SENIORITY IS NOT THE SOLE BASIS OF THE CRITERIA FOR RETRENCHMENT; REHIRING OF RETRENCHED EMPLOYEES DOES NOT INDICATE BAD FAITH OF A RECOVERING CORPORATION; VALIDITY OF WAIVER AND QUITCLAIM

Seniority cannot be the sole basis for the selection in retrenchment.

The post below is part of this author’s digest of the decision of the Supreme Court in a March 13, 2018 FASAP case. The issues were separated to highlight the important aspect of the decision without burdening the reader with very lengthy exposition of various issues resolved by the Court.

Hence, the in successive posts, the reader may choose which issue to read of this decision.

Flight Attendants and Stewards Association of the Philippines (FASAP) Vs. Philippine Airlines, Inc., Patria Chiong and The Court of Appeals/In Re: Letters of Atty. Estelito P. Mendoza Re: G.R. No. 178083 – Flight Attendants of the Philippines (FASAP) vs. Philippine Airlines, Inc., et al.

G.R. No. 178083/A.M. No. 11-10-1-SC, March 13, 2018

Facts:

PAL retrenched cabin crew personnel in a retrenchment and demotion scheme of June 15, 1998 which was made effective on July 15, 1998.

The Labor Arbiter’s found the retrenchment illegal. However, the NLRC set aside the Labor Arbiter’s findings of illegal retrenchment.

The CA affirmed on August 23, 2006 the Decision of the NLRC. The CA likewise denied the motion for reconsideration.

FASAP appealed to the Supreme Court (SC). Resolving the appeal of FASAP, the Third Division of the SC promulgated its decision on July 22, 2008 reversing the decision promulgated on August 23, 2006 by the Court of Appeals (CA) and entering a new one finding PAL guilty of unlawful retrenchment.

The SC Third Division differed from the decision of the Court of Appeals (CA), which had pronounced in its appealed decision promulgated on August 23, 2006 that the remaining issue between the parties concerned the manner by which PAL had carried out the retrenchment program.

Instead, the SC Third Division disbelieved the veracity of PAL’s claim of severe financial losses, and concluded that PAL had not established its severe financial losses because of its non-presentation of audited financial statements. It further concluded that PAL had implemented the retrenchment program in bad faith, and had not used fair and reasonable criteria in selecting the employees to be retrenched.

After PAL filed its Motion for Reconsideration, the Court, upon motion, held oral arguments. Upon conclusion of the oral arguments, the Court directed the parties to explore a possible settlement and to submit their respective memoranda. The parties did not reach any settlement; hence, the SC, through the Special Third Division, resolved the issues on the merits through the resolution of October 2, 2009 denying PAL’s motion for reconsideration.

The SC Special Third Division was unconvinced by PAL’s change of theory in urging the June 1998 Association of Airline Pilots of the Philippines (ALPAP) pilots’ strike as the reason behind the immediate retrenchment; and observed that the strike was a temporary occurrence that did not require the immediate and sweeping retrenchment of around 1,400 cabin crew.

Not satisfied, PAL filed the Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for Reconsideration of the Decision of July 22, 2008.

On October 5, 2009, the writer of the resolution of October 2, 2009, Justice Consuelo Ynares-Santiago, compulsorily retired from the Judiciary. Pursuant to A.M. No. 99-8-09-SC, G.R. No. 178083 was then raffled to Justice Presbitero J. Velasco, Jr., a Member of the newly-constituted regular Third Division.

Upon the SC’s subsequent reorganization, G.R. No. 178083 (instant petition before the SC) was transferred to the First Division where Justice Velasco, Jr. was meanwhile re-assigned. Justice Velasco, Jr. subsequently inhibited himself from the case due to personal reasons. Pursuant to SC Administrative Circular No. 84-2007, G.R. No. 178083 was again re-raffled to Justice Arturo D. Brion, whose membership in the Second Division resulted in the transfer of G.R. No. 178083 to said Division.

On September 7, 2011, the Second Division denied with finality PAL’s Second Motion for Reconsideration of the Decision of July 22, 2008. Thereafter, PAL, through Atty. Estelito P. Mendoza, its collaborating counsel, sent a series of letters inquiring into the propriety of the successive transfers of G.R. No. 178083. His letters were docketed as A.M. No. 11-10-1-SC.

On October 4, 2011, the Court En Banc issued a resolution: (a) assuming jurisdiction over G.R. No. 178083; (b) recalling the September 7, 2011 resolution of the Second Division; and (c) ordering the re-raffle of G.R. No. 178083 to a new Member-in-Charge.

Resolving the issues raised by Atty. Mendoza in behalf of PAL, as well as the issues raised against the recall of the resolution of September 7, 2011, the Court En Banc promulgated its resolution in A.M. No. 11-10-1-SC on March 13, 2012,23 in which it summarized the intricate developments involving G.R. No. 178083.

In the same resolution of March 13, 2012, the SC En Banc directed the re-raffle of G.R. No. 178083 to the remaining Justices of the former Special Third Division who participated in resolving the issues pursuant to Section 7, Rule 2 of the Internal Rules of the Supreme Court (IRSC).

This last resolution impelled FASAP to file the Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13 March 2012], praying that the September 7, 2011 resolution in G.R. No. 178083 be reinstated.

Learn more on how to validly retrench employees. Get a copy of the Guide to Valid Dismissal of Employees Second Edition

The SC directed the consolidation of G.R. No. 178083 and A.M. No. 11-10-1-SC on April 17, 2012.

FASAP contends that a second motion for reconsideration was a prohibited pleading; that PAL failed to prove that it had complied with the requirements for a valid retrenchment by not submitting its audited financial statements; that PAL had immediately terminated the employees without prior resort to less drastic measures; and that PAL did not observe any criteria in selecting the employees to be retrenched. FASAP stresses that the October 4, 2011 resolution recalling the September 7, 2011 decision was void for failure to comply with Section 14, Article VIII of the 1987 Constitution; that the participation of Chief Justice Renato C. Corona who later on inhibited from G.R. No. 178083 had further voided the proceedings; that the 1987 Constitution did not require that a case should be raffled to the Members of the Division who had previously decided it; and that there was no error in raffling the case to Justice Brion, or, even granting that there was error, such error was merely procedural.

Issue/s:

Whether or not seniority should be used as sole basis for the selection in retrenchment

SC Ruling:

The SC granted PAL’s Motion for Reconsideration of the Resolution of October 2, 2009 and Second Motion for Reconsideration of the Decision of July 22, 2008 filed by PAL and Chiong; and DENY the Motion for Reconsideration [Re: The Honorable Court’s Resolution dated 13 March 2012] of FASAP.

Accordingly, the SC reversed the July 22, 2008 decision and the October 2, 2009 resolution; and affirmed the decision promulgated on August 23, 2006 by the CA.

In selecting the employees to be dismissed, the employer is required to adopt fair and reasonable criteria, taking into consideration factors like: (a) preferred status; (b) efficiency; and (c) seniority, among others.

The requirement of fair and reasonable criteria is imposed on the employer to preclude the occurrence of arbitrary selection of employees to be retrenched. Absent any showing of bad faith, the choice of who should be retrenched must be conceded to the employer for as long as a basis for the retrenchment exists.

The Court will only strike down the retrenchment of an employee as capricious, whimsical, arbitrary, and prejudicial in the absence of a clear-cut and uniform guideline followed by the employer in selecting him or her from the work pool. Following this standard, PAL validly implemented its retrenchment program.

PAL resorted to both efficiency rating and inverse seniority in selecting the employees to be subject of termination. As the NLRC keenly pointed out, the “ICCD Masterank 1997 Ratings -Seniority Listing” submitted by PAL sufficiently established the criteria for the selection of the employees to be laid off. To insist on seniority as the sole basis for the selection would be unwarranted, it appearing that the applicable CBA did not establish such limitation. This counters the statement in the dissent that the retrenchment program was based on unreasonable standards without regard to service, seniority, loyalty and performance.

To require PAL to further limit its criteria would be inconsistent with jurisprudence and the principle of fairness. Instead, we hold that for as long as PAL followed a rational criteria defined or set by the CBA and existing laws and jurisprudence in determining who should be included in the retrenchment program, it sufficiently met the standards of fairness and reason in its implementation of its retrenchment program.

The rehiring of previously retrenched employees should not invalidate a retrenchment program, the rehiring being an exercise of the employer’s right to continue its business. Consequently, the Court could not pass judgment on the motive behind PAL’s initiative to implement “Plan 22” (led to the recall/rehire of some of the retrenched employees) instead of “Plan 14.” The prerogative thereon belonged to the management alone due to its being in the best position to assess its own financial situation and operate its own business. Even the Court has no power to interfere with such exercise of the prerogative.

Citing EDI Staffbuilders International, Inc. vs. National Labor Relations Commission, the SC held that it laid down the basic contents of valid and effective quitclaims and waivers. To prevent disputes on the validity and enforceability of quitclaims and waivers of employees under Philippine laws, said agreements should contain the following: 1. A fixed amount as full and final compromise settlement; 2. The benefits of the employees if possible with the corresponding amounts, which the employees arc giving up in consideration of the fixed compromise amount; 3. A statement that the employer has dearly explained to the employee in English, Filipino, or in the dialect known to the employees -that by signing the waiver or quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are due them under the law; and 4. A statement that the employees signed and executed the document voluntarily, and had fully understood the contents of the document and that their consent was freely given without any threat, violence, duress, intimidation, or undue influence exerted on their person.

The release and quitclaim signed by the affected employees substantially satisfied the aforestated requirements. The consideration was clearly indicated in the document in the English language, including the benefits that the employees would be relinquishing in exchange for the amounts to be received.

There is no question that the employees who had occupied the position of flight crew knew and understood the English language. Hence, they fully comprehended the terms used in the release and quitclaim that they signed. Indeed, not all quitclaims are per se invalid or against public policy. A quitclaim is invalid or contrary to public policy only: (1) where there is clear proof that the waiver was wrangled from an unsuspecting or gullible person; or (2) where the terms of settlement are unconscionable on their face.

Based on these standards, the SC upheld the release and quitclaims signed by the retrenched employees herein.