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LA CONSOLACION COLLEGE OF MANILA v. VIRGINIA PASCUA

FACTS:

On January 10, 2000, Virginia Pascua's services as a school physician were engaged by La Consolacion College of Manila. She started working part-time before serving full-time from 2008. On September 29, 2011, Pascua was handed an Inter-Office Memo inviting her to a meeting regarding her "working condition." In that meeting, Pascua was handed a termination of employment letter, citing the decrease in enrollment in the institution as the reason for her dismissal. Pascua sought clarification regarding the criteria for retrenchment, why she was selected for termination over another employee, and whether other cost-cutting measures were implemented. Pascua completed clearance procedures but made a note that she reserved the right to question the legality of her termination. She filed a complaint for illegal dismissal against La Consolacion. Labor Arbiter Roque ruled that Pascua's dismissal was illegal, but the National Labor Relations Commission reversed the decision. The Court of Appeals reinstated the Labor Arbiter's decision, prompting La Consolacion to file the present petition. The issue is whether Pascua's retrenchment was valid.

ISSUES:

  1. Whether La Consolacion College Manila complied with the substantive and procedural requisites for retrenchment.

  2. Whether the retrenchment of the employee violated her seniority and tenurial rights.

  3. Whether or not the repeal of Section 9 of RA 6649 by RA 6938 is unconstitutional for being violative of the right to security of tenure and non-diminution of benefits.

  4. Whether or not Section 47(a) of RA 6938 violates the right to security of tenure and non-diminution of benefits.

RULING:

  1. La Consolacion College Manila complied with the substantive requisites for retrenchment by showing that the retrenchment was reasonably necessary and likely to prevent substantial business losses and that it was done in good faith. However, it failed to comply with the third substantive requisite of using fair and reasonable criteria in selecting employees for retrenchment, specifically considering their status and seniority.

  2. The Supreme Court ruled that the retrenchment violated the employee's seniority and tenurial rights. The court emphasized that the seniority factor is an important ingredient for the validity of a retrenchment program. It stated that the criteria used for retrenchment should be fair and reasonable, which includes factors such as seniority. In this case, there was no dispute about the employee's seniority and preferred status. The employer's disregard of the employee's seniority and preferred status in favor of a part-time employee indicates an unfair and unreasonable criterion for retrenchment. Therefore, the retrenchment was deemed illegal.

  3. The repeal of Section 9 of RA 6649 by RA 6938 is not unconstitutional. The contention that it violates the right to security of tenure and non-diminution of benefits is without merit as the said provision did not guarantee security of tenure nor provide for any vested right. Furthermore, the repeal is a valid exercise of legislative power.

  4. Section 47(a) of RA 6938 does not violate the right to security of tenure and non-diminution of benefits. The provision merely grants legislative authority to the Board of Trustees of the Home Insurance and Guaranty Corporation (HIGC) to exempt certain positions from the coverage of the Career Service Law and to fix the compensation of HIGC personnel.

PRINCIPLES:

  • Retrenchment may only be exercised when other less drastic means have been tried and found to be inadequate. It should be reasonably necessary and likely to prevent substantial business losses. It must also be done in good faith for the advancement of the employer's interest and not to defeat or circumvent the employees' right to security of tenure. Fair and reasonable criteria, such as status, efficiency, seniority, and other relevant factors, must be used in selecting employees for retrenchment.

  • The necessity of retrenchment to stave off genuine and significant business losses or reverses must be demonstrated by an employer's independently audited financial statements. The employer must also show that its losses increased through a period of time and that the company's condition is not likely to improve in the near future.

  • Seniority is a crucial facet of a fair and reasonable criterion for effecting retrenchment. Failure to consider seniority in selecting employees for retrenchment renders the retrenchment invalid.

  • Seniority is an important factor in determining the validity of a retrenchment program.

  • The criteria used for retrenchment should be fair and reasonable.

  • The Labor Code's permissiveness towards retrenchments aims to strike a balance between legitimate management prerogatives and the demands of social justice.

  • When retrenchment becomes necessary, the employer should implement cost-saving measures while respecting labor rights.

  • Good faith of the employer may preclude or diminish the recovery of backwages.

  • The repeal of a statute by a subsequent law is valid as long as there is no constitutional prohibition against it and the repeal is clearly expressed or implied.

  • The right to security of tenure and non-diminution of benefits may be impaired as long as there is a legitimate and lawful objective, the impairment is reasonably necessary for the accomplishment of the purpose, and there is no undue prejudice or deprivation of due process.