VCMC v.

Yballe,
January 15, 2014

PEREZ, J.:

FACTS:

Petitioner Intec is engaged in the manufacture and assembly of mechanical system and printed circuit
board for cassette tape recorder, CD and CD ROM
player while private respondents were hired by Intec in as production workers. 

RESPONDENTS PETITIONER

 In 2005, respondents’ working days
were reduced from 6 days to 2-4 days
due to what petitioner claimed as lack of
job orders.
 Respondents discovered that Intec hired
around 188 contractual employees
tasked to perform tasks which
respondents were regularly doing.
 In May 2006, respondents claimed that
they were effectively terminated from
employment as shown in the
Establishment Termination Report
submitted to DOLE.
 Two (2) days later, respondents filed a
complaint for illegal dismissal.
 Intec claimed that the reduced work week
policy was implemented to forestall business
losses and it insisted that the 188 workers
they hired were on-the-job trainees and they
were already employed prior to the
implementation of the reduced working days
policy.
 Intec also claimed that respondents
voluntarily resigned or abandoned their work
when they filed their application for leave
following the issuance of the second
memorandum extending the implementation
of the reduced number of working days

LABOR ARBITER: LA Ay-ad declared that respondents were illegally dismissed and adjudged Intec and
its officials liable for payment of separation pay and backwages

NLRC: Set aside the decision of the LA and held that Intec suffered tremendous financial losses which
justified the reduction of working days

CA: Reversed NLRC and reinstated the decision of the LA

ISSUE: WON there was an authorized cause for the separation of the respondents from Intec

SC: NO. The Court has held that management is free to regulate, according to its own discretion and
judgment, all aspects of employment, including hiring, work assignments, working methods, time, place,
and manner of work, processes to be followed, supervision of workers, working regulations, transfer of
employees, work supervision, lay-off of workers, and discipline, dismissal and recall of workers. The
exercise of management prerogative, however, is not absolute as it must be exercised in good faith and
with due regard to the rights of labor.

Thus, it was incumbent upon Intec to prove that that the implementation of the reduced working days is
valid and done in good faith. Intec claims that it implemented a reduction of work days scheme to
forestall its losses.

An examination of Intec's financial statements for 2005-2006 shows that while Intec suffered a net loss
of P9,240,929.00 in 2005, it earned a net income of P9,568,674.00 in 2006. The period covered in the
financial statement of 2006 is from May 2005-April 2006. It was only on the 9 th month of operation did
Intec decide to carry out the reduced work day scheme. Note that the reduced work day scheme was
implemented only in January 2006. Unless evidence is shown by the company that the income for 2006
was earned only between the months of January to April, it is safe to presume that at the time the
reduced work day scheme was being implemented, the company was still benefiting from its gains as
shown in the numbers for 2006.

Furthermore, the loss incurred in 2005 may be attributed to the acquisition of property and equipment
amounting to P9,218,967.0012 in 2005. There is also no indication in the financial statements, much less
an observation made by the independent auditor, that a reduction in demand would necessitate a
reduction in the employees' work days.

Intec committed illegal reduction of work hours. Constructive dismissal occurs when there is
cessation of work because continued employment is rendered impossible, unreasonable or
unlikely; when there is a demotion in rank or diminution in pay or both; or when a clear
discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee. Intec's unilateral and arbitrary reduction of the work day scheme had significantly greatly
reduced respondents' salaries thereby rendering it liable for constructive dismissal.