Title
Pantoja vs. SCA Hygiene Products Corporation
Case
G.R. No. 163554
Decision Date
Apr 23, 2010
Employee rejected transfer, accepted separation pay, and executed quitclaim; later claimed illegal dismissal. Court ruled no illegal dismissal, upholding employer's good faith business decision.
illegal dismissal
transfer offer
court rules in favor

Case Summary (G.R. No. 163554)

Factual Background

SCA Hygiene Products Corporation employed Dannie M. Pantoja as a utility man beginning March 15, 1987 and later assigned him as a back tender at Paper Mill No. 4. Respondent informed petitioner by Notice of Transfer dated March 27, 1999 of a reorganization and offered transfer to Paper Mill No. 5 in anticipation of the permanent shutdown of Paper Mill No. 4 effective May 5, 1999, explaining that the shutdown was part of a streamlining program prompted by low sales and orders for industrial paper. Petitioner refused the transfer offer, accepted separation pay in the amount of P356,335.20 equivalent to two months pay for every year of service, and executed a release and quitclaim. Respondent filed an Establishment Termination Report with the Department of Labor and Employment listing 31 terminated employees.

Proceedings Before the Labor Arbiter

Petitioner filed a complaint for illegal dismissal on June 20, 2000 alleging that Paper Mill No. 4 never experienced a permanent shutdown and continued to operate, and submitting documentary evidence and an affidavit of a co-employee attesting to continued operation and the employment of contractual workers. On March 23, 2001 the Labor Arbiter dismissed the complaint for lack of merit, finding that petitioner voluntarily separated by rejecting reassignment and executing a release and quitclaim after receiving separation pay.

Ruling of the National Labor Relations Commission

On appeal, the NLRC reversed the Labor Arbiter in its May 30, 2002 Decision, finding petitioner’s dismissal illegal. The NLRC accepted petitioner’s evidence of continuous operation of Paper Mill No. 4 and concluded that the purported shutdown was a feigned measure rendering the redundancy program legally infirm, that petitioner’s refusal to transfer was therefore immaterial, and that the quitclaim was invalid because it was executed under fraud and misrepresentation by respondent. The NLRC ordered reinstatement without loss of seniority, payment of full backwages less the separation pay of P356,335.20, and attorney’s fees equivalent to ten percent of the total net amount due.

Proceedings Before the Court of Appeals

SCA Hygiene Products Corporation sought certiorari relief from the NLRC decision in the Court of Appeals. The CA, in its January 30, 2004 Decision in CA-G.R. SP No. 73076, reversed the NLRC, reinstated the Labor Arbiter’s dismissal of the complaint, and held that petitioner’s rejection of transfer and acceptance of separation pay constituted a valid basis for separation. The CA granted respondent’s motion to annul the NLRC’s entry of judgment. The CA denied petitioner’s motion for reconsideration on May 13, 2004.

Issue Presented

The sole issue presented to the Supreme Court was whether SCA Hygiene Products Corporation was guilty of illegal dismissal in terminating Dannie M. Pantoja.

Parties' Contentions

Petitioner argued that respondent’s streamlining and retrenchment was a sham devised to rid the company of regular employees and that the supposed shutdown never occurred, rendering his separation involuntary and the quitclaim void for fraud and misrepresentation. Respondent maintained that it legitimately exercised its management prerogative in implementing a reorganization and partial closure prompted by low sales and orders, that it offered reassignment to posts of equal rank and pay which petitioner refused, and that petitioner voluntarily accepted separation pay and executed a valid release and quitclaim.

Supreme Court Ruling

The Supreme Court DENIED the petition and AFFIRMED the CA’s January 30, 2004 Decision and May 13, 2004 Resolution. The Court held that respondent properly exercised its management prerogative in good faith, that there was no showing of arbitrariness or bad faith, that petitioner’s acceptance of separation pay and execution of the release and quitclaim were voluntary, and that the quitclaim was valid and binding. The Court therefore found no illegal dismissal.

Legal Basis and Reasoning

The Court found that respondent presented uncontroverted evidence of low volume of sales and orders for industrial paper in 1999, corroborated by the affidavit of respondent’s VP-Tissue Manufacturing Director, and that respondent’s decision to shut down Paper Mill No. 4 was a business judgment within the scope of its management prerogative. Citing International Harvester Macleod, Inc. v. Intermediate Appellate Court, the Court reiterated that the determination to phase out a department and reduce personnel as a labor and cost-saving device is a recognized management prerogative that courts will not lightly disturb. The Court observed that respondent did not proceed directly to retrenchment but offered affected employees an option to be transferred to equal posts without diminution in rank or pay, thereby showing that retrenchment was used only as a last resort. The resumption of operations at Paper Mill No. 4 in 2000 due to a more favorable business climate did not render the earlier retrenchment illegal because the decision to abolish the mill in 1999 responded to contemporary financial exigencies and constituted a legitimate business judgment. The Court reje

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