G.R. No. 154689 - Unicorn Safety Glass, Inc. vs. Basarte

Case Summary (G.R. No. 154689)

Factual Background

Respondents normally worked six (6) times a week, from Monday to Saturday, and were paid on a weekly basis. They were union officers in a union organized within petitioner company. The company’s management invoked economic distress to justify a schedule reduction. Specifically, in the March 2, 1998 memorandum, Hilario Yulo informed respondents that their workdays would be reduced effective April 13, 1998, and cited: decrease in sales, increase in the cost of production, devaluation of the peso, and increase in the minimum wage.

Respondents protested in writing. In a letter dated March 12, 1998, they objected to the proposed reduction and questioned the legitimacy of the cited reasons. They also suspected that the management intended to retaliate because only union officers were affected. In response to continued objections, Hilario Yulo issued the April 6, 1998 memorandum, implementing a work rotation schedule from April 13, 1998 to April 30, 1998, which effectively placed respondents on a three-day workweek during that period. A copy of the rotation scheme was sent to the Department of Labor and Employment.

Respondents maintained their opposition. They wrote another protest letter dated April 7, 1998, and on the same day they met with the spouses Yulo to inquire into the reasons for the reduced workweek. They were told that it was management’s prerogative to impose it. Instead of reporting for work on April 13, 1998, respondents filed a complaint with the NLRC docketed as NLRC Case No. NCR-00-04-03277-98. They alleged constructive dismissal, unfair labor practice (union busting), non-payment of five days service incentive leave pay, and demanded reinstatement, full backwages, and damages including attorneys’ fees.

While the complaint was pending, petitioners asserted that respondents refused work. Petitioners sent telegrams instructing each respondent to report for work. Respondents replied through a letter dated April 18, 1998, explaining that, because of management’s indifference and alleged violation of their rights, a constructive dismissal complaint had already been filed and that they decided not to report for work.

Petitioners then demanded an explanation. However, respondents neither returned to work nor replied to the telegrams.

Labor Arbiter’s Proceedings and Ruling

After hearing, the Labor Arbiter Felipe Pati found no constructive dismissal. The decision reasoned that the evidence on record—telegrams, letters, and memoranda sent by respondents ordering petitioners to report for work—did not support a finding of constructive termination. The Labor Arbiter viewed respondents’ continued refusal to report as deliberate and noted their admission, in the joint letter-reply, that they decided not to report due to disagreement with the work rotation adopted by petitioner company. Based on that admission, the Labor Arbiter held that the charge of illegal dismissal was misplaced and concluded that refusal to report for work was not a proper remedy. The Labor Arbiter also dismissed the unfair labor practice allegation for lack of legal and factual basis.

The Labor Arbiter dismissed the case for lack of merit. Nevertheless, it ordered petitioner company to pay respondents unpaid service incentive leave pay in the total amount of P5,110.00, while also dismissing the cases of PAQUITO MANONGSONG and ELMER SULTORA with prejudice upon grounds of amicable settlement and subsequent withdrawals.

NLRC Proceedings and Treatment of Waivers and Settlements

Both parties litigated on appeal. During the pendency of the appeal, petitioner company filed a Motion to Dismiss on the ground that respondents Basarte, Flores, Decio, and Lor had allegedly entered into amicable settlements and executed a Waiver, Release and Quitclaim.

Respondents’ representative opposed, claiming that the waivers were executed without his knowledge and without the presence of the Labor Arbiter, and that the amounts received were unconscionably inadequate.

In a decision dated October 31, 2000, the NLRC sustained the Labor Arbiter. It found no showing of involuntariness or unconscionability. It emphasized that respondents personally went to the company office for settlement, acknowledged signing the waiver and quitclaim, and brought them before a notary public. The NLRC considered it implausible to claim involuntariness nearly a year later. It also held that the settlement amounts were more than the judgment award, citing that the amounts given to Rodrigo Basarte, Jaimelito Flores, Joselito Decio, and Teodolfo Lor were more than the labor arbiter’s award. The NLRC thus dismissed the cases with prejudice as to those complainants and affirmed the dismissal for lack of merit.

Court of Appeals Disposition

Respondents then filed a petition for certiorari with the Court of Appeals. The Court of Appeals found respondents’ case partly meritorious. It declined, however, to make a contrary finding on the unfair labor practice charge due to the absence of clear-cut and convincing evidence.

The Court of Appeals ordered the reinstatement of Rodrigo Basarte, Jaimelito Flores, and Ronnie Decio without loss of seniority rights and privileges, and awarded their full backwages from April 13, 1998 until reinstatement. Alternatively, it granted separation pay if reinstatement was no longer feasible. It also awarded ten percent (10%) attorneys’ fees based on the total awards and taxed costs against petitioners.

Issues Raised Before the Supreme Court

Petitioners sought review by raising two main errors: first, they argued that the Court of Appeals erred in reversing the Labor Arbiter’s ruling, which the NLRC had affirmed, that respondents were not illegally dismissed; second, they argued that the Court of Appeals erred in nullifying the release, waiver and quitclaims executed by respondents Rodrigo Basarte and Jaimelito Flores.

Supreme Court’s Treatment of Constructive Dismissal and Management Prerogative

The Supreme Court reiterated that constructive dismissal has been defined as a quitting that becomes inevitable because continued employment becomes impossible, unreasonable, or unlikely, such as when employment conditions involve demotion in rank and diminution in pay. It also recognized that constructive dismissal may arise even without diminution, when an employer’s acts of discrimination, insensibility, or disdain become unbearable, foreclosing any real choice except to resign.

In reviewing the record, the Court agreed with the Court of Appeals that petitioners’ bare assertions regarding the rotation plan, and their failure to refute respondents’ allegation that respondents were targeted due to union activities, warranted reversal of the Labor Arbiter’s conclusion. The Court held that petitioners had the burden to prove that the work rotation scheme was a genuine business necessity and not intended to subdue the organized union. The economic reasons cited in petitioners’ memoranda were deemed too general to substantiate the necessity of the scheme. Petitioners pointed to reduced electric consumption as evidence of an economic slump, but the Court ruled that such a fact did not, by itself, prove that the rotation schedule was the most reasonable alternative to address company problems.

The Court also took note of petitioners’ rigid stance. The Court considered petitioners’ insistence on implementation, coupled with the fact that respondents were union officers, as an indication that reasons other than business necessity motivated the plan. The Court observed that respondents attempted repeatedly to discuss the issue with Hilario Yulo. Good faith required management to listen and to consider a scheme amenable to both parties, or to persuade employees that no viable option existed. Petitioners allegedly ignored respondents’ letters, leaving respondents to seek legal redress.

The Court acknowledged management’s latitude in the exercise of management prerogative to regulate employment matters such as hiring, assignments, working methods, supervision, discipline, dismissal, and recall, and the prerogative to change working hours when exigencies of service require it. Yet the Court emphasized that management prerogative is not absolute. It must be exercised in good faith and with due regard to the rights of labor. The Court explained that prerogative cannot be used to circumvent labor law or oppress employees, because labor laws exist to balance conflicting interests and ensure equal footing when parties bargain in good faith.

Applying these principles, the Court concluded that petitioners’ exercise of prerogative appeared to be an underhanded circumvention of the law. The work rotation was implemented summarily and apparently singled out respondents who were union officers. Management’s alleged disinterest in hearing respondents’ side created a situation where reporting for work amounted to acquiescence in an unjust arrangement.

Refutation of “Abandonment” by Respondents

Petitioners contended, in substance, that respondents abandoned their jobs by failing to report. The Court reiterated that abandonment requires two elements: (1) failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever the employer-employee relationship, with the second element more determinative and shown by overt acts. It held that the employer carries the burden of proof of a clear and deliberate intent.

Nonetheless, the Court found petitioners’ abandonment theory inconsistent with respondents’ constructive dismissal complaint. The Court held that a charge of abandonment is totally inconsistent with the filing of a complaint for constructive dismissal and the reasons advanced for the employees’ conduct. Respondents’ protest was directed at maintaining regular work hours, and they even prayed for reinstatement and backwages. Such demands were incompatible with any intent to abandon employment. Accordingly, respondents could not be char

Case Syllabus (G.R. No. 154689)

Parties and Procedural Posture

Unicorn Safety Glass, Inc. and the Spouses Lily and Hilario Yulo filed a Petition for Review on Certiorari to set aside the Court of Appeals decisions dated October 18, 2001 and August 7, 2002, which had reversed the Labor Arbiter and the NLRC.
The respondents were regular employees of Unicorn Safety Glass Incorporated, and they also served as officers of the organized union in the company.
The dispute began as an NLRC complaint for constructive dismissal and unfair labor practice, including alleged union busting, non-payment of five days service incentive leave pay, and claims for moral and exemplary damages and attorneys’ fees.
The Labor Arbiter rendered judgment on January 26, 1999 finding no constructive dismissal and dismissing the unfair labor practice charge for lack of legal and factual basis, while ordering payment for unpaid service incentive leave pay.
The NLRC, in a decision dated October 31, 2000, affirmed the Labor Arbiter and granted motions to dismiss based on amicable settlements for certain complainants.
The Court of Appeals partially granted respondents’ petition for certiorari, ordering reinstatement and full backwages for some respondents, while declining to make a contrary finding on unfair labor practice due to lack of clear-cut and convincing evidence.
The Supreme Court denied the petition and affirmed in toto the Court of Appeals decision.

Employment, Union Role, and Pay Arrangement

Respondents normally worked six (6) times a week from Monday to Saturday, and they were paid on a weekly basis.
Respondents were union officers in petitioner company, which was owned and managed by the Spouses Lily and Hilario Yulo.
The reduction of workdays and the ensuing controversy centered on whether management’s action was a legitimate business response or was aimed at subduing the organized union.

Management’s Work Reduction Plan

On March 2, 1998, Hilario Yulo, as general manager, issued a Memorandum announcing that effective April 13, 1998, respondents’ workdays would be reduced due to economic considerations.
The Memorandum cited factors including decrease in sales, increase in cost of production, devaluation of the peso, and increase in minimum wage.
On March 12, 1998, respondents registered a protest in a letter dated March 12, 1998, expressing doubts on the reasons offered and suspecting union-related retaliation because only union officers were affected.
On April 6, 1998, Hilario Yulo issued another Memorandum implementing a work rotation schedule from April 13, 1998 to April 30, 1998, which effectively reduced workdays to three days a week.
A copy of the rotation scheme was sent to the Department of Labor and Employment.
Respondents protested in a letter dated April 7, 1998, and they also met with the Spouses Yulo and inquired about the reasons for the reduced workweek.
They were told that the matter was management prerogative.
On April 13, 1998, instead of reporting for work, respondents filed an NLRC complaint for constructive dismissal and unfair labor practice, and they prayed for reinstatement and full backwages.

Respondents’ Non-Reporting and Company Responses

Because respondents did not report for work, petitioner company sent telegrams ordering them to report.
On April 18, 1998, respondents informed Yulo by letter that management’s alleged indifference and violation of their rights led them to lodge the constructive dismissal complaint.
Respondents also stated that they decided not to report for work at all given the working environment they were subjected to.
Petitioner company requested respondents’ explanation for non-reporting, but respondents neither reported for work nor replied to the telegrams.

Labor Arbiter Findings

The Labor Arbiter ruled that respondents were not constructively terminated, emphasizing that the evidence showed respondents’ refusal to report for work rather than a termination.
The Labor Arbiter found it significant that respondents received multiple communications from petitioner company yet simply ignored them.
The Labor Arbiter considered respondents’ own submissions, including a joint letter-reply dated April 18, 1998, as reinforcing that they chose not to report for work because they did not agree with the rotation.
The Labor Arbiter held that refusal to report for work was not a proper remedy if respondents opposed the rotation scheme.
The Labor Arbiter dismissed the unfair labor practice charge for lack of legal and factual basis.
Despite dismissing the dismissal and unfair labor practice claims, the Labor Arbiter ordered petitioner company to pay unpaid service incentive leave pay in the total amount of P5,110.00.
The Labor Arbiter also dismissed with prejudice certain cases involving PAQUITO MANONGSONG and ELMER SULTORA based on amicable settlement and withdrawals.

NLRC Ruling on Settlements

During the pendency of the appeal, petitioner company filed a Motion to Dismiss alleging that respondents Basarte, Flores, Decio, and Lor executed Waiver, Release and Quitclaim and entered amicable settlements.
Respondents’ representative opposed, arguing that the waivers were signed without his knowledge and not in the presence of the Labor Arbiter, and that the amounts received were unconscionably inadequate.
The NLRC, in its October 31, 2000 decision, sustained the Labor Arbiter and was not convinced that the settlements were involuntary.
The NLRC reasoned that complainants went to petitioner’s office for settlement, signed the waiver before a Notary Public, and acknowledged executing it.
The NLRC rejected the unconscionability claim, noting that the amounts granted were more than the judgment award and emphasizing the elapsed time before the later challenge.
The NLRC’s dispositive portion dismissed the cases with prejudice as to the specified complainants and affirmed the Labor Arbiter’s decision.

Court of Appeals Disposition

Respondents filed a petition for certiorari with the Court of Appeals.
The Court of Appeals found the respondents’ case partly meritorious and reversed the Labor Arbiter and NLRC in relevant respects.
The Court of Appeals declined to make a contrary finding on unfair labor practice due to lack of clear-cut and convincing evidence.
The