Labor Digested Cases

G.R. No. 106107

June 2, 1994

AGUSTIN CHU, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and VICTORIAS MILLING COMPANY, INC. respondents.

FACTS: Petitioner retired from the service of private respondent upon reaching the age of sixty under its regular retirement program. He was granted an extention of service by the Board of Directors of private respondent under a "Special Contract of Employment." The contract provided, inter alia, that its term was for a period of one year. Petitioner was employed as Head of the Warehousing, Sugar, Shipping and Marine Department. Private respondent issued two Memorandums, both providing for a rotation of the personnel and other organizational changes. Pursuant to the memoranda, petitioner was transferred to the Sugar Sales Department. Petitioner protested his transfer and requested a reconsideration but was denied. Consequently, petitioner filed a complaint for illegal dismissal, contending that he was constructively dismissed from his employment. The Labor Arbiter said that petitioner’s transfer was without change in rank or salary; petitioner’s designation in either department was the same; the personnel rotation was pursuant to organizational changes done in the valid exercise of management prerogatives; there was no bad faith in the transfer of petitioner, as other employees similarly situated as he were likewise affected; and petitioner failed to show that he was prejudiced by the changes or transferred to a demeaning or humiliating position. Petitioner appealed to the NLRC which affirmed the Labor Arbiter’s decision. The NLRC also denied petitioner’s motion for reconsideration. Petitioner contends that there was no valid exercise of management prerogative because said transfer was unreasonable and caused inconvenience to him. Petitioner

argues that private respondent’s prerogative to transfer him was limited by the "Special Contract of Employment," which was the "law" between the parties.

ISSUE: Whether petitioner was illegally dismissed from his employment.

HELD: No. An owner of a business enterprise is given considerable leeway in managing his business because it is deemed important to society as a whole that he should succeed. Our law, therefore, recognizes certain rights as inherent in the management of business enterprises. These rights are collectively called management prerogatives or acts by which one directing a business is able to control the variables thereof so as to enhance the chances of making a profit. "Together, they may be taken as the freedom to administer the affairs of a business enterprise such that the costs of running it would be below the expected earnings or receipts. In short, the elbow room in the quest for profits". One of the prerogatives of management, and a very important one at that, is the right to transfer employees in their work station. It is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes, and competence to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee’s right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. This is a function associated with the employer’s inherent right to control and manage effectively its enterprise. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. Petitioner’s bare assertion that the transfer was unreasonable and caused him inconvenience cannot override the fact, as found by the Labor Arbiter and respondent

Commission, that the rotation was made in good faith and was not discriminatory, and that there was no demotion in rank or a diminution of his salary, benefits and privileges.

G.R. No. L-53515

February 8, 1989

SAN MIGUEL BREWERY SALES FORCE UNION (PTGWO), petitioner, vs. HON. BLAS F. OPLE, as Minister of Labor and SAN MIGUEL CORPORATION, respondents.

FACTS: A collective bargaining agreement was entered into by petitioner San Miguel Corporation Sales Force Union (PTGWO), and the private respondent, San Miguel Corporation, Section 1, of Article IV. Subsequently, the company introduced a marketing scheme known as the "Complementary Distribution System" (CDS) whereby its beer products were offered for sale directly to wholesalers through San Miguel's sales offices. The labor union (herein petitioner) filed a complaint for unfair labor practice in the Ministry of Labor, with a notice of strike on the ground that the CDS was contrary to the existing marketing scheme. It was alleged that the new marketing scheme violates Section 1, Article IV of the collective bargaining agreement because the introduction of the CDS would reduce the take-home pay of the salesmen and their truck helpers for the company would be unfairly competing with them.

ISSUE: Whether the CDS violates the collective bargaining agreement and an indirect way of busting the union.

HELD: No. The Minister of Labor held that, their is nothing in the record as to suggest that the unilateral action of the employer in inaugurating the new sales scheme was designed to discourage union organization or diminish its influence, but rather it is undisputable that the establishment of such scheme was part of its overall plan to improve efficiency and economy and at the same time gain profit to the highest. Public respondent was correct in holding that the CDS is a valid exercise of management prerogatives. Except as limited by special laws, an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of work. Every business enterprise endeavors to increase its profits. In the process, it may adopt or devise means designed towards that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The free will of management to conduct its own business affairs to achieve its purpose cannot be denied. So long as a company's management prerogatives are exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold them. San Miguel Corporation's offer to compensate the members of its sales force who will be adversely affected by the implementation of the CDS by paying them a so-called "back adjustment commission" to make up for the commissions they might lose as a result of the CDS proves the company's good faith and lack of intention to bust their union.

G.R. No. 185814

October 13, 2010

PERFORATED MATERIALS, INC., WINFRIED HARTMANNSHENN,

and HINRICH JOHANN SCHUMACHER, Petitioners,

- versus -

MANUEL F. DIAZ, Respondent.

FACTS: Manuel F. Diaz (respondent) was hired by petitioner SHS as Manager for Business Development on probationary status from July 18, 2005 to January 18, 2006, with a monthly salary of P100,000.00. Respondents duties, responsibilities, and work hours were described in the Contract of Probationary Employment. In addition to the responsibilities laid in the contract, respondent was also instructed by Hartmannshenn to report to the SHS office and plant at least two (2) days every work week to observe technical processes involved in the manufacturing of perforated materials, and to learn about the products of the company, which respondent was hired to market and sell. During respondents employment, Hartmannshenn was often abroad and, because of business exigencies, his instructions to respondent were either sent by electronic mail or relayed through telephone or mobile phone. When he would be in the Philippines, he and the respondent held meetings. As to respondents work, there was no close supervision by him. During meetings with the respondent, Hartmannshenn expressed his dissatisfaction over respondents poor performance. Respondent allegedly failed to make any concrete business proposal or implement any specific measure to improve the productivity of the SHS office and plant or deliver sales except for a meagre P2,500.00 for a sample product. Hartmannshenn then instructed Taguiang not to release respondents salary. Later that afternoon, respondent called and inquired about his salary. Taguiang informed him that it was being withheld and that he had to immediately communicate with Hartmannshenn. The next day, on November 30, 2005, respondent served on SHS a demand letter and a resignation letter.

Petitioners averred that respondent was unable to give a proper explanation for his behavior. Hartmannshenn then accepted respondents resignation and informed him that his salary would be released upon explanation of his failure to report to work, and proof that he did, in fact, work for the period in question. He demanded that respondent surrender all company property and information in his possession. Respondent agreed to these exit conditions through electronic mail. Instead of complying with the said conditions, however, respondent sent another electronic mail message to Hartmannshenn and Schumacher on December 1, 2005, appealing for the release of his salary. After which, respondent filed a Complaint against the petitioners for illegal dismissal; non-payment of salaries/wages and 13th month pay with prayer for reinstatement and full backwages; exemplary damages, and attorneys fees, costs of suit, and legal interest. The Labor Arbiter rendered his decision stating that respondent was constructively dismissed because the withholding of his salary was contrary to Article 116 of the Labor Code as it was not one of the exceptions for allowable wage deduction by the employer under Article 113 of the Labor Code. He had no other alternative but to resign because he could not be expected to continue working for an employer who withheld wages without valid cause. The LA also held that respondents probationary employment was deemed regularized because petitioners failed to conduct a prior evaluation of his performance and to give notice two days prior to his termination as required by the Probationary Contract of Employment and Article 281 of the Labor Code. Petitioners contention that they lost trust and confidence in respondent as a managerial employee was not given credence for lack of notice to explain the supposed loss of trust and confidence and absence of an evaluation of respondents performance. Petitioners are jointly and severally liable to respondent for backwages including 13th month pay as there was no showing in the salary vouchers presented that such was integrated in the salary; for moral and exemplary damages for having in bad faith harassed respondent into resigning; and for attorneys fees. On appeal, the NLRC reversed the decision of the Labor Arbiter. The NLRC explained that the withholding of respondents salary was a valid exercise of management prerogative. The act was deemed justified as it was reasonable to demand an explanation for failure to report to work and to account for his work accomplishments. Respondent filed a motion for reconsideration but the NLRC subsequently denied it for lack of merit. Upon appeal, the CA reversed the NLRC resolutions in its decision. CA held that withholding respondents salary was not a valid exercise of management prerogative as there is no such thing as a management prerogative to withhold wages

temporarily. Petitioners averments of respondents failure to report to work were found to be unsubstantiated allegations not corroborated by any other evidence, insufficient to justify said withholding and lacking in probative value. The malicious withholding of respondents salary made it impossible or unacceptable for respondent to continue working, thus, compelling him to resign. The respondents immediate filing of a complaint for illegal dismissal could only mean that his resignation was not voluntary. As a probationary employee entitled to security of tenure, respondent was illegally dismissed. The CA ruled out actual reinstatement, however, reasoning out that antagonism had caused a severe strain in their relationship. It was of the view that separation pay equivalent to at least one month pay would be a more equitable disposition. The petitioners went to the Supreme Court praying for the reversal and setting aside of the subject CA decision. Hence, this petition.

ISSUE: Whether or not the temporary withholding of respondents salary/wages by petitioners was a valid exercise of management prerogative. Whether or not respondent voluntarily resigned.

HELD: (1) Management prerogative refers to the right of an employer to regulate all aspects of employment, such as the freedom to prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of employees, supervision of their work, lay-off and discipline, and dismissal and recall of work.[12] Although management prerogative refers to the right to regulate all aspects of employment, it cannot be understood to include the right to temporarily withhold salary/wages without the consent of the employee. To sanction such an interpretation would be contrary to Article 116 of the Labor Code.

The Court finds petitioners evidence insufficient to prove that respondent did not work from November 16 to November 30, 2005. The nature of respondents job did not allow close supervision and monitoring by petitioners. Although it cannot be determined with certainty whether respondent worked for the entire period from November 16 to November 30, 2005, the consistent rule is that if doubt exists between the evidence presented by the employer and that by the employee, the scales of justice must be tilted in favor of the latter in line with the policy mandated by Articles 2 and 3 of the Labor Code to afford protection to labor and construe doubts in favor of labor.

(2) Petitioners contend that respondent could not have been constructively dismissed because he voluntarily resigned as evidenced by his resignation letter. The Court agrees with the LA and the CA that respondent was forced to resign and was, thus, constructively dismissed. There is constructive dismissal if an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued employment. It exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.

What made it impossible, unreasonable or unlikely for respondent to continue working for SHS was the unlawful withholding of his salary. For said reason, he was forced to resign. It would be absurd to require respondent to tolerate the unlawful withholding of his salary for a longer period before his employment can be considered as so impossible, unreasonable or unlikely as to constitute constructive dismissal. Even granting that the withholding of respondents salary, would not constitute an unlawful act, the continued refusal to release his salary after the payroll period was clearly unlawful.

Respondent was constructively dismissed and, therefore, illegally dismissed. Although respondent was a probationary employee, he was still entitled to security of tenure. Section 3 (2) Article 13 of the Constitution guarantees the right of all workers to security of tenure. In using the expression all workers, the Constitution puts no distinction between a probationary and a permanent or regular employee. This means that

probationary employees cannot be dismissed except for cause or for failure to qualify as regular employees.

Respondents reinstatement, however, is no longer feasible as antagonism has caused a severe strain in their working relationship. Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable. Payment liberates the employee from what could be a highly oppressive work environment, and at the same time releases the employer from the obligation of keeping in its employ a worker it no longer trusts. Therefore, a more equitable disposition would be an award of separation pay equivalent to at least one month pay, in addition to his full backwages, allowances and other benefits.

ALFREDO S. PAGUIO, petitioner, vs. PHILIPPINE LONG DISTANCE TELEPHONE CO., INC., ENRIQUE D. PEREZ, RICARDO P. ZARATE, ISABELO FERIDO, and RODOLFO R. SANTOS, respondents.

FACTS: Petitioner Alfredo S. Paguio was appointed Head of PLDTs Garnet Exchange. PLDT implemented the Greater Metro Manila Network Performance Assessment program covering 27 exchanges of the 5 centers. Petitioner wrote respondent Santos a memorandum criticizing the 1994 performance ranking of the GMM Exchanges. Petitioner again sent a memorandum to respondent Santos criticizing the 1995 East Exchanges performance ranking for being based only on the attainment of objectives, without considering other relevant factors that contributed to the attainment of the same. Petitioner again wrote respondent Santos requesting reconsideration, claiming that the scheme was not fair to an old exchange like Garnet. Respondent Santos denied petitioners request and instructed petitioner to submit the rebalancing schedules. Petitioner again, wrote respondent Santos, complaining that the rating and ranking of the Exchanges were unfair. Respondent Santos then issued a memorandum reassigning petitioner to a position in the Office of the GMM East Center Head for Special Assignments. Protesting the said transfer, petitioner asked respondent Ferido for a formal hearing on the charges against him and for the deferment of his re-assignment pending resolution of the charges. Petitioner then filed a complaint for illegal demotion and damages against respondents because of inaction from the management. The Labor Arbiter dismissed the complaint on the ground that petitioners transfer was an exercise of a management prerogative and there was no showing that the same amounted to a demotion in rank and privileges. Petitioner appealed to the NLRC, which reversed the decision of the Labor Arbiter. His transfer involves a diminution of his salary, benefits and other privileges. On account of his transfer, he was assigned a functionless position. As a consequence, he was deprived of the opportunity to get promoted or to be entitled to wage increase equivalent to sixteen percent (16%) of his salary, as he could not have any performance to speak of in his present designation there being no work assigned to him. Respondent PLDT then filed a special civil action for certiorari in the Court of Appeals, seeking a reversal of

the decision of the NLRC. The appeals court upheld the NLRC decision that petitioners transfer was not justified by the circumstances. It noted that petitioner was well intentioned in criticizing the management of the company and that even as he criticized the management decisions petitioner nevertheless complied with them. While it is true that private respondents re-assignment did not involve a diminution of salary, however, petitioners have not disputed that he was actually placed on a frozen status, as he was assigned to a functionless position, with no office and staff, and without any opportunity to get any promotion or wage increase as he does not have any performance to speak of because there is no work assigned to him. Petitioner moved for reconsideration, but the Court of Appeals denied his motion. Petitioner now seeks review of the decision of the Court of Appeals, insofar as it deleted the original award of P384,000.00 to him representing his salary increase.

ISSUE: Whether the reassignment of the petitioner to other position is covered under the management prerogative of the employer.

HELD: No. The Supreme Court held that, notwithstanding the foregoing, we hold that petitioner is entitled to damages. Under Article 21 of the Civil Code, any person who wilfully causes loss or injury to another in a manner that is contrary to morals, good customs or public policy shall compensate the latter for the damage. The illegal transfer of petitioner to a functionless office was clearly an abuse by respondent PLDT of its right to control the structure of its organization. The right to transfer or reassign an employee is decidedly an employers exclusive right and prerogative. In several cases, however, we have ruled that such managerial prerogative must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner by which such right is to be exercised. As found by both the NLRC and the Court of Appeals, there is no clear justification for the transfer of petitioner except that it was done as a result of petitioners disagreement with his superiors with regard to company policies.

With the finding that the transfer was illegal, petitioner is entitled to be reinstated to his former, or a substantially equivalent, position without loss of seniority rights. Reinstatement contemplates a restoration to a position from which one has been removed or separated so that the employee concerned may resume the functions of the position he already held.[26] This position would be Senior Manager Level 2, the position he occupied before he was illegally transferred. Reinstatement, to which petitioner is lawfully entitled, must be given full effect and must restore petitioner to his rightful place in the present organizational structure of respondent company approximating his status before he was illegally transferred. As the position no longer exists, petitioner should be restored to an equivalent position.