Almirante: Retrenchment

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By Dominador Almirante

Labor case Digest

Saturday, January 25, 2014


Petitioner Sanoh Fulton Phils., Inc. is a domestic corporation that manufactures automotive parts and wire condensers for home appliances. In view of job order cancellations relating to the manufacture of wire condensers by Matsushita, Sanyo and National Panasonic, Sanoh decided to phase out its Wire Condenser Department. On Dec. 22, 2003, the Human Resources manager of Sanoh informed the employees of that department of retrenchment effective Jan. 22, 2004. Respondents Emmanuel Bernardo and Samuel Taghoy filed complaints for illegal dismissal, claiming there was no valid cause for retrenchment. Sanoh insists that it is the prerogative of management to effect retrenchment as long as it is done in good faith. It claims that it had in fact closed down the wire condenser in view of serious business losses. Does this defense prosper?

The Supreme Court ruling: No.

The Supreme Court said: We are mindful of the principle that losses in the operation of the enterprise, lack of work, or considerable reduction on the volume of business may justify an employer to reduce the work force. But a lull caused by lack of orders or shortage of materials must be of such nature as would severely affect the continued business operations of the employer to the detriment of all and sundry if not properly addressed. Sanoh asserts that cancelled orders of wire condensers led to the phasing out of the Wire Condenser Department, which triggered retrenchment. Sanoh presented the letters of cancellation given by Matsushita and Sanyo as evidence of cancelled orders. The evidence presented by Sanoh barely established the connection between the cancelled orders and the projected business losses that may be incurred by Sanoh.

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Sanoh failed to prove that these cancelled orders would severely impact on their production of wire condensers. The Court held in Lambert Pawnbrokers and Jewelry Corp. v. Binamira, G.R. No. 170464, July 12, 2010, 624 SCRA 705, that the losses must be supported by sufficient and convincing evidence and the normal method of discharging this is by the submission of financial statements duly audited by independent external auditors. Petitioner failed to present proof of the extent of the reduced order and its contribution to the sustainability of its business (Sanoh Fulton Phils., Inc. and Mr. Eddie Jose vs. Emmanuel Bernardo and Samuel Taghoy, G.R. No. 187214, Aug. 14, 2013).

(Almirante is a former labor arbiter)

Published in the Sun.Star Cebu newspaper on January 26, 2014.

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