Labor Law

Part 4

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION 

G.R. No. 100641 June 14, 1993

FARLE P. ALMODIEL, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), RAYTHEON PHILS., INC., respondents.

Apolinario Lomabao, Jr. for petitioner.

Vicente A. Cruz, Jr., for private respondent.

NOCON, J.:

Subject of this petition for certiorari  is the decision dated March 21, 1991 of the National Labor Relations
Commission in NLRC Case No.
00-00645-89 which reversed and set aside the Labor Arbiter's decision dated September 27, 1989 and ordered
instead the payment of separation pay and financial assistance of P100,000.00. Petitioner imputes grave abuse of
discretion on the part of the Commission and prays for the reinstatement of the Labor Arbiter's decision which
declared his termination on the ground of redundancy illegal.

Petitioner Farle P. Almodiel is a certified public accountant who was hired in October, 1987 as Cost Accounting
Manager of respondent Raytheon Philippines, Inc. through a reputable placement firm, John Clements Consultants,
Inc. with a starting monthly salary of P18,000.00. Before said employment, he was the accounts executive of
Integrated Microelectronics, Inc. for several years. He left his lucrative job therein in view of the promising career
offered by Raytheon. He started as a probationary or temporary employee. As Cost Accounting Manager, his major
duties were: (1) plan, coordinate and carry out year and physical inventory; (2) formulate and issue out hard copies of
Standard Product costing and other cost/pricing analysis if needed and required and (3) set up the written Cost
Accounting System for the whole company. After a few months, he was given a regularization increase of P1,600.00
a month. Not long thereafter, his salary was increased to P21,600.00 a month.

On August 17, 1988, he recommended and submitted a Cost Accounting/Finance Reorganization, affecting the
whole finance group but the same was disapproved by the Controller. However, he was assured by the Controller
that should his position or department which was apparently a one-man department with no staff becomes untenable
or unable to deliver the needed service due to manpower constraint, he would be given a three (3) year advance
notice.

In the meantime, the standard cost accounting system was installed and used at the Raytheon plants and
subsidiaries worldwide. It was likewise adopted and installed in the Philippine operations. As a consequence, the
services of a Cost Accounting Manager allegedly entailed only the submission of periodic reports that would use
computerized forms prescribed and designed by the international head office of the Raytheon Company in California,
USA.

On January 27, 1989, petitioner was summoned by his immediate boss and in the presence of IRD Manager, Mr.
Rolando Estrada, he was told of the abolition of his position on the ground of redundancy. He pleaded with

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management to defer its action or transfer him to another department, but he was told that the decision of
management was final and that the same has been conveyed to the Department of Labor and Employment. Thus, he
was constrained to file the complaint for illegal dismissal before the Arbitration Branch of the National Capital Region,
NLRC, Department of Labor and Employment.

On September 27, 1989, Labor Arbiter Daisy Cauton-Barcelona rendered a decision, the dispositive portion of which
reads as follows:

WHEREFORE, judgment is hereby rendered declaring that complainant's termination on the

ground of redundancy is highly irregular and without legal and factual basis, thus ordering the
respondents to reinstate complainant to his former position with full backwages without lost of
seniority rights and other benefits. Respondents are further ordered to pay complainant
P200,000.00 as moral damages and P20,000.00 as exemplary damages, plus ten percent (10%) of
the total award as attorney's fees.1

Raytheon appealed therefrom on the grounds that the Labor Arbiter committed grave abuse of discretion in denying
its rights to dismiss petitioner on the ground of redundancy, in relying on baseless surmises and self-serving
assertions of the petitioner that its act was tainted with malice and bad faith and in awarding moral and exemplary
damages and attorney's fees.

On March 21, 1991, the NLRC reversed the decision and directed Raytheon to pay petitioner the total sum of
P100,000.00 as separation pay/financial assistance. The dispositive portion of which is hereby quoted as follows:

WHEREFORE, the appealed decision is hereby set aside. In its stead, Order is hereby issued
directing respondent to pay complainant the total separation pay/financial assistance of One
Hundred Thousand Pesos (P100,000.00).

SO ORDERED.2

From this decision, petitioner filed the instant petition averring that:

The public respondent committed grave abuse of discretion amounting to (lack of) or in excess of
jurisdiction in declaring as valid and justified the termination of petitioner on the ground of
redundancy in the face of clearly established finding that petitioner's termination was tainted with
malice, bad faith and irregularity.3

Termination of an employee's services because of redundancy is governed by Article 283 of the Labor Code which
provides as follows:

Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate
the employment of any employee due to installation of labor-saving devices, redundancy,
retrenchment to prevent losses or the closing or cessation of operation of the establishment or
undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the worker and the Department of Labor and Employment at least one
(1) month before the intended date thereof. In case of termination due to installation of labor-saving
devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment
to prevent losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be

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equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.

There is no dispute that petitioner was duly advised, one (1) month before, of the termination of his employment on
the ground of redundancy in a written notice by his immediate superior, Mrs. Magdalena B.D. Lopez sometime in the
afternoon of January 27, 1989. He was issued a check for P54,863.00 representing separation pay but in view of his
refusal to acknowledge the notice and the check, they were sent to him thru registered mail on January 30, 1989.
The Department of Labor and Employment was served a copy of the notice of termination of petitioner in accordance
with the pertinent provisions of the Labor Code and the implementing rules.

The crux of the controversy lies on whether bad faith, malice and irregularity crept in the abolition of petitioner's
position of Cost Accounting Manager on the ground of redundancy. Petitioner claims that the functions of his position
were absorbed by the Payroll/Mis/Finance Department under the management of Danny Ang Tan Chai, a resident
alien without any working permit from the Department of Labor and Employment as required by law. Petitioner relies
on the testimony of Raytheon's witness to the effect that corollary functions appertaining to cost accounting were
dispersed to other units in the Finance Department. And granting that his department has to be declared redundant,
he claims that he should have been the Manager of the Payroll/Mis/Finance Department which handled general
accounting, payroll and encoding. As a B. S. Accounting graduate, a CPA with M.B.A. units, 21 years of work
experience, and a natural born Filipino, he claims that he is better qualified than Ang Tan Chai, a B.S. Industrial
Engineer, hired merely as a Systems Analyst Programmer or its equivalent in early 1987, promoted as MIS Manager
only during the middle part of 1988 and a resident alien.

On the other hand, Raytheon insists that petitioner's functions as Cost Accounting Manager had not been absorbed
by Ang Tan Chai, a permanent resident born in this country. It claims to have established below that Ang Tan Chai
did not displace petitioner or absorb his functions and duties as they were occupying entirely different and distinct
positions requiring different sets of expertise or qualifications and discharging functions altogether different and
foreign from that of petitioner's abolished position. Raytheon debunks petitioner's reliance on the testimony of Mr.
Estrada saying that the same witness testified under oath that the functions of the Cost Accounting Manager had
been completely dispensed with and the position itself had been totally abolished.

Whether petitioner's functions as Cost Accounting Manager have been dispensed with or merely absorbed by
another is however immaterial. Thus, notwithstanding the dearth of evidence on the said question, a resolution of this
case can be arrived at without delving into this matter. For even conceding that the functions of petitioner's position
were merely transferred, no malice or bad faith can be imputed from said act. A survey of existing case law will
disclose that in Wiltshire File Co., Inc. v. NLRC,4 the position of Sales Manager was abolished on the ground of
redundancy as the duties previously discharged by the Sales Manager simply added to the duties of the General
Manager to whom the Sales Manager used to report. In adjudging said termination as legal, this Court said that
redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirements of the enterprise. The characterization of an employee's services
as no longer necessary or sustainable, and therefore, properly terminable, was an exercise of business judgment on
the part of the employer. The wisdom or soundness of such characterization or decision was not subject to
discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely
arbitrary and malicious action is not shown.

In the case of International Macleod, Inc. v. Intermediate Appellate Court,5 this Court also considered the position of
Government Relations Officer to have become redundant in view of the appointment of the International Heavy
Equipment Corporation as the company's dealer with the government. It held therein that the determination of the
need for the phasing out of a department as a labor and cost saving device because it was no longer economical to

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retain said services is a management prerogative and the courts will not interfere with the exercise thereof as long as
no abuse of discretion or merely arbitrary or malicious action on the part of management is shown.

In the same vein, this Court ruled in Bondoc v. People's Bank and Trust Co.,6 that the bank's board of directors
possessed the power to remove a department manager whose position depended on the retention of the trust and
confidence of management and whether there was need for his services. Although some vindictive motivation might
have impelled the abolition of his position, this Court expounded that it is undeniable that the bank's board of
directors possessed the power to remove him and to determine whether the interest of the bank justified the
existence of his department.

Indeed, an employer has no legal obligation to keep more employees than are necessary for the operation of its
business. Petitioner does not dispute the fact that a cost accounting system was installed and used at Raytheon
subsidiaries and plants worldwide; and that the functions of his position involve the submission of periodic reports
utilizing computerized forms designed and prescribed by the head office with the installation of said accounting
system. Petitioner attempts to controvert these realities by alleging that some of the functions of his position were still
indispensable and were actually dispersed to another department. What these indispensable functions that were
dispersed, he failed however, to specify and point out. Besides, the fact that the functions of a position were simply
added to the duties of another does not affect the legitimacy of the employer's right to abolish a position when done
in the normal exercise of its prerogative to adopt sound business practices in the management of its affairs.

Considering further that petitioner herein held a position which was definitely managerial in character, Raytheon had
a broad latitude of discretion in abolishing his position. An employer has a much wider discretion in terminating
employment relationship of managerial personnel compared to rank and file employees.7 The reason obviously is that
officers in such key positions perform not only functions which by nature require the employer's full trust and
confidence but also functions that spell the success or failure of an enterprise.

Likewise destitute of merit is petitioner's imputation of unlawful discrimination when Raytheon caused corollary
functions appertaining to cost accounting to be absorbed by Danny Ang Tan Chai, a resident alien without a working
permit. Article 40 of the Labor Code which requires employment permit refers to non-resident aliens. The
employment permit is required for entry into the country for employment purposes and is issued after determination
of the non-availability of a person in the Philippines who is competent, able and willing at the time of application to
perform the services for which the alien is desired. Since Ang Tan Chai is a resident alien, he does not fall within the
ambit of the provision.

Petitioner also assails Raytheon's choice of Ang Tan Chai to head the Payroll/Mis/Finance Department, claiming that
he is better qualified for the position. It should be noted, however, that Ang Tan Chai was promoted to the position
during the middle part of 1988 or before the abolition of petitioner's position in early 1989. Besides the fact that Ang
Tan Chai's promotion thereto is a settled matter, it has been consistently held that an objection founded on the
ground that one has better credentials over the appointee is frowned upon so long as the latter possesses the
minimum qualifications for the position. In the case at bar, since petitioner does not allege that Ang Tan Chai does
not qualify for the position, the Court cannot substitute its discretion and judgment for that which is clearly and
exclusively management prerogative. To do so would take away from the employer what rightly belongs to him as
aptly explained in National Federation of Labor Unions v. NLRC:8

It is a well-settled rule that labor laws do not authorize interference with the employer's judgment in
the conduct of his business. The determination of the qualification and fitness of workers for hiring
and firing, promotion or reassignment are exclusive prerogatives of management. The Labor Code
and its implementing Rules do not vest in the Labor Arbiters nor in the different Divisions of the
NLRC (nor in the courts) managerial authority. The employer is free to determine, using his own
discretion and business judgment, all elements of employment, "from hiring to firing" except in

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cases of unlawful discrimination or those which may be provided by law. There is none in the
instant case.

Finding no grave abuse of discretion on the part of the National Labor Relations Commission in reversing and
annulling the decision of the Labor Arbiter and that on the contrary, the termination of petitioner's employment was
anchored on a valid and authorized cause under Article 283 of the Labor Code, the instant petition for certiorari  must
fail.

SO ORDERED.

Narvasa, C.J., Padilla and Regalado, JJ., concur.

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Part 4

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 93666             April 22, 1991

GENERAL MILLING CORPORATION and EARL TIMOTHY CONE, petitioners,

vs.
HON. RUBEN D. TORRES, in his capacity as Secretary of Labor and Employment, HON. BIENVENIDO E.
LAGUESMA, in his capacity as Acting Secretary of Labor and Employment, and BASKETBALL COACHES
ASSOCIATION OF THE PHILIPPINES, respondents.

Sobrevinas, Diaz, Hayudini & Bodegon Law Office for petitioners.

Rodrigo, Cuevas & De Borja for respondent BCAP.

RESOLUTION

FELICIANO, J.:

On 1 May 1989, the National Capital Region of the Department of Labor and Employment issued Alien Employment
Permit No. M-0689-3-535 in favor of petitioner Earl Timothy Cone, a United States citizen, as sports consultant and
assistant coach for petitioner General Milling Corporation ("GMC").

On 27 December 1989, petitioners GMC and Cone entered into a contract of employment whereby the latter
undertook to coach GMC's basketball team.

On 15 January 1990, the Board of Special Inquiry of the Commission on Immigration and Deportation approved
petitioner Cone's application for a change of admission status from temporary visitor to pre-arranged employee.

On 9 February 1990, petitioner GMC requested renewal of petitioner Cone's alien employment permit. GMC also
requested that it be allowed to employ Cone as full-fledged coach. The DOLE Regional Director, Luna Piezas,
granted the request on 15 February 1990.

On 18 February 1990, Alien Employment Permit No. M-02903-881, valid until 25 December 1990, was issued.

Private respondent Basketball Coaches Association of the Philippines ("BCAP") appealed the issuance of said alien
employment permit to the respondent Secretary of Labor who, on 23 April 1990, issued a decision ordering
cancellation of petitioner Cone's employment permit on the ground that there was no showing that there is no person
in the Philippines who is competent, able and willing to perform the services required nor that the hiring of petitioner
Cone would redound to the national interest.

Petitioner GMC filed a Motion for Reconsideration and two (2) Supplemental Motions for Reconsideration but said
Motions were denied by Acting Secretary of Labor Bienvenido E. Laguesma in an Order dated 8 June 1990.

Petitioners are now before the Court on a Petition for Certiorari, dated 14 June 1990, alleging that:

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1. respondent Secretary of Labor gravely abused his discretion when he revoked petitioner Cone's alien
employment permit; and

2. Section 6 (c), Rule XIV, Book I of the Omnibus Rules Implementing the Labor Code is null and void as it
is in violation of the enabling law as the Labor Code does not empower respondent Secretary to determine if
the employment of an alien would redound to national interest.

Deliberating on the present Petition for Certiorari, the Court considers that petitioners have failed to show any grave
abuse of discretion or any act without or in excess of jurisdiction on the part of respondent Secretary of Labor in
rendering his decision, dated 23 April 1990, revoking petitioner Cone's Alien Employment Permit.

The alleged failure to notify petitioners of the appeal filed by private respondent BCAP was cured when petitioners
were allowed to file their Motion for Reconsideration before respondent Secretary of Labor.1

Petitioner GMC's claim that hiring of a foreign coach is an employer's prerogative has no legal basis at all. Under
Article 40 of the Labor Code, an employer seeking employment of an alien must first obtain an employment permit
from the Department of Labor. Petitioner GMC's right to choose whom to employ is, of course, limited by the statutory
requirement of an alien employment permit.

Petitioners will not find solace in the equal protection clause of the Constitution. As pointed out by the Solicitor-
General, no comparison can be made between petitioner Cone and Mr. Norman Black as the latter is "a long time
resident of the country," and thus, not subject to the provisions of Article 40 of the Labor Code which apply only to
"non-resident aliens." In any case, the term "non-resident alien" and its obverse "resident alien," here must be given
their technical connotation under our law on immigration.

Neither can petitioners validly claim that implementation of respondent Secretary's decision would amount to an
impairment of the obligations of contracts. The provisions of the Labor Code and its Implementing Rules and
Regulations requiring alien employment permits were in existence long before petitioners entered into their contract
of employment. It is firmly settled that provisions of applicable laws, especially provisions relating to matters affected
with public policy, are deemed written into contracts.2 Private parties cannot constitutionally contract away the
otherwise applicable provisions of law.

Petitioners' contention that respondent Secretary of Labor should have deferred to the findings of Commission on
Immigration and Deportation as to the necessity of employing petitioner Cone, is, again, bereft of legal basis. The
Labor Code itself specifically empowers respondent Secretary to make a determination as to the availability of the
services of a "person in the Philippines who is competent, able and willing at the time of application to perform the
services for which an alien is desired."3

In short, the Department of Labor is the agency vested with jurisdiction to determine the question of availability of
local workers. The constitutional validity of legal provisions granting such jurisdiction and authority and requiring proof
of non-availability of local nationals able to carry out the duties of the position involved, cannot be seriously
questioned.

Petitioners apparently also question the validity of the Implementing Rules and Regulations, specifically Section 6 (c),
Rule XIV, Book I of the Implementing Rules, as imposing a condition not found in the Labor Code itself. Section 6 (c),
Rule XIV, Book I of the Implementing Rules, provides as follows:

Section 6. Issuance of Employment Permit –– the Secretary of Labor may issue an employment permit to
the applicant based on:

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a) Compliance by the applicant and his employer with the requirements of Section 2 hereof;

b) Report of the Bureau Director as to the availability or non-availability of any person in the Philippines who
is competent and willing to do the job for which the services of the applicant are desired.

(c) His assessment as to whether or not the employment of the applicant will redound to the national
interest;

(d) Admissibility of the alien as certified by the Commission on Immigration and Deportation;

(e) The recommendation of the Board of Investments or other appropriate government agencies if the
applicant will be employed in preferred areas of investments or in accordance with the imperative of
economic development;

x x x           x x x          x x x

(Emphasis supplied)

Article 40 of the Labor Code reads as follows:

Art. 40. Employment per unit of non-resident aliens. –– Any alien seeking admission to the Philippines for
employment purposes and any domestic or foreign employer who desires to engage an alien for
employment in the Philippines shall obtain an employment permit from the Department of Labor.

The employment permit may be issued to a non-resident alien or to the applicant employer after a
determination of the non-availability of a person in the Philippines who is competent, able and willing at the
time of application to perform the services for which the alien is desired.

For an enterprise registered in preferred areas of investments, said employment permit may be issued upon
recommendation of the government agency charged with the supervision of said registered enterprise.
(Emphasis supplied)

Petitioners apparently suggest that the Secretary of Labor is not authorized to take into account the question of
whether or not employment of an alien applicant would "redound to the national interest" because Article 40 does not
explicitly refer to such assessment. This argument (which seems impliedly to concede that the relationship of
basketball coaching and the national interest is tenuous and unreal) is not persuasive. In the first place, the second
paragraph of Article 40 says: "[t]he employment permit may be issued to a non-resident alien or to the applicant
employer after a determination of the non-availability of a person in the Philippines who is competent, able and willing
at the time of application to perform the services for which the alien is desired." The permissive language employed
in the Labor Code indicates that the authority granted involves the exercise of discretion on the part of the issuing
authority. In the second place, Article 12 of the Labor Code sets forth a statement of objectives that the Secretary of
Labor should, and indeed must, take into account in exercising his authority and jurisdiction granted by the Labor
Code,

Art. 12. Statement of Objectives. –– It is the policy of the State:

a) To promote and maintain a state of full employment through improved manpower training, allocation and
utilization;

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x x x           x x x          x x x

c) To facilitate a free choice of available employment by persons seeking work in conformity with the
national interest;

d) To facilitate and regulate the movement of workers in conformity with the national interest;

e) To regulate the employment of aliens, including the establishment of a registration and/or work permit
system;

x x x           x x x          x x x

Thus, we find petitioners' arguments on the above points of constitutional law too insubstantial to require further
consideration.1avvphi1

Petitioners have very recently manifested to this Court that public respondent Secretary of Labor has reversed his
earlier decision and has issued an Employment Permit to petitioner Cone. Petitioners seek to withdraw their Petition
for Certiorari on the ground that it has become moot and academic.

While ordinarily this Court would dismiss a petition that clearly appears to have become moot and academic, the
circumstances of this case and the nature of the questions raised by petitioners are such that we do not feel justified
in leaving those questions unanswered.4

Moreover, assuming that an alien employment permit has in fact been issued to petitioner Cone, the basis of the
reversal by the Secretary of Labor of his earlier decision does not appear in the record. If such reversal is based on
some view of constitutional law or labor law different from those here set out, then such employment permit, if one
has been issued, would appear open to serious legal objections.

ACCORDINGLY, the Court Resolved to DISMISS the Petition for certiorari for lack of merit. Costs against petitioners.

Fernan, C.J., Bidin and Davide, Jr., JJ., concur.

Gutierrez, Jr., J., in the result.