In February 1999, the employee was hired to work as a production operator in the hermetic department of the employer corporation. Later, the employee was promoted to the position of quality assurance calibration technician.
On 23 April 2009, the employee filed for and commenced her 60-day maternity leave, which was to end on 21 June 2009. She gave birth on 27 April 2009.
On 8 May 2009, while on her maternity leave, the employee was asked to see the employer’s human resource and administrative manager. During their meeting on 21 May 2009, the employee received a letter informing her of her dismissal from employment, effective on 22 June 2009, or the day after the end of her maternity leave. She was told that she would receive her separation pay on the same date. The employer explained that it had to implement survival measures (such as energy saving programs, forced leaves, and compressed workweek arrangements) in view of the global economic crisis that started in the previous year. The employer added that it also suffered a 30% reduction in business volume resulting to substantial losses that threatened its survival. According to the employer, to minimize continuing losses and to ensure survival of the company, it had no alternative but to implement a retrenchment program.
The employee then went to the Department of Labor and Employment, where she was advised to first accept her separation pay before filing a complaint. Thus, on 8 June 2009, after she had been required to process her clearance and sign several documents, the employee received her separation pay.
On 9 July 2009, the employee lodged her complaint for illegal dismissal against her employer.
Was the dismissal from employment on the ground of retrenchment valid?
In Team Pacific Corp. v. Parente1G.R. No. 206789, July 15, 2020, the Supreme Court declared the illegality of the employee’s dismissal from employment.
Under Article 2982Article 298 of the Labor Code of the Philippines states: “ARTICLE 298. 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 workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. . . . 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 one (1) whole year. of the Labor Code of the Philippines, retrenchment is one of the authorized causes to dismiss an employee. It involves a reduction in the workforce and is resorted to when the employer encounters business reverses, losses, or economic difficulties, such as “recessions, industrial depressions, or seasonal fluctuations.” This is usually done as a last recourse when other methods are found inadequate.3La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.
There is a valid retrenchment if the employer had complied with the procedural and substantive requisites of valid retrenchment.
With regard to the procedural requisites for a valid retrenchment, the employer must:
- serve a written notice on the employee and the Department of Labor and Employment one month before the date of the dismissal; and
- pay the required amount of separation pay.
As to the substantive requisites, the employer must show that:
- the retrenchment was a necessary measure to prevent substantial and serious business losses;
- the retrenchment was done in good faith and not to defeat employees’ rights; and
- it was fair and reasonable in selecting the employees who will be retrenched.4La Consolacion College of Manila v. Pascua, G.R. No. 214744, March 14, 2018.
Absent any of these, the dismissal is illegal.
In the said case, the Court found that the employer failed to comply with all the requisites for a valid retrenchment.
Record revealed that the employer submitted the following documents:
- Audited Financial Statements for the years 2006 to 2009, showing its net losses and deficits amounting to millions;
- Letter dated 29 April 2008 advising the Department of Labor and Employment of the compressed work week arrangement it will be implementing;
- Notice of Retrenchment dated 8 May 2009, served on the Department of Labor and Employment;
- Duly accomplished Establishment Employment Report received by the Department of Labor and Employment on 8 May 2009;
- List of Affected Workers by Displacements received by the Department of Labor and Employment on 8 May 2009; and
- The Decision granting the employer’s Petition for Corporate Rehabilitation.
Although the Court acknowledged that these documents would suffice to show business losses and compliance with notice requirements, it, nonetheless, ruled that the employer failed to establish that the employees chosen for retrenchment were selected through fair and reasonable criteria. According to the Court, the employer failed to prove that it used fair and reasonable criteria in carrying out the retrenchment program. It also failed to justify why it included the employee, who had already been employed for 10 years. The Court thus ordered the employer to reinstate the employee to her former position and pay her backwages.
Did the acts of accepting separation pay from the employer and signing a waiver and quitclaim bar the employee from questioning the illegality of her dismissal?
The Court held that the employee was not barred by estoppel. According to the Court, such acts are generally taken with a grain of salt, considering that employees are usually at an economic disadvantage and are often left with no choice, since they are suddenly faced with the pressure to meet financial burdens. Here, the Court found that the employee was dismissed from employment when she had just given birth. Her dismissal’s effectivity was set on the date she was supposed to return from her maternity leave. For the Court, the employee was at a clear disadvantage, having found herself without a job and a source of income right at a time when finances were crucial. Thus, the employee could not be deemed to have waived her right to file a complaint. She was not estopped from contesting the legality of her dismissal.
Can the officers be held solidarily liable with the employer corporation?
The Supreme Court ruled in the negative in view of the principle that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with malice or bad faith. According to the Court, although the employer was unable to show that it applied fair and reasonable criteria in selecting the employees to be entrenched, it did not mean that the dismissals were automatically done in bad faith or with malice. It may have simply failed to strictly comply or to sufficiently prove compliance with the stringent rules for a valid retrenchment. As such, bad faith or malice must still be proved. Since the employee failed to present clear and convincing evidence that the officers of the employer corporation acted in bad faith or with malice, breached any duty, or were motivated by ill will, the employer corporation’s separate and distinct personality was respected.
Further reading:
- Team Pacific Corp. v. Parente, G.R. No. 206789, July 15, 2020.
