THIRD DIVISION
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JUVY M. MANATAD, Petitioner, - versus - PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, Respondent. |
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G.R. No. 172363 Present: YNARES-SANTIAGO, J., Chairperson, AUSTRIA-MARTINEZ,
CHICO-NAZARIO, NACHURA, and REYES, JJ. Promulgated: |
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CHICO-NAZARIO,
J.:
Before this Court is a Petition for
Review on Certiorari[1] under Rule 45 of
the Revised Rules of Court filed by petitioner Juvy M. Manatad seeking the
reversal and the setting aside of the Decision[2]
dated
WHEREFORE, the petition is GRANTED. The
Decision dated
The
present controversy stems from the following antecedent factual and procedural
facts:
In September
1988, petitioner was employed by respondent Philippine Telegraph and Telephone Corporation
(PT&T) as junior clerk with a monthly salary of P3,839.74. She was later promoted as Account Executive,
the position she held until she was temporarily laid off from employment on
Petitioner’s temporary separation from
employment was pursuant to the Temporary Staff Reduction Program adopted by respondent
due to serious business reverses. On 16
November 1998, petitioner received a letter from respondent inviting her to
avail herself of its Staff Reduction Program Package equivalent to one-month
salary for every year of service, one and one-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. Petitioner,
however, did not opt to avail herself of the said package. On
Consequently, petitioner filed a Complaint
for illegal dismissal against respondent, its Regional Director for Visayas Reynaldo Macrohon, and its President and
Chief Executive Officer Marilyn Eleonor Santiago before the Labor
Arbiter claiming the award of separation pay, damages and attorney’s fees. In her Position Paper, petitioner mainly alleged
that the retrenchment program adopted by respondent was illegal for it was
gaining profits for the period of July 1997 to June 1998. In support of her allegation that respondent
was obtaining profits, petitioner presented the central Visayas Operating
Margin Reports[6] showing the respondent’s
gross revenue and net profits in the region for the period in question:
|
Month |
Gross Revenue |
Net Profit |
|
July
1997 |
|
|
|
August
1997 |
2,314,527.75 |
662,812.13 |
|
September
1997 |
2,308,364.14 |
604,924.51 |
|
October
1997 |
2,403,083.30 |
649,583.33 |
|
November
1997 |
1,965,446.44 |
367,956.48 |
|
December
1997 |
2,391,721.94 |
657,023.23 |
|
January
1998 |
2,649,857.35 |
825,581.17 |
|
February
1998 |
2,611,029.13 |
702,132.23 |
|
March
1998 |
2,340,166.83 |
488,549.78 |
|
April
1998 |
2,199,814.78 |
230,380.21 |
|
May
1998 |
2,186,735.40 |
403,416.66 |
|
June
1998 |
2,240,238.94 |
500,656.64 |
Petitioner
further belied respondent’s contention that it was suffering from serious
financial reverses by presenting respondent’s Special Order No. 98-21[7]
granting an increase in the salaries of its employees under Job Grade 8 and 9
in the amount of P2,300.00 a month effective January 1998. Petitioner’s evidence supposedly showed that it
was still economically viable for respondent to continue its business
operations without downsizing its workforce.
Petitioner thus prayed for the award of separation pay in the amount of P107,000.00,
unpaid salary, prorated 13th month pay, unpaid vacation leave
benefits and attorney’s fees.
On the other hand, respondent asserted
that petitioner was separated from service pursuant to a valid retrenchment
implemented by the company. Retrenchment
is an authorized cause for the employer to terminate the services of an
employee. Due to huge business losses
suffered by respondent in the sum of P684,096,285.00 from 1995-1998, it
was constrained to arrest escalating operating costs by downsizing its
workforce.
Respondent claimed that it was
suffering from serious financial reverses from 1995 up to 1999, as shown below:
|
YEAR |
PROFIT |
LOSSES |
|
1995 |
|
|
|
1996 |
|
|
|
1997 |
|
|
|
1998 |
|
|
|
1999 |
|
|
To
support its claim, respondent submitted its financial statements for the fiscal
period of P558
Million which resulted in a deficit of about P574 Million as of
On
WHEREFORE, premises considered, judgment
is hereby rendered ordering the respondent Philippine Telephone and Telegraph
Corp. (PT&T) to pay the complainant Juvy Manatad the following:
1. Separation pay -- P107,000.00
2. Backwages -- P 42,800.00
3. Unpaid wages -- P
50,850.00
4. Vacation and sick leave pay -- P
13,563.00
5. Proportionate 13th month
pay – P 1,335.00
6. Attornet’s fee -- P
21,554.00
-----------------
TOTAL -- P
237,102.00
Less Advances -- P 13,050.00
-----------------
P 224,050.00
The other claims and the case against
respondents Reynaldo Machoron and Marilyn Santiago are dismissed for lack of
merit.[10]
Dissatisfied, petitioner appealed to
the NLRC arguing that the Labor Arbiter gravely abused its discretion in
sustaining the illegality of petitioner’s dismissal. In ruling that respondent’s retrenchment
program was unjustified, the Labor Arbiter disregarded the financial statements
submitted by the respondent which were audited by independent auditors showing
that it was in dire financial distress.
On
WHEREFORE, the Decision of the Labor
Arbiter dated
The Motion for Reconsideration filed
by respondent was denied by the NLRC in its Resolution dated
On Certiorari,
the Court of Appeals reversed the NLRC and the Labor Arbiter Decisions and
upheld the validity of respondent’s retrenchment program.[13] The appellate court was fully persuaded that
the respondent was besieged by a continuing downtrend in its business
operations and severe financial losses which justified its immediate drastic
reduction of personnel.[14] The financial standing of respondent cannot be
determined by the performance of a single branch or unit alone but by the
performance of all its branches integrated as a whole. In addition, the comparative statements of
income prepared by independent auditors constitute a normal method of proving
the profit and loss performance of a business company. Finally, the Court of Appeals also observed
that respondent duly complied with the requirement of service of notice to the
employee one month before the intended date of retrenchment.
Similarly
ill-fated was petitioner’s Motion for Reconsideration which was denied by the
Court of Appeals in a Resolution[15]
dated
Petitioner
is now before this Court via the Petition at bar raising the following
issues:
I.
[WHETHER OR NOT THE COURT OF APPEALS
ERRED] IN DECLARING THAT PETITIONER WAS NOT ILLEGALLY DISMISSED;
II.
[WHETHER
OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT THE RETRENCHMENT MADE BY PRIVATE
RESPONDENT WAS VALID AND LEGAL WHEN PETITIONER DID NOT GIVE CONSENT;
III.
[WHETHER
OR NOT THE COURT OF APPEALS ERRED] IN NOT DECLARING THAT THE ALLEGED LOSSES OF
PRIVATE RESPONDENT WAS ALTERED TO CONFORM WITH THE EVIDENCE OF PETITIONER
SHOWING PROFITS IN THE CENTRAL VISAYAS OPERATIONS GROUP;
IV.
[WHETHER
OR NOT THE COURT OF APPEALS ERRED] IN FINDING THAT PETITIONER IS BOUND BY THE
COLLECTIVE BARGAINING AGREEMENT [CBA] WHEN SHE IS NOT A UNION MEMBER;
V.
[WHETHER
OR NOT THE COURT OF APPEALS ERRED] IN DELETING THE AWARD OF SEPARATION PAY, BACKWAGES,
UNPAID WAGES, VACATION AND SICK LEAVE PAY, PROPORTIONATE 13th MONTH
PAY, AND ATTORNEY’S FEES.[16]
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.[17] In the discharge of these requirements, it is
the employer who bears the onus, being
in the nature of affirmative defense.[18]
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.[19]
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
The financial statements reflect that respondent
suffered substantial loss in the amount of P558 Million by
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[23]:
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 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).[24]
Even if we take into consideration the figures submitted
by petitioner and accede to her position that respondent was gaining
substantial profits from its
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.[25]
In fact, even granting arguendo that respondent was not experiencing losses, it is still
authorized by Article 283[26]
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.[27]
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.[28]
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
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.[29] 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.
WHEREFORE,
premises considered, the instant Petition is DENIED. The Court of Appeals Decision dated
SO ORDERED.
|
|
MINITA V.
CHICO-NAZARIO
Associate
Justice |
WE
CONCUR:
CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson
Associate Justice
Associate Justice
RUBEN T. REYES
Associate Justice
ATTESTATION
I attest that the
conclusions in the above Decision were reached in consultation before the case
was assigned to the writer of the opinion of the Court’s Division.
CONSUELO
YNARES-SANTIAGO
Associate Justice
Chairperson, Third 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
were 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. 4-20.
[2] Penned by Associate Justice Pampio A. Abarintos with
Associate Justices Mercedes Gozo-Dadole and Ramon M. Bato, Jr., concurring. Rollo,
pp. 21-29.
[3]
[4]
[5]
[6] Records, p. 15.
[7]
[8]
[9]
[10] Rollo, p. 107.
[11] Records, pp. 329-333.
[12] Rollo, p. 113.
[13]
[14]
[15]
[16]
[17] F.F. Marine Corporation v. National Labor Relations Commission, G.R. No. 152039,
[18] San Miguel
Corporation v. Aballa, G.R. No. 149011,
[19] F.F. Marine
Corporation v. National Labor Relations Commission, supra note 17 at 165.
[20]
[21] Records, p. 169.
[22] Supra note 18 at 430.
[23] G.R. No. 131108,
[24] Rollo, pp.
25-26.
[25] Records, p. 169.
[26] 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.
[27] Mac
[28] Uichico v. National
Labor Relations Commission, G.R. No. 121434,
[29] Manila Water
Company, Inc. v. Peña, G.R. No. 158255, 8 July 2004, 434 SCRA 53, 64-65.