CASE DIGEST : Ruben Serrano v. National Labor Relations Commission and Isetann Department Store G.R. No. 117040, January 27, 2000 En Banc — Mendoza, J

 

FACTS

Ruben Serrano was hired by Isetann Department Store as a security checker on October 4, 1984. He eventually became a regular employee and, in 1988, became head of the Security Checkers Section. In 1991, Isetann decided, as a cost-cutting measure, to phase out its entire security section and engage the services of an independent security agency. On October 11, 1991, Isetann gave Serrano a memorandum informing him that his termination was effective that same day because of the company's retrenchment program.

Serrano filed a complaint for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay. The Labor Arbiter found that he had been illegally dismissed. It ruled that Isetann failed to establish that the retrenchment was necessary to prevent or minimize losses, failed to accord Serrano due process, and failed to use reasonable standards in selecting employees whose employment would be terminated.

Isetann appealed. The NLRC reversed the Labor Arbiter and found that Isetann acted within its management prerogative when it phased out its Security Checkers Section and engaged an independent security agency for purposes of cost reduction and economy. The NLRC ordered Isetann to pay Serrano separation pay equivalent to one month pay for every year of service, unpaid salary, and proportionate 13th-month pay. Serrano then brought the case to the Supreme Court.

The Supreme Court found that the phase-out of the Security Checkers Section was a legitimate business decision and that the termination of Serrano's services was for an authorized cause, specifically redundancy. The Court nevertheless considered Isetann's failure to comply with the statutory notice requirement applicable to termination for authorized causes.

ISSUE

The first issue was whether Isetann validly terminated Serrano's employment on the ground of redundancy. The Court considered whether the phase-out of the Security Checkers Section and the engagement of an independent security agency constituted a legitimate exercise of management prerogative and an authorized cause for termination.

The second issue was whether the failure of Isetann to give Serrano the required notice rendered his termination illegal. The Court considered the effect of the notice requirement under Article 283 of the Labor Code, which required written notice to the worker and the Department of Labor and Employment at least one month before the intended termination in cases of authorized causes.

The third issue was whether Serrano was entitled to backwages in addition to separation pay because Isetann failed to comply with the statutory notice requirement.

HELD

The Supreme Court GRANTED the petition and MODIFIED the NLRC resolution. It held that the termination of Serrano's employment was based on an authorized cause, namely redundancy. The Court found that Isetann's decision to phase out its Security Checkers Section and engage an independent security agency was a legitimate business decision. There was no sufficient proof that Isetann acted maliciously or arbitrarily.

The Court explained that Article 283 of the Labor Code authorized an employer to terminate employment because of the installation of labor-saving devices, redundancy, retrenchment to prevent losses, or closure or cessation of operations, subject to the requirements provided by law. In cases of redundancy, the employer must comply with the statutory requirements, including the required written notice.

The Court held that Isetann failed to comply with the mandatory 30-day notice requirement. However, the Court ruled that the notice requirement under Article 283 was not an aspect of due process that would invalidate a termination otherwise based on an authorized cause. The Court therefore sustained the termination as valid.

The Court further held that because the termination was validly based on redundancy, Serrano should not be reinstated. He was entitled to separation pay equivalent to one month pay for every year of service, as well as his unpaid salary and proportionate 13th-month pay.

The Court, however, also ruled that because Isetann failed to comply with the required notice, Serrano was entitled to full backwages from the time his employment was terminated on October 11, 1991 until the decision became final. The case was remanded to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards.