RIGHTSIZING INVOLVES REDUCTION OF THE NUMBER OF WORKERS AND RELATED FUNCTIONS ONCE THE DESIRED SIZE IS ATTAINED, ENGAGING THE SERVICES OF SERVICE CONTRACTORS DOES NOT EXPAND THE SIZE OF THE CORPORATE STRUCTURE

Rightsizing aims to trim down, streamline, or simplify the structure of the organization to the level of utmost efficiency and productivity in order to realize profit and survive. After the retrenchment shall have been implemented, the desired size of the corporation is attained. Engaging the services of service contractors does not expand the size of the corporate structure. In this sense, the retrenched workers were not replaced.

The Supreme Court held in the following case:

Purisimo M. Cabaobas, et al. vs. Pepsi-Cola Products Philippines, Inc.
G.R. No. 176908, March 25, 2015

Facts:

In 1999, Pepsi-Cola Products Philippines, Inc. (Pepsi) Tanauan Plant allegedly incurred business losses in the total amount of P29,167,390.00 Pesos. To avert further losses, PEPSI implemented a company-wide retrenchment program denominated as Corporate-wide Rightsizing Program (CRP) from 1999 to 2000, and retrenched forty-seven (47) employees of its Tanauan Plant on July 31, 1999.

On September 24, 1999, twenty-seven (27) of said employees, led by Anecito Molon (Molon, et al.), filed complaints for illegal dismissal before the NLRC which were docketed as NLRC RAB Cases Nos. VIII-9-0432-99 to 9-0458-99, entitled “Molon, et al. v. Pepsi-Cola Products, Philippines, Inc.”

On January 15, 2000, Complainants, who are permanent and regular employees of the Tanauan Plant, received their respective letters, informing them of the cessation of their employment on February 15, 2000, pursuant to PEPSI’s CRP. Complainants then filed their respective complaints for illegal dismissal before the National Labor Relations Commission Regional Arbitration Branch No. VIII in Tacloban City.

Complainants alleged that PEPSI was not facing serious financial losses because after their termination, it regularized four (4) employees and hired replacements for the forty-seven (47) previously dismissed employees. They also alleged that PEPSI’s CRP was just designed to prevent their union, Leyte Pepsi-Cola Employees Union-Associated Labor Union (LEPCEU-ALU), from becoming the certified bargaining agent of PEPSI’s rank-and-file employees.

PEPSI countered that Complainants were dismissed pursuant to its CRP to save the company from total bankruptcy and collapse; thus, it sent notices of termination to them and to the Department of Labor and Employment. In support of its argument that its CRP is a valid exercise of management prerogative, PEPSI submitted audited financial statements showing that it suffered financial reverses in 1998 in the total amount of P700,000,000.00 PESOS, P27,000,000.00 PESOS of which was allegedly incurred in the Tanauan Plant in 1999.

LA Ruling:

The Labor Arbiter rendered a Decision finding the dismissal of Complainants as illegal.

PEPSI appealed from the Decision of the Labor Arbiter to the Fourth Division of the NLRC of Tacloban City.

NLRC Ruling:

Meanwhile, the NLRC consolidated all other cases involving PEPSI and its dismissed employees.

The NLRC rendered a Consolidated Decision nullifying the Executive Labor Arbiter’s, and DISMISSING the complaints for illegal dismissal, and in its stead declaring the retrenchment program of Pepsi pursuant to its CRP, a valid exercise of management prerogatives.

The NLRC also ordered Pepsi to pay the complainants their package separation benefits of 1 & ½ months salary for every year of service, plus commutation of all vacation and sick leave credits in the respective amounts hereunder indicated opposite their names.

Complainants and PEPSI filed their respective motions for reconsideration of the consolidated decision, which the NLRC denied in a Resolution. Dissatisfied, Complainants filed a petition for certiorari with the CA.

CA Ruling:

The CA rendered a Decision, denying their petition and affirming the NLRC Decision. The CA issued a Resolution denying Complainants’ motion for reconsideration.

Issue/s:

Whether or not in a retrenchment based on rightsizing program the regularization of worker and hiring of replacements and additional workers render the termination illegal; Whether or not there is union busting

SC Ruling:

The Supreme Court did not find merit in the petition.

How to Design and Formulate Company Code of Discipline

http://www.lvsbooks.com/product/how-to-design-and-formulate-company-code-of-discipline/Replacements refer to the regular workers subjected to retrenchment, occupying regular positions in the company structure. Artemio Kempis, a filer mechanic with a salary of P9,366.00 was replaced by Rogelio Castil. Rogelio Castil was hired through an agency named Helpmate Janitorial Services. Castil’s employer is Helpmate Janitorial Services. How can a janitorial service employee perform function of a filer mechanic? How much does Pepsi Cola pay Helpmate Janitorial Services for the contract of service? These questions immediately come to mind. Being not a regular employee of Pepsi Cola, he is not a replacement of Kempis.

The idea of rightsizing is to reduce the number of workers and related functions and trim down, streamline, or simplify the structure of the organization to the level of utmost efficiency and productivity in order to realize profit and survive. After the CRP shall have been implemented, the desired size of the corporation is attained. Engaging the services of service contractors does not expand the size of the corporate structure. In this sense, the retrenched workers were not replaced.

The SC resolved the issue of union busting by citing the September 11, 2002 NLRC Decision debunking said issue in the Certified Notice of Strike Case No. V-000001-2000. Pepsi Cola, in the selection of workers to be retrenched, did not take into consideration union affiliation because the unit was supposed to be composed of all members of good standing of LEPCEU-UOEF#49 there being a “UNION SHOP” provision in the existing CBA.

In the conciliation conference, PEPSI COLA expressed its willingness to sit down with unions and review the criteria. When this was suggested by the conciliator, the idea was then and there rejected by the unions, giving the impression that the real conflict was inter-union. There being no cooperation from the unions, PEPSI COLA went on with the first batch of retrenchment involving 47 workers.

It bears stressing that all 47 workers signed individual release and quitclaims and settled their complaints with respondent Pepsi Cola, apparently with the assistance of LEPCEU-ALU. It is awkward for LEPCEU-ALU to argue that a serious corporate-wide rightsizing program cannot be implemented in PEPSI-COLA Tanauan Plant because a nascent unrecognized union would probably be busted.

The SC held that the foregoing NLRC ruling was validated in Pepsi-Cola Products Philippines, Inc. v. Molon, ruling that the Court finds it difficult to attribute any act of union busting or ULP on the part of Pepsi considering that it retrenched its employees in good faith. Pepsi tried to sit-down with its employees to arrive at mutually beneficial criteria which would have been adopted for their intended retrenchment. In the same vein, Pepsi’s cooperation during the NCMB-supervised conciliation conferences can also be gleaned from the records. Furthermore, the fact that Pepsi’s rightsizing program was implemented on a company-wide basis dilutes respondents’ claim that Pepsi’s retrenchment scheme was calculated to stymie its union activities, much less diminish its constituency. Therefore, absent any perceived threat to LEPCEU-ALU’s existence or a violation of respondents’ right to self-organization–as demonstrated by the foregoing actuations–Pepsi cannot be said to have committed union busting or ULP in this case.