Serrano v. NLRC

SERRANO V. NATIONAL LABOR RELATIONS COMMISSION AND ISETANN DEPARTMENT STORE

27 January 2000 | Mendoza | Special civil action in the SC, Certiorari

FACTS
Ruben Serrano was hired by Isetann Dept. Store as a security checker

1984 – Contractual; 1985 – Regular; 1988 – Head of Security Checkers

In 1991, as a cost-cutting measure, Isetann decided to phase out the entire security section and engage the services of an independent security agency.

Isetann sent a memo to Serrano on 11 Oct 1991, reiterating their verbal notice of termination effective on the same day.

Serrano filed a complaint on 3 Dec 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, nonpayment of salary and overtime pay


Labor Arbiter held that Serrano was illegally dismissed

• Failed to establish that the cause of retrenchment is to minimize losses
• Did not accord due process to Serrano
• Did not use reasonable standards in selecting employees to be terminated
• Did not show employees’ inefficiency so as to justify their replacement
• The day after Serrano’s dismissal, Isetann hired another person as a safety and security supervisor
• Isetann ordered to pay backwages, reinstatement, unpaid wages, 13th month pay, attorney’s fees

NLRC reversed Labor Arbiter’s decision upon Isetann’s appeal

• Phase-out of security section, hiring of agency is a legitimate business decision
• Labor Arbiter’s distinction between retrenchment and employment of cost-saving devices insignificant
• Reasonable criteria does not apply because the entire Security Section was abolished
• No bad faith in appointing a supervisor because it was separate from Serrano’s position as Security Checkers head
• Isetann ordered to give separation pay, unpaid salary, 13th month pay
• Serrano’s MfR denied

ISSUE AND HOLDING

WON the abolition of the Security Checkers section and the employment of an independent security agency falls under any of the authorized causes for dismissal under Article 283 of the Labor Code - YES, authorized cause is redundancy; Serrano should be given separation pay at the rate of one-month pay for every year of service (Art. 283)

DISCUSSION

Art. 283 provides that one month before intended date, written notice must be served on the workers and DOLE

Authorized causes under Art. 283 (Closure of establishment and reduction of personnel)

Installation of labor-saving devices Redundancy	Separation pay at the rate of at least one-month pay or one-month pay for every year of service (whichever is higher)
Retrenchment to prevent losses Closing or cessation of operations	Separation pay at the rate of at least one-month pay or half-month pay for every year of service (whichever is higher)

Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the employer’s exercise of judgment.
That the phase-out constituted a legitimate business decision is a factual finding of NLRC.

History of policies

When there is just cause but no due process (requirements of notice and opportunity to be heard)
Before: Dismissal is illegal
The shift took place in Wenphil Corp. v. NLRC

• Highly prejudicial to the employer’s interests to reinstate an employee who has been shown to be guilty of the charges that warranted his dismissal
• Dismissal must be for just or authorized cause and after due process

Now: Dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process (Sebuguero v. NLRC)

• Fines imposed range from P1,000 to P10,000

Reexamining Wenphil doctrine

• J. Panganiban – Monetary sanctions are too insignificant, niggardly, late
• J. Puno – “Dismiss now, pay later” policy convenient for moneyed employers
• In their opinion, such dismissal is void and employee should be reinstated and paid backwages

Remedy – pay full backwages from dismissal until determination that dismissal was for a just cause BUT STILL, dismissal must be upheld

Why violation of the notice requirement cannot be considered a denial of due process resulting in the nullity of dismissal
Due process clause is a limitation on governmental powers and DOES NOT APPLY to the exercise of private power

a. Only the state has authority to take life, liberty, property
b. Purpose of clause is to ensure that the exercise of this power is consistent with civilized methods

Notice and hearing are required under the due process clause before the power of the organized society is brought to bear upon the individual

a. This is NOT the case of termination of employee – no adversary system here (there is no charge against the employee)
b. Purpose of 30-day written notice is to give employee time to prepare for the eventual job loss, and for DOLE to determine WON economic causes exist to justify his termination
c. Even in cases of dismissal under Article 282[1], purpose of notice and hearing is NOT to comply with the due process clause in the Constitution; Compliance with notice requirement does not foreclose right of employee to question the legality of his dismissal

d. History of related laws

1. Art. 302 of Spanish Code of Commerce – employee/employer can terminate relationship by giving one month notice; in lieu of notice, mesada (one month pay) could be given to employee
2. NCC 2270 – repealed Art. 302 of Spanish Code of Commerce
3. RA 1052 (Termination Pay Law) – revived mesada
4. RA 1787 – amended RA 1052 by providing for giving of advance notice or payment of compensation (1/2 month per year of service)
5. Rules implementing BP 130, RA 6715 (amending NCC 277(b) – notice required even when the dismissal was for cause

Employer CANNOT be expected to be an impartial judge of his own cause

Also the case for termination for a just cause under Article 282

J. Puno disputes this as he says that many cases have been won by employees before grievance committees manned by impartial judges of the company

Grievance machinery is DIFFERENT – established by agreement of employer, employees and is composed of representatives from both sides

If the violation of the notice requirement is not a denial of due process, what is it?
Mere failure to observe a procedure for the termination of employment, which makes the termination merely ineffectual

What makes a dismissal of an employee illegal?
Only the absence of a just cause for termination as provided in Article 279

Basis	Authorized cause	Notice	Reinstate	Kind of pay
Art. 283	P	Î	Î	Separation pay, backwages
Art. 283	Î	Î	P	Backwages
Art. 282	P	Î	Î	Backwages from termination until it is determined that there is just cause

DISPOSITIVE PORTION

Petition granted. NLRC resolution modified. Isetann is ordered to:

• Pay separation pay equivalent to one month pay per year of service
• Unpaid salary
• Proportionate 13^th month pay
• Full backwages from termination until this decision becomes final

Case remanded to Labor Arbiter to determine computation of monetary awards to Serrano.

OPINIONS [2]

Separate Opinion – Bellosillo

• Prefers to call indemnity or penalty as disturbance compensation
• Proposes that amount of the award be uniform and rational and not arbitrary

Dissenting Opinion – Puno

• Wenphil did not change ruling that violation of the pre-dismissal notice requirement is an infringement of due process
• Submits a return to the pre-Wenphil rule where a reasonless violation of the notice requirement makes the dismissal illegal and results in the employee’s reinstatement

• One undesirable effect of Wenphil is to compel employees to seek relief against illegal dismissals with DOLE (whereas before, a remedy can be sought before the employer) and oftentimes, they do not know why they were dismissed in the first place
• Dilution of the rule has been abused by employers who followed the “dismiss now, pay later” strategy
• An employee under Article 283 has a stronger claim to the right to a pre-dismissal notice and hearing (rather than post facto dismissal hearing)
• Disagrees with majority opinion that due process requirement does not apply to the exercise of private power; private due process is a settled norm in administrative law

Separate Opinion – Vitug

• A just or authorized cause and a written notice are required concurrently but not equipollent in their consequence in terminating an employer-employee relationship
• Where there is no just or authorized cause, reinstatement and payment of backwages would be proper. Damages might also be awarded if dismissal is attended by bad faith of employer. Separation pay can substitute for reinstatement if such reinstatement is not feasible.
• Employer must be made to pay corresponding damages for failure to comply with notice requirement

Separate Opinion – Panganiban

• Notice requirement finds basis not only in the Labor Code but also in the due process clause of the Constitution
• When the employee is dismissed without due process, he is illegally dismissed. He is entitled to backwages and reinstatement.
• The Labor Code grants the dismissed employee the right to be notified as well as the right to be heard.

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[1] Causes under Article 282 are (1) serious misconduct or willful disobedience, (2) gross and habitual neglect of duties, (3) fraud or breach of trust, (4) commission of crime against employer or immediate family member or authorized representatives, and (5) other analogous causes.

[2] For this part, I will only take note of discussions different from what has been presented in the majority opinion.