Cases: Management Prerogative

man teaching woman in front of monitor

What is a Labor Law Case or Labor Jurisprudence? A Labor Law Case or Labor Jurisprudence is a decision/resolution on a labor dispute by the Supreme Court of the Philippines. Per Article 8 of the Civil Code, judicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines. 

Labor Cases or Jurisprudence on the above-mentioned topic

1. Concept

Coca-Cola Export Corporation v. Gacayan
G.R. No. 149433, 15 December 2010
The employer’s right to conduct the affairs of its business, according to its own discretion and judgment, is well-recognized. An employer has a free reign and enjoys wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline in its employees and to impose penalties, including dismissal, upon erring employees. This is a management prerogative, where the free will of management to conduct its own affairs to achieve its purpose takes form. The only criterion to guide the exercise of its management prerogative is that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.
Peckson v. Robinsons Supermarket Corporation
G.R. No. 198534, 03 July 2013
[BACKGROUND]
[The employee] first joined the [the Company – a supermarket] as a Sales Clerk on November 3, 1987. On October 26, 2006, she was holding the position of Category Buyer when… [she was] reassigned… to the position of Provincial Coordinator, effective November 1, 2006. Claiming that her new assignment was a demotion because it was non-supervisory and clerical in nature, the [the employee] refused to turn over her responsibilities to the new Category Buyer, or to accept her new responsibilities as Provincial Coordinator…
In a memorandum to [the employee] dated November 13, 2006, the [the Company]… demanded an explanation from her within 48 hours for her refusal to accept her new assignment despite written and verbal demands [citing] a company rule, Offenses Subject to Disciplinary Action No. 4.07, which provided that “[d]isobedience, refusal or failure to do assigned task or to obey superior’s/official’s orders/instructions, or to follow established procedures or practices without valid reason” would be meted the penalty of suspension.
[The employee] ignored the 48-hour deadline to explain imposed… On November 23, 2006, [the employee was] issued… another memorandum, reiterating [the] demand to explain in writing within 48 hours why [the employee] persistently refused to assume her new position, and warning her that this could be her final chance to present her side or be deemed to have waived her right to be heard.
In her one-paragraph reply submitted on November 27, 2006, the [the employee] stated that she could not accept the position of Provincial Coordinator since she saw it as a demotion. As it turned out, however, on November 9, 2006, [the employee] had already filed a complaint for constructive dismissal against [the Company]…
[RESOLUTION]
In Rural Bank of Cantilan, Inc. v. Julve, the Court had occasion to summarize the general jurisprudential guidelines affecting the right of the employer to regulate employment, including the transfer of its employees:
Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees. The only limitations to the exercise of this prerogative are those imposed by labor laws and the principles of equity and substantial justice.
While the law imposes many obligations upon the employer, nonetheless, it also protects the employer’s right to expect from its employees not only good performance, adequate work, and diligence, but also good conduct and loyalty. In fact, the Labor Code does not excuse employees from complying with valid company policies and reasonable regulations for their governance and guidance.
Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a movement from one position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another of equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient cause; (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee…
In Philippine Japan Active Carbon Corporation v. NLRC, it was held that the exercise of management’s prerogative concerning the employees’ work assignments is based on its assessment of the qualifications, aptitudes and competence of its employees, and by moving them around in the various areas of its business operations it can ascertain where they will function with maximum benefit to the company.
It is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes, and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee’s right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal.
As a privilege inherent in the employer’s right to control and manage its enterprise effectively, its freedom to conduct its business operations to achieve its purpose cannot be denied. We agree with the appellate court that the respondents are justified in moving the [the employee] to another equivalent position, which presumably would be less affected by her habitual tardiness or inconsistent attendance than if she continued as a Category Buyer, a “frontline position” in the day-to-day business operations of a supermarket such as Robinsons.
If the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a constructive dismissal.
As we have already noted, the respondents had the burden of proof that the transfer of the [the employee] was not tantamount to constructive dismissal, which as defined in Blue Dairy Corporation v. NLRC, is a quitting because continued employment is rendered impossible, unreasonable or unlikely, or an offer involving a demotion in rank and diminution of pay:
The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.
Thus, as further held in Philippine Japan Active Carbon Corporation, when the transfer of an employee is not unreasonable, or inconvenient, or prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits and other privileges, the employee may not complain that it amounts to a constructive dismissal.
But like all other rights, there are limits to the exercise of managerial prerogative to transfer personnel, and on the employer is laid the burden to show that the same is without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Indeed, management prerogative may not be used as a subterfuge by the employer to rid himself of an undesirable worker.
Interestingly, although the [the employee] claims that she was constructively dismissed, yet until the unfavorable decision of the LA on May 30, 2007, for seven (7) months she continued to collect her salary while also adamantly refusing to heed the order… to report to the Metroeast Depot. It was only on June 22, 2007, after the LA’s decision, that she filed her “forced” resignation. Her deliberate and unjustified refusal to assume her new assignment is a form of neglect of duty, and according to the LA, an act of insubordination. We saw how the company sought every chance to hear her out on her grievances and how she ignored the memoranda… asking her to explain her refusal to accept her transfer. All that [the employee] could say was that it was a demotion and that her floating status embarrassed her before the suppliers and her co-employees.
[The Company has] discharged the burden of proof that the transfer of the [the employee] was not tantamount to constructive dismissal.
In Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, a machinist who had been employed with the [the employee] company for 16 years was reduced to the service job of transporting filling materials after he failed to report for work for one (1) day on account of an urgent family matter. This is one instance where the employee’s demotion was rightly held to be an unlawful constructive dismissal because the employer failed to show substantial proof that the employee’s demotion was for a valid and just cause:
In case of a constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for valid and legitimate grounds such as genuine business necessity. Particularly, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of proof, the employee’s demotion shall no doubt be tantamount to unlawful constructive dismissal. x x x…
In the case at bar, we agree with the appellate court that there is substantial showing that the transfer of the [the employee] from Category Buyer to Provincial Coordinator was not unreasonable, inconvenient, or prejudicial to her. The [the employee] failed to dispute that the job classifications of Category Buyer and Provincial Coordinator are similar, or that they command a similar salary structure and responsibilities. We agree with the NLRC that the Provincial Coordinator’s position does not involve mere clerical functions but requires the exercise of discretion from time to time, as well as independent judgment, since the Provincial Coordinator gives appropriate recommendations to management and ensures the faithful implementation of policies and programs of the company. It even has influence over a Category Buyer because of its recommendatory function that enables the Category Buyer to make right decisions on assortment, price and quantity of the items to be sold by the store.
Endico v. Quantum Foods Distribution Center
G.R. No. 161615, 30 January 2009
[BACKGROUND]
On 2 January 1995, [the Company – a food business] hired [the employee] as Field Supervisor of Davao City. [the Company] provided [the employee] with a service vehicle on the understanding that after five years of continuous service to the company and upon payment of 10% of the vehicle’s book value, [the Company] would turn over possession and ownership of the vehicle to [the employee].
In June 1995, [the employee] was transferred to Cebu. On 2 January 1996, [the employee] was promoted as Area Manager of Cebu. In 1997, in recognition of [the employee]’s achievements and contributions to [the Company], he was awarded “Master Awards for Sales Excellence” as the most outstanding Area Manager and was also rewarded with an all-expense paid trip to Thailand. In the same year, [the employee] was also given a plaque of recognition for the elite 100% Achiever’s Award. In 1998, [the employee] was again rewarded with an all-expense paid trip to Hong Kong for his very good performance that year.
In 1999, due to the economic slowdown and to save on operational costs, [the Company] streamlined its operations through the reduction of the company’s contractual merchandisers. [the employee’s] merchandisers were reduced from twelve to five.
In a fax message dated 11 June 1999, … [the] National Sales Manager of [the Company], instructed … [the] Regional Sales Manager [RSM] and [the employee’s] immediate supervisor, to immediately relieve [the employee] from his position. [The RSM] was also instructed to handle the vacated position and to be responsible in the turn over of all company properties issued to [the employee] including the service vehicle. [The RSM] was likewise ordered to advise [the employee] to report to the head office on 14 June 1999. [the employee] complied with the order and proceeded to the head office in Parañaque.
In the show cause memorandum dated 14 June 1999, [the Company] asked [the employee] to explain in writing, within 24 hours, why no administrative action should be taken against him because of “serious misconduct due to mismanagement of sales area resulting to lost sales and goodwill with number one major account.” The memorandum stated that, from 1 May to 11 June 1999 at Shoemart Supermarket, Cebu (SM account), [the employee] violated Rules 169 and 1710 of [the Company]’ general policies and procedure.
On the same day, [the employee] filed an application for leave of absence effective 17 June to 2 July 1999.
In his answer dated 16 June 1999, [the employee] denied that there was serious misconduct and mismanagement in his area as far as the deployment of merchandisers was concerned. [The employee] said that he properly coordinated all his actions with [the RSM]. [The employee] presented a letter13 dated 3 May 1999, where he informed [the RSM] and the head office that the SM account wanted a merchandiser assigned to it for a whole day coverage and rejected the merchandiser assigned to it with a half-day schedule. In another letter dated 7 May 1999, [the employee] gave the head office an update on the status of the SM account. [The employee] added that [the Company] did not accord him due process because he was immediately relieved without being given the opportunity to explain his side. On the same day, [the employee] also withdrew his application for leave of absence.
On 17 June 1999, [the Company] recalled [the employee’s] application for leave of absence and required him to report to the head office. [The Company] also issued a Personnel Action Request17 dated 11 June 1999, which provided for [the employee’s] transfer as Area Sales Manager of Cebu to Area Sales Manager of the head office effective 14 June 1999. However, [the employee] failed to report for work. In telegrams dated 30 June18 and 6 July 1999, [the Company] reiterated its directive for [the employee] to report to the head office.
Also on 17 June 1999, [the employee], believing that [the Company] intended to ease him out of the company, filed a complaint for constructive illegal dismissal. [the employee] also prayed for the payment of separation pay, backwages, other monetary benefits, damages, attorney’s fees and recovery of the service vehicle.
[RESOLUTON]
[The employee] maintains that he was constructively dismissed because he did not commit any offense that would justify his relief. [The employee] adds that his transfer was intended to unreasonably inconvenience him and his family because of its substantial effect on their finances and quality of family life, which would ultimately force him to quit.
On the other hand, [the Company] insists that [the employee] was not transferred but was only temporarily recalled to the head office pending investigation. [The Company] argues that if it did transfer [the employee], it was merely exercising a management prerogative.
Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer’s judgment in the conduct of its business. For this reason, the Court often declines to interfere in legitimate business decisions of employers. The law must protect not only the welfare of employees, but also the right of employers.
In the pursuit of its legitimate business interests, especially during adverse business conditions, management has the prerogative to transfer or assign employees from one office or area of operation to another – provided there is no demotion in rank or diminution of salary, benefits and other privileges and the action is not motivated by discrimination, bad faith, or effected as a form of punishment or demotion without sufficient cause. This privilege is inherent in the right of employers to control and manage their enterprises effectively. The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them.
Managerial prerogatives, however, are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice. The test for determining the validity of the transfer of employees was explained in Blue Dairy Corporation v. NLRC as follows:
Like other rights, there are limits thereto. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.
In this case, we find no reason to disturb the conclusion of the Court of Appeals that there was no constructive dismissal. Reassignments made by management pending investigation of violations of company policies and procedures allegedly committed by an employee fall within the ambit of management prerogative. The decision of [the Company] to transfer [the employee] pending investigation was a valid exercise of management prerogative to discipline its employees. The transfer, while incidental to the charges against [the employee], was not meant as a penalty, but rather as a preventive measure to avoid further loss of sales and the destruction of [the Company’s] image and goodwill. It was not designed to be the culmination of the then on-going administrative investigation against [the employee].
Neither was there any demotion in rank or any diminution of [the employee]’s salary, privileges and other benefits. [The employee] was being transferred to the head office as area sales manager, the same position [the employee] held in Cebu. There was also no proof that the transfer involved a diminution of [the employee’s] s salary, privileges and other benefits.
On the alleged inconvenience on [the employee] and his family because of the transfer from Cebu to the head office in Parañaque, we rule that the transfer is valid, there being no showing that there was bad faith on the part of [the Company]. Moreover, we find that [the Company], considering the declining sales and the loss of a major account in Cebu, was acting in the legitimate pursuit of what it considered its best interest in deciding to transfer [the employee] to the head office.
Bankard, Inc. v. NLRC, BEU-AWATU
G.R. No. 171664, 06 March 2013
[BACKGROUND]
On June 26, 2000, [the Company Union] filed before the National Conciliation and Mediation Board (NCMB) its first Notice of Strike (NOS), docketed as NS-06-225-00, alleging commission of unfair labor practices by [the Company – a bank], to wit: 1) job contractualization; 2) outsourcing/contracting-out jobs; 3) manpower rationalizing program; and 4) discrimination.
[RESOLUTION]q
Aside from the bare allegations of the Union, nothing in the records strongly proves that [the Company] intended its program, the MRP, as a tool to drastically and deliberately reduce union membership. Contrary to the findings and conclusions of both the NLRC and the CA, there was no proof that the program was meant to encourage the employees to disassociate themselves from the Union or to restrain them from joining any union or organization. There was no showing that it was intentionally implemented to stunt the growth of the Union or that [the Company] discriminated, or in any way singled out the union members who had availed of the retirement package under the MRP. True, the program might have affected the number of union membership because of the employees’ voluntary resignation and availment of the package, but it does not necessarily follow that [the Company] indeed purposely sought such result. It must be recalled that the MRP was implemented as a valid cost-cutting measure, well within the ambit of the so-called management prerogatives. [the Company] contracted an independent agency to meet business exigencies. In the absence of any showing that [the Company] was motivated by ill will, bad faith or malice, or that it was aimed at interfering with its employees’ right to self-organize, it cannot be said to have committed an act of unfair labor practice.
x x x
The employer’s right to conduct the affairs of its business, according to its own discretion and judgment, is well-recognized. Management has a wide latitude to conduct its own affairs in accordance with the necessities of its business. As the Court once said:
The Court has always respected a company’s exercise of its prerogative to devise means to improve its operations. Thus, we have held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, supervision and transfer of employees, working methods, time, place and manner of work.
This is so because the law on unfair labor practices is not intended to deprive employers of their fundamental right to prescribe and enforce such rules as they honestly believe to be necessary to the proper, productive and profitable operation of their business.
Contracting out of services is an exercise of business judgment or management prerogative. Absent any proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer. Furthermore, bear in mind that ULP is punishable with both civil and/or criminal sanctions. As such, the party so alleging must necessarily prove it by substantial evidence. The Union, as earlier noted, failed to do this. [the Company] merely validly exercised its management prerogative. Not shown to have acted maliciously or arbitrarily, no act of ULP can be imputed against it.

2. Limitations of Management Prerogative

a. Good faith

Julie Bakeshop v. Arnaiz
G.R. No. 173882, 15 February 2012
[The employees – Chief Bakers – were dismissed after their refusal to be transferred or reassigned as utility/security personnel.]
We have held that management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor.
In constructive dismissal cases, the employer has the burden of proving that the transfer of an employee is for just or valid ground, such as genuine business necessity. The employer must demonstrate that the transfer is not unreasonable, inconvenient, or prejudicial to the employee and that the transfer does not involve a demotion in rank or a diminution in salary and other benefits. If the employer fails to overcome this burden of proof, the employee’s transfer is tantamount to unlawful constructive dismissal.
In this case, [the employers] insist that the transfer of [the employees] was a measure of self-preservation and was prompted by a desire to protect the health of the buying public, claiming that [the employees] should be transferred to a position where they could not sabotage the business pending resolution of their cases. According to [the employers], the possibility that [the employees] might introduce harmful substances to the bread while in the performance of their duties as chief bakers is not imaginary but real as borne out by what Tolores did in one of the bakeshops in Culasi, Antique where he was assigned as baker.
This postulation is not well-taken. On the contrary, [the employers] failed to satisfy the burden of proving that the transfer was based on just or valid ground. [The employers] bare assertions of imminent threat from the [the employees] are mere accusations which are not substantiated by any proof. This Court is proscribed from making conclusions based on mere presumptions or suppositions. An employee’s fate cannot be justly hinged upon conjectures and surmises. The act attributed against Tolores does not even convince us as he was merely a suspected culprit in the alleged sabotage for which no investigation took place to establish his guilt or culpability. Besides, Reyes still retained Tolores as an employee and chief baker when he could have dismissed him for cause if the allegations were indeed found true. In view of these, this Court finds no compelling reason to justify the transfer of [the employees] from chief bakers to utility/security personnel. What appears to this Court is that [the employees’] transfer was an act of retaliation on the part of [the employers] due to the former’s filing of complaints against them, and thus, was clearly made in bad faith. In fact, the employee even admitted that he caused the reassignments due to the pending complaints filed against him…
Isabela-1 Electric Coop., Inc. v. Del Rosario, Jr.
G.R. No. 226369, 17 July 2019
[BACKGROUND]
On January 29, 1996, [the Company – an electric cooperative] hired [the employee] as Financial Assistant. The latter quickly rose from the ranks. After just three (3) months, on April 26, 1996, he got promoted as Acting Management Internal Auditor and on October 26, 1996, as Management Internal Auditor at [the Company’s] main office.
As Management Internal Auditor, [the employee] was receiving a basic monthly salary of P30,979.00 exclusive of representation allowance and other emoluments and benefits. [the Company] never raised any issue regarding his performance and capacity to lead his department.
In January 2011, [the Company] approved a reorganization plan declaring all positions in the company vacant. [the employee], along with other employees signed a Manifesto to oppose the reorganization. Despite this opposition, [the Company] proceeded to implement the reorganization in June 2011.8 Additionally, [the Company] informed its employees in writing, that they were on a “hold-over capacity.”
Together with other employees, [the employee] was made to fill out a prescribed application form. There, [the employee] listed “Internal Auditor Manager A,” his current position, as his first preference, and “Finance Services Department Manager A” as his second.
While on vacation leave in October 2012, [the employee] received two (2) letters from [the Company]. The first referred to his appointment as probationary Area Operations Manager. The second contained four (4) office memoranda which (a) indicated his area of assignment; (b) ordered him to cease acting as [the Company’s] management internal auditor; (c) directed him to turn over his current post and pertinent documents to his successor; and (d) appointed his subordinate Arlene B. Boy as officer-in-charge of the Auditing Department.11 Although [the employee] had issues about this new appointment, including the fact that his successor was not even a Certified Public Accountant (CPA) as he was the only CPA among [the Company’s] employees, he begrudgingly accepted his appointment.
Three (3) months later, in January 2013, [the employee] sent a letter to [the Company’s] general manager… voicing out his concern that the new position given him was a demotion. In the same letter he requested to be reinstated to his former position, especially since he was the only CPA among [the Company’s] employees. [the Company], however, did not act on his letter.
[RESOLUTION]
The Court has been faced with charges of constructive dismissal. In several occasions, We have recognized management prerogative to effect the transfer of its employees. At other times, though, We have succored the worker’s rights against arbitrary transfers which amount to constructive dismissal.
In Philippine Industrial Security Agency Corporation vs. Percival Aguinaldo, We held that the “Court is fully aware of the right of management to transfer its employees as part of management prerogative. But like all rights, the same cannot be exercised with unbridled discretion. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic element of justice and fair play.” The Court then emphasized:
While it is true that an employer is free to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, layoff of workers and the discipline, dismissal and recall of workers (San Miguel Brewery Sales vs. Opie, G.R. No. 53515, February 8, 1989), and this right to transfer employees forms part of management prerogatives, the employee’s transfer should not be unreasonable, nor inconvenient, nor prejudicial to him. It should not involve a demotion in rank or diminution of his salaries, benefits and other privileges, as to constitute constructive dismissal…
Here, the NLRC and Court of Appeals correctly ruled that [the employee] was demoted without sufficient cause.
Demotion involves a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary. This was exactly what happened to [the employee].
[The Company], nonetheless, argues that [the employee] was not demoted, but was appointed to a new position as a result of the company’s reorganization. There was allegedly no diminution in [the employee]’s rank because: (a) he is still a manager; (b) his functions were not diminished; (c) as the Court of Appeals held, there was no diminution in his salary; (d) there was no change in his place of work; and (e) there was no change in the benefits and privileges given to him.
We do not agree.
Diminution in rank
Contrary to [the Company’s] claim, although [the employee’s] present position bears the appellation “manager,” the responsibilities he used to discharge as manager in his former position had been significantly reduced. We cite with concurrence the Court of Appeals’ relevant findings, viz:
x x x x Indeed, as correctly pointed out by the NLRC, the position of Management Auditor encompasses a more vast expanse in the Cooperative than the position of Area Manager/Head. Thus, the former position entails more responsibilities and requires a certain qualification that must be complied with as compared to the latter position. Based on the position description attached as “Annex C-1” to private [the employee]’s position paper with the Labor Arbiter, an Internal Audit Manager must be a Certified Public Accountant (CPA) with at least 5 years experience in auditing procedures and a holder of a master’s degree in Management or Business Administration. On the other hand, such requirements are not mentioned in the position of Area Manager as seen in private [the employee]’s appointment. Thus, a non-CPA or a non-holder of a master’s degree can hold the position of Area Manager. Moreover, the Management Auditor covers the different financial aspects of the Cooperative while the Area Manager position given to private [the employee] is limited to collection and operation. There is a palpable diminution ofresponsibilities…
xxx xxx xxx
Too, the NLRC correctly observed:
x x x x Without question, as an Area Head his responsibilities are limited to a specific area, in contrast to his previous position where the coverage of his responsibilities involves the entire financial transaction of the Cooperative. Interestingly also, the position of Area Head, where he was appointed, does not match his qualification(s) as a licensed CPA since the responsibilities attached to it consist of supervision and implementation of activities on house connection, collection, disconnection, apprehension, maintenance and operations and consumer services in his area. Visibly, the Complainant was not only demoted but placed in a position where he cannot advance and exercise his full potential and qualification.
xxx xxx xxx
So, what is in a name? Although [the employee] retained the appellation “manager,” his new rank was in fact a demotion from his former position.
More, [the Company] has consistently admitted that [the employee] is the only licensed CPA among its employees. In addition, [the employee] holds a Master’s Degree in Business Administration. [the Company] also concedes that [the employee] has been working for the company as auditor continuously for fifteen (15) years before the reorganization. [the employee] has all the qualifications to continue holding the position of Management Internal Auditor, which after the reorganization, was not abolished. For no apparent reason, [the Company] opted to appoint, even in an acting capacity, a non-CPA as Management Internal Auditor. In fine, [the Company] arbitrarily, sans any rhyme or reason peremptorily removed [the employee] from his post as Management Internal Auditor in the guise of a supposed reorganization and exercise of management prerogative.

b. Employee’s Rights

Leus v. St. Scholastica’s College Westgrove
G.R. No. 187226, 28 January 2015
[BACKGROUND]
[The employee] was hired by St. Scholastica’s College Westgrove (SSCW), a Catholic educational institution, as a non-teaching personnel, engaged in pre-marital sexual relations, got pregnant out of wedlock, married the father of her child, and was dismissed by SSCW, in that order. The question that has to be resolved is whether the [employee’s] conduct constitutes a ground for her dismissal.
[RESOLUTION]
The Court has held that “management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. The exercise of management prerogative, however, is not absolute as it must be exercised in good faith and with due regard to the rights of labor.” Management cannot exercise its prerogative in a cruel, repressive, or despotic manner.
SSCW, as employer, undeniably has the right to discipline its employees and, if need be, dismiss them if there is a valid cause to do so. However, … there is no cause to dismiss the [employee]. Her conduct is not considered by law as disgraceful or immoral. Further, [the employers] themselves have admitted that SSCW, at the time of the controversy, does not have any policy or rule against an employee who engages in pre-marital sexual relations and conceives a child as a result thereof. There being no valid basis in law or even in SSCW’s policy and rules, SSCW’s dismissal of the [employee] is despotic and arbitrary and, thus, not a valid exercise of management prerogative.
In sum, the Court finds that the [employee] was illegally dismissed as there was no just cause for the termination of her employment. SSCW failed to adduce substantial evidence to establish that the [employee’s] conduct, i.e., engaging in pre-marital sexual relations and conceiving a child out of wedlock, assessed in light of the prevailing norms of conduct, is considered disgraceful or immoral. The labor tribunals gravely abused their discretion in upholding the validity of the [employee’s] dismissal as the charge against the [employee’s] lay not on substantial evidence, but on the bare allegations of SSCW. In turn, the CA committed reversible error in upholding the validity of the [employee’s] dismissal, failing to recognize that the labor tribunals gravely abused their discretion in ruling for the [employers].
Dongon v. Rapid Movers and Forwarders Co., Inc.
G.R. No. 163431, 28 August 2013
[BACKGROUND]
[The Company] is engaged in the hauling and trucking business while [the employee] is a former truck helper leadman.
[The employee] area of assignment is the Tanduay Otis Warehouse where he has a job of facilitating the loading and unloading [of the] [the Company’s] trucks. On 23 April 2001, [the employee] and his driver, [V. Villaruz], were in the vicinity of Tanduay as they tried to get some goods to be distributed to their clients.
Tanduay’s security guard called the attention of [the employee] as to the fact that Mr. Villaruz’[s] was not wearing an Identification Card (I.D. Card). [The employee], then, assured the guard that he will secure a special permission from the management to warrant the orderly release of goods.
Instead of complying with his compromise, [the employee] lent his I.D. Card to Villaruz; and by reason of such misrepresentation, [the employee] and Mr. Villaruz got a clearance from Tanduay for the release of the goods. However, the security guard, who saw the misrepresentation committed by [the employee] and Mr. Villaruz, accosted them and reported the matter to the management of Tanduay.
On 23 May 2001, after conducting an administrative investigation, [the employee] was dismissed from the [the Company].q
[RESOLUTION]
It is true that an employer is given a wide latitude of discretion in managing its own affairs. The broad discretion includes the implementation of company rules and regulations and the imposition of disciplinary measures on its employees. But the exercise of a management prerogative like this is not limitless, but hemmed in by good faith and a due consideration of the rights of the worker. In this light, the management prerogative will be upheld for as long as it is not wielded as an implement to circumvent the laws and oppress labor.
To us, dismissal should only be a last resort, a penalty to be meted only after all the relevant circumstances have been appreciated and evaluated with the goal of ensuring that the ground for dismissal was not only serious but true. The cause of termination, to be lawful, must be a serious and grave malfeasance to justify the deprivation of a means of livelihood. This requirement is in keeping with the spirit of our Constitution and laws to lean over backwards in favor of the working class, and with the mandate that every doubt must be resolved in their favor.
Although we recognize the inherent right of the employer to discipline its employees, we should still ensure that the employer exercises the prerogative to discipline humanely and considerately, and that the sanction imposed is commensurate to the offense involved and to the degree of the infraction. The discipline exacted by the employer should further consider the employee’s length of service and the number of infractions during his employment. The employer should never forget that always at stake in disciplining its employee are not only his position but also his livelihood, and that he may also have a family entirely dependent on his earnings.
Considering that [the employee’s] motive in lending his company ID to Villaruz was to benefit [the Company] as their employer by facilitating the loading of goods at the Tanduay Otis Warehouse for distribution to [the Company’s] clients, and considering also that [the employee] had rendered seven long unblemished years of service to [the Company], his dismissal was plainly unwarranted. The NLRC’s reversal of the decision of the Labor Arbiter by holding that penalty too harsh and disproportionate to the wrong attributed to him was legally and factually justified, not arbitrary or whimsical. Consequently, for the CA to pronounce that the NLRC had thereby gravely abused its discretion was not only erroneous but was itself a grave abuse of discretion amounting to lack of jurisdiction for not being in conformity with the pertinent laws and jurisprudence. We have held that a conclusion or finding derived from erroneous considerations is not a mere error of judgment but one tainted with grave abuse of discretion.

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References

Presidential Decree No. 442, a.k.a. Labor Code of the Philippines

Disclaimer: All information is for educational and general information only. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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