Intec Cebu, Inc. vs. Court of Appeals

Factual Background

The respondents were hired in 1997 and 1998 by Intec Cebu Inc. as production workers in the manufacture and assembly of mechanical systems and printed circuit boards. In 2005 respondents’ working days were reduced from a six-day week to two-to-four days, and Intec explained that the reduction was due to lack of job orders. Respondents discovered, however, that Intec engaged about one hundred eighty-eight contractual workers to perform tasks similar to those previously performed by regular employees. On May 17, 2006 respondents executed an Establishment Termination Report submitted to the Department of Labor and Employment and filed a complaint for illegal dismissal two days later.

Labor Arbiter Proceedings and Ruling

The Labor Arbiter found that respondents were constructively dismissed because Intec hired casual employees to replace them while implementing the reduced-work-day scheme. The Labor Arbiter ordered Intec and its officials jointly and severally to pay separation pay and backwages totaling PHP 6,967,924.00 as indicated in the attached computation sheet, and dismissed other claims for insufficiency of evidence or lack of jurisdiction.

NLRC Ruling

The National Labor Relations Commission set aside the Labor Arbiter’s decision and held that respondents were not dismissed, either actually or constructively, finding that Intec suffered tremendous financial losses which justified the reduction of working days. The NLRC nonetheless directed Intec to pay separation pay to the thirty-seven complainants in the aggregate amount of PHP 1,125,735.00 and denied entitlement to backwages.

Court of Appeals Decision

The Court of Appeals reversed the NLRC in its Decision dated April 22, 2009 and reinstated the Labor Arbiter’s finding of constructive dismissal as to the respondents whose petitions were properly before it. The CA dismissed the petitions of several employees for failure to sign verification of non-forum-shopping.

Petition for Certiorari and Assignments of Error

Petitioners filed a petition for certiorari under Rule 65, Rules of Court, alleging grave abuse of discretion by the Court of Appeals. The principal assignments included: that the CA improperly overturned its own resolution dismissing the respondents’ petition and granted reconsideration; that the CA disregarded the NLRC’s factual finding that complainants were not dismissed; that the CA capriciously characterized petitioners’ audited financial statements as self-serving merely because they were not prepared by an independent auditor; that the CA circumvented the doctrine limiting judicial review of NLRC factual findings as in Jardine Davis, Inc. v. NLRC, G.R. No. 26272 (1999); and that, even if respondents were entitled to separation pay and backwages, the computation contained glaring errors.

Petitioners’ Factual and Legal Assertions

Petitioners contended that the reduced work days were a bona fide management prerogative undertaken to forestall business losses following loss of major job orders. Intec relied on audited financial statements for 2001–2006 to show losses and asserted that trainees and hires from TESDA and Sisters of Mary were on-the-job trainees or casuals retained to meet urgent off-and-on job orders and not to replace regular employees. Petitioners also urged that certain respondents voluntarily resigned or abandoned their work after the second memorandum extending reduced work days.

Respondents’ Position

Respondents urged affirmation of the Labor Arbiter and Court of Appeals, asserting constructive dismissal. They relied on evidence that Intec hired contractual employees to perform the regular tasks of respondents while reducing respondents’ working days, and denied abandonment by demonstrating that they filed complaints for illegal dismissal to protest the termination and to demonstrate desire to return to work.

Legal Standard on Management Prerogative

The Court recalled the settled rule that management may regulate hiring, work assignments, working methods, and lay-offs as part of its prerogative, but that such prerogative is not absolute and must be exercised in good faith with due regard to employees’ rights, citing Royal Plant Workers Union v. Coca-Cola Bottlers Philippines - Cebu Plant. The Court emphasized that an employer asserting a reduction of work days or retrenchment must prove the bona fides of the measure.

Supreme Court’s Examination of Evidence

The Court scrutinized Intec’s documentary support. The financial statements showed a net loss in 2005 of PHP 9,240,929.00 and a net income in the 2006 statement of PHP 9,568,674.00, with the 2006 period covering May 2005 to April 2006. The Court noted the reduced-work-day scheme was implemented in January 2006 and found no evidence that the 2006 income was earned only after January. The Court observed that the 2005 loss may be attributable to acquisition of property and equipment totaling PHP 9,218,967.00 and that the audited statements contained no observation that a reduction in demand mandated reduction of work days. The Court found the delivery data and slump-in-demand report deficient because they lacked preparation date, were prepared by Intec employees and approved by the company president, and were not supported by sales or delivery receipts. The Court also considered the hiring of one hundred eighty-eight workers and concluded that petitioners failed to prove that these hires were performing work materially different from that of regular employees or that their engagement did not undermine the need for respondents’ services. Taken together, the Court concluded that Intec failed to carry the burden of proving a bona fide, good-faith reduction of work days as a cost-cutting measure.

Constructive Dismissal and Abandonment

The Court held that Intec’s unilateral reduction of work days significantly diminished respondents’ salaries and constituted an illegal reduction of work hours amounting to constructive dismissal, consistent with the doctrine that constructive dismissal occurs when continued employment is rendered impossible, unreasonable, or unlikely, or when there is a substantial diminution of salary or rank, citing Mcmer Corporation, Inc. v. NLRC, G.R. No. 193421. The Court rejected petitioners’ abandonment claim, reiterating that abandonment requires clear proof of deliberate and unjustified intent to sever the employment relationship and that filing a complaint for illegal dismissal is inconsistent with abandonment, citing MZR Industries v. Colambot.

Procedural Rule on Certiorari and Remedy of Appeal

The Court addressed the choice of remedy and reiterated the requisites for certiorari: that the writ be directed against a tribunal exercising judicial or quasi-judicial functions; that such tribunal acted without or in excess of jurisdic