AM-PHIL FOOD CONCEPTS, INC., v.

PAOLO JESUS Petitioner’s Contention: Am-Phil claimed that Padilla was not
T. PADILLA illegally terminated and that it validly exercised a management
prerogative. It asserted that Padilla was hired merely as part of an
G.R. No. 188753, October 01, 2014 – DINO experimental marketing program. It added that in 2003, it did suffer
serious and adverse business losses and that, in the first quarter of
EMPLOYER AM – PHIL FOOD
2004, it was compelled to retrench employees so as to avoid further
CONCEPTS
EMPLOYEE PAOLO JESUS PADILLA losses. Am-Phil also underscored that Padilla executed a quitclaim
and release in its favor.

DOCTRINE: Retrenchment is an exercise of management’s Ruling of Lower Courts:

prerogative to terminate the employment of its employees en masse, LA: rendered the decision finding that Padilla was illegally
to either minimize or prevent losses, or when the company is about to dismissed.16 He noted that Am-Phil failed to substantiate its claim of
close or cease operations for causes not due to business losses. Further, serious business losses and that it failed to comply with the procedural
retrenchment has been described as “a measure of last resort when requirement for a proper retrenchment (i.e., notifying the Department
other less drastic means have been tried and found to be inadequate.” of Labor and Employment).
FACTS: Respondent Padilla was hired as a Marketing Associate by NLRC: Affirmed LA
Am-Phil, a corporation engaged in the restaurant business. Am-Phil
sent Padilla a letter confirming his regular employment. Sometime in CA: Affirmed both LA and CA
the first week of March 2004, informed Padilla that Am-Phil would be
ISSUE: whether respondent Paolo Jesus T. Padila was dismissed
implementing a retrenchment program that would be affecting three
through a valid retrenchment implemented by petitioner Am-Phil
(3) of its employees, Padilla being one of them. The retrenchment
Food Concepts, Inc. YES
program was allegedly on account of serious and adverse business
conditions, i.e., lack of demand in the market, stiffer competition, RULING:
devaluation of the Philippine peso, and escalating operation
YES.
costs.9cralawlawlibrary. Padilla questioned Am-Phil’s choice to
retrench him. Article 283 of the Labor Code recognizes retrenchment as an
authorized cause for terminating employment. It states:
In response, Am-Phil's three (3) officers gave him two options: (1) be
retrenched with severance pay or (2) be transferred as a waiter in Am- Art. 283. Closure of establishment and reduction of personnel. The
Phil’s restaurant, a move that entailed his demotion. Am-Phil sent employer may also terminate the employment of any employee due to
Padilla a memorandum notifying him of his retrenchment. Padilla was the installation of labor-saving devices, redundancy, retrenchment to
paid separation pay in the amount of ?26,245.38. On April 20, 2004, prevent losses or the closing or cessation of operation of the
Padilla executed a quitclaim and release in favor of Am-Phil. Padilla establishment or undertaking unless the closing is for the purpose of
filed the complaint for illegal dismissal. circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (4) that the employer exercises its prerogative to retrench employees
(1) month before the intended date thereof. In case of termination due in good faith for the advancement of its interest and not to defeat
to the installation of labor-saving devices or redundancy, the worker or circumvent the employees’ right to security of tenure; and
affected thereby shall be entitled to a separation pay equivalent to at (5) that the employer used fair and reasonable criteria in ascertaining
least his one (1) month pay or to at least one (1) month pay for every who would be dismissed and who would be retained among the
year of service, whichever is higher. In case of retrenchment to prevent employees, such as status (i.e., whether they are temporary, casual,
losses and in cases of closures or cessation of operations of regular or managerial employees), efficiency, seniority, physical
establishment or undertaking not due to serious business losses or fitness, age, and financial hardship for certain workers.55 (Citations
financial reverses, the separation pay shall be equivalent to one (1) omitted)
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 Am-Phil failed to establish
be considered one (1) whole year. compliance with the requisites
Retrenchment is an exercise of management’s prerogative to terminate for a valid retrenchment
the employment of its employees en masse, to either minimize or
prevent losses, or when the company is about to close or cease Am-Phil’s 2001 to 2004 audited financial statements, the sole proof
operations for causes not due to business losses. Further, retrenchment upon which Am-Phil relies on to establish its claim that it suffered
has been described as “a measure of last resort when other less drastic business losses, have been deemed unworthy of consideration. These
means have been tried and found to be inadequate.” audited financial statements were mere annexes to the motion for leave
to admit supplemental rejoinder which Labor Arbiter Chuanico
Thus, this court has outlined the requirements for a valid retrenchment, validly disregarded. No credible explanation was offered as to why
each of which must be shown by clear and convincing evidence, as these statements were not presented when the evidence-in-chief was
follows: being considered by the labor arbiter. It follows that there is no clear
and convincing evidence to sustain the substantive ground on which
the supposed validity of Padilla’s retrenchment rests.
(1) that the 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 Moreover, it is admitted that Am-Phil did not serve a written notice to
expected, are reasonably imminent as perceived objectively and in the Department of Labor and Employment one (1) month before the
good faith by the employer; intended date of Padilla’s retrenchment, as required by Article 283 of
(2) that the employer served written notice both to the employees and the Labor Code.56cralawlawlibrary
to the Department of Labor and Employment at least one month
prior to the intended date of retrenchment; While it is true that Am-Phil gave Padilla separation pay, compliance
(3) that the employer pays the retrenched employees separation pay with none but one (1) of the many requisites for a valid retrenchment
equivalent to one month pay or at least ½ month pay for every year does not absolve Am-Phil of liability.
of service, whichever is higher;
WHEREFORE, the petition for review
on certiorari is DENIED. The February 25, 2009 decision and the
July 3, 2009 resolution of the Court of Appeals are AFFIRMED.