FAQ: Management prerogative

What is management prerogative?

Management prerogative is the bundle of rights inherent to the employer who gets to decide all aspects of employment, from pre-employment to post-employment, unless limited or regulated by labor law.

What are examples of management prerogative?

The exercise of management prerogative may come in various forms, such as implementing workplace policies and regulations, enforcing company practices, managing of employees, and so on.

As earlier explained, management prerogative covers pre-employment to post-employment, and everything else in between, including work hours/schedules, work assignments, work supervision, disciplinary action, recall, and so on.

What is the legal basis of management prerogative?

The Supreme Court recognized management prerogative as an inherent right of an employer. This means that such bundle of rights automatically attaches or ensues the moment a business becomes an employer. This is the meaning of it being an inherent right.

Since it is an inherent right, no law is needed. Thus, there are no legal provisions pertaining to management prerogative in the 1987 Constitution, Republic Acts, as well as in older laws, such as Presidential Decrees, Batasang Pambansa, and so on.

Is management prerogative unlimited?

No, management prerogative is not unlimited. Management prerogative has two general limitations, which are: (a) it must be exercised in good faith, and (b) it must be exercised with due regard to the rights of the employees.

What is the test of good faith?

In general, there is good faith if there is legitimate business reason behind the exercise of management prerogative. Conversely, there is good faith if there is no malice, bad faith, or ill-will in the exercise of the employer’s rights.

What does it mean to say ‘with due regard to the rights of the employees’?

The clause “with due regard to the rights of the employees” refers to the labor law, which is generally the source of employee rights. Thus, the exercise of management prerogative should be in compliance with labor laws and regulations to be able to say that employer exercised its rights with due regard to the rights of the employees.

May employees question an employer’s management prerogative?

In general, employees may not question the employer’s management prerogative as its exercise enjoy the presumption of good faith and regularity. Thus, employees may not simply refuse to comply with company policies and regulations because they are questioning it.

On this point, it should be emphasized that, in case employees are seriously damaged or prejudiced such as losing their employment or not being paid their compensation and benefits, they may file a labor complaint with labor courts to determine the validity or legality of the employer’s exercise of its management prerogative.

Who determines if the employer properly exercised its management prerogative?

It is only the labor courts which can determine whether an employer properly exercised its management prerogative. Hence, as earlier stated, employees cannot simply refuse to comply with company policies and regulations because they question their validity.

If employees strongly believe that the employer is not properly exercising its management prerogative, they may file a labor case to challenge the validity of an employer’s management prerogative.

Thereafter, it is the labor courts which will finally decide whether the employer indeed properly exercised its management prerogative. If the employer abused its rights, then it may be liable for administrative sanctions with regulatory agencies and/or compensation/damages to the employees.

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