Title
Flight Attendants and Stewards Association of the Philippines vs. Philippine Airlines, Inc.
Case
G.R. No. 178083
Decision Date
Mar 13, 2018
FASAP vs PAL: Dispute over 1998 retrenchment program legality; Supreme Court reversed prior rulings, affirming PAL's financial necessity and fair retrenchment criteria.

Case Summary (G.R. No. 178083)

Timeline and Procedural Antecedents

• August 23, 2006: CA upholds NLRC decision declaring retrenchment valid
• July 22, 2008: Third Division reverses CA, finds PAL guilty of illegal retrenchment; orders reinstatement or backwages plus separation pay; awards attorney’s fees
• October 2, 2009: Special Third Division denies PAL’s first motion for reconsideration, reduces attorney’s fee award
• January 20, 2010: Regular Third Division grants PAL leave to file second motion for reconsideration (2nd MR) “in the higher interest of justice”
• September 7, 2011: Second Division denies PAL’s 2nd MR with finality
• October 4, 2011: En banc recalls the September 7, 2011 order and re-raffles the case
• March 13, 2012: En banc confirms recall, assumes jurisdiction, directs re-raffle to remaining Third Division members
• April 17, 2012: Consolidation of G.R. No. 178083 and A.M. No. 11-10-1-SC

Applicable Law

• 1987 Constitution: Art. 4(2)–(3), Art. 8(14) on reasons and form of judicial decisions
• Labor Code Art. 298 (formerly Art. 283), permitting retrenchment to prevent losses, subject to one-month notice and separation pay
• IRSC Rule 15(3) allowing a second motion for reconsideration “in the higher interest of justice” upon two-thirds en banc vote

Procedural Rulings

• Validity of en banc recall: The October 4, 2011 recall of the Second Division’s order was a proper exercise of inherent power to recall non-final resolutions; no “decision” on the merits was issued, so Art. VIII, Sec. 14 does not apply.
• Second motion for reconsideration: The grant of leave to file PAL’s 2nd MR discharged the bar on successive MRs under the IRSC; the Court may grant it in the higher interest of justice where the original decision is legally erroneous and unjust.

Substantive Ruling – Legality of the Retrenchment

To validate a retrenchment under Art. 298, the employer must establish by clear and convincing proof that:

  1. Losses are substantial (not de minimis) and actual or reasonably imminent;
  2. Retrenchment is necessary and likely to prevent those losses;
  3. The employer acted in good faith, not to evade tenure protection;
  4. Fair and reasonable criteria were used in selecting employees;
  5. Notice requirements and separation pay were observed.

Proof of Financial Losses

• Judicial admission: FASAP, in pleadings before the Labor Arbiter, NLRC, and CA, expressly acknowledged PAL’s dire financial position, obviating the need for audited statements.
• Judicial notice: PAL was placed under SEC-supervised rehabilitation and receivership, itself a finding of substantial business reverses; courts may take judicial notice of public acts and orders.
• Related jurisprudence: Prior rulings (e.g., Clarion Printing House v. NLRC) recognize receivership as proof of severe losses; audited financial statements are not the sole proof where rehabilitation has been judicially invoked.

Good Faith Implementation

• PAL consulted FASAP in February–March 1998 on cost-cutting alternatives, including layoffs, fleet reduction, work-rotation, and stock-dividend schemes; temporary measures failed.
• The ALPAP pilots’ strike in June 1998 aggravated losses, threatening PAL’s continued operations within weeks; retrenchment followed only after other measures proved insufficient.
• Recall of retrenched employees (Plan 22 vs. Plan 14) reflected PAL’s reluctance to lose trained staff and does not demonstrate bad faith or evasion of tenure guarantees





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