Labor Law

SMART COMMUNICATIONS, INC. vs. ASTORGA G.R. No. 148132 January 28, 2008 Redundancy, authorised causes for dismissal, Article 283, One month Notice, Backwages

FACTS:

Astorga was employed by Smart as District Sales Manager of the Corporate Sales Marketing Group/ Fixed Services Division. SMART launched an organizational realignment to achieve more efficient operations. Part of the reorganization was the outsourcing of the marketing and sales force. Thus, SMART formed SMART-NTT Multimedia, Incorporated (SNMI). Since SNMI was formed to do the sales and marketing work, SMART abolished the CSMG/FSD, Astorga’s division.
SNMI agreed to absorb the CSMG personnel who would be recommended by SMART. Astorga landed last in the performance evaluation, thus, she was not recommended by SMART. SMART, nonetheless, offered her a supervisory position in the Customer Care Department, but she refused the offer because the position carried lower salary rank and rate.

Astorga continued reporting for work. SMART issued a memorandum advising Astorga of the termination of her employment on ground of redundancy,

Astorga filed a Complaint for illegal dismissal, non-payment of salaries and other benefits with prayer for moral and exemplary damages against SMART.

In the meantime, SMART sent a letter to Astorga demanding that she pay the current market value of the Honda Civic Sedan which was given to her under the company’s car plan program, or to surrender the same to the company for proper disposition.

Astorga, however, failed and refused to do either, thus prompting SMART to file a suit for replevin before the RTC which was subsequently denied.

Astorga elevated the denial of her motion via certiorari to the CA, which, in its February 28, 2000 Decision,19 reversed the RTC ruling. Granting the petition and, consequently, dismissing the replevin case, the CA held that the case is intertwined with Astorga’s complaint for illegal dismissal; thus, it is the labor tribunal that has rightful jurisdiction over the complaint. SMART’s motion for reconsideration having been denied.

On the other hand, the labor arbiter held that Astorga’s dismissal from employment illegal. While recognizing SMART’s right to abolish any of its departments, the Labor Arbiter held that such right should be exercised in good faith and for causes beyond its control. The Arbiter found the abolition of CSMG done neither in good faith nor for causes beyond the control of SMART, but a ploy to terminate Astorga’s employment. The Arbiter also ruled that contracting out the functions performed by Astorga to an in-house agency like SNMI was illegal.

SMART also appealed the unfavorable ruling of the Labor Arbiter in the illegal dismissal case to the NLRC which declared the abolition of CSMG and the creation of SNMI to do the sales and marketing services for SMART a valid organizational action.

 

 

ISSUE:

Whether or not Astorga’s dismissal was valid.

 

RULING:

Astorga was terminated due to redundancy, which is one of the authorized causes for the dismissal of an employee. The nature of redundancy as an authorized cause for dismissal is explained in the leading case of Wiltshire File Co., Inc. v. National Labor Relations Commission, viz:

x x x redundancy in an employer’s personnel force necessarily or even ordinarily refers to duplication of work. That no other person was holding the same position that private respondent held prior to termination of his services does not show that his position had not become redundant. Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person.

We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.

However, as aptly found by the CA, SMART failed to comply with the mandated one month notice prior to termination.

Article 283 of the Labor Code clearly provides:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the 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 workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof x x x.

SMART’s assertion that Astorga cannot complain of lack of notice because the organizational realignment was made known to all the employees as early as February 1998 fails to persuade.

Astorga’s actual knowledge of the reorganization cannot replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the effectivity of such termination, to give them sufficient time to find other suitable employment or to make whatever arrangements are needed to cushion the impact of termination.

Smart gave her a formal notice of termination barely two (2) weeks before the effective date of termination, a period very much shorter than that required by law.

This procedural infirmity, however, would not render the termination of Astorga’s employment illegal. The validity of termination can exist independently of the procedural infirmity of the dismissal.

In DAP Corporation v. CA, the dismissal of the employees therein valid and for authorized cause even if the employer failed to comply with the notice requirement under Article 283 of the Labor Code.

The Court found the need to modify, by increasing, the indemnity awarded by the CA to Astorga, as a sanction on SMART for non-compliance with the one-month mandatory notice requirement, in light of our ruling in Jaka Food Processing Corporation v. Pacot, viz.:

[I]f the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee, and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employer’s exercise of his management prerogative.

The award of backwages to Astorga by the CA should be deleted for lack of basis. Backwages is a relief given to an illegally dismissed employee. Thus, before backwages may be granted, there must be a finding of unjust or illegal dismissal from work.The Labor Arbiter ruled that Astorga was illegally dismissed. But on appeal, the NLRC reversed the Labor Arbiter’s ruling and categorically declared Astorga’s dismissal valid. This ruling was affirmed by the CA in its assailed Decision. Since Astorga’s dismissal is for an authorized cause, she is not entitled to backwages.

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