serrano v nlrc

9/26/2015 SUPREMECOURTREPORTSANNOTATEDVOLUME323

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VOL. 323, JANUARY 27, 2000 445Serrano vs. National Labor Relations Commission

G.R. No. 117040. January 27, 2000.*

RUBEN SERRANO, petitioner, vs. NATIONAL LABORRELATIONS COMMISSION and ISETANNDEPARTMENT STORE, respondents.

Labor Law Dismissal Absent proof that management actedin a malicious or arbitrary manner, the Court will not interferewith the exercise of judgment by an employer.As we pointed outin another case, the [management of a company] cannot bedenied the faculty of promoting efficiency and attaining economyby a study of what units are essential for its operation. To itbelongs the ultimate determination of whether services should beperformed by its personnel or contracted to outside agencies . . .[While there] should be mutual consultation, eventually deferenceis to be paid to what management decides.Consequently,absent proof that management acted in a malicious or arbitrarymanner, the Court will not interfere with the exercise of judgmentby an employer.

Same Same Termination of petitioners services was for anauthorized cause, i.e., redundancy.That the phaseout of thesecurity section constituted a legitimate business decisionis afactual finding of an administrative agency which must beaccorded respect and even finality by this Court since nothing canbe found in the record which fairly detracts from such finding.Accordingly, we hold

________________

* EN BANC.

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446 SUPREME COURT REPORTS ANNOTATED

Serrano vs. National Labor Relations Commission

that the termination of petitioners services was for an authorizedcause, i.e., redundancy. Hence, pursuant to Art. 283 of the LaborCode, petitioner should be given separation pay at the rate of onemonth pay for every year of service.

Same Same Due Process It is now settled that where thedismissal of one employee is in fact for a just and valid cause andis so proven to be but he is not accorded his right to due process x xx the dismissal shall be upheld but the employer must besanctioned for noncompliance with the requirements of or forfailure to observe, due process.This is not the first time thisquestion has arisen. In Sebuguero v. NLRC, workers in a garmentfactory were temporarily laid off due to the cancellation of ordersand a garment embargo. The Labor Arbiter found that theworkers had been illegally dismissed and ordered the company topay separation pay and backwages. The NLRC, on the other hand,found that this was a case of retrenchment due to business lossesand ordered the payment of separation pay without backwages.This Court sustained the NLRCs finding. However, as thecompany did not comply with the 30day written notice in Art.283 of the Labor Code, the Court ordered the employer to pay theworkers P2,000.00 each as indemnity. The decision followed theruling in several cases involving dismissals which, althoughbased on any of the just causes under Art. 282, were effectedwithout notice and hearing to the employee as required by theimplementing rules. As this Court said: It is now settled thatwhere the dismissal of one employee is in fact for a just and validcause and is so proven to be but he is not accorded his right to dueprocess, i.e., he was not furnished the twin requirements of noticeand opportunity to be heard, the dismissal shall be upheld but theemployer must be sanctioned for noncompliance with therequirements of, or for failure to observe, due process.

Same Same Same Rule reversed a long standing policy thatthe dismissal or termination is illegal if effected without notice tothe employee.The rule reversed a long standing policytheretofore followed that even though the dismissal is based on ajust cause or the termination of employment is for an authorizedcause, the dismissal or termination is illegal if effected withoutnotice to the employee. The shift in doctrine took place in 1989 inWenphil Corp. v. NLRC. In announcing the change, this Court



said: x x x However, the petitioner must nevertheless be held toaccount for failure to extend to private respondent his right to aninvestigation before

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causing his dismissal. The rule is explicit as above discussed. Thedismissal of an employee must be for just or authorized cause andafter due process. Petitioner committed an infraction of the secondrequirement. Thus, it must be imposed a sanction for its failure togive a formal notice and conduct an investigation as required bylaw before dismissing petitioner from employment. Consideringthe circumstances of this case petitioner must indemnify theprivate respondent the amount of P1,000.00. The measure of thisaward depends on the facts of each case and the gravity of theomission committed by the employer.

Same Same Same The Due Process Clause of theConstitution is a limitation on government powers.The first isthat the Due Process Clause of the Constitution is a limitation ongovernmental powers. It does not apply to the exercise of privatepower, such as the termination of employment under the laborCode. This is plain from the text of Art. III, 1 of the Constitution,viz.: No person shall be deprived of life, liberty, or propertywithout due process of law . . . .The reason is simple: Only theState has authority to take the life, liberty, or property of theindividual. The purpose of the Due Process Clause is to ensurethat the exercise of this power is consistent with what areconsidered civilized methods.

Same Same Same Notice and hearing under the Due ProcessClause before the power of organized society are brought to bearupon the individual.The second reason is that notice andhearing are required under the Due Process Clause before thepower of organized society are brought to bear upon theindividual. This is obviously not the case of termination ofemployment under Art. 283. Here the employee is not faced withan aspect of the adversary system. The purpose for requiring a 30day written notice before an employee is laid off is not to affordhim an opportunity to be heard on any charge against him, forthere is none. The purpose rather is to give him time to prepare



for the eventual loss of his job and the DOLE an opportunity todetermine whether economic causes do exist justifying thetermination of his employment.

Same Same Same Not all notice requirements arerequirements of due process.Not all notice requirements arerequirements of due process. Some are simply part of a procedureto be followed before a right granted to a party can be exercised.Others are simply an application of the Justinian precept,embodied in the Civil Code,

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to act with justice, give everyone his due, and observe honesty andgood faith toward ones fellowmen. Such is the notice requirementin Arts. 282283. The consequence of the failure either of theemployer or the employee to live up to this precept is to make himliable in damages, not to render his act (dismissal or resignation,as the case may be) void. The measure of damages is the amountof wages the employee should have received were it not for thetermination of his employment without prior notice. If warranted,nominal and moral damages may also be awarded.

Same Same Same Employers failure to comply with thenotice requirement does not constitute a denial of due process but amere failure to observe a procedure for the termination ofemployment which makes the termination of employment merelyineffectual.We hold, therefore, that, with respect to Art. 283 ofthe Labor Code, the employers failure to comply with the noticerequirement does not constitute a denial of due process but amere failure to observe a procedure for the termination ofemployment which makes the termination of employment merelyineffectual. It is similar to the failure to observe the provisions ofArt. 1592, in relation to Art. 1191, of the Civil Code in rescindinga contract for the sale of immovable property. Under theseprovisions, while the power of a party to rescind a contract isimplied in reciprocal obligations, nonetheless, in cases involvingthe sale of immovable property, the vendor cannot exercise thispower even though the vendee defaults in the payment of theprice, except by bringing an action in court or giving notice ofrescission by means of a notarial demand. Consequently, a notice



of rescission given in the letter of an attorney has no legal effect,and the vendee can make payment even after the due date sinceno valid notice of rescission has been given.

Same Same Same Whether the employee is reinstated or onlygranted separation pay, he should be paid full backwages if he hasbeen laid off without written notice at least 30 days in advance.In sum, we hold that if in proceedings for reinstatement underArt. 283, it is shown that the termination of employment was dueto an authorized cause, then the employee concerned should notbe ordered reinstated even though there is failure to comply withthe 30day notice requirement. Instead, he must be grantedseparation pay in accordance with Art. 283. x x x If the employeesseparation is without cause, instead of being given separationpay, he should be reinstated. In either case, whether he isreinstated or only granted

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separation pay, he should be paid full backwages if he has beenlaid off without written notice at least 30 days in advance.

BELLOSILLO, J., Separate Opinion:

Labor Law Dismissal Just and authorized causes fortermination of employment by the employer.Article 282 of theLabor Code enumerates the just causes for the termination ofemployment by the employer: (a) serious misconduct or willfuldisobedience by the employee of the lawful orders of his employeror the latters representative in connection with the employeeswork (b) gross and habitual neglect by the employee of his duties(c) fraud or willful breach by the employee of the trust reposed inhim by his employer or his duly authorized representative (d)commission of a crime or offense by the employee against theperson of his employer or any immediate member of his family orhis duly authorized representative and, (e) other causesanalogous to the foregoing. On the other hand, Arts. 283 and 284of the same Code enumerate the socalled authorized causes: (a)installation of labor saving devices (b) redundancy (c)retrenchment to prevent losses (d) closure or cessation of the



establishment or undertaking unless the closure or cessation isfor the purpose of circumventing the provisions of the law and, (e)disease.

Same Same When is a position redundant.In the instantcase, we agree with the NLRC that the dismissal of petitionerSerrano was for an authorized cause, i.e., redundancy, whichexists where the services of an employee are in excess of what arereasonably demanded by the actual requirements of theenterprise. A position is redundant where it is superfluous, andthe superfluity may be the outcome of other factors such asoverhiring of workers, decreased volume of business, or droppingof a particular product line or service activity previouslymanufactured or undertaken by the enterprise.

Same Same Hiring of an independent security agency is abusiness decision properly within the exercise of managementprerogative The wisdom or soundness of the management decisionis not subject to the discretionary review of the Labor Arbiter nor ofthe National Labor Relations Commission.The hiring of anindependent security agency is a business decision properlywithin the exercise of management prerogative. As such, thisCourt is denied the authority to delve into its wisdom although itis equipped with the

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power to determine whether the exercise of such prerogative is inaccordance with law. Consequently, the wisdom or soundness ofthe management decision is not subject to the discretionaryreview of the Labor Arbiter nor of the NLRC unless there is aviolation of law or arbitrariness in the exercise thereof, in whichcase, this Court will step in. Specifically, we held in InternationalHarvester Macleod, Inc. v. Intermediate Appellate Court that thedetermination of whether to maintain or phase out an entiredepartment or section or to reduce personnel lies withmanagement. The determination of the need for the phasing outof a department as a labor and cost saving device because it is nolonger economical to retain its services is a managementprerogative.

Same Same Due Process Employer may terminate the



employment of any employee due to redundancy by serving awritten notice on the worker and the DOLE at least one (1) monthbefore the intended date thereof.As specifically provided in Art.283 of the Labor Code, the employer may terminate theemployment of any employee due to redundancy by serving awritten notice on the worker and the DOLE at least one (1) monthbefore the intended date thereof. In the instant case, ISETANNclearly violated the provisions of Art. 283 on notice. It did notsend a written notice to DOLE which is essential because theright to terminate an employee is not an absolute prerogative.The lack of written notice denied DOLE the opportunity todetermine the validity of the termination.

Same Same Same Although the cause for discharge may bejust or authorized, it is still necessary and obligatory to afford theemployee concerned his basic and more important right to notice.The written notice ISETANN sent to Serrano was dated 11October 1991 or on the same day the intended termination was totake effect. This obviously did not comply with the 30daymandatory requirement. Although the cause for discharge may bejust or authorized, it is still necessary and obligatory to afford theemployee concerned his basic and more important right to notice.Serrano was not given the chance to make the neededadjustments brought about by his termination.

Same Same Same Failure to send notice of termination toSerrano, not tantamount to violation of his constitutional right todue process but merely constitutes noncompliance with theprovision on notice under Article 283 of the Labor Code.We areof the view that

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failure to send notice of termination to Serrano is not tantamountto violation of his constitutional right to due process but merelyconstitutes noncompliance with the provision on notice underArt. 283 of the Labor Code.

Same Same Same Nonobservance of the notice requirementis not denial of due process but merely a failure to comply withlegal obligation.From the foregoing, it is clear that theobservance of due process is demanded in governmental acts.



Particularly in administrative proceedings, due process startswith the tribunal or hearing officer and not with the employer. Inthe instant case, what is mandated of the employer to observe isthe 30day notice requirement. Hence, nonobservance of thenotice requirement is not denial of due process but merely afailure to comply with a legal obligation for which, we stronglyrecommend, we impose a disturbance compensation as discussedhereunder.

Same Same Same Court has consistently upheld in the pastas valid although irregular the dismissal of an employee for a justor authorized cause but without notice.We have consistentlyupheld in the past as valid although irregular the dismissal of anemployee for a just or authorized cause but without notice andhave imposed a sanction on the erring employers in the form ofdamages for their failure to comply with the notice requirement.

Same Same Same Petitioners dismissal being improper andirregular, he is entitled to separation pay and backwages theamounts of which to be determined by the Labor Arbiter, plus P10,000.00 as disturbance compensation.In the instant case,Serrano was given his walking papers only on the very same dayhis termination was to take effect. DOLE was not served anywritten notice. In other words, there was nonobservance of the30day notice requirement to both Serrano and the DOLE.Serrano was thus terminated for an authorized cause but was notaccorded his right to 30day notice. Thus, his dismissal beingimproper and irregular, he is entitled to separation pay and backwages the amounts of which to be determined by the LaborArbiter, plus P10,000.00 as disturbance compensation which,from its very nature, must be paid immediately to cushion theimpact of his economic dislocation.

452

452 SUPREME COURT REPORTS ANNOTATEDSerrano vs. National Labor Relations Commission

PUNO, J., Dissenting Opinion:

Labor Law Dismissal To justify dismissal of an employee fora just cause, employee must be given two kinds of notice by hisemployer Pre and post notice requirements are not meretechnicalities but are requirements of due process.The longestablished jurisprudence is that to justify dismissal of anemployee for a just cause, he must be given two kinds of notice by



his employer, viz.: (1) notice to apprise the employee of theparticular acts or omissions for which the dismissal is sought, and(2) subsequent notice to inform him of the employers decision todismiss him. Similarly, deeply ingrained is our ruling that thesepre and post notice requirements are not mere technicalities butare requirements of due process.

Same Same Four (4) authorized causes for termination ofemployment under Article 283 of the Labor Code The right todismiss on authorized causes is not an absolute prerogative of anemployer.The case at bar specifically involves Article 283 of theLabor Code which lays down four (4) authorized causes fortermination of employment. These authorized causes are: (1)installation of laborsaving devices (2) redundancy (3)retrenchment to prevent losses and (4) closing or cessation ofoperation of the establishment or undertaking unless the closingis for the purpose of circumventing the law. It also provides thatprior to the dismissal of an employee for an authorized cause, theemployer must send two written notices at least one month beforethe intended dismissalone notice to the employee and anothernotice to the Department of Labor and Employment (DOLE). Wehave ruled that the right to dismiss on authorized causes is not anabsolute prerogative of an employer.

Same Same The burden should be on the employer toestablish and justify the authorized causes.The burden shouldbe on the employer to establish and justify these authorizedcauses. Due to their complexity, the law correctly directs thatnotice should be given to the DOLE for it is the DOLE more thanthe lowly employee that has the expertise to validate the allegedcause in an appropriate hearing. In fine, the DOLE provides theequalizer to the powers of the employer in an Article 283situation. Without the equalizing influence of DOLE, theemployee can be abused by his employer.

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VITUG, J., Separate Opinion:

Labor Law Dismissal An employee whose employment isterminated for a just cause is not entitled to the payment ofseparation benefits Separation pay would be due, when the layoffis on account of an authorized cause.An employee whose



employment is terminated for a just cause is not entitled to thepayment of separation benefits. Separation pay would be due,however, when the layoff is on account of an authorized cause.The amount of separation pay would depend on the ground for thetermination of employment. A layoff due to the installation of alabor saving device, redundancy (Article 283) or disease (Article284), entitles the worker to a separation pay equivalent to one (1)month pay or at least one (1) month pay for every year of service,whichever is higher.When the termination of employment isdue to retrenchment to prevent losses, or to closure or cessation ofoperations of an establishment or undertaking not due to seriousbusiness losses or financial reverses, the separation pay is only anequivalent of one (1) month pay or at least onehalf (1/2) monthpay for every year of service, whichever is higher.In the aboveinstances, a fraction of at least six (6) months is considered as one(1) whole year.

Same Same Due process in the context of a termination ofemployment would be twofold, i.e., substantive and proceduraldue process.Due process in the context of a termination ofemployment, particularly, would be twofold, i.e., substantive dueprocess which is complied with when the action of the employer ispredicated on a just cause or an authorized cause, and proceduraldue process which is satisfied when the employee has theopportunity to contest the existence of the ground invoked by theemployer in terminating the contract of employment and to beheard thereon.

Same Same Same Damages If an employer fails to complywith the requirements of notice in terminating the services of theemployee, the employer must be made to pay correspondingdamages to the employee.Where there is just cause or anauthorized cause for the dismissal or layoff but the requiredwritten notices therefor have not been properly observed by anemployer, it would neither be right and justifiable nor likelyintended by law to order either the reinstatement of the dismissedor laidoff employee or the payment of back salaries to him simplyfor the lack of such notices if, and so long as, the employee is notdeprived of an opportunity to contest

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that dismissal or layoff and to accordingly be heard thereon. Inthe termination of employment for an authorized cause (thiscause being attributable to the employer), the laidoff employee isstatutorily entitled to separation pay, unlike a dismissal for a justcause (a cause attributable to an employee) where no separationpay is due. In either case, if an employer fails to comply with therequirements of notice in terminating the services of theemployee, the employer must be made to pay, as so hereinaboveexpressed, corresponding damages to the employee.

PANGANIBAN, J., Separate Opinion:

Labor Law Dismissal When an employee is dismissedwithout notice and hearing, the effect is an illegal dismissal andthe appropriate reliefs are reinstatement and full back wages.Inshort, when an employee is dismissed without notice and hearing,the effect is an illegal dismissal and the appropriate reliefs arereinstatement and full back wages. In ruling that the dismissalshould be upheld, the Court majority has virtually renderednugatory the employees right to due process as mandated by lawand the Constitution. It implicitly allows the employer to simplyignore such right and to just pay the employee. While it increasesthe payment to full back wages, it doctrinally denigrates hisright to due process to a mere statutory right to notice.

Same Same Two essential requisites for an employers validtermination of an employees services Where there has been no justor authorized cause, the employee is awarded reinstatement orseparation pay and backwages.In the past, this Court hasuntiringly reiterated that there are two essential requisites for anemployers valid termination of an employees services: (1) a justor authorized cause and (2) due process. During the last ten years,the Court has been quite firm in this doctrinal concept, but it hasbeen less than consistent in declaring the illegality of a dismissalwhen due process has not been observed. This is particularlynoticeable in the relief granted. Where there has been no just orauthorized cause, the employee is awarded reinstatement orseparation pay, and back wages. If only the second requisite (dueprocess) has not been fulfilled, the employee, as earlier stated, isgranted indemnity or damages amounting to a measly P1,000 upto P10,000.

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Same Same Illegal dismissal results not only from theabsence of a legal cause, but likewise from the failure to observedue process.I respectfully submit that illegal dismissal resultsnot only from the absence of a legal cause (enumerated in Arts.282 to 284 of the Labor Code), but likewise from the failure toobserve due process. Indeed, many are the cases, labor orotherwise, in which acts violative of due process are unequivocallyvoided or declared illegal by the Supreme Court. In PepsiColaBottling Co. v. NLRC, the Court categorically ruled that thefailure of management to comply with the requirements of dueprocess made its judgment of dismissal void and nonexistent.

Same Same Due Process Denial of a persons fundamentalright to due process amounts to the illegality of the proceedingsagainst him.Clearly deducible from our extant jurisprudence isthat the denial of a persons fundamental right to due processamounts to the illegality of the proceedings against him.Consequently, he is brought back to his status quo ante, notmerely awarded nominal (damages or indemnity.

Same Same Same The twin requirements of notice andhearing constitute the essential elements of due process.In a longline of cases involving judicial, quasijudicial and administrativeproceedings, some of which I summarized earlier, the Court hasheld that the twin requirements of notice and hearing (or, at thevery least, an opportunity to be heard) constitute the essentialelements of due process. In labor proceedings, both are theconditio sine qua non for a dismissal to be validly effected. Theperceptive Justice Irene Cortes has aptly stated: One cannot gowithout the other, for otherwise the termination would, in theeyes of the law, be illegal.

SPECIAL CIVIL ACTION in the Supreme Court.Certiorari.

The facts are stated in the opinion of the Court.Buenaluz, Urbano Law Office for petitioner.Romeo Batino for private respondent.

MENDOZA, J.:

This is a petition seeking review of the resolutions, datedMarch 30, 1994 and August 26, 1994, of the National Labor

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Relations Commission (NLRC) which reversed the decisionof the Labor Arbiter and dismissed petitioner RubenSerranos complaint for illegal dismissal and denied hismotion for reconsideration. The facts are as follows:

Petitioner was hired by private respondent IsetannDepartment Store as a security checker to apprehendshoplifters and prevent pilferage of merchandise.

1 Initially

hired on October 4, 1984 on contractual basis, petitionereventually became a regular employee on April 4, 1985. In1988, he became head of the Security Checkers Section ofprivate respondent.

2 Sometime in 1991, as a costcutting

measure, private respondent decided to phase out its entiresecurity section and engage the services of an independentsecurity agency. For this reason, it wrote petitioner thefollowing memorandum:

3

October 11, 1991MR. RUBEN SERRANO PRESENTDear Mr. Serrano,

In view of the retrenchment program of thecompany, we hereby reiterate our verbal notice to youof your termination as Security Section Head effeciveOctober 11, 1991. Please secure your clearance fromthis office.

Very truly yours, [Sgd.] TERESITA A. VILLANUEVA Human Resources Division Manager

The loss of his employment prompted petitioner to file acomplaint on December 3, 1991 for illegal dismissal, illegallayoff, unfair labor practice, underpayment of wages, andnonpayment of salary and overtime pay.

4

________________

1 TSN of testimony of petitioner, pp. 24, 7678, April 24, 1992.2 Petitioners Position Paper, Annex C Records, p. 19.3 Id., AnnexB id., p. 21.4 Records, p. 2.

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(a)


The parties were required to submit their position papers,on the basis of which the Labor Arbiter defined the issuesas follows:

5

Whether or not there is a valid ground for the dismissal of thecomplainant.

Whether or not complainant is entitled to his monetary claimsfor underpayment of wages, nonpayment of salaries, 13th monthpay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, theLabor Arbiter rendered a decision finding petitioner tohave been illegally dismissed. He ruled that privaterespondent failed to establish that it had retrenched itssecurity section to prevent or minimize losses to itsbusiness that private respondent failed to accord dueprocess to petitioner that private respondent failed to usereasonable standards in selecting employees whoseemployment would be terminated that private respondenthad not shown that petitioner and other employees in thesecurity section were so inefficient so as to justify theirreplacement by a security agency, or that costsavingdevices [such as] secret video cameras (to monitor andprevent shoplifting) and secret code tags on themerchandise could not have been employed instead, theday after petitioners dismissal, private respondentemployed a safety and security supervisor with duties andfunctions similar to those of petitioner.

Accordingly, the Labor Arbiter ordered:6

WHEREFORE, above premises considered, judgment is herebydecreed:

Finding the dismissal of the complainant to be illegal andconcomitantly, Respondent is ordered to pay complainantfull backwages without qualification or deduction in theamount of P74,740.00

________________

5 Decision, dated April 30, 1993 of Labor Arbiter Pablo C. Espiritu. Petition,Annex A Rollo, p. 30.



(b)

(c)

(d)

6 Id., pp. 3536.

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from the time of his dismissal until reinstatement(computed till promulgation only) based on his monthlysalary of P4,040.00/month at the time of his terminationbut limited to (3) three yearsOrdering the Respondent to immediately reinstate thecomplainant to his former position as security sectionhead or to a reasonably equivalent supervisorial positionin charges of security without loss of seniority rights,privileges and benefits. This order is immediatelyexecutory even pending appealOrdering the Respondent to pay complainant unpaidwages in the amount of P2,020.73 and proportionate 13thmonth pay in the amount of P3,198.30Ordering the Respondent to pay complainant the amountof P7,995.91, representing 10% attorneys fees based onthe total judgment award of P79,959.12. All other claims of the complainant whether monetary orotherwise is hereby dismissed for lack of merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in itsresolution of March 30, 1994, reversed the decision of theLabor Arbiter and ordered petitioner to be given separationpay equivalent to one month pay for every year of service,unpaid salary, and proportionate 13th month pay.Petitioner filed a motion for reconsideration, but his motionwas denied.

The NLRC held that the phaseout of privaterespondents security section and the hiring of anindependent security agency constituted an exercise byprivate respondent of [a] legitimate business decisionwhose wisdom we do not intend to inquire into and forwhich we cannot substitute our judgment that thedistinction made by the Labor Arbiter betweenretrenchment and the employment of costsavingdevices under Art. 283 of the Labor Code was insignificantbecause the company official who wrote the dismissal letter



apparently used the term retrenchment in its plain andordinary sense: to layoff or remove from ones job,regardless of the reason therefor that the rule ofreasonable criteria in the selection of the employees to beretrenched did not apply because all positions in thesecurity section had been abolished and that theappointment of a safety and security su

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pervisor referred to by petitioner to prove bad faith onprivate respondents part was of no moment because theposition had long been in existence and was separate frompetitioners position as head of the Security CheckersSection.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCYBY THE PRIVATE RESPONDENT TO REPLACE ITSCURRENT SECURITY SECTION A VALID GROUND FOR THEDISMISSAL OF THE EMPLOYEES CLASSED UNDER THELATTER?

7

Petitioner contends that abolition of private respondentsSecurity Checkers Section and the employment of anindependent security agency do not fall under any of theauthorized causes for dismissal under Art. 283 of the LaborCode.

Petitioner Laid Off for Cause

Petitioners contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel.The employermay also terminate the employment of any employee due to theinstallation of laborsaving devices, redundancy, retrenchment toprevent losses or the closing or cessation of operations of theestablishment or undertaking unless the closing is for the purposeof circumventing the provisions of this Title, by serving a writtennotice on the workers and the Department of Labor andEmployment at least one (1) month before the intended datethereof. In case of termination due to the installation of labor



saving devices or redundancy, the worker affected thereby shallbe entitled to a separation pay equivalent to at least one (1)month pay or to at least one (1) month pay for every year ofservice, whichever is higher. In case of retrenchment to preventlosses and in cases of closure or cessation of operations ofestablishment or undertaking not due to serious business lossesor financial reverses, the separation pay shall be equivalent to atleast one (1) month pay or at least onehalf (1/2) month pay forevery year of service, whichever is higher. A fraction of at least six(6) months shall be considered as one (1) whole year.

________________

7 Petition, p. 10 id., p. 16.

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In De Ocampo v. National Labor Relations Commission,8

this Court upheld the termination of employment of threemechanics in a transportation company and theirreplacement by a company rendering maintenance andrepair services. It held:

In contracting the services of Gemac Machineries, as part of thecompanys costsaving program, the services rendered by themechanics became redundant and superfluous, and thereforeproperly terminable. The company merely exercised its businessjudgment or management prerogative. And in the absence of anyproof that the management abused its discretion or acted in amalicious or arbitrary manner, the court will not interfere withthe exercise of such prerogative.

9

In Asian Alcohol Corporation v. National Labor RelationsCommission,

10 the Court likewise upheld the termination of

employment of water pump tenders and their replacementby independent contractors. It ruled that an employersgood faith in implementing a redundancy program is notnecessarily put in doubt by the availment of the services ofan independent contractor to replace the services of theterminated employees to promote economy and efficiency.

Indeed, as we pointed out in another case, the[management of a company] cannot be denied the faculty



of promoting efficiency and attaining economy by a study ofwhat units are essential for its operation. To it belongs theultimate determination of whether services should beperformed by its personnel or contracted to outsideagencies . . . [While there] should be mutual consultation,eventually deference is to be paid to what managementdecides.

11 Consequently, absent proof that management

acted in a malicious or arbitrary manner, the

________________

8 213 SCRA 652 (1992).9 Id., at 662.10 G.R. No. 131108, March 25, 1999, 305 SCRA 416.11 Shell Oil Workers Union v. Shell Company of the Philippines, Ltd.,

39 SCRA 276, 284285 (1971).

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Court will not interfere with the exercise of judgment by anemployer.

12

In the case at bar, we have only the bare assertion ofpetitioner that, in abolishing the security section, privaterespondents real purpose was to avoid payment to thesecurity checkers of the wage increases provided in thecollective bargaining agreement approved in 1990.

13 Such

an assertion is not a sufficient basis for concluding that thetermination of petitioners employment was not a bona fidedecision of management to obtain reasonable return fromits investment, which is a right guaranteed to employersunder the Constitution.

14 Indeed, that the phaseout of the

security section constituted a legitimate business decisionis a factual finding of an administrative agency which mustbe accorded respect and even finality by this Court sincenothing can be found in the record which fairly detractsfrom such finding.

15 Accordingly, we hold that the

termination of petitionersservices was for an authorized cause, i.e., redundancy.

Hence, pursuant to Art. 283 of the Labor Code, petitionershould be given separation pay at the rate of one monthpay for every year of service.



Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment ofan employee for any of the authorized causes the employermust serve a written notice on the workers and theDepartment of Labor and Employment at least one (1)month before the intended date thereof. In the case at bar,petitioner was given a notice of termination on October 11,1991. On the

________________

12 Asian Alcohol Corporation v. National Labor Relations Commission,G.R. No. 131108, March 25, 1999, 305 SCRA 416.

13 TSN, p. 61, April 24, 1992.14 CONST., ART. XIII, 3.15 E.g., Aurora Land Projects Corporation v. NLRC, 266 SCRA 48

(1997).

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same day, his services were terminated. He was thusdenied his right to be given written notice before thetermination of his employment, and the question is theappropriate sanction for the violation of petitioners right.

To be sure, this is not the first time this question hasarisen. In Sebuguero v. NLRC,

16 workers in a garment

factory were temporarily laid off due to the cancellation oforders and a garment embargo. The Labor Arbiter foundthat the workers had been illegally dismissed and orderedthe company to pay separation pay and backwages. TheNLRC, on the other hand, found that this was a case ofretrenchment due to business losses and ordered thepayment of separation pay without backwages. This Courtsustained the NLRCs finding. However, as the companydid not comply with the 30day written notice in Art. 283 ofthe Labor Code, the Court ordered the employer to pay theworkers P2,000.00 each as indemnity.

The decision followed the ruling in several casesinvolving dismissals which, although based on any of thejust causes under Art. 282,

17 were effected without notice



(a)

(b)

(c)

(d)

(e)

(d)

and hearing to

________________

16 248 SCRA 532 (1995).17 This provision reads: Termination by employer.An employer may

terminate an employment for any of the following causes:

Serious misconduct or willful disobedience by the employee of thelawful orders of his employer or representative in connection withhis workGross and habitual neglect by the employee of his duties

Fraud or willful breach by the employee of the trust reposed inhim by his employer or duly authorized representativeCommission of a crime or offense by the employee against theperson of his employer or any immediate member of his family orhis duly authorized representative andOther causes analogous to the foregoing.

463


the employee as required by the implementing rules.18 As

this Court said: It is now settled that where the dismissalof one employee is in fact for a just and valid cause and isso proven to be but he is not accorded his right to dueprocess, i.e., he was not furnished the twin requirements ofnotice and opportunity to be heard, the dismissal shall beupheld but the employer must be sanctioned for noncompliance with the requirements of, or for failure toobserve, due process.

19

________________

18 Bk. VI, Rule 1, of the Omnibus Rules and Regulations to Implementthe Labor Code provides in pertinent parts: Section 2. Security of tenure . . . .

In all cases of termination of employment, the following standardsof due process shall be substantially observed:

For termination of employment based on just causes as defined inArticle 282 of the Labor Code:



(i)

(ii)

(iii)

A written notice served on the employee specifying the ground orgrounds for termination, and giving said employee reasonableopportunity within which to explain his side.A hearing or conference during which the employee concerned,with the assistance of counsel if he so desires, is given opportunityto respond to the charge, present his evidence, or rebut theevidence presented against him.A written notice of termination served on the employee, indicatingthat upon due consideration of all the circumstances, grounds havebeen established to justify his termination.

For termination of employment as defined in Article 283 of theLabor Code, the requirement of due process shall be deemedcomplied with upon service of a written notice to the employee andthe appropriate Regional Office of the Department of Labor andEmployment at least thirty days before effectivity of thetermination, specifying the ground or grounds for termination. . . .

19 Sebuguero v. NLRC, 248 SCRA at 547.

464


The rule reversed a long standing policy theretoforefollowed that even though the dismissal is based on a justcause or the termination of employment is for anauthorized cause, the dismissal or termination is illegal ifeffected without notice to the employee. The shift indoctrine took place in 1989 in Wenphil Corp. v. NLRC.

20 In

announcing the change, this Court said:21

The Court holds that the policy of ordering the reinstatement tothe service of an employee without loss of seniority and thepayment of his wages during the period of his separation until hisactual reinstatement but not exceeding three (3) years withoutqualification or deduction, when it appears he was not affordeddue process, although his dismissal was found to be for just andauthorized cause in an appropriate proceeding in the Ministry ofLabor and Employment, should be reexamined. It will be highlyprejudicial to the interests of the employer to impose on him theservices of an employee who has been shown to be guilty of thecharges that warranted his dismissal from employment. Indeed, itwill demoralize the rank and file if the undeserving, if notundesirable, remains in the service.



. . .However, the petitioner must nevertheless be held to account

for failure to extend to private respondent his right to aninvestigation before causing his dismissal. The rule is explicit asabove discussed. The dismissal of an employee must be for just orauthorized cause and after due process. Petitioner committed aninfraction of the second requirement. Thus, it must be imposed asanction for its failure to give a formal notice and conduct aninvestigation as required by law before dismissing petitioner fromemployment. Considering the circumstances of this casepetitioner must indemnify the private respondent the amount ofP1,000.00. The measure of this award depends on the facts of eachcase and the gravity of the omission committed by the employer.

________________

20 170 SCRA 69 (1989).21 Id., at 7576.

465


The fines imposed for violations of the notice requirementhave varied from P1,000.00

22 to P2,000.00

23 to P5,000.00

24 to

P10,000.00.25

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriatesanctions for violations of the notice requirement in light ofour experience during the last decade or so with theWenphil doctrine. The number of cases involving dismissalswithout the requisite notice to the employee, althougheffected for just or authorized causes, suggests that theimposition of fine for violation of the notice requirementhas not been effective in deterring violations of the noticerequirement. Justice Panganiban finds the monetarysanctions too insignificant, too niggardly, and sometimeseven too late. On the other hand, Justice Puno says therehas in effect been fostered a policy of dismiss now, paylater which moneyed employers find more convenient tocomply with than the requirement to serve a 30day



written notice (in the case of termination of employment foran authorized cause under Arts. 283284) or to give noticeand hearing (in the case of dismissals for just causes underArt. 282).

For this reason, they regard any dismissal or layoffwithout the requisite notice to be null and void even thoughthere are just or authorized causes for such dismissal orlayoff. Conse

_______________

22 E.g., Aurelio v. NLRC, 221 SCRA 432 (1993) (dismissal of amanagerial employee for breach of trust) Rubberworld (Phils.), Inc. v.NLRC, 183 SCRA 421 (1990) (dismissal for absenteeism, leaving the workplace without notice, tampering with machines) Shoemart, Inc. v. NLRC,176 SCRA 385 (1989) (dismissal for abandonment of work).

23 Sebuguero v. NLRC, 248 SCRA 536 (1995) (termination ofemployment due to retrenchment).

24 E.g., Worldwide Papermills, Inc. v. NLRC, 244 SCRA 125 (1995)(dismissal for gross and habitual neglect of duties).

25 E.g., Reta v. NLRC, 232 SCRA 613 (1994) (dismissal for negligenceand insubordination).

466


quently, in their view, the employee concerned should bereinstated and paid backwages.

Validity of Petitioners Layoff Not Affected by Lack ofNotice

We agree with our esteemed colleagues, Justices Puno andPanganiban, that we should rethink the sanction of fine foran employers disregard of the notice requirement. We donot agree, however, that disregard of this requirement byan employer renders the dismissal or termination ofemployment null and void. Such a stance is actually areversion to the discredited preWenphil rule of ordering anemployee to be reinstated and paid backwages when it isshown that he has not been given notice and hearingalthough his dismissal or layoff is later found to be for a



just or authorized cause. Such rule was abandoned inWenphil because it is really unjust to require an employerto keep in his service one who is guilty, for example, of anattempt on the life of the employer or the latters family, orwhen the employer is precisely retrenching in order toprevent losses.

The need is for a rule which, while recognizing theemployees right to notice before he is dismissed or laid off,at the same time acknowledges the right of the employer todismiss for any of the just causes enumerated in Art. 282 orto terminate employment for any of the authorized causesmentioned in Arts. 283284. If the Wenphil rule imposing afine on an employer who is found to have dismissed anemployee for cause without prior notice is deemedineffective in deterring employer violations of the noticerequirement, the remedy is not to declare the dismissalvoid if there are just or valid grounds for such dismissal orif the termination is for an authorized cause. That would beto uphold the right of the employee but deny the right ofthe employer to dismiss for cause. Rather, the remedy is toorder the payment to the employee of full backwages fromthe time of his dismissal until the court finds that thedismissal was for a just cause. But,

467


otherwise, his dismissal must be upheld and he should notbe reinstated. This is because his dismissal is ineffectual.

For the same reason, if an employee is laid off for any ofthe causes in Arts. 283284, i.e., installation of a laborsaving device, but the employer did not give him and theDOLE a 30day written notice of termination in advance,then the termination of his employment should beconsidered ineffectual and he should be paid backwages.However, the termination of his employment should not beconsidered void but he should simply be paid separationpay as provided in Art. 283 in addition to backwages.

Justice Puno argues that an employers failure to complywith the notice requirement constitutes a denial of theemployees right to due process. Prescinding from thispremise, he quotes the statement of Chief Justice

Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco26



Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco26

that acts of Congress, as well as of the Executive, can denydue process only under the pain of nullity, and judicialproceedings suffering from the same flaw are subject to thesame sanction, any statutory provision to the contrarynotwithstanding. Justice Puno concludes that thedismissal of an employee without notice and hearing, evenif for a just cause, as provided in Art. 282, or for anauthorized cause, as provided in Arts. 283284, is a nullity.Hence, even if just or authorized causes exist, the employeeshould be reinstated with full back pay. On the other hand,Justice Panganiban quotes from the statement in People v.Bocar

27 that [w]here the denial of the fundamental right of

due process is apparent, a decision rendered in disregard ofthat right is void for lack of jurisdiction.

Violation of Notice Requirement Not a Denial of DueProcessThe cases cited by both Justice Puno and Panganiban refer,however, to the denial due process by the State, which isnot

________________

26 110 Phil. 113, 118 (1960).27 138 SCRA 166, 170 (1985).

468


the case here. There are three reasons why, on the otherhand, violation by the employer of the notice requirementcannot be considered a denial of due process resulting inthe nullity of the employees dismissal or layoff.

The first is that the Due Process Clause of theConstitution is a limitation on governmental powers. Itdoes not apply to the exercise of private power, such as thetermination of employment under the labor Code. This isplain from the text of Art. III, 1 of the Constitution, viz.:No person shall be deprived of life, liberty, or propertywithout due process of law . . . . The reason is simple: Only



the State has authority to take the life, liberty, or propertyof the individual. The purpose of the Due Process Clause isto ensure that the exercise of this power is consistent withwhat are considered civilized methods.

The second reason is that notice and hearing arerequired under the Due Process Clause before the power oforganized society are brought to bear upon the individual.This is obviously not the case of termination of employmentunder Art. 283. Here the employee is not faced with anaspect of the adversary system. The purpose for requiring a30day written notice before an employee is laid off is not toafford him an opportunity to be heard on any chargeagainst him, for there is none. The purpose rather is togivehim time to prepare for the eventual loss of his job and theDOLE an opportunity to determine whether economiccauses do exist justifying the termination of hisemployment.

Even in cases of dismissal under Art. 282, the purposefor the requirement of notice and hearing is not to complywith Due Process Clause of the Constitution. The time fornotice and hearing is at the trial stage. Then that is thetime we speak of notice and hearing as the essence ofprocedural due process. Thus, compliance by the employerwith the notice requirement before he dismisses anemployee does not foreclose the right of the latter toquestion the legality of his dismissal. As Art. 277(b)provides, Any decision taken by the employer shall bewithout prejudice to the right of the worker to contest thevalidity or legality of his dismissal by filing a

469


complaint with the regional branch of the National LaborRelations Commission.

Indeed, to contend that the notice requirement in theLabor Code is an aspect of due process is to overlook thefact that Art. 283 had its origin in Art. 302 of the SpanishCode of Commerce of 1882 which gave either party to theemployeremployee relationship the right to terminatetheir relationship by giving notice to the other one monthin advance. In lieu of notice, an employee could be laid offby paying him a mesada equivalent to his salary for onemonth.

28 This provision was repealed by Art. 2270 of the



month.28 This provision was repealed by Art. 2270 of the

Civil Code, which took effect on August 30, 1950. But onJune 12, 1954, R.A. No. 1052, otherwise known as theTermination Pay Law, was enacted reviving the mesada.On June 21, 1957, the law was amended by R.A. No. 1787providing for the giving of advance notice or the payment ofcompensation at the rate of onehalf month for every yearof service.

29

_______________

28 ART. 302 of the Code of Commerce provided: In cases in which no special time is fixed in the contracts of service, anyone of the parties thereto may dissolve it, advising the other party thereofone month in advance. The factory or shop clerk shall be entitled, in such case, to the salary duefor said month.

29 R.A. No. 1052, as amended by R.A. No. 1787, provided: SECTION 1. In cases of employment without a definite period, in acommercial, industrial, or agricultural establishment or enterprise, theemployer or the employee may terminate at any time the employmentwith just cause, or without just cause in the case of an employee byserving written notice on the employer at least one month in advance, orin the case of an employer, by serving such notice to the employee at leastone month in advance or onehalf month for every year of service of theemployee, whichever is longer, a fraction of at least months beingconsidered as one whole year. The employer, upon whom no such notice was served in case oftermination of employment without just cause may hold the employeeliable for damages.

470


The Termination Pay Law was held not to be a substantivelaw but a regulatory measure, the purpose of which was togive the employer the opportunity to find a replacement orsubstitute, and the employee the equal opportunity to lookfor another job or source of employment. Where thetermination of employment was for a just cause, no noticewas required to be given to the employee.

30 It was only on

September 4, 1981 that notice was required to be giveneven where the dismissal or termination of an employee



was for cause. This was made in the rules issued by thethen Minister of Labor and Employment to implement B.P.Blg. 130 which amended the Labor Code. And it was stillmuch later when the notice requirement was embodied inthe law with the amendment of Art. 277(b) by R.A. No.6715 on March 2, 1989. It cannot be that the former regimedenied due process to the employee. Otherwise, thereshould now likewise be a rule that, in case an employeeleaves his job without cause and without prior notice to hisemployer, his act should be void instead of simply makinghim liable for damages.

The third reason why the notice requirement under Art.283 cannot be considered a requirement of the Due ProcessClause is that the employer cannot really be expected to beentirely an impartial judge of his own cause. This is alsothe case in termination of employment for a just causeunder Art. 282 (i.e., serious misconduct or willfuldisobedience by the employee of the lawful orders of theemployer, gross and habitual neglect of duties, fraud orwillful breach of trust of the employer, commission of crimeagainst the employer or the latters immediate family orduly authorized representatives, or other analogous cases).

_________________

The employee, upon whom no such notice was served in case oftermination of employment without just cause shall be entitled tocompensation from the date of termination of his employment in anamount equivalent to his salaries or wages corresponding to the requiredperiod of notice.

30 Abe v. Foster Wheeler Corp., 110 Phil. 198 (1960) Malate Taxicaband Garage, Inc. v. CIR, 99 Phil. 41 (1956)

471


Justice Puno disputes this. He says that statistics in theDOLE will prove that many cases have been won byemployees before the grievance committees manned byimpartial judges of the company. The grievance machineryis, however, different because it is established byagreement of the employer and the employees andcomposed of representatives from both sides. That is why,in Batangas Laguna Tayabas Bus Co. v. Court of Appeals,

31



in Batangas Laguna Tayabas Bus Co. v. Court of Appeals,31

which Justice Puno cites, it was held that Since the rightof [an employee] to his labor is in itself a property and thatthe labor agreement between him and [his employer] is thelaw between the parties, his summary and arbitrarydismissal amounted to deprivation of his property withoutdue process of law. But here wef are dealing withdismissals and layoffs by employers alone, without theintervention of any grievance machinery. Accordingly inMontemayor v. Araneta University Foundation,

32 although a

professor was dismissed without a hearing by hisuniversity, his dismissal for having made homosexualadvances on a student was sustained, it appearing that inthe NLRC, the employee was fully heard in his defense.

Lack of Notice Only Makes Termination IneffectualNot all notice requirements are requirements of dueprocess. Some are simply part of a procedure to be followedbefore a right granted to a party can be exercised. Othersare simply an application of the Justinian precept,embodied in the Civil Code,

33 to act with justice, give

everyone his due, and observe honesty and good faithtoward ones fellowmen. Such is the notice requirement inArts. 282283. The consequence of the failure either of theemployer or the employee to live up to this precept is tomake him liable in damages, not to render his act(dismissal or resignation, as the case may be) void. Themeasure of damages is the amount of wages the employee

________________

31 71 SCRA 470, 480 (1976).32 77 SCRA 321 (1977).33 CIVIL CODE, ART. 19.

472


should have received were it not for the termination of hisemployment without prior notice. If warranted, nominaland moral damages may also be awarded.

We hold, therefore, that, with respect to Art. 283 of theLabor Code, the employers failure to comply with the



notice requirement does not constitute a denial of dueprocess but a mere failure to observe a procedure for thetermination of employment which makes the termination ofemployment merely ineffectual. It is similar to the failureto observe the provisions of Art. 1592, in relation to Art.1191, of the Civil Code

34 in rescinding a contract for the sale

of immovable property. Under these provisions, while thepower of a party to rescind a contract is implied inreciprocal obligations, nonetheless, in cases involving thesale of immovable property, the vendor cannot exercise thispower even though the vendee defaults in the payment ofthe price, except by bringing an action in court or givingnotice of rescission by means of a notarial demand.

35

Consequently, a notice of rescission given in the letter of anattorney has no legal effect, and the vendee can makepayment even after the due date since no valid notice ofrescission has been given.

36

Indeed, under the Labor Code, only the absence of a justcause for the termination of employment can make the dis

________________

34 ART. 1191: The power to rescind obligations is implied in reciprocalones, in case one of the obligors should not comply with what is incumbentupon him . . . .

ART. 1592: In the sale of immovable property, even though it may have beenstipulated that upon failure to pay the price at the time agreed upon the rescissionof the contract shall of right take place, the vendee may pay, even after theexpiration of the period, as long as no demand for rescission of the contract hasbeen made upon him either judicially or by a notarial act. After the demand, thecourt may not grant him a new term.

35 De la Cruz v. Legaspi, 98 Phil. 43 (1955) Taguba v. Vda. de Leon,132 SCRA 722 (1984).

36 See Maximo v. Fabian, G.R. No. L8015, December 23, 1955,(unpub.), 98 Phil. 989.

473


missal of an employee illegal. This is clear from Art. 279which provides:



1.

2.

Security of Tenure.In cases of regular employment, theemployer shall not terminate the services of an employee exceptfor a just cause or when authorized by this Title. An employeewho is unjustly dismissed from work shall be entitled toreinstatement without loss of seniority rights and other privilegesand to his full backwages, inclusive of allowances, and to his otherbenefits or their monetary equivalent computed from the time hiscompensation was withheld from him up to the time of his actualreinstatement.

37

Thus, only if the termination of employment is not for anyof the causes provided by law is it illegal and, therefore, theemployee should be reinstated and paid backwages. Tocontend, as Justices Puno and Panganiban do, that even ifthe termination is for a just or authorized cause theemployee concerned should be reinstated and paidbackwages would be to amend Art. 279 by adding anotherground for considering a dismissal illegal. What is more, itwould ignore the fact that under Art. 285, if it is theemployee who fails to give a written notice to the employerthat he is leaving the service of the latter, at least onemonth in advance, his failure to comply with the legalrequirement does not result in making his resignation voidbut only in making him liable for damages.

38

_________________

37 Emphasis added.38 ART. 285 reads:

Termination by employee.(a) An employee may terminate without just cause theemployeeemployer relationship by serving a written notice on the employer atleast one (1) month in advance. The employer upon whom no such notice wasserved may hold the employee liable for damages.

(b) An employee may put an end to the relationship without serving any noticeon the employer for any of the following just causes:

Serious insult by the employer or his representative on the honor andperson of the employee

Inhuman and unbearable treatment accorded the employee by theemployer or his representative

474




3.

4.

This disparity in legal treatment, which would result fromthe adoption of the theory of the minority cannot simply beexplained by invoking President Ramon Magsaysays mottothat he who has less in life should have more in law.That would be a misapplication of this noble phraseoriginally from Professor Thomas Reed Powell of theHarvard Law School.

Justice Panganiban cites PepsiCola Bottling Co. v.NLRC,

39 in support of his view that an illegal dismissal

results not only from want of legal cause but also from thefailure to observe due process. The PepsiCola caseactually involved a dismissal for an alleged loss of trustand confidence which, as found by the Court, was notproven. The dismissal was, therefore, illegal, not becausethere was a denial of due process, but because thedismissal was without cause. The statement that thefailure of management to comply with the noticerequirement taints the dismissal with illegalitywasmerely a dictum thrown in as additional grounds forholding the dismissal to be illegal.

Given the nature of the violation, therefore, theappropriate sanction for the failure to give notice is thepayment of backwages for the period when the employee isconsidered not to have been effectively dismissed or hisemployment terminated. The sanction is not the paymentalone of nominal damages as Justice Vitug contends.

The refusal to look beyond the validity of the initial actiontaken by the employer to terminate employment either foran authorized or just cause can result in an injustice to theemployer. For not giving notice and hearing beforedismissing an employee, who is otherwise guilty of, say,theft, or even of an

________________

Commission of a crime or offense by the employer or hisrepresentative against the person of the employee or any of theimmediate members of his family andOther causes analogous to any of the foregoing.

39 210 SCRA 277 (1992).

475




attempt against the life of the employer, an employer willbe forced to keep in his employ such guilty employee. Thisis unjust.

It is true the Constitution regards labor as a primarysocial economic force.

40 But so does it declare that it

recognizes the indispensable role of the private sector,encourages private enterprise, and provides incentives toneeded investment.

41 The Constitution bids the State to

afford full protection to labor.42 But it is equally true that

the law, in protecting the rights of the laborer, authorizesneither oppression nor selfdestruction of the employer.

43

And it is oppression to compel the employer to continue inemployment one who is guilty or to force the employer toremain in operation when it is not economically in hisinterest to do so.

In sum, we hold that if in proceedings for reinstatementunder Art. 283, it is shown that the termination ofemployment was due to an authorized cause, then theemployee concerned should not be ordered reinstated eventhough there is failure to comply with the 30day noticerequirement. Instead, he must be granted separation payin accordance with Art. 283, to wit:

In case of termination due to the installation of laborsavingdevices or redundancy, the worker affected thereby shall beentitled to a separation pay equivalent to at least his one (1)month pay or to at least one month for every year of service,whichever is higher. In case of retrenchment to prevent losses andin cases of closures or cessation of operations of establishment orundertaking not due to serious business losses or financialreverses, the separation pay shall be equivalent to one (1) monthpay or at least onehalf (1/2)

________________

40 Art. II, 18.41 Id., 20.42 Art. XIII, 3.43 Manila Trading and Supply Co. v. Zulueta, 69 Phil. 485, 487 (1940) (per

Laurel, J.) Accord, Villanueva v. NLRC, 293 SCRA 259 (1998) DI Security andGeneral Services, Inc. v. NLRC, 264 SCRA 458 (1996) Flores v. NLRC, 256 SCRA,735 (1996) San Miguel Corporation v. NLRC, 218 SCRA 293 (1993) Colgate



Palmolive Philippines, Inc. v. Ople, 163 SCRA 323 (1988).

476


month pay for every year of service, whichever is higher. Afraction of at least six months shall be considered one (1) wholeyear.

If the employees separation is without cause, instead ofbeing given separation pay, he should be reinstated. Ineither case, whether he is reinstated or only grantedseparation pay, he should be paid full backwages if he hasbeen laid off without written notice at least 30 days inadvance. On the other hand, with respect to dismissals forcause under Art. 282, if it is shown that the employee wasdismissed for any of the just causes mentioned in said Art.282, then, in accordance with that article, he should not bereinstated. However, he must be paid backwages from thetime his employment was terminated until it is determinedthat the termination of employment is for a just causebecause the failure to hear him before he is dismissedrenders the termination of his employment without legaleffect.

WHEREFORE, the petition is GRANTED and theresolution of the National Labor Relations Commission isMODIFIED by ordering private respondent IsetannDepartment Store, Inc. to pay petitioner separation payequivalent to one (1) month pay for every year of service,his unpaid salary, and his proportionate 13th month payand, in addition, full backwages from the time hisemployment was terminated on October 11, 1991 up to thetime the decision herein becomes final. For this purpose,this case is REMANDED to the Labor Arbiter forcomputation of the separation pay, backwages, and othermonetary awards to petitioner.

SO ORDERED.

Davide, Jr. (C.J.), Melo, Kapunan, Quisumbing,Purisima, Pardo, Buena, GonzagaReyes and De Leon, Jr.,JJ., concur.

Bellosillo, J., Please see separate opinion.Puno, J., Please see dissenting opinion.



Vitug, J., Please see Separate Opinion.Panganiban, J., Please see Separate Opinion.

477


YnaresSantiago, J., I join the dissenting opinion ofJ. Puno.

SEPARATE OPINION

BELLOSILLO, J.:

We point out at the outset that this Petition for Review,which was filed before the promulgation of St. MartinFuneral Home v. National Labor Relations Commission,

1 is

not the proper means by which NLRC decisions areappealed to this Court. Before St. Martin Funeral Home, itwas only through a Petition for Certiorari under Rule 65that NLRC decisions could be reviewed and nullified by uson the ground of lack of jurisdiction or grave abuse ofdiscretion amounting to lack or excess of jurisdiction. AfterSt. Martin Funeral Home, petitions like the one at bar areinitially filed in the Court of Appeals for properadjudication.

In the interest of justice, however, and in order to writefinis to the instant case which has already dragged on forso long, we shall treat the petition pro hac vice as one forcertiorari under Rule 65 although it is captioned Petitionfor Review on Certiorari, after all, it was filed within thereglementary period for the filing of a petition for certiorariunder Rule 65.

Briefly, on 4 April 1985 private respondent IsetannDepartment Store, Inc. (ISETANN), employed petitionerRuben Serrano as Security Checker until his appointmentas Security Section Head. On 11 October 1991 ISETANNthrough its Human Resource Division Manager Teresita A.Villanueva sent Serrano a memorandum terminating hisemployment effective immediately in view of theretrenchment program of the company, and directing himto secure clearance from their office.

2 Petitioner Serrano



filed with the NLRC Adjudication Office a complaint forillegal dismissal and underpayment of wages

________________

1 G.R. No. 130866, 16 September 1998, 295 SCRA 494.2 Exh. B,Records, p. 21.

478


against ISETANN. Efforts at amicable settlement provedfutile. Ms. Cristina Ramos, Personnel AdministrationManager of ISETANN, testified that the security checkersand their section head were retrenched due to theinstallation of a labor saving device, i.e., the hiring of anindependent security agency.

Finding the dismissal to be illegal, the Labor Arbiterordered the immediate reinstatement of Serrano to hisformer or to an equivalent position plus payment of backwages, unpaid wages, 13th month pay and attorneys fees.

On appeal the NLRC reversed the Labor Arbiter andruled that ISETANN acted within its prerogative when itphased out its Security Section and retained the services ofan independent security agency in order to cut costs andeconomize.

Upon denial of his motion for reconsideration3 Serrano

filed the instant petition imputing grave abuse of discretionon the part of the NLRC.

Article 282 of the Labor Code enumerates the justcauses for the termination of employment by the employer:(a) serious misconduct or willful disobedience by theemployee of the lawful orders of his employer or the lattersrepresentative in connection with the employees work, (b)gross and habitual neglect by the employee of his duties (c)fraud or willful breach by the employee of the trust reposedin him by his employer or his duly authorizedrepresentative (d) commission of a crime or offense by theemployee against the person of his employer or anyimmediate member of his family or his duly authorizedrepresentative and, (e) other causes analogous to theforegoing.

On the other hand, Arts. 283 and 284 of the same Code



enumerate the socalled authorized causes: (a) installationof labor saving devices (b) redundancy (c) retrenchment toprevent losses (d) closure or cessation of the establishmentor undertaking unless the closure or cessation is for thepurpose of circumventing the provisions of the law and, (e)disease.

________________

3 Rollo, p. 63.

479


The just causes enumerated under Art. 282 of the LaborCode are provided by the employee who causes theinfraction. The authorized causes are provided by theemployer either because of outside factors such as thegeneral decline in the economy or merely part of its longrange plan for business profitability. Corollarily, intermination for a just cause, the employee is not entitled toseparation pay unlike in termination for an authorizedcause. In addition, the basis in computing the amount ofseparation pay varies depending on whether thetermination is due to the installation of a labor savingdevice, or redundancy, in which case, the employee isentitled to receive separation pay equivalent to at least one(1) month pay or to at least one (1) month pay for everyyear of service. In case the termination is due toretrenchment in order to prevent losses or in case of closureor cessation of operation of the establishment orundertaking not due to serious business losses or financialreverses, the separation pay is lower, i.e., equivalent to one(1) month pay or at least onehalf month pay for every yearof service, whichever is higher. As may be gleaned from theforegoing, where the cause of termination is for thefinancial advantage or benefit of the employer, the basis incomputing for separation pay is higher compared totermination dictated by necessity with no appreciablefinancial advantage to the employer.

In the instant case, we agree with the NLRC that thedismissal of petitioner Serrano was for an authorizedcause, i.e., redundancy, which exists where the services of



an employee are in excess of what are reasonablydemanded by the actual requirements of the enterprise. Aposition is redundant where it is superfluous, and thesuperfluity may be the outcome of other factors such asoverhiring of workers, decreased volume of business, ordropping of a particular product line or service activitypreviously manufactured or undertaken by the enterprise.

4

________________

4 Sebuguero v. National Labor Relations Commission, G.R. No. 115395,27 September 1995, 248 SCRA 536 Almodiel v. National Labor RelationsCommission, G.R. No. 100641, 14 June 1993, 223 SCRA 341.

480


The hiring of an independent security agency is a businessdecision properly within the exercise of managementprerogative. As such, this Court is denied the authority todelve into its wisdom although it is equipped with thepower to determine whether the exercise of suchprerogative is in accordance with law. Consequently, thewisdom or soundness of the management decision is notsubject to the discretionary review of the Labor Arbiter norof the NLRC unless there is a violation of law orarbitrariness in the exercise thereof, in which case, thisCourt will step in.

5 Specifically, we held in International

Harvester Macleod, Inc. v. Intermediate Appellate Court6

that the determination of whether to maintain or phase outan entire department or section or to reduce personnel lieswith management. The determination of the need for thephasing out of a department as a labor and cost savingdevice because it is no longer economical to retain itsservices is a management prerogative.

After having established that the termination ofpetitioner Ruben Serrano was for an authorized cause, wenow address the issue of whether proper procedures wereobserved in his dismissal.

Since the State affords protection to labor under theConstitution,

7 workers enjoy security of tenure and may

only be removed or terminated upon valid reason andthrough strict observance of proper procedure.

8 Article 279



of the Labor Code specifically provides

Art. 279. Security of Tenure.In cases of regular employment, theemployer shall not terminate the services of an employee exceptfor a just cause or when authorized by this Title. An employeewho is unjustly dismissed from work shall be entitled toreinstatement without loss of seniority rights and other privilegesand to his

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5 De Ocampo v. National Labor Relations Commission, G.R. No. 101539, 4September 1992, 213 SCRA 652, 662.

6 G.R. No. 73287, 18 May 1987, 149 SCRA 641.7 Art. XIII, Sec. 3, 1987 Constitution, reiterated in Art. 3, Labor Code.8 Art. 3, Labor Code.

481


full backwages, inclusive of allowances, and to his other benefitsor their monetary equivalent computed from the time hiscompensation was withheld from him up to the time of his actualreinstatement.

Security of tenure however does not guarantee perpetualemployment. If there exists a just or an authorized cause,the employer may terminate the services of an employeebut subject always to procedural requirements. Theemployer cannot be legally compelled to have in its employa person whose continued employment is patently inimicalto its interest. The law, while affording protection to theemployee, does not authorize the oppression or destructionof his employer.

9

Subject then to the constitutional right of workers tosecurity of tenure and to be protected against dismissalexcept for a just or authorized cause, and without prejudiceto the requirement of notice under Art. 283 of the LaborCode, the employer shall furnish the worker whoseemployment is sought to be terminated a written noticecontaining a statement of the cause of termination andshall afford the latter ample opportunity to be heard and todefend himself with the assistance of his representative, ifhe so desires, in accordance with company rules and



regulations promulgated pursuant to guidelines set by theDOLE.

10

As specifically provided in Art. 283 of the Labor Code,the employer may terminate the employment of anyemployee due to redundancy by serving a written notice onthe worker and the DOLE at least one (1) month before theintended date thereof. In the instant case, ISETANNclearly violated the provisions of Art. 283 on notice.

11 It did

not send a written

_________________

9 Alcantara, Samson S., Reviewer in Labor and Social Legislation, 1993Ed., p. 347.

10 Art. 277, Labor Code.11 Art. 283. Closure of establishment and reduction of personnel.The

employer may also terminate the employment of any employee due to theinstallation of labor saving devices, redundancy, retrenchment to preventlosses or the closing or cessation of operation of the establishment orundertaking x x x by serving a written notice on the worker and theMinistry of Labor and Employment at least one (1) month before theintended date thereof x x x x.

482


notice to DOLE which is essential because the right toterminate an employee is not an absolute prerogative. Thelack of written notice denied DOLE the opportunity todetermine the validity of the termination.

The written notice ISETANN sent to Serrano was dated11 October 1991 or on the same day the intendedtermination was to take effect. This obviously did notcomply with the 30day mandatory requirement. Althoughthe cause for discharge may be just or authorized, it is stillnecessary and obligatory to afford the employee concernedhis basic and more important right to notice. Serrano wasnot given the chance to make the needed adjustmentsbrought about by his te

serrano v nlrc

Documents

labor code

labor arbiter

management actedin

payment of separation

company topay separation

process x

business lossesand

anauthorized cause