Title
Flight Attendants and Stewards Association of the Philippines vs. Philippine Airlines, Inc.
Case
G.R. No. 178083
Decision Date
Oct 2, 2009
Philippine Airlines' retrenchment of 1,400 cabin crew in 1998 deemed illegal; insufficient proof of financial necessity, unfair criteria, and rehiring indicated bad faith.

Case Summary (G.R. No. 78223)

Background and Procedural History

This case revolves around the motion for reconsideration filed by Philippine Airlines, Inc. (PAL) challenging a previous decision from July 22, 2008, which found PAL guilty of illegal dismissal of over 1,400 flight attendants. The initial decision reversed prior rulings by the National Labor Relations Commission (NLRC) and the Court of Appeals, which had upheld PAL's retrenchment actions due to its financial distress. The Supreme Court's ruling mandated PAL to reinstate affected employees and awarded full backwages, subject to certain conditions regarding separation pay.

Issues Raised in the Motion for Reconsideration

PAL argued that its financial condition justified its actions, including the retrenchment of its flight attendants. It submitted evidence of its financial struggles, including audited financial statements, a petition for suspension of payments, and the approval from the Securities and Exchange Commission (SEC) regarding its financial status. PAL asserted that FASAP never contested the economic basis for the retrenchment but targeted its allegedly discriminatory execution.

Financial Distress and Corporate Decisions

PAL maintained that significant financial losses necessitated the reduction of its workforce. The company contended that external factors, such as a pilots' strike, peso depreciation, and the Asian financial crisis worsened its circumstances. PAL claimed that it consulted with FASAP prior to implementing the retrenchment plan, indicating that discussions about possible layoffs had commenced in early 1998.

Change in Retrenchment Plan

Initially, PAL planned a massive downsizing of its fleet from 54 aircraft to 14. However, due to evolving circumstances and guidance from industry experts, PAL shifted to a new plan (Plan 22), expanding its fleet capacity. PAL argued that this change justified the rehiring of some employees previously retrenched, framing it as a legitimate exercise of business judgment rather than an indication of bad faith.

Legal Standards for Retrenchment

Under Article 283 of the Labor Code, retrenchment as a measure must be warranted by the employer's financial condition, must utilize fair and reasonable criteria in selecting employees to terminate, and must demonstrate that all other less drastic measures have been exhausted. The Supreme Court found that PAL’s retrenchment did not satisfy these legal requirements, particularly the criteria of good faith and reasonableness.

Ruling on the Legality of the Retrenchment

The Court reiterated that PAL's financial difficulties did not constitute a sufficient basis for the mass retrenchment of its crew. The employees’ dismissal did not adhere to the necessary legal protocols, which include providing prior notices to the affected employees and the Department of Labor and Employment, or employing fair criteria for termination. The Court maintained that the reliance on a temporary pilots' strike did not excuse PAL from following proper procedures.

Consequences of the Supreme Court's Decision

The Supreme Court ruled that the mass retrenchment was executed illegally, prompting the Court to uphold the initial award of reinstatement and back wages to the affected f

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