Almirante: Retrenchment

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By Dominador Almirante

Labor case Digest

Friday, August 8, 2014


LAST March 15, 2004, respondents Ignacio Tagyamon, Pablito Luna, Fe Badayos, Anicia dela Cruz and Cynthia Comandao received a uniformly worded memorandum of dismissal from petitioner Philippine Carpet Manufacturing Corp. (PCMC). They were informed that petitioner was implementing a retrenchment program in accordance with Article 283 of the Labor Code. The reason was a slump in the market demand for their products on account of un-competitiveness of price. They were paid their separation pay and executed deeds of release, waiver and quitclaim.

Claiming that they were aggrieved by petitioner’s decision to terminate their employment, the respondents filed separate complaints for illegal dismissal. The Court of Appeals (CA) reversed the decision of the labor arbiter (LA) and the National Labor Relations Commission (NLRC) and granted the respondents’ petition for certiorari.

Applying the doctrine of stare decisis, the CA cited the ruling of the Supreme Court in Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto. Tomas, 518 Phil. 299 (2006). Did the CA err?

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The Supreme Court (Third Division) ruling: No.

This case and the PHILCEA case involve the same period, which is March to April 2004; the issuance of the memorandum to employees informing them of the implementation of the cost-reduction program; the implementation of the voluntary retirement program and retrenchment program, except that this case involves different employees; the execution of deeds of release, waiver, and quitclaim, and the acceptance of separation pay by the affected employees.

The illegality of the basis of the implementation of both voluntary retirement and retrenchment programs of petitioners had been thoroughly ruled upon by the Court in the PHILCEA case. It discussed the requisites of both retrenchment and redundancy as authorized causes of termination and that petitioners failed to substantiate them.

In ascertaining the bases of the termination of employees, it took into consideration petitioners’ claim of business losses; the purchase of machinery and equipment after the termination, the declaration of cash dividends to stockholders, the hiring of 100 new employees after the retrenchment, and the authorization of full blast overtime work for six hours daily. These, said the Court, are inconsistent with petitioners’ claim that there was a slump in the demand for its products which compelled them to implement the termination programs. In arriving at its conclusions, the Court took note of petitioners’ net sales, gross and net profits, as well as net income.

The Court, thus, reached the conclusion that the retrenchment effected by PCMC is invalid due to a substantive defect (Philippine Carpet Manufacturing Corp., et. al. vs. Ignacio B. Tagyamon, et. al., G.R. No. 191475, Dec. 11, 2013).

Published in the Sun.Star Cebu newspaper on August 09, 2014.

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