FACTS:

Regina Astorga was employed by Smart Communications, Incorporated (SMART) as a District Sales Manager. Due to organizational realignment, SMART formed Smart-NTT Multimedia, Incorporated (SNMI) to handle sales and marketing. Astorga, who ranked last in the performance evaluation, was not recommended for absorption by SNMI. SMART offered her a supervisory position in a different department, but she refused due to lower salary. SMART then terminated Astorga on the grounds of redundancy. Astorga filed a complaint for illegal dismissal.

In response, SMART filed a replevin case against Astorga to recover a company vehicle assigned to her. Astorga moved to dismiss the replevin case, arguing lack of jurisdiction. The Regional Trial Court (RTC) denied Astorga's motion. Astorga appealed to the Court of Appeals (CA), which dismissed the replevin case, stating that it is the labor tribunal that has rightful jurisdiction over the complaint.

Meanwhile, SMART appealed the Labor Arbiter's ruling declaring Astorga's dismissal illegal and ordering her reinstatement with full backwages and other benefits. The National Labor Relations Commission (NLRC) reversed the Labor Arbiter's ruling and declared Astorga's dismissal valid. The NLRC also ordered Astorga to return the company vehicle assigned to her.

Astorga appealed the NLRC decision to the CA, which affirmed the NLRC resolutions with modifications. The CA imposed a penalty on SMART for non-compliance with notice requirements prior to termination. The CA also ruled that the issue of the return of the company vehicle should be decided by the regular court, not the NLRC.

Both Astorga and SMART filed petitions for review before the Supreme Court. Astorga argued that her dismissal violated her right to security of tenure. SMART argued that the CA erred in ruling that it did not comply with notice requirements prior to termination.

ISSUES:

1. Whether SMART complied with the notice requirements prior to terminating Astorga on the ground of redundancy.

2. Whether the notices given by SMART to Astorga and the Department of Labor and Employment are substantial compliance with the notice requirements before termination.

3. Whether the rule enunciated in Serrano v. NLRC applies in the case.

4. Whether the RTC has jurisdiction over the replevin case filed by SMART.

5. Whether the CA failed to appreciate that the subject of the replevin case is not the enforcement of a car plan privilege but simply the recovery of a company car.

6. Whether Astorga can still be considered an employee of SMART under the Labor Code.

7. Whether the termination of Astorga's employment was illegal and tainted with bad faith.

8. Whether there was a compelling economic reason for redundancy.

9. Whether the lack of formal and written notice of termination violates the provisions of the Labor Code.

10. Whether the dismissal of the employee was valid despite the procedural infirmity.

11. Whether the employer is liable for non-compliance with the one-month mandatory notice requirement.

12. Whether the employee is entitled to separation pay and backwages.

RULING:

1. The Court ruled that SMART complied with the notice requirements prior to terminating Astorga on the ground of redundancy.

2. The notices given by SMART to Astorga and the Department of Labor and Employment are considered substantial compliance with the notice requirements before termination.

3. The rule enunciated in Serrano v. NLRC does not apply in the case.

4. The RTC has jurisdiction over the replevin case filed by SMART.

5. The CA failed to appreciate that the subject of the replevin case is not the enforcement of a car plan privilege but simply the recovery of a company car.

6. Astorga cannot be considered an employee of SMART under the Labor Code.

7. The Supreme Court found that there was no convincing evidence to prove that the termination of Astorga's employment was illegal and tainted with bad faith. The Court did not believe that the reorganization was done solely to get rid of her, especially since she was offered a position in another department. The Court held that the employer's characterization of an employee's services as superfluous or no longer necessary is an exercise of business judgment and is not subject to discretionary review, as long as there is no violation of law or arbitrary or malicious action shown.

8. The Court agreed with the Court of Appeals (CA) that there was a compelling economic reason for redundancy. The organizational realignment introduced by SMART, which culminated in the abolition of Astorga's department, was aimed at making the sales and marketing departments more efficient and competitive. The Court upheld SMART's decision to outsource the responsibilities of the abolished department to a joint venture company, as it was a legitimate exercise of management prerogative and a sound business judgment.

9. The lack of formal and written notice of termination violates the provisions of the Labor Code.

10. The dismissal of the employee was valid despite the procedural infirmity.

11. The employer is liable for non-compliance with the one-month mandatory notice requirement but the penalty imposed is increased to P50,000.00.

12. The employee is entitled to separation pay equivalent to at least one (1) month's salary and is also entitled to salary from the date of non-payment until the effective date of her termination. The award of backwages is deleted.

PRINCIPLES:

• Replevin is an action whereby the owner or person entitled to repossession of goods or chattels may recover those goods or chattels from one who has wrongfully taken or detained them. It falls within the jurisdiction of the regular courts.

• The right of possession in a replevin case is the primary relief sought, and it is an ordinary statutory proceeding to adjudicate rights to the title or possession of personal property.

• The determination of who has the better right to take possession of the property in a replevin case is addressed to the competence of civil courts.

• Redundancy is considered an authorized cause for the termination of an employee, as long as proper notice and due process are observed.

• Notices given by the employer to the employee and the Department of Labor and Employment are considered substantial compliance with the notice requirements before termination.

• The rule enunciated in Serrano v. NLRC, which deals with the lack of notice, does not apply in cases where there is substantial compliance with the notice requirements.

• Redundancy exists when 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 superfluous or no longer necessary, and therefore terminable, is an exercise of business judgment on the part of the employer.

• An employer is not precluded from adopting a new policy conducive to more economical and effective management, even if it is not experiencing economic reverses.

• The employer has the prerogative to adopt measures that promote greater efficiency, reduce overhead costs, and enhance prospects of economic gains, as long as it is within the framework of existing laws.

• Compliance with the one-month notice requirement prior to termination is mandatory under Article 283 of the Labor Code.

• The formal and written notice of termination is required by the law to inform the employees of the specific date of termination, at least a month prior to the effectivity of such termination. This gives them sufficient time to find other suitable employment or make arrangements to cushion the impact of termination.

• The validity of termination can exist independently of the procedural infirmity of the dismissal. However, the employer may still be held liable for non-compliance with the procedural requirements.

• The amount of penalty for non-compliance with the one-month mandatory notice requirement may be increased if the dismissal is based on an authorized cause under Article 283 of the Labor Code.

• An employee is entitled to separation pay equivalent to at least one (1) month's pay or to at least one (1) month's pay for every year of service, whichever is higher, as provided in Article 283 of the Labor Code.

• In labor cases, the burden of proving the payment of monetary claims rests on the employer. Failure to discharge this burden may result in liability for unpaid wages.

• Backwages are only granted in cases of unjust or illegal dismissal from work. If the dismissal is for an authorized cause, backwages may not be awarded.