SECOND DIVISION
LINTON COMMERCIAL CO., INC. G.R. No. 163147
and DESIREE ONG,
Petitioners,
Present:
QUISUMBING,
J.,
Chairperson,
-versus- CARPIO,
CARPIO
MORALES,
TINGA,
and
VELASCO,
JR., JJ.
ALEX A. HELLERA, FRANCISCO
RACASA, DANTE ESCARLAN,
DONATO SASA, RODOLFO OLINAR, Promulgated:
DANIEL CUSTODIO, ARTURO
POLLO,
ROBERT OPELIÑA, B. PILAPIL,
WINIFREG
BLANDO, JUANITO October 10, 2007
GUILLERMO, DONATO BONETE,
ISAGANI
ILAGAN, REXTE SOLANOY,
RODOLFO
LIM, ERNESTO ALCANTARA, DANTE
DUMAPE, FELIPE CAGOCO, JR.,
JOSE
NARCE, NELIO CANTIGA, QUIRINO
C.
SATPARAM ELMER, ROMEO BALAIS,
CLAUDIO S. MORALES, DANILO
NORLE,
LEONCIO RACASA, NOEL LEONCIO
RACASA, NOEL ACEDILLA,
ELPIDIO E.
VERGABINIA, JR., CONRADO
CAGOCO,
ROY BORAGOY, EDUARDO GULTIA,
REYNALDO
ROY DURANO, LEO
BLANDO, JAYOMA A., NOMER
ALTAREJOS,
RAMON OLINAR III, SATURNINO
C. EBAYA,
FERNANDO R. REBUCAS, NICANOR
L. DE
CASTRO, EDUARDO GONZALES,
ISAGANI
GONZALES, THOMAS ANDRAB, JR.,
MINIETO
DURANO, ERNESTO VALLENTE,
NONITO I.
DULA, NESTOR M. BONETE, JOSE
SALONOY,
ALBERTO LAGMAN, ROLANDO
TORRES,
ROLANDO TOLDO, ROLINDO
CUALQUIERA,
ARMANDO
SELAPIO, MARTIN V.
VILLACAMPA, JR., CARLITO
PABLE, DANTE ESCARLAN, M.
DURANO, RAMON
ROSO, LORETA RAFAEL, and
ELEZAR MELLEJOR,
Respondents.
x-------------------------------------------------------------------------------------x
D E C I S I O N
Tinga, J.:
This is a petition for review under
Rule 45 of the Rules of Civil Procedure seeking the reversal of the Decision[1] of
the Court of Appeals promulgated on
This case originated from a labor complaint
filed before the National Labor Relations Commission (NLRC) in which herein respondents
contended that petitioner Linton Commercial Company, Inc. (Linton) had committed
illegal reduction of work when it imposed a reduction of work hours thereby
affecting its employees.
Linton is a domestic corporation engaged
in the business of importation, wholesale, retail and fabrication of steel and
its by-products.[3] Petitioner Desiree Ong is Linton’s vice president.[4] On
On
Aggrieved, sixty-eight (68) workers (workers)
filed a Complaint for illegal reduction of workdays with the Arbitration Branch
of the NLRC on
On the other hand, the workers pointed
out that Linton implemented the reduction of work hours without observing
Article 283 of the Labor Code, which required submission of notice thereof to
DOLE one month prior to the implementation of reduction of personnel, since
Linton filed only the establishment termination report enacting the compressed
workweek on the very date of its implementation.[10]
Petitioners, on the other hand,
contended that the devaluation of the peso created a negative impact in
international trade and affected their business because a majority of their raw
materials were imported. They claimed that their business suffered a net loss
of P3,569,706.57 primarily due to currency devaluation and the slump in
the market. Consequently, Linton decided to reduce the working days of its
employees to three (3) days on a rotation basis as a cost-cutting measure.
Further, petitioners alleged that the compressed workweek was actually
implemented on
Pending decision of the Labor
Arbiter, twenty-one (21) of the workers signed individual release and quitclaim
documents stating that they had voluntarily tendered their resignation as
employees of Linton and that they had been fully paid of all monetary compensation
due them.[12]
On
Petitioners appealed to the National
Labor Relations Commission (NLRC). In a Resolution[14]
promulgated on
The workers then filed before the
Court of Appeals[17] a
petition for certiorari under Rule 65 of the Rules of Civil Procedure assailing
the decision[18] of the
NLRC and its resolution[19] that
denied their Motion for Reconsideration. In the petition, the workers claimed
that the NLRC erred in finding that the one (1) month notice requirement under
Article 283 of the Labor Code did not apply to the instant case; that Linton
did not exceed the limits of its business prerogatives; and that Linton was able
to establish a factual basis on record to justify the reduction of work days.
In its Comment,[20]
Linton highlighted the fact that the caption, the body as well as the
verification of the petition submitted by complainants-workers indicated solely
“Alex Hellera, et al.” as petitioners.
Linton argued that the petition was defective and did not necessarily include
the other workers in the proceedings before the NLRC. Linton also mentioned that
21 out of the 68 complainants-workers executed individual resignation letters
and individual waivers and quitclaims.[21] With these waivers and quitclaims, Linton
raised in issue whether the petition still included the signatories of said
documents. Moreover, Linton pointed out that
the caption of the petition did not include the NLRC as party respondent, which
made for another jurisdictional defect. The rest of its arguments were merely a
reiteration of its arguments before the NLRC.
In reversing the NLRC, the Court of
Appeals, in its Decision[22]
dated 12 December 2003 ruled that the failure to indicate all the names of
petitioners in the caption of the petition was not violative of the Rules of Court because the records of the
case showed that there were sixty-eight (68) original complainants who filed
the complaint before the Arbitration Branch of the NLRC. The appellate court likewise
considered the quitclaims and release documents as “ready documents” which did
not change the fact that the 21 workers were impelled to sign the same. The
appellate court gave no credence to the said quitclaims, considering the
economic disadvantage that would be suffered by the employees. The appellate
court also noted that the records did not show that the 21 workers desisted
from pursuing the petition and that the waivers and quitclaims would not bar
the 21 complainants from continuing the action.[23]
On the failure to include the NLRC as
party respondent, the appellate court treated the NLRC as a nominal party which
ought to be joined as party to the petition simply because the technical rules
require its presence on record. The inclusion of the NLRC in the body of the
petition was deemed by the appellate court as substantial compliance with the
rules.
On the main issues, the Court of
Appeals ruled that the employees were constructively dismissed because the short
period of time between the submission of the establishment termination report
informing DOLE of its intention to observe a compressed workweek and the actual
implementation thereat was a manifestation of Linton’s intention to eventually
retrench the employees. It found that Linton
had failed to observe the substantive and procedural requirements of a valid
dismissal or retrenchment to avoid or minimize business losses since it had failed
to present adequate, credible and persuasive evidence that it was indeed
suffering, or would imminently suffer, from drastic business losses. Linton’s
financial statements for 1997-1998 showed no indication of financial losses,
and the alleged loss of P3,645,422.00 in 1997 was considered
insubstantial considering its total asset of P1,065,948,601.00.Hence,
the appellate court considered Linton’s losses as de minimis.[24]
Lastly, the appellate court found
Linton to have failed to adopt a more sensible means of cutting the costs of its
operations in less drastic measures not grossly unfavorable to labor. Hence,
Linton failed to establish enough factual basis to justify the necessity of a
reduced workweek.[25]
Petitioners filed a motion for reconsideration[26] which
the appellate court denied through a Resolution[27] dated
In filing the instant petition for
review, petitioners allege that the Court of Appeals erred when it considered
the petition as having been filed by all sixty (68) workers, in disregard of
the fact that only “Alex Hellera, et al.” was indicated as petitioner in the
caption, body and verification of the petition and twenty-one (21) of the workers
executed waivers and quitclaims. Petitioners
further argue that the Court of Appeals erred in annulling the release and
quitclaim documents signed by 21 employees because no such relief was prayed
for in the petition. The validity of the release and quitclaim was also not raised
as an issue before the labor arbiter nor the NLRC. Neither was it raised in the
very petition filed before the Court of Appeals. Petitioners conclude that the Court of Appeals,
therefore, had invalidated the waivers and quitclaims motu proprio.
Petitioners also allege that the
Court of Appeals erred when it held that the reduction of workdays is
equivalent to constructive dismissal. They posit that there was no reduction of
salary but instead only a reduction of working days from six to three days per
week. Petitioners add that the reduction of workdays, while not expressly
covered by any of the provisions of the Labor Code, is analogous to the
situation contemplated in Article 286[28]
of the Labor Code because the company implemented the reduction of workdays to
address its financial losses. Lastly, they note that since there was no
retrenchment, the one-month notice requirement under Article 283 of the Labor
Code is not applicable.
First, we resolve the procedural
issues of the case. Rule 7, Section 1 of the Rules of Court states that the
names of the parties shall be indicated in the title of the original complaint
or petition. However, the rules itself endorses
its liberal construction if it promotes the objective of securing a just,
speedy and inexpensive disposition of the action or proceeding.[29] Pleadings shall be construed liberally so as
to render substantial justice to the parties and to determine speedily and
inexpensively the actual merits of the controversy with the least regard to
technicalities.[30]
In Vlason Enterprises Corporation
v. Court of Appeals[31]
the Court pronounced that, while the general rule requires the inclusion of
the names of all the parties in the title of a complaint, the non-inclusion of
one or some of them is not fatal to the cause of action of a plaintiff,
provided there is a statement in the body of the petition indicating that a
defendant was made a party to such action.
If in Vlason the Court found that the absence of defendant’s name
in the caption would not cause the dismissal of the action, more so in this
case where only the names of some of petitioners were not reflected. This is
consistent with the general rule that mere failure to include the name of a
party in the title of a complaint is not fatal by itself.[32]
Petitioners likewise challenge the
absence of the names of the other workers in the body and verification of the
petition. The workers’ petition shows
that the petition stipulated as parties-petitioners “Alex A. Hellera, et al.” as employees of Linton, meaning
that there were more than one petitioner who were all workers of Linton. The
petition also attached the resolution[33]
of the NLRC where the names of the workers clearly appear. As documents
attached to a complaint form part thereof,[34]
the petition, therefore has sufficiently indicated that the rest of the workers
were parties to the petition.
With respect to the absence of the workers’
signatures in the verification, the verification requirement is deemed
substantially complied with when some of the parties who undoubtedly have
sufficient knowledge and belief to swear to the truth of the allegations in the
petition had signed the same. Such verification is deemed a sufficient assurance that the matters
alleged in the petition have been made in good faith or are true and correct, and
not merely speculative.[35] The
verification in the instant petition states that Hellera, the affiant, is the president
of the union of “which complainants are all members and officers.”[36] As the matter at hand is a labor dispute
between Linton and its employees, the union president undoubtedly has
sufficient knowledge to swear to the truth of the allegations in the petition.
Hellera’s verification sufficiently meets the purpose of the requirements set
by the rules.
Moreover, the Court has ruled that
the absence of a verification is not jurisdictional, but only a formal defect.[37]
Indeed, the Court has ruled in the past that a pleading required by the Rules
of Court to be verified may be given due course even without a verification if
the circumstances warrant the suspension of the rules in the interest of
justice.[38]
We turn to the propriety of the Court
of Appeals’ ruling on the invalidity of the waivers and quitclaims executed by the
21 workers. It must be remembered that the petition filed before the Court of
Appeals was a petition for certiorari under Rule 65 in which, as a rule, only
jurisdictional questions may be raised, including matters of grave abuse of
discretion which are equivalent to lack of jurisdiction.[39] The issue on the validity or invalidity of
the waivers and quitclaims was not raised as an issue in the petition. Neither
was it raised in the NLRC. There is no point of reference from which one can
determine whether or not the NLRC committed grave abuse of discretion in its
finding on the validity and binding effect of the waivers and quitclaims since
this matter was never raised in issue in the first place.
In addition, petitioners never had
the opportunity to support or reinforce the validity of the waivers and
quitclaims because the authenticity and binding effect thereof were never
challenged. In the interest of fair play, justice and due process, the
documents should not have been unilaterally evaluated by the Court of Appeals.
Thus, the corresponding modification of its Decision should be ordained.
After resolving the technical aspects
of this case, we now proceed to the merits thereof. The main issue in this labor dispute is
whether or not there was an illegal reduction of work when Linton implemented a
compressed workweek by reducing from six to three the number of working days
with the employees working on a rotation basis.
In Philippine Graphic Arts, Inc.
v. NLRC,[40] the
Court upheld for the validity of the reduction of working hours, taking into
consideration the following: the arrangement was temporary, it was a more
humane solution instead of a retrenchment of personnel, there was notice and
consultations with the workers and supervisors, a consensus were reached on how
to deal with deteriorating economic conditions and it was sufficiently proven
that the company was suffering from losses.
The Bureau of Working Conditions of
the DOLE, moreover, released a bulletin[41] providing
for in determining when an employer can validly reduce the regular number of
working days. The said bulletin states that a reduction of the number of
regular working days is valid where the arrangement is resorted to by the
employer to prevent serious losses due to causes beyond his control, such as
when there is a substantial slump in the demand for his goods or services or
when there is lack of raw materials.
Although the bulletin stands more as
a set of directory guidelines than a binding set of implementing rules, it has one
main consideration, consistent with the ruling in Philippine Graphic Arts
Inc., in determining the validity of reduction of working hours—that the
company was suffering from losses.
Petitioners attempt to justify their
action by alleging that the company was suffering from financial losses owing
to the Asian currency crisis. Was petitioners’ claim of financial losses
supported by evidence?
The lower courts did not give
credence to the income statement submitted by Linton because the same was not
audited by an independent auditor.[42]
The NLRC, on the other hand, took judicial notice of the Asian currency crisis
which resulted in the devaluation of the peso and a slump in market demand.[43]
The Court of Appeals for its part held that Linton failed to present adequate,
credible and persuasive evidence to show that it was in dire straits and indeed
suffering, or would imminently suffer, from drastic business losses. It did not
find the reduction of work hours justifiable, considering that the alleged loss
of P3,645,422.00 in 1997 is insubstantial compared to Linton’s total
asset of P1,065,948,601.76.[44]
A close examination of petitioners’
financial reports for 1997-1998 shows that, while the company suffered a loss
of P3,645,422.00 in 1997, it retained a considerable amount of earnings[45]
and operating income.[46] Clearly
then, while Linton suffered from losses for that year, there remained enough
earnings to sufficiently sustain its operations. In business, sustained operations in the
black is the ideal but being in the red is a cruel reality. However, a year of financial
losses would not warrant the immolation of the welfare of the employees, which
in this case was done through a reduced workweek that resulted in an unsettling
diminution of the periodic pay for a protracted period. Permitting reduction of
work and pay at the slightest indication of losses would be contrary to the
State’s policy to afford protection to labor and provide full employment.[47]
Certainly, management has the
prerogative to come up with measures to ensure profitability or loss
minimization. However, such privilege is not absolute. Management prerogative
must be exercised in good faith and with due regard to the rights of labor.[48]
As previously stated, financial
losses must be shown before a company can validly opt to reduce the work hours
of its employees. However, to date, no definite
guidelines have yet been set to determine whether the alleged losses are sufficient
to justify the reduction of work hours. If
the standards set in determining the justifiability of financial losses under Article
283 (i.e., retrenchment) or Article 286
(i.e., suspension of work) of the
Labor Code were to be considered, petitioners would end up failing to meet the
standards. On the one hand, Article 286
applies only when there is a bona fide
suspension of the employer’s operation of a business or undertaking for
a period not exceeding six (6) months.[49] Records show that Linton continued its business
operations during the effectivity of the compressed workweek, which spanned
more than the maximum period. On the other hand, for retrenchment to be
justified, any claim of actual or potential business losses must satisfy the
following standards: (1) the losses incurred are substantial and not de
minimis; (2) the losses are actual or reasonably imminent; (3) the
retrenchment is reasonably necessary and is likely to be effective in
preventing the expected losses; and (4) the alleged losses, if already incurred,
or the expected imminent losses sought to be forestalled, are proven by
sufficient and convincing evidence.[50] Linton failed to comply with these standards.
All taken into account, the
compressed workweek arrangement was unjustified and illegal. Thus, petitioners
committed illegal reduction of work hours.
In assessing the monetary award in
favor of respondents, the Court has taken the following factors into account:
(1) The compressed workweek arrangement
was lifted after six (6) months, or on
(2) The claims of the workers, as
reflected in their pleadings, were narrowed to petitioners’ illegal reduction
of their work hours and the non-payment of their compensation for three (3) days
a week from
(3) As found by the NLRC, 21 of the
workers are no longer entitled to any monetary award since they had already executed
their respective waivers and quitclaims. We give weight to the finding and
exclude the 21 workers as recipients of the award to be granted in this case. Consequently,
only the following workers are entitled to the award, with the amounts
respectively due them stated opposite their names:
1. Alex A.
Hellera - P16,368.30
2. Francisco Racasa - 16,458.00
3. Dante Escarlan - 15,912.00
4. Donato Sasa - 15,580.50
5. Rodolfo Olinar - 15,912.00
6. Daniel Custodio - 15,912.00
7. Arturo Pollo - 16,660.80
8. B. Pilapil - 16,075.80
9. Donato Bonete - 15,600.00
10. Isagani Yap - 15,678.00
11. Cesar Ragonon - 16,068.00
12. Benedicto Bagan - 15,775.50
13. Rexte Solanoy - 15,678.00
14. Felipe Cagoco, Jr. - 15,990.00
15. Jose Narce - 16,348.80
16. Quirino C. Ada - 15,990.00
17. Salfaram Elmer - 16,302.00
18. Romeo Balais - 16,302.00
19. Claudio S. Morales - 15,947.10
20. Elpidio E. Vergabinia - 15,561.00
21. Conrado Cagoco - 15,990.00
22. Roy Boragoy - 15,892.50
23. Reynaldo Santos - 16,200.60
24. Lino
25. Roy Durano - 15,678.00
26. Leo Valencia - 15,678.00
27. Jayoma A. - 15,561.00
28. Ramon Olinar III - 15,678.00
29. Saturnino C. Ebaya - 15,919.80
30. Nicanor L. de Castro - 16,614.00
31. Eduardo Gonzales - 15,678.00
32. Isagani Gonzales - 16,469.70
33. Thomas Andrab, Jr. - 15,912.00
34. Minieto Durano - 16,660.80
35. Ernesto Vallente - 15,997.80
36. Nestor M. Bonete - 15,705.30
37. Jose Salonoy - 16,458.00
38. Alberto Lagman - 16,660.80
39. Rolando Torres - 15,678.00
40. Rolindo Cualquiera - 16,068.00
41. Armando Lima - 16,426.80
42. Alfredo Selapio - 16,060.20
43. Martin V. Villacampa - 15,939.30
44. Carlito Pable - 16,263.00
45. Dante Escarlan - 15,912.00
46. M. Durano - 16,614.00
47. Ramon Roso - 16,302.00[52]
(4) The Labor Arbiter’s decision in
favor of respondents was reversed by the NLRC. Considering that there is no
provision for appeal from the decision of the NLRC,[53]
petitioners should not be deemed at fault in not paying the award as ordered by
the Labor Arbiter. Petitioners’ liability only gained a measure of certainty
only when the Court of Appeals reversed the NLRC decision. In the interest of
justice, the 6% legal interest on the award should commence only from the date
of promulgation of the Court of Appeals’ Decision on
WHEREFORE,
the Petition is GRANTED IN PART. The decision of the Court of Appeals reinstating
the decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect
that the 21 workers who executed waivers and quitclaims are no longer entitled
to back payments. Petitioners are ORDERED TO PAY respondents, except the
aforementioned 21 workers, the monetary award as computed,[54] pursuant
to the decision of the Labor Arbiter[55] with
interest at the rate of 6% per annum from 12 December 2003, the date of
promulgation of the Court of Appeals’ decision, until the finality of this decision,
and thereafter at the rate of 12% per annum until full payment.
SO
ORDERED.
DANTE O. TINGA Associate Justice
WE CONCUR:
LEONARDO A. QUISUMBING
Associate Justice
Chairperson
ANTONIO T. CARPIO CONCHITA CARPIO MORALES
Associate Justice Associate Justice
PRESBITERO J. VELASCO,
JR.
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
LEONARDO A. QUISUMBING
Associate Justice
Chairperson,
Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Chairperson’s Attestation, it is hereby
certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
[1]Rollo, pp. 68-77. Penned by Court of Appeals Justice Romeo A.
Brawner and concurred in by Justices Rebecca De Guia-Salvador and Jose C.
Reyes, Jr.
[2]
[4]CA
Records, p. 34.
[5]Rollo,
p. 80.
[6]
[7]
[8]
[11]
[13]
[14]
[15]
[16]
[17]Rollo, pp. 182-206. Petition for Review
on Certiorari.
[18]CA
rollo, pp. 33-42.
[19]
[22]Supra
note 1.
[28]Art.
286. When employment not deemed
terminated.—The bona fide suspension of the operation of a business or
undertaking for a period not exceeding six (6) months, or the fulfillment by
the employee of a military service or civic duty shall not terminate
employment. In all such cases, the employer shall reinstate the employee to his
former position without loss of seniority rights if he indicates his desire to
resume his work not later than one (1) month from the resumption of operations
of his employer from his relief from the military or civic duty.
[30]Vlason
Enterprises Corporation, v. CA, 369
Phil. 269, 304 (1999) citing Contech
Construction Technology & Development Corp. v. Court of Appeals, 211
SCRA 692, 695-697, 23 July 1992.
[32]Supra
note 30.
[34]Philippine Bank of Communications v. Court
of Appeals, G.R. No. 92067, 22 March 1991, 195 SCRA 567, 573, reiterating Asia Banking Corporation v. Walter E. Olsen
& Co. 48 Phil 529.
[35]Ateneo de Naga University et al. v. Manalo, G.R. No. 160455, 9 May 2005, 458 SCRA 325, citing Torres
v. Specialized Packaging Development Corporation, G.R. No. 149634, 6 July 2004, 434 SCRA 455.
[36]Rollo, p. 210.
[37]PASUDECO v. NLRC, 339 Phil. 120, 127 (1997).
[41]Explanatory
Bulletin on the Effect of Reduction of Workdays on Wages/Living Allowances,
signed by Director Augusto G. Sanchez, dated 23 July 1985.
[43]
[44]
[48]Unicorn Safety Glass, Inc. et al. v. Basarte, G.R. No. 154689,
[50]Tanjuan
v. Phil. Postal Savings Bank, Inc., 457 Phil. 993, 1009 (2003), reiterating
Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC, 357 Phil.
110, 120,
[52]CA rollo, pp. 79-81. Computed by the
Research and Information Unit of the NLRC, dated
[53]The
special civil action of certiorari being the proper vehicle for judicial review
of decisions of the NLRC: See St. Martin Funeral Home v. NLRC, 356 Phil.
811 (1998).
[55]Supra
note 13. Dated