outsourced the services involving
forwarding, packing, loading and clerical activities related thereto;

Ruling:

Yes. The forwarding arrangement complies with the requirements of Article 106 of the Labor
Code and its implementing rules. To reiterate, no evidence or argument questions the company's
basic objective of achieving "greater economy and efficiency of operations."

The forwarding arrangement has been in place since 1998 and no evidence has been presented
showing that any regular employee has been dismissed or displaced by the forwarders'
employees since then. No evidence likewise stands before us showing that the outsourcing has
resulted in a reduction of work hours or the splitting of the bargaining unit - effects that under
the implementing rules of Article 106 of the Labor Code can make a contracting arrangement
illegal. The other requirements of Article 106, on the other hand, are simply not material to the
present petition. Thus, on the whole, we see no evidence or argument effectively showing that
the outsourcing of the forwarding activities violate our labor laws, regulations, and the parties'
CBA, specifically that it interfered with, restrained or coerced employees in the exercise of their
rights to self-organization as provided in Section 6, par. (f) of the implementing rules.

SMART COMMUNICATIONS, INC. vs REGINA M. ASTORGA

Facts: Astorga was employed by respondent Smart Communications, Incorporated (SMART)

on May 8, 1997 as District Sales Manager of the Corporate Sales Marketing Group/ Fixed
Services Division (CSMG/FSD).

SMART launched an organizational realignment to achieve more efficient operations. Part of the
reorganization was the outsourcing of the marketing and sales force. Thus, SMART entered into
a joint venture agreement with NTT of Japan, and formed SMART-NTT Multimedia,
Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART
abolished the CSMG/FSD, Astorga’s division.

SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. Astorga
landed last in the performance evaluation, thus, she was not recommended by SMART. SMART,
nonetheless, offered her a supervisory position in the Customer Care Department, but she
refused the offer because the position carried a lower salary rank and rate.

Despite the abolition of the CSMG/FSD, Astorga continued reporting for work. But on March 3,
1998, SMART issued a memorandum advising Astorga of the termination of her employment on
ground of redundancy, effective April 3, 1998. Astorga received it on March 16, 1998.

Issue: Whether or not the dismissal of Astorga was valid.

Ruling:

Yes. Redundancy is one of the authorized causes for the dismissal of an employee. The
characterization of an employee’s services as superfluous or no longer necessary and, therefore,
properly terminable, is an exercise of business judgment on the part of the employer. Such
characterization or decision is not subject to discretionary review unless that a violation of law
or arbitrary or malicious action is not shown.

The organizational realignment introduced by SMART, which culminated in the abolition of

CSMG/FSD and termination of Astorga’s employment was an honest effort to make SMART’s
sales and marketing departments more efficient and competitive.
However, SMART failed to comply with the mandated one (1) month notice prior to
termination. The record shows that Astorga received the notice of termination only on March 16,
1998 or less than a month prior to its effectivity on April 3, 1998. Likewise, the Department of
Labor and Employment was notified of the redundancy program only on March 6, 1998.

Be that as it may, this procedural infirmity would not render the termination of Astorga’s
employment illegal. The validity of termination can exist independently of the procedural
infirmity of the dismissal.