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RURAL BANK OF CANTILAN, INC.

, and WILLIAM HOTCHKISS III, Petitioners,


vs.
ARJAY RONNEL H. JULVE, Respondent.
FACTS
On August 1, 1997, the Rural Bank of Cantilan, Inc., petitioner, hired respondent as a management trainee.
Later, he was appointed as planning and marketing officer.
On June 18, 2001, William Hotchkiss III (also a petitioner), president of petitioner bank, issued a memorandum
addressed to all its branch managers informing them of the abolition of the positions of planning and marketing
officer and remedial officer; that this was undertaken in accordance with the banks Personnel Streamlining
Program; and that the operations officer shall absorb the functions of the abolished offices.
On July 18, 2001, Hotchkiss sent respondent a memorandum stating that he has been appointed bookkeeper I at
the banks branch in Madrid, Surigao del Sur effective immediately with the same salary corresponding to his
old position. Initially, respondent agreed to accept the appointment, but eventually, he changed his mind and
withdrew because he felt that this was a demotion.
Respondent filed with the Regional Arbitration Branch No. XIII, National Labor Relations Commission
(NLRC), Butuan City, a complaint for constructive dismissal against petitioners.
ISSUE
WON the transfer was valid.
HELD
YES. 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.2 The only limitations to the exercise of this
prerogative are those imposed by labor laws and the principles of equity and substantial justice.
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;4 (b) the employer has the inherent
right to transfer or reassign an employee for legitimate business purposes;5 (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;6 (d) the employer must be able to show that the transfer is not unreasonable,
inconvenient, or prejudicial to the employee.7
Constructive dismissal is defined as "quitting when continued employment is rendered impossible,
unreasonable, or unlikely as the offer of employment involves a demotion in rank and diminution of pay.
Respondent contends that the abolition of his position as planning and marketing officer and his appointment as
bookkeeper I and assistant branch head of the Madrid Branch is a demotion. However, a look at the functions of
his new position shows the contrary. The bookkeeper and assistant branch head is not only charged with
preparing financial reports and monthly bank reconciliations, he is also the head of the Accounting Department
of a branch. Under any standard, these are supervisory and administrative tasks which entail great responsibility.
Moreover, respondents transfer did not decrease his pay.
Nor was respondents transfer motivated by ill-will or prejudice on the part of petitioners. His position was not
the only one abolished pursuant to the banks Personnel Streamlining Program. We recall that the position of
remedial officer was likewise abolished. Petitioners reason was to acquire savings from the salaries it would
pay to full-time personnel in these positions.
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Finally, we note that despite respondents refusal to accept the new appointment, petitioners did not dismiss
him. Rather, it was he who opted to terminate his employment when he purposely failed to report for work.

G.R. No. 125303. June 16, 2000]


DANILO LEONARDO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
REYNALDOS MARKETING CORPORATION, ET. AL., respondents.

and

[G.R. No. 126937. June 16, 2000]


AURELIO FUERTE and DANILO LEONARDO, petitioners, vs. RAUL T. AQUINO, VICTORIANO
R. CALAYCAY and ROGELIO I. RALAYA, as Chairman and Members of the NATIONAL
LABOR RELATIONS COMMISSION, SECOND DIVISION and REYNALDOS MARKETING
and/or REYNALDO PADUA, respondents.
FACTS:

Petitioner Aurelio Fuerte was originally employed by private respondent REYNALDO'S MARKETING
CORPORATION on August 11, 1981 as a muffler specialist, receiving P45.00 per day.
When he was appointed supervisor in 1988, his compensation was increased to P122.00 a day, augmented by a
weekly supervisor's allowance of P600.00. On the other hand, DANILO LEONARDO was hired by private
respondent on March 4, 1988 as an auto-aircon mechanic at a salary rate of P35.00 per day. His pay was
increased to P90.00 a day when he attained regular status six months later. From such time until he was
allegedly terminated, he claims to have also received a monthly allowance equal to P2, 500.00 as his share in
the profits of the auto-aircon division. FUERTE alleges that on January 3, 1992, he was instructed to report at
private respondent's main office where he was informed by the company's personnel manager that he would be
transferred to its Sucat plant due to his failure to meet his sales quota, and for that reason, his supervisor's
allowance would be withdrawn. For a short time, Fuerte reported for work at the Sucat plant; however, he
protested his transfer, subsequently filing a complaint for illegal termination. On his part, Leonardo alleges that
on April 22, 1991, private respondent was approached by the same personnel manager who informed him that
his services were no longer needed. He, too, filed a complaint for illegal termination. The case was heard by
Labor Arbiter Jesus N. Rodriguez, Jr. On December 15, 1994, Labor Arbiter Emerson C. Tumanon, to whom the
case was subsequently assigned, rendered judgment in favor of petitioners. To reinstate complainant Aurelio
Fuerte, to the position he was holding before the demotion, and to reinstate likewise complainant Danilo
Leonardo to his former position or in lieu thereof, they be reinstated through payroll reinstatement without any
of them losing their seniority rights and other privileges, inclusive of allowance and to their other benefits. On
appeal, the respondent Commission modified the decision ordering the reinstatement of Fuerte but without any
monetary claims and finding the complaint of Danilo Leonardo lack or merit, hence, dismissed.
ISSUE:
Whether the petitioners were illegally dismissed.
HELD:
In Fuerte's case, private respondent claims that the latter was demoted pursuant to a company policy
intended to foster competition among its employees. Under this scheme, private respondent's employees are
required to comply with a monthly sales quota. Should a supervisor such as Fuerte fail to meet his quota for a
certain number of consecutive months, he will be demoted, whereupon his
supervisors allowance will be withdrawn and be given to the individual who takes his place. When the
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employee concerned succeeds in meeting the quota again, he is re-appointed supervisor and his allowance is
restored.
Insofar as the action taken against Fuerte is concerned, private respondent's justification is well
illustrated in the record. He was unable to meet his quota for five months in 1991, from July to November of
that year. Yet he insists that it could not possibly be so. He argues that he must have met his quota considering
that he received his supervisor's allowance for the period aforesaid.
Fuerte nonetheless decries his transfer as being violative of his security of tenure, the clear implication
being that he was constructively dismissed. We have held that an employer acts well within its rights in
transferring an employee as it sees fit provided that there is no demotion in rank or diminution in pay. The two
circumstances are deemed badges of bad faith, and thus constitutive of constructive dismissal.
Yet here, the transfer was undertaken beyond the parameters as aforesaid. The instinctive conclusion
would be that his transfer is actually a constructive dismissal, but oddly, private respondent never denies that it
was really demoting Fuerte for cause. It should be borne in mind, however, that the right to demote an employee
also falls within the category of management prerogatives.
This arrangement appears to us to be an allowable exercise of company rights. An employer is entitled to
impose productivity standards for its workers, and in fact, non-compliance may be visited with a penalty even
more severe than demotion. In the case at bar, the petitioners' failure to meet the sales quota assigned to each of
them constitute a just cause of their dismissal, regardless of the permanent or probationary status of their
employment. This management prerogative of requiring standards may be availed of so long as they are
exercised in good faith for the advancement of the employer's interest.
Neither can we say that Fuerte's actions are indicative of abandonment. To constitute such a ground for
dismissal, there must be (1) failure to report for work or absence without valid or justifiable reason; and (2) a
clear intention, as manifested by some overt acts, to sever the employer-employee relationship. We have
accordingly held that the filing of a complaint for illegal dismissal, as in this case, is inconsistent with a charge
of abandonment.
Hence, given that Fuerte may not be deemed to have abandoned his job, and neither was he
constructively dismissed by private respondent, the Commission did not err in ordering his reinstatement but
without backwages. In a case where the employee's failure to work was occasioned neither by his abandonment
nor by a termination, the burden of economic loss is not rightfully shifted to the employer; each party must bear
his own loss.
With regard to Leonardo, private respondent likewise insists that it never severed the former's
employment. On the contrary, the company claims that it was Leonardo who abandoned his post following an
investigation wherein he was asked to explain an incident of alleged "sideline" work which occurred on April
22, 1991. It would appear that late in the evening of the day in question, the driver of a red Corolla arrived at the
shop looking for Leonardo. The driver said that, as prearranged, he was to pick up Leonardo who would
perform a private service on the vehicle. When reports of the "sideline" work reached management, it
confronted Leonardo and asked for an explanation. According to private respondent, Leonardo gave
contradictory excuses, eventually claiming that the unauthorized service was for an aunt. When pressed to
present his aunt, it was then that Leonardo stopped reporting for work, filing his complaint for illegal dismissal
some ten months after his alleged termination.
It must be stressed that while Leonardo alleges that he was illegally dismissed from his employment by
the respondents, surprisingly, he never stated any reason why the respondents would want to ease him out from
his job. Moreover, why did it take him ten (10) long months to file his case if indeed he was aggrieved by
respondents. All the above facts clearly point that the filing of his case is a mere afterthought on the part of
complainant Leonardo.
Leonardo protests that he was never accorded due process. As testified to by Merlin P. Orallo, the
personnel manager, he was given a memorandum asking him to explain the incident in question, but he refused
to receive it. In an analogous instance, we held that an employee's refusal to sign the minutes of an investigation
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cannot negate the fact that he was accorded due process. We find no reason to disturb the Commission's ruling
that Leonardo had abandoned his position.

Lepanto Ceramics, Inc. vs. Lepanto Ceramics Employees Association


G.R. No. 180866, March 2, 2010
Facts:
Petitioner Lepanto Ceramics, Inc., a corporation primarily in the business of manufacture, makes, buy and sell,
on whole sale basis, tiles, marbles, mosaics and other similar products. Respondent Lepanto Ceramics
Employees Association is the sole and exclusive bargaining agent in the establishment of petitioner.
In 1998, petitioner gave P3, 000.00 as bonus to its employees, members of the respondent Association.
Subsequently, in September 1999, petitioner and respondent Association entered into a Collective Bargaining
Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to the
members of the respondent Association.
In the succeeding years, 1999, 2000, 2001, petitioner gave bonuses in a form of a certificate which is
equivalent to P3, 000.00. However, in 2002, petitioner gave only P600.00 as cash benefit. Respondent
Association objected to the P600.00 cash benefit and argued that it was in violation of the CBA. Petitioner
averred that the giving of extra compensation was based on the companys available resources for a given year
and the workers are not entitled to a bonus if the company does not make profits. Unable to amicably settle the
dispute, the case was referred to the Voluntary Arbitrator. The Voluntary Arbitrator rendered a decision,
declaring that petitioner is bound to grant each of its workers a Christmas bonus of P3,000.00 for the reason that
the bonus was given prior to the effectivity of the CBA between the parties and that the financial losses of the
company is not a sufficient reason to exempt it from granting the same. On appeal, the Court of Appeals
affirmed the ruling of the Voluntary Arbitrator.
Issue:
Is petitioner obliged to give a Christmas bonus to respondent Association?
Ruling:
Yes. Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it must
have been promised by the employer and expressly agreed upon by the parties. Given that the bonus in this case
is integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act
of generosity on the part of the petitioner but a contractual obligation it has undertaken.
A reading of the provision of the CBA reveals that the same provides for the giving of a "Christmas gift
package/bonus" without qualification. The said provision did not state that the Christmas package shall be made
to depend on the petitioners financial standing. The records are also bereft of any showing that the petitioner
made it clear during CBA negotiations that the bonus was dependent on any condition. Indeed, if the petitioner
and respondent Association intended that the P3,000.00 bonus would be dependent on the company earnings,
such intention should have been expressed in the CBA.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA. The rule
is settled that any benefit and supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded on the
constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor full
protection.

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Lepanto Ceramics Inc. v. Lepanto Ceramics Employees Association


Facts: In December 1998, petitioner gave a P3,000.00 bonus to its employees, members of the respondent
Association. Subsequently, in September 1999, petitioner and respondent Association entered into a Collective
Bargaining Agreement (CBA) which provides for, among others, the grant of a Christmas gift package/bonus to
the members of the respondent Association. The Christmas bonus was one of the enumerated existing benefit,
practice of traditional rights which shall remain in full force and effect.
The text reads:
Section 8. All other existing benefits, practice of traditional rights consisting of
Christmas Gift package/bonus, reimbursement of transportation expenses in case of
breakdown of service vehicle and medical services and safety devices by virtue of company
policies by the UNION and employees shall remain in full force and effect.
Section 1. EFFECTIVITY
This agreement shall become effective on September 1, 1999 and shall remain in full
force and effect without change for a period of four (4) years or up to August 31,
2004 except as to the representation aspect which shall be effective for a period of five (5)
years. It shall bind each and every employee in the bargaining unit including the present
and future officers of the Union.
In the succeeding years, 1999, 2000 and 2001, the bonus was not in cash. Instead, petitioner gave each
of the members of respondent Association Tile Redemption Certificates equivalent to P3,000.00.[9] The bonus
for the year 2002 is the root of the present dispute. Petitioner gave a year-end cash benefit of Six Hundred
Pesos (P600.00) and offered a cash advance to interested employees equivalent to one (1) month salary payable
in one year.[10] The respondent Association objected to the P600.00 cash benefit and argued that this was in
violation of the CBA it executed with the petitioner.
In support of its claim, respondent Association insisted that it has been the traditional practice of the
company to grant its members Christmas bonuses during the end of the calendar year, each in the amount
of P3,000.00 as an expression of gratitude to the employees for their participation in the companys continued
existence in the market. The bonus was either in cash or in the form of company tiles.
The petitioner averred that the complaint for nonpayment of the 2002 Christmas bonus had no basis as
the same was not a demandable and enforceable obligation. It argued that the giving of extra compensation was
based on the companys available resources for a given year and the workers are not entitled to a bonus if the
company does not make profits. Petitioner adverted to the fact that it was debt-ridden having incurred net
losses for the years 2001 and 2002 totaling to P1.5 billion; and since 1999, when the CBA was signed, the
companys accumulated losses amounted to over P2.7 billion.
Issue: whether petitioner violated the CBA with regard to bonus
Held: yes. By definition, a bonus is a gratuity or act of liberality of the giver. It is something given in addition
to what is ordinarily received by or strictly due the recipient. A bonus is granted and paid to an employee for his
industry and loyalty which contributed to the success of the employers business and made possible the
realization of profits. A bonus is also granted by an enlightened employer to spur the employee to greater efforts
for the success of the business and realization of bigger profits.
Generally, a bonus is not a demandable and enforceable obligation. For a bonus to be enforceable, it
must have been promised by the employer and expressly agreed upon by the parties. Given that the bonus in this
case is integrated in the CBA, the same partakes the nature of a demandable obligation. Verily, by virtue of its
incorporation in the CBA, the Christmas bonus due to respondent Association has become more than just an act
of generosity on the part of the petitioner but a contractual obligation it has undertaken.
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A reading of the provision of the CBA reveals that the same provides for the giving of a Christmas gift
package/bonus without qualification. Terse and clear, the said provision did not state that the Christmas
package shall be made to depend on the petitioners financial standing. The records are also bereft of any
showing that the petitioner made it clear during CBA negotiations that the bonus was dependent on any
condition. Indeed, if the petitioner and respondent Association intended that the P3,000.00 bonus would be
dependent on the company earnings, such intention should have been expressed in the CBA.
All given, business losses are a feeble ground for petitioner to repudiate its obligation under the CBA.
The rule is settled that any benefit and supplement being enjoyed by the employees cannot be reduced,
diminished, discontinued or eliminated by the employer. The principle of non-diminution of benefits is founded
on the constitutional mandate to protect the rights of workers and to promote their welfare and to afford labor
full protection.
SIME DARBY PILIPINAS, INC. vs. NATIONAL LABOR RELATIONS COMMISSION and SIME
DARBY SALARIED EMPLOYEES ASSOCIATION
[G.R. No. 119205. April 15, 1998]
FACTS:
Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber
products.
Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of monthly
salaried employees of petitioner at its Marikina factory.
All company factory workers in Marikina including members of private respondent union worked from 7:45
a.m. to 3:45 p.m. with a 30 minute paid on call lunch break.
On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly
salaried employees in its Marikina Tire Plant a change in work schedule except those in the Warehouse and
Quality Assurance Department working on shifts
TO: ALL FACTORY-BASED EMPLOYEES
RE: NEW WORK SCHEDULE
Effective Monday, September 14, 1992, the new work schedule
factory office will be as follows:
7:45 A.M. 4:45 P.M. (Monday to Friday) 7:45 A.M. 11:45 P.M. (Saturday).
Coffee break time will be ten minutes only anytime between: 9:30 A.M. 10:30 A.M. and
2:30 P.M. 3:30 P.M.
Lunch break will be between: 12:00 NN 1:00 P.M. (Monday to Friday).
Private respondent felt affected adversely by the change in the work schedule and discontinuance of the 30minute paid on call lunch break. It filed on behalf of its members a complaint with the Labor Arbiter for
unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime
Darby International Tire Co., Inc. v. NLRC.
The Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the
elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise of
management prerogative and that the new work schedule, break time and one-hour lunch break did not have the
effect of diminishing the benefits granted to factory workers as the working time did not exceed eight (8) hours.
Moreover, it explains that the decision in the earlier Sime Darby case was not applicable to the instant case
because the former involved discrimination of certain employees who were not paid for their 30-minute lunch
break while the rest of the factory workers were paid.
On appeal, the NLRC sustained the Labor Arbiter.
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Upon motion for reconsideration, the NLRC reversed its earlier decision considering the decision of the Court
in the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay the money value
of these covered employees deprived of lunch and/or working time breaks.
The Office of the Solicitor General filed in lieu of comment a manifestation and motion recommending that the
petition be granted because the new work schedule was not discriminatory of the union members nor did it
constitute unfair labor practice on the part of petitioner.
ISSUE:
WON the act of management in revising the work schedule of its employees and discarding their paid lunch
break constitutive of unfair labor practice
RULING:
NO.
The new work schedule was not discriminatory of the union members nor did it constitute unfair labor
practice on the part of petitioner.
The right to fix the work schedules of the employees rests principally on their employer. In the instant case
petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its business operations and
its improved production.
It rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees could be
called upon to do jobs during that period as they were on call. Even if denominated as lunch break, this period
could very well be considered as working time because the factory employees were required to work if
necessary and were paid accordingly for working.
With the new work schedule, the employees are now given a one-hour lunch break without any interruption
from their employer. Since the employees are no longer required to work during this one-hour lunch break,
there is no more need for them to be compensated for this period.
The Sime Darby case is not applicable in this case because the issue in that case involved the matter of granting
lunch breaks to certain employees while depriving the other employees of such breaks. This case does not
pertain to any controversy involving discrimination of employees.
Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that
goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer
to exercise what are clearly management prerogatives.
Thus, 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.
Further, management retains the prerogative, whenever exigencies of the service so require, to change the
working hours of its employees. So long as such prerogative is exercised in good faith for the advancement of
the employers interest and not for the purpose of defeating or circumventing the rights of the employees under
special laws or under valid agreements, this Court will uphold such exercise
While the Constitution is committed to the policy of social justice and the protection of the working class, it
should not be supposed that every dispute will be automatically decided in favor of labor. Management also has
right which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although this
Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the
employer, such as favoritism has not blinded the Court to the rule that justice is in every case for the deserving,
to be dispensed in the light of the established facts and the applicable law and doctrine.

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Duncan vs. Glaxo Case Digest


Duncan Assoc. of Detailman-PTGWO vs. Glaxo Wellcome Phils., Inc.
G.R. No. 162994, September 17, 2004
FACTS:
Tecson was hired by Glaxo as a medical representative on Oct. 24, 1995. Contract of employment signed by
Tecson stipulates, among others, that he agrees to study and abide by the existing company rules; to disclose to
management any existing future relationship by consanguinity or affinity with co-employees or employees with
competing drug companies and should management find that such relationship poses a prossible conflict of
interest, to resign from the company. Company's Code of Employee Conduct provides the same with stipulation
that management may transfer the employee to another department in a non-counterchecking position or
preparation for employment outside of the company after 6 months.
Tecson was initially assigned to market Glaxo's products in the Camarines Sur-Camarines Norte area and
entered into a romantic relationship with Betsy, an employee of Astra, Glaxo's competition. Before getting
married, Tecson's District Manager reminded him several times of the conflict of interest but marriage took
place in Sept. 1998. In Jan. 1999, Tecson's superiors informed him of conflict of intrest. Tecson asked for time
to comply with the condition (that either he or Betsy resign from their respective positions). Unable to comply
with condition, Glaxo transferred Tecson to the Butuan-Surigao City-Agusan del Sur sales area. After his
request against transfer was denied, Tecson brought the matter to Glaxo's Grievance Committee and while
pending, he continued to act as medical representative in the Camarines Sur-Camarines Norte sales area. On
Nov. 15, 2000, the National Conciliation and Mediation Board ruled that Glaxo's policy was valid...
ISSUE:
Whether or not the policy of a pharmaceutical company prohibiting its employees from marrying employees of
any competitor company is valid
RULING:
On Equal Protection
Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies, and other confidential
programs and information from competitors. The prohibition against pesonal or marital relationships with
employees of competitor companies upon Glaxo's employees is reasonable under the circumstances because
relationships of that nature might compromise the interests of the company. That Glaxo possesses the right to
protect its economic interest cannot be denied.
It is the settled principle that the commands of the equal protection clause are addressed only to the state or
those acting under color of its authority. Corollarily, it has been held in a long array of US Supreme Court
decisions that the equal protection clause erects to shield against merely privately conduct, however,
discriminatory or wrongful.
The company actually enforced the policy after repeated requests to the employee to comply with the policy.
Indeed the application of the policy was made in an impartial and even-handed manner, with due regard for the
lot of the employee.
On Constructive Dismissal
Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued
employment becomes impossible, unreasonable or unlikely; when there is demotion in rank, or diminution in
pay; or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the
employee. None of these conditions are present in the instant case.
1. G.R. No. 148340. January 26, 2004]
2. J.A.T. GENERAL SERVICES and JESUSA ADLAWAN TOROBU, petitioners, vs. NATIONAL
LABOR RELATIONS COMMISSION and JOSE F. MASCARINAS, respondents.
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FACTS: Due to decline in the sales of heavy equipment, Jesusa Adlawan Trading and General Services
(JAT) temporarily suspended its operations starting on March 1998. On May 1998, it indefinitely closed
shop. Private respondent, who was hired as a probation employee in April 1997, filed a complaint
against the company for illegal dismissal and underpayment of wages because he was required to sign a
piece of paper. When he refused, his employment was terminated. On December 14, 1998, JAT filed an
Establishment Termination Report with the Department of Labor and Employment (DOLE), notifying
the latter of its decision to close its business operations due to business losses and financial reverses.
ISSUE: Whether or not the private respondent was dismissed legally.
RULING:
YES. The dismissal was based on valid grounds. In the event, under Article283 of the Labor Code, three
requirements are necessary for a valid cessation of business operations, namely: (a) service of a written
notice to the employees and to the DOLE at least one (1) month before the intended date thereof; (b) the
cessation of business must be bona fide in character; and (c) payment to the employees of termination
pay amounting to at least one-half (1/2) month pay for every year of service, or one (1) month pay,
whichever is higher. All the requisites were present. The petitioners notified the workers of its decision
to permanently close through written letters dated November 25m 1998.It also submitted a termination
report to the DOLE. Next, the closure of business operation by petitioner is not tainted with bad faith or
other circumstance that arouses undue suspicion of malicious intent. The decision to close arrived after a
suspension of operation for several months precipitated by a slowdown in sales without prospects of
improving. Thus, the closing was justified.
FOR ADDITIONAL INFO
QUERY: What is the rule with regards to separation pay during the closure of business operations?
ANSWER: The Court held in this case that the closure of business operation is allowed under the Labor
Code, provided separation pay be paid to the terminated employee. It is settled that in case of closure or
cessation of operation of a business establishment not due to serious business losses or financial
reverses, the employees are always given separation benefits. The amount of separation pay must be
computed from the time private respondent commenced employment with petitioners until the time the
latter ceased operations.
QUERY: Will the private respondent be entitled to backwages? ANSWER: NO. Considering that private
respondent was not illegally dismissed, however, no bac wages need to be awarded. Backwages in
general are granted on grounds of equity for earnings which a worker or employee has lost due to illegal
dismissal. It is well settled that backwages may be granted only when there is a finding of illegal
dismissal.

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