Case Summary (G.R. No. 117040)
Labor Arbiter’s Decision The Arbiter held that Isetann:
• Failed to prove genuine retrenchment to prevent losses or redundancy under Art. 283
• Did not observe procedural requirements (no notice, no selection criteria, no hearing)
• Acted in bad faith despite hiring a similar supervisor the day after Serrano’s dismissal Accordingly, the Arbiter ordered:
- Reinstatement without loss of seniority
- Full back wages (capped at three years)
- Unpaid wages and proportionate 13th-month pay
- 10% attorney’s fees on the total award
NLRC’s Ruling On Isetann’s appeal, the NLRC found:
• A bona fide business decision to abolish the security section — a valid exercise of management prerogative under redundancy or labor-saving device grounds (Art. 283)
• Use of “retrenchment” in its ordinary, non-legal sense did not vitiate the termination
• No need for selection criteria where all section positions were abolished
• The previously existing security supervisor role was separate from Serrano’s position Hence, it denied reinstatement and ordered separation pay of one month per year of service, plus unpaid salary and 13th-month pay.
Issue Presented Whether replacing its security section with an independent agency constitutes an authorized ground for terminating employment under Art. 283.
Redundancy as Authorized Cause Under the 1987 Constitution’s security-of-tenure guarantee and Art. 283, an employer may terminate due to labor-saving devices or redundancy, subject to notice and separation pay. Precedents (De Ocampo v. NLRC, Asian Alcohol Corp. v. NLRC) uphold an employer’s discretion to use independent contractors without court substitution of judgment, absent proof of malice or arbitrariness. Serrano’s unproven allegation that Isetann aimed to avoid CBA wage increases does not rebut the finding of good-faith business judgment.
Notice Requirement Under Art. 283 and Art. 277(b), an employer must serve 30-day written notice on the employee and DOLE before effecting layoff for authorized cause. Serrano received no such notice. Jurisprudence (Wenphil Corp. v. NLRC; Sebuguero v. NLRC) treats omission of prior notice not as a total nullity but as a procedural irregularity warranting a “sanction” (historically indemnity or damages). While full due process in termination for just causes (Art. 282) traditionally includes notice and hearing, the failure to give 30-day notice for authorized causes renders the termination ineffectual but does not invalidate the substantive ground of redundancy.
Supreme Court’s Holding 1. Valid Authorized Cause — Serrano’s termination was for r
Case Syllabus (G.R. No. 117040)
Facts
- Petitioner Ruben Serrano hired October 4, 1984 by Isetann Department Store as security checker; became regular April 4, 1985 and head of Security Checkers Section in 1988.
- In 1991 Isetann decided to phase out its security section and engage an independent security agency.
- Serrano was notified of his termination by memo dated October 11, 1991—effective immediately and without 30-day notice.
- On December 3, 1991 Serrano filed a complaint for illegal dismissal and layoff, unfair labor practice, underpayment of wages, nonpayment of salary and overtime pay.
Labor Arbiter Proceedings and Decision
- Issues defined from position papers:
- Validity of Serrano’s dismissal.
- Entitlement to unpaid wages, 13th month pay and overtime.
- Alleged unfair labor practice by Isetann.
- Hearing held; on April 30, 1993 the Labor Arbiter found:
- No proof Isetann retrenched to prevent losses.
- Lack of due process and reasonable selection standards.
- Proof of replacement by a safety and security supervisor the day after Serrano’s dismissal.
- Reliefs ordered:
- Reinstatement to former or equivalent position with full backwages (P 74,740, limited to three years).
- Payment of unpaid wages (P 2,020.73) and proportionate 13th month pay (P 3,198.30).
- Attorney’s fees at 10% of award (P 7,995.91).
NLRC Resolution and Rationale
- On appeal, the NLRC reversed on March 30, 1994; denied reconsideration August 26, 1994.
- NLRC held:
- Phase-out of security section and hiring of agency a legitimate business decision (management prerogative).
- Use of term “retrenchment” in plain sense; difference between retrenchment and other cost-saving devices imma