G.R. No. 117040 - Serrano vs. National Labor Relations Commission

Petitioner Ruben Serrano was hired by Isetann Department Store, Inc. on October 4, 1984 as a security checker; he became a regular employee on April 4, 1985 and, in 1988, head of the Security Checkers Section.
As part of a cost-cutting measure in 1991, Isetann decided to phase out its in-house security section and to contract with an independent security agency. By memorandum dated October 11, 1991, Isetann advised Serrano that, “in view of the retrenchment program,” his employment as Security Section Head was terminated effective that same day. No 30-day prior notice was given to Serrano and no notice was served on the DOLE.

On December 3, 1991, Serrano filed a complaint for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay. The issues were framed as: (a) validity of dismissal; (b) monetary claims for underpayment of wages, salaries, 13th month pay, and overtime pay; and (c) unfair labor practice.
On April 30, 1993, the Labor Arbiter ruled that Serrano was illegally dismissed, reasoning that Isetann failed to prove retrenchment to prevent losses; failed to accord due process; used no reasonable selection criteria; and, the day after dismissal, engaged a safety and security supervisor with similar functions. Remedies awarded included reinstatement to his former or equivalent position, full backwages (limited to three years), unpaid wages, proportionate 13th month pay, and attorney’s fees; other claims were denied.
On appeal, the NLRC reversed (March 30, 1994), holding that the phase-out of the security section and outsourcing to an independent security agency was a legitimate business decision within management prerogative; the rule on “reasonable criteria” was inapplicable because the entire section was abolished; the safety and security supervisor position was separate and long-existent. The NLRC awarded separation pay (one month per year of service), unpaid salary, and proportionate 13th month pay; Serrano’s motion for reconsideration was denied (August 26, 1994).

Serrano sought review, asserting that replacing the security section with an independent agency does not fall under the authorized causes in Article 283 of the Labor Code, and that due notice requirements were violated.
The case presented both the substantive ground for termination (redundancy vs retrenchment) and the procedural effect and sanction for failure to comply with Article 283’s 30-day notice to the employee and the DOLE.
The Supreme Court also took the opportunity to re-examine the then-prevailing “Wenphil” line of cases that imposed nominal indemnity for dismissals effected without observance of notice, despite the presence of just or authorized cause.

Whether phasing out the entire in-house security section and engaging an independent security agency is an authorized cause—specifically redundancy—under Article 283 of the Labor Code sufficient to terminate employees in the abolished section.

What is the legal effect of the employer’s failure to comply with Article 283’s 30-day prior written notice to both the affected employees and the DOLE, and what is the appropriate sanction when termination is otherwise for an authorized cause.

Whether Serrano is entitled to reinstatement and backwages, or separation pay and monetary awards only; and whether the NLRC erred in reversing the Labor Arbiter.