ABANDONMENT

G.R. No. 175369               February 27, 2013

TEGIMENTA CHEMICAL PHILS. and VIVIAN ROSE D.

GARCIA, Petitioners, 
vs.
MARY ANNE OCO, Respondent.

For abandonment to exist, two factors must be present: (1) the failure to
report for work or absence without a valid or justifiable reason; and (2) a
clear intention to sever the employer-employee relationship, with the
second element as the more determinative factor being manifested by
some overt acts.25

The mere absence of an employee is not sufficient to constitute

abandonment.26 As an employer, Tegimenta has the burden of proof to
show the deliberate and unjustified refusal of the employee to resume the
latter’s employment without any intention of returning.27

Here, Tegimenta failed to discharge its burden of proving that Oco desired
to leave her job. The courts a quo uniformly found that she had
continuously reported for work right after her vacation, and that her office
attendance was simply cut off when she was categorically told not to report
anymore. These courts even noted that she had also called up the office to
follow up her status; and when informed of her definite termination, she lost
no time in filing a case for illegal dismissal. Evidently, her actions did not
constitute abandonment and instead implied her continued interest to stay
employed.

Abandonment is a matter of intention and cannot lightly be inferred or

legally presumed from certain equivocal acts.30 For abandonment to be
appreciated, there must be a "clear, willful, deliberate, and unjustified
refusal of the employee to resume employment."31 Here, the mere fact that
Oco asked for separation pay, after she was told to no longer report for
work, does not reflect her intention to leave her job. She is merely
exercising her option under Article 279 of the Labor Code, which entitles
her to either reinstatement and back wages or payment of separation pay.

RETRENCHMENT

G.R. No. 172846               July 24, 2013

MANILA POLO CLUB EMPLOYEES' UNION (MPCEU) FUR-

TUCP, Petitioner, 
vs.
MANILA POLO CLUB, INC., Respondent.

Likewise, the case of Eastridge Golf Club, Inc. v. Eastridge Golf Club, Inc.,
Labor-Union, Super stressed the differences:

Retrenchment or lay-off is the termination of employment initiated by the

employer, through no fault of the employees and without prejudice to the
latter, during periods of business recession, industrial depression, or
seasonal fluctuations, or during lulls occasioned by lack of orders, shortage
of materials, conversion of the plant for a new production program or the
introduction of new methods or more efficient machinery, or of automation.
It is an exercise of management prerogative which the Court upholds if
compliant with certain substantive and procedural requirements, namely:

1. That retrenchment is necessary to prevent losses and it is proven,

by sufficient and convincing evidence such as the employer's
financial statements audited by an independent and credible external
auditor, that such losses are substantial and not merely flimsy and
actual or reasonably imminent; and that retrenchment is the only
effective measure to prevent such imminent losses;

2. That written notice is served on to the employees and the DOLE at

least one (1) month prior to the intended date of retrenchment; and
 3. That the retrenched employees receive separation pay equivalent
to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher.

The employer must prove compliance with all the foregoing requirements.
Failure to prove the first requirement will render the retrenchment illegal
and make the employer liable for the reinstatement of its employees and
payment of full backwages. However, were the retrenchment undertaken
by the employer is bona fide, the same will not be invalidated by the latter's
failure to serve prior notice on the employees and the DOLE; the employer
will only be liable in nominal damages, the reasonable rate of which the
Court En Banc has set at ₱50,000.00 for each employee.

G.R. No. 172363             March 7, 2008

JUVY M. MANATAD,  vs.

PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION.

The present controversy hinges on the sole issue of whether or not the
retrenchment program implemented by respondent was valid.

The pertinent provision of the Labor Code reads:

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 [Department] 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 a
separation pay equivalent 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.

Retrenchment is the termination of employment initiated by the employer

through no fault of the employees and without prejudice to the latter,
resorted to by management during periods of business recession; industrial
depression; or seasonal fluctuations, during lulls occasioned by lack of
orders, shortage of materials, conversion of the plant for a new production
program, or the introduction of new methods or more efficient machinery or
automation. Retrenchment is a valid management prerogative. It is,
however, subject to faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence. In the discharge of these
requirements, it is the employer who bears the onus, being in the nature of
affirmative defense.

For a valid retrenchment, the following requisites must be complied with:

(a) the retrenchment is necessary to prevent losses and such losses are
proven; (b) written notice to the employees and to the DOLE at least one
month prior to the intended date of retrenchment; and (c) payment of
separation pay equivalent to one-month pay or at least one-half month pay
for every year of service, whichever is higher.

Jurisprudential standards for the losses which may justify retrenchment

have been reiterated by this Court in a long line of cases to forestall
management abuse of this prerogative, viz:

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 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 to 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 on
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.20

In the case at bar, respondent instituted a retrenchment program to arrest

its alleged escalating financial losses by downsizing its workforce.
Respondent claimed that a significant portion of its operational expenses
went to manpower resources constraining it to implement measures to
reduce the number of employees so as to revive its fiscal condition.

In rejecting respondent's claim of economic reverses, the Labor Arbiter cast

doubt on the authenticity of the financial statements submitted by
respondent, since these were not signed by the person who prepared
them. The Labor Arbiter likewise ruled that even if the financial statements
were valid, they still did not meet the quantum of proof needed in order to
establish losses. These findings were affirmed by the NLRC.

Banking on the Labor Arbiter and NLRC Decisions, petitioner now insists
that respondent failed to prove that it was suffering from substantial loss
that would justify the retrenchment. She asserts that respondent was in
sound fiscal condition when it embarked on the reduction of its personnel,
thus, making the retrenchment program invalid.

We do not agree.

The theories espoused by the opposing parties must be weighed together

with the evidence adduced and in consonance with the evidentiary
principles decreed by law and jurisprudence. We cannot favor the bare
assertions and empty figures submitted by the petitioner over the financial
statements audited by independent auditors presented by respondent
without transgressing the basic rule in assessing business losses,
entrenched in jurisprudence.

Upon examination of the evidence adduced by both parties, we are

convinced that, indeed, respondent experienced serious financial crises as
shown in the financial statements audited by independent auditors, SGV &
Co. and Alba Ledesma & Co. It is unlikely therefore that respondent was
just feigning business losses in order to ease out employees. To quote the
conclusion by SGV & Co. in its Report of Independent Public Accountants:

The accompanying financial statements have been prepared

assuming that the Company will continue as a going concern. The
Company has incurred a substantial loss of about P558 million
for the year ended June 30, 1998, which resulted to a deficit of
about P574 million as of June 30, 1998. As discussed in Note 1,
the company has negotiated with its creditors for the suspension of
payments affecting its outstanding balances as of June 30, 1998 until
the completion of an acceptable restructuring plan. The suspension of
payments covers a period of sixty (60) days from the signing of the
Memorandum of Agreement dated August 26, 1998. The Company's
ability to continue as a going concern depends, among others, on the
completion of an acceptable restructuring plan. The financial
statements do not include any adjustments that might result from the
outcome of these uncertainties. (Emphasis supplied.)

The financial statements reflect that respondent suffered substantial loss in

the amount of P558 Million by 30 June 1998. The Report of SGV & Co.
substantiates the alleged precarious financial condition of the respondent.
The financial statements audited by independent external auditors
constitute the normal method of proving the profit and loss performance of
a company as enunciated in San Miguel Corporation v. Abella:

Normally, the condition of business losses is shown by audited

financial documents like yearly balance sheets, profit and loss
statements and annual income tax returns. The financial statements
must be prepared and signed by independent auditors failing which
they can be assailed as self-serving documents.

No evidence can best attest to a company's economic status other than its
financial statement. We defined the evidentiary weight accorded to audited
financial statements in Asian Alcohol Corporation v. National Labor
Relations Commission:

The condition of business losses is normally shown by audited

financial documents like yearly balance sheets and profit and loss
statements as well as annual income tax returns. It is our ruling that
financial statements must be prepared and signed by independent
auditors. Unless duly audited, they can be assailed as self-serving
documents. But it is not enough that only the financial statements for
the year during which retrenchment was undertaken, are presented in
evidence. For it may happen that while the company has indeed been
losing, its losses may be on a downward trend, indicating that
business is picking up and retrenchment, being a drastic move,
should no longer be resorted to. Thus, the failure of the employer to
show its income or loss for the immediately preceding year or to
prove that it expected no abatement of such losses in the coming
years, may bespeak the weakness of its cause. It is necessary that
the employer also show that its losses increased through a period of
time and that the condition of the company is not likely to improve in
the near future.

Being guided accordingly, we find that respondent was fully justified in

implementing a retrenchment program since it was undergoing business
reverses, not only for a single fiscal year, but for several years prior to and
even after the program. In a span of six years, respondent realized profits
only in one year, in 1997. We thus quote with approval the disquisition of
the Court of Appeals:
 As shown in the financial statements, during the years ended June
1995, 1996, 1998, 1999 and 2000, [herein respondent] incurred net
losses of P40 million, P85 million, P555 million, P558 million, P700
million and P1.196 billion, respectively, resulting in a deficit of P2.169
billion as of June 30, 2000. We note, however, that [herein
respondent] earned income in 1997 in the amount of P1.4 million. But
it is clear that petitioner suffered a major setback when after
earning P1.4 Million (as of June 1997), [respondent] posted an
astronomical financial loss of P555 million in the succeeding year (as
of June 1998).

Even if we take into consideration the figures submitted by petitioner and

accede to her position that respondent was gaining substantial profits from
its Central Visayas office, the said numbers, nonetheless, do not bespeak
respondent's overall financial standing in light of the fact that respondent is
operating nationwide and the Central Visayas office is only one of its many
branches. Losses or gains of a business entity cannot be fully assessed by
isolating or selecting only particular branches or offices. There are
recognized accounting principles and methods by which the business firm's
performance can be objectively and thoroughly evaluated at the end of
every fiscal year, and the assessment accurately reported in the company's
financial statement.

That the financial statements are audited by independent auditors

safeguards the same from the manipulation of the figures therein to suit the
company's needs. The auditing of financial reports by independent external
auditors are strictly governed by national and international standards and
regulations for the accounting profession. It bears to stress that the
financial statements submitted by respondent were audited by reputable
auditing firms. Hence, petitioner's assertion that respondent merely
manipulated its financial statements to make it appear that it was suffering
from business losses that would justify the retrenchment is incredible and
baseless.

In addition, the fact that the financial statements were audited by

independent auditors settles any doubt on the authenticity of these
documents for lack of signature of the person who prepared it. As reported
by SGV & Co., the financial statements presented fairly, in all material
aspects, the financial position of the respondent as of 30 June 1998 and
1997, and the results of its operations and its cash flows for the years
ended, in conformity with the generally accepted accounting principles.

In fact, even granting arguendo that respondent was not experiencing

losses, it is still authorized by Article 283 of the Labor Code to cease its
business operations. Explicit in the said provision is that closure or
cessation of business operations is allowed even if the business is not
undergoing economic losses. The owner, for any bona fide reason, can
lawfully close shop anyone. Just as no law forces anyone to go into
business, no law can compel anybody to continue in it. It would indeed be
stretching the intent and spirit of the law if we were to unjustly interfere with
the management's prerogative to close or cease its business operations,
just because said business operations are not suffering any loss or simply
to provide the worker's continued employment.

The law recognizes the right of every business entity to reduce its work
force if the same is made necessary by compelling economic factors which
would endanger its existence or stability. In spite of overwhelming support
granted by the social justice provisions of our Constitution in favor of labor,
the fundamental law itself guarantees, even during the process of tilting the
scales of social justice towards workers and employees, "the right of
enterprises to reasonable returns of investment and to expansion and
growth." To hold otherwise would not only be oppressive and inhuman, but
also counter-productive and ultimately subversive of the nation's thrust
towards a resurgence in our economy which would ultimately benefit the
majority of our people. Where appropriate and where conditions are in
accord with law and jurisprudence, the Court has authorized valid
reductions in the work force to forestall business losses, the hemorrhaging
of capital, or even to recognize an obvious reduction in the volume of
business which has rendered certain employees redundant.

We also find that the respondent complied with the requisite notices to the
employee and the DOLE to effect a valid retrenchment. Petitioner failed to
refute that she received the written notice of retrenchment from respondent
on 16 November 1998. Although respondent failed to furnish DOLE with a
formal letter notifying it of the retrenchment, it still substantially complied
with the requirement. Since the National Conciliation and Mediation Board,
the reconciliatory arm of DOLE, supervised the negotiation for separation
package, we agree with the Court of Appeals that it would be superfluous
to still require respondent to serve notice of the retrenchment to DOLE.
The separation package offered by respondent to its employees was way
above the minimum requirement set by law. Aside from the separation pay
equivalent to one-month salary for every year of service, respondent
offered additional monetary benefits such as one and a half month salary,
pro-rated 13th month pay, conversion of unused sick and vacation leave
credits, and Health Maintenance Organization and group life insurance
coverage until full payment of the separation package.

Petitioner's proposition that she was not a union member and, therefore,
not legally bound by the terms of the Collective Bargaining Agreement, is
irrelevant in the instant controversy. Non-membership in a union does not
exempt an employee from the application of Article 283 of the Labor Code
which enumerates the authorized causes for terminating employment. In
this case, petitioner was terminated pursuant to the retrenchment program
implemented by respondent. As discussed above, the respondent complied
with the legal requirements for a valid retrenchment. Therefore, petitioner's
separation from employment was legal and valid.

Consequently, petitioner is not entitled to backwages. It is well settled that

backwages may be granted only when there is a finding of illegal dismissal.
Nevertheless, petitioner is entitled to separation pay as provided under
respondent's Staff Reduction Program Package equivalent to one-month
salary for every year of service, one and a half month salary, pro-rated
13th month pay, conversion to cash of unused vacation and sick leave
credits, and Health Maintenance Organization and group life insurance
coverage until full payment of the separation package.

https://www.lawphil.net/judjuris/juri2018/mar2018/gr_178083_2018.html

March 13, 2018

G.R. No. 178083

FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF THE

PHILIPPINES (FASAP), Petitioner 
vs.
PHILIPPINE AIRLINES, INC., PATRIA CHIONG and THE COURT OF
APPEALS, Respondents
IN RE: LETTERS OF ATTY. ESTELITO P. MENDOZA RE: G.R. NO.
178083 - FLIGHT ATTENDANTS AND STEWARDS ASSOCIATION OF
THE PHILIPPINES (F ASAP) vs. PHILIPPINE AIRLINES, INC., ETAL.

PAL implemented a valid retrenchment program

Retrenchment or downsizing is a mode of terminating employment initiated

by the employer through no fault of the employee and without prejudice to
the latter, resorted to by management during periods of business
recession, industrial depression or seasonal fluctuations or during lulls over
shortage of materials. It is a reduction in manpower, a measure utilized by
an employer to minimize business losses incurred in the operation of its
business.85

Anent retrenchment, Article 29886 of the Labor Code provides as follows:

Article 298. 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
workers 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 a separation pay equivalent 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 closure 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 to 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 one (1) whole year.

Accordingly, the employer may resort to retrenchment in order to avert

serious business losses. To justify such retrenchment, the following
conditions must be present, namely:

1. The retrenchment must be reasonably necessary and likely to

prevent business losses;
 2. The losses, if already incurred, are not merely de minimis, but
substantial, serious, actual and real, or, if only expected, are
reasonably imminent;

3. The expected or actual losses must be proved by sufficient and

convincing evidence;

4. The retrenchment must be in good faith for the advancement of its

interest and not to defeat or circumvent the employees' right to
security of tenure; and

5. There must be fair and reasonable criteria m 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.87

Based on the July 22, 2008 decision, PAL failed to: (1) prove its financial
losses because it did not submit its audited financial statements as
evidence; (2) observe good faith in implementing the retrenchment
program; and (3) apply a fair and reasonable criteria in selecting who would
be terminated.

Upon a critical review of the records, we are convinced that PAL had met
all the standards in effecting a valid retrenchment.

PAL’s serious financial losses were duly established

PAL was discharged of the

| burden to prove serious
| financial losses in view of
| F ASAP's admission

PAL laments the unfair and unjust conclusion reached in the July 22, 2008
decision to the effect that it had not proved its financial losses due to its
non-submission of audited financial statements. It points out that the matter
of financial losses had not been raised as an issue before the Labor
Arbiter, the NLRC, the CA, and even in the petition in G.R. No. 178083 in
view of FASAP’s admission of PAL having sustained serious losses; and
that PAL’s having been placed under rehabilitation sufficiently indicated the
financial distress that it was suffering.

It is quite notable that the matter of PAL’s financial distress had originated
from the complaint filed by F ASAP whereby it raised the sole issue
of "Whether or not respondents committed Unfair Labor Practice." 88 F
ASAP believed that PAL, in terminating the 1,400 cabin crew members,
had violated Section 23, Article VII and Section 31, Article IX of the 1995-
2000 P AL-FASAP CBA. Interestingly, FASAP averred in its position paper
therein that it was not opposed to the retrenchment program because it
understood PAL’s financial troubles; and that it was only questioning
the manner and lack of standard in carrying out the retrenchment, thus:

At the outset, it must be pointed out that complainant was never opposed to
the retrenchment program itself, as it understands respondent PAL’s
financial troubles. In fact, complainant religiously cooperated with
respondents in their quest for a workable solution to the company-
threatening problem. Attached herewith as Annexes "A" to "D" are the
minutes of its meetings with respondent PAL’s representatives showing
complainant's active participation in the deliberations on the issue.

What complainant vehemently objects to are the manner and the lack of
criteria or standard by which the retrenchment program was implemented
or carried out, despite the fact that there are available criteria or standard
that respondents could have utilized or relied on in reducing its workforce.
In adopting a retrenchment program that was fashioned after the evil
prejudices and personal biases of respondent Patria Chiong, respondent
PAL grossly violated at least two important provisions of its CBA with
complainant - Article VII, Section 23 and Article IX, Sections 31and 32.89

These foregoing averments of F ASAP were echoed in its reply90 and

memorandum91 submitted to the Labor Arbiter.

Evidently, FASAP’s express recognition of PAL’s grave financial situation

meant that such situation no longer needed to be proved, the same having
become a judicial admission92 in the context of the issues between the
parties. As a rule, indeed, admissions made by parties in the pleadings, or
in the course of the trial or other proceedings in the same case are
conclusive, and do not require further evidence to prove them.93 By
FASAP’s admission of PAL’s severe financial woes, PAL was relieved of its
burden to prove its dire financial condition to justify the retrenchment.
Thusly, PAL should not be taken to task for the non-submission of its
audited financial statements in the early part of the proceedings inasmuch
as the non-submission had been rendered irrelevant.

Yet, the July 22, 2008 decision ignored the judicial admission and unfairly
focused on the lack of evidence of PAL’s financial losses. The Special
Third Division should have realized that PAL had been discharged of its
duty to prove its precarious fiscal situation in the face of FASAP’s
admission of such situation. Indeed, PAL did not have to submit the audited
financial statements because its being in financial distress was not in issue
at all.

Nonetheless, the dissent still insists that PAL should be faulted for failing to
prove its substantial business losses, and even referred to several
decisions of the Court94 wherein the employers had purportedly established
their serious business losses as a requirement for a valid retrenchment.

Unfortunately, the cases cited by the dissent obviously had no application

herein because they originated from either simple complaints of illegal
retrenchment, or unfair labor practice, or additional separation pay.95

LVN Pictures originated from a complaint for unfair labor practice (ULP)

based on Republic Act No. 874 (Industrial Peace Act). The allegations in
the complaint concerned interference, discrimination and refusal to bargain
collectively. The Court pronounced therein that the employer (L VN
Pictures) did not resort to ULP because it was able to justify its termination,
closure and eventual refusal to bargain collectively through the financial
statements showing that it continually incurred serious financial losses.
Notably, the Court did not interfere with the closure and instead recognized
LVN’s management prerogative to close its business and dismiss its
employees.

North Davao Mining was a peculiar case, arising from a complaint for

additional separation pay, among others. The Court therein held that
separation pay was not required if the reason for the termination was due
to serious business losses. It clarified that Article 283 (now Art. 298)
governed payment of separation benefits in case of closure of business not
due to serious business losses. When the reason for the closure was
serious business losses, the employer shall not be required to grant
separation pay to the terminated employees.

In Manatad, the complaint for illegal dismissal was based on the allegation

that the retrenchment program was illegal because the employer was
gaining profits. Hence, the core issue revolved around the existence (or
absence) of grave financial losses that would justify retrenchment.

In the cited cases, the employers had to establish that they were incurring
serious business losses because it was the very issue, if not intricately
related to the main issue presented in the original complaints. In contrast,
the sole issue herein as presented by F ASAP to the Labor Arbiter was the
"manner of retrenchment," not the basis for retrenchment. F ASAP itself, in
representation of the retrenched employees, had admitted in its position
paper, as well as in its reply and memorandum submitted to the Labor
Arbiter the fact of serious financial losses hounding PAL. In reality, PAL
was not remiss by not proving serious business losses. FASAP’s admission
of PAL’s financial distress already established the latter's precarious
financial state.

August 16, 2017

G.R. No. 195457

READ-RITE PHILIPPINES, INC., Petitioner, 

vs.
GINA G. FRANCISCO, MAXIMINO H. REYES, LUCIA E. MACHADO, IRENE G. ABANILLA,
EDNA L. GUAVES, ARLENE FRANCISCO, JOSEPHINE V. TRINIDAD, MARILYN E. AMPARO,
SOLITA F. SANTOS, ELLEN T. CASTILLO, ROSALIE V ALDEABELLA, MARITA E. RIVERA,
JULITA M. MAGNO, MARCIA P. DELA TORRE, ELENA ANGCAHAN, ESTER H. REYES,
CORAZON ARMADILLA, IRMA A. PEREGRINO, DELFIN D. DUBAN, AMANCIA PRADO,
CECILIA D. NABUA, DANNY A. CABUCOY, ELIZABETH R. REVELLAME, ELVIRA R. MAGNO,
GIERL YN R. VILLANEVA, JEANETTE GAA LEGASPI, GREGORIA I. MARASIGAN, JOHN
JOSEPH R. MAGNO, LODELYN P. CASTILLO, JUSTINA TORTOSA, LENY M. ZARENO, LOIDA
E. ESTOMATA, MA. BASILIA DE LA ROSA, MA. GRACIA DE GUZMAN, MA. NENITA G.
CASTILLO, MERCEDARIO A. MARTINEZ, NORA M. PAVELON, PRECILLA D. MAGBITANG,
RAQUEL CABUCOY, REGAL M. ALFARO, RIZA UMANDAP, ROSALITA R. MANLUNAS,
ROSEMARIE C. LEYVA, ROSSANA M. YUMOL, SENETA SERENO, VILMA R. MANALO,
YOLANDA Y. MANGAOANG, GLORIA BARSOLASCO and NENA M. REYES, Respondents.

Respondents are only entitled to

involuntary separation benefits
The Court rules that respondents are only entitled to involuntary separation pay given that they were
retrenched employees.

Retrenchment to prevent losses is one of the authorized causes for an employee's separation from
employment. As explained in Waterfront Cebu City Hotel v. Jimenez  : 28

Retrenchment is the termination of employment initiated by the employer through no fault of and
without prejudice to the employees. It is resorted to during periods of business recession, industrial
depression, or seasonal fluctuations or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of new methods
or more efficient machinery or of automation. It is an act of the employer of dismissing employees
because of losses in the operation of a business, lack of work, and considerable reduction on the
volume of his business. (Citations omitted.)

Article 283 (now Article 298) of the Labor Code, as amended, recognizes retrenchment as a right of
the management to meet clear and continuing economic threats or during periods of economic
recession to prevent losses.  Said article reads:
29

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 workers 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 a separation pay equivalent
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 one (1) whole year. (Emphasis supplied.)

Respondents never disputed the fact that they were retrenched employees of Read-Rite and they
were accordingly paid involuntary separation benefits of one month pay per year of service. They,
however, claim similar entitlement to voluntary separation benefits under Read-Rite's
Compensation and Benefits Manual.

To our mind, the Labor Arbiter and the NLRC were correct in ruling that voluntary and involuntary
separation benefits are distinct from one another. The same are embodied in separate provisions of
both the Compensation and Benefits Manual, upon which the respondents base their claim, and the
Read-Rite Retirement Plan, which the Court of Appeals cited in its ruling. Respondents’ right to
voluntary and involuntary separation benefits are governed by the aforementioned instruments. 30

As to involuntary separation benefits, the Compensation and Benefits Manual explicitly and

specifically states that "an employee terminated involuntarily for reasons beyond his control (except
for just cause), including but not limited to retrenchment or redundancy, shall be entitled to receive
the applicable minimum benefit prescribed by law."

On the other hand, Section 4, Article VII of the Retirement Plan more emphatically states that a
member thereof who is "terminated involuntarily for reasons beyond his control (except for just
cause), including but not limited to retrenchment or redundancy, shall be entitled to receive the
applicable minimum benefit prescribed by law on involuntary separation or the benefit computed in
accordance with Article VII, Section 3 of this Plan, whichever is greater." Section 3, Article VII of the
Retirement Plan pertains to voluntary separation benefits.

As to voluntary separation benefits, the Compensation and Benefits Manual and Retirement Plan
are ostensibly silent as to the conditions for an employee's entitlement thereto, save for the length of
the required continuous service. However, by its nomenclature alone, one ·could easily discern that
the award of voluntary separation benefits involves a situation that is opposite of that contemplated
in involuntary separation benefits - that is, the employee's separation from employment is by his own
choice and/or for reasons within his control. Indeed, the term voluntary is defined as "proceeding
from the will or from one's own choice or consent"; "unconstrained by interference"; or "done by
design or intention."
31

Given the diametrical nature of an involuntary and a voluntary separation from service, one
necessarily excludes the other. For sure, an employee's termination from service cannot be
voluntary and involuntary at the same time. As respondents' termination was involuntary in
nature, i.e., by virtue of a retrenchment program undertaken by Read-Rite, they are only entitled to
receive involuntary separation benefits under the express provisions of the company's
Compensation and Benefits Manual and the Retirement Plan.

In view of the foregoing discussion, the Court is more inclined to believe that the payment of
additional voluntary separation benefits, on top of involuntary separation benefits, to eight retrenched
employees of ReadRite in April 1999 was indeed a mistake since the same was not in accordance
with the company's Compensation and Benefits Manual and its Retirement Plan. In any event,
whether said payment was a mistake or otherwise, respondents cannot use the same to bolster their
own claim of entitlement to additional voluntary separation benefits.

First, the labor tribunals and the Court of Appeals were one in declaring that the single, isolated
payment of additional voluntary separation benefits to the eight retrenched employees of Read-Rite
in April 1999 did not convert the same into a voluntary company practice that cannot be unilaterally
withdrawn by the company. The Court had since declared in National Sugar Refineries Corporation
v. National Labor Relations Commission  that to be considered as a company practice, the grant of
32

benefits should have been practiced over a long period of time, .and must be shown to have been
consistent and deliberate.

Second, respondents are wrong to insist that they had been discriminated upon by Read-Rite in view
of the similarity of their case to that obtaining in Businessday Information Systems and Services, Inc.
v. National Labor Relations Commission. 33

In said case, Businessday Information Systems and Services, Inc. (BSSI) terminated the services of
some of its employees as a retrenchment measure brought about by financial reverses. The
retrenched employees were given separation pay equivalent to one-half (1/2) month pay for every
year of service. In an attempt to rehabilitate its business as a trading company, BSSI retained some
of its employees. Nonetheless, after only two and a half months, BSSI also terminated their services
as it decided to cease all of its business operations. The second and third batches of retrenched
employees were then given separation pay equivalent to one full month pay for every year of service
and a mid-year bonus.

In granting the claim of the first batch of retrenched BSSI employees, the Court found that "there
was impermissible discrimination against [them] in the payment of their separation benefits. The law
requires an· employer to extend equal treatment to its employees. It may not, in the guise of
exercising management prerogatives, grant greater benefits to some and less to others."  However,
34

in so ruling, the Court took into account the following findings of the NLRC:
The respondent argued that the giving of more separation benefit to the second and third
batches of employees separated was their expression of gratitude and benevolence to the
remaining employees who have tried to save and make the company viable in the remaining
days of operations. This justification is not plausible. There are workers in the first batch who have
rendered more years of service and could even be said to be more efficient than those separated
subsequently, yet they did not receive the same recognition. Understandably, their being retained
longer in their job and be not included in the batch that was first terminated, was a concession
enough and may already be considered as favor granted by the respondents to the prejudice of the
complainants. As it happened, there are workers in the first batch who have rendered more years in
service but received lesser separation pay, because of that arrangement made by the respondents
in paying their termination benefits[.] x x x. (Emphasis supplied, citation omitted.)
35