[ LABOR 2 | ATTY.

NOLASCO ] 1

02. AM-PHIL FOOD CONCEPTS, INC. vs. PAOLO JESUS T. PADILLA sales were not lower relative to the previous year, and the Petitioner
G.R. No. 188753, October 1, 2014 was in fact still hiring new employees.
Leonen  In response to this, Petitioner’s officers gave Respondent the choice
Digest by: DOLAR of either (1) being retrenched with severance pay, or (2) being
transferred as a waiter to another restaurant which would be a
TOPIC: Termination; Authorized Causes; Retrechment demotion.
 Respondent chose retrenchment and executed a quitclaim in favor of
PARTIES: Petitioner.
Employer: Am-Phil Food Concepts, Inc.  Respondent later filed a complaint for illegal dismissal against
Employee: Paolo Jesus Padilla Petitioner.
 In its defense, Petitioner claimed that there was no illegal dismissal
DOCTRINE: For retrenchment to be valid, the grounds relied therefor must as it had validly exercised a management prerogative. Petitioner also
be clearly and convincingly shown by evidence, otherwise the retrenchment relied on the quitclaim executed by Respondent.
will be deemed invalid.  The LA rendered a decision in favor of Respondent. It ruled that
Petitioner was unable to substantiate its claims of serious business
RECIT-READY: Respondent was retrenched by Petitioner. Petitioner losses and further failed to notify the DOLE, which was a procedural
claimed that it was suffering business losses which necessitated the requirement for proper retrenchment.
retrenchment of Respondent. Respondent questioned the retrenchment and o Petitioner filed a motion for leave to file a supplemental
filed a complaint for illegal dismissal. Petitioner did not submit to the LA its rejoinder. Said supplemental rejoinder contained the audited
financial reports. It was only after the LA rendered a decision that Petitioner financial statements of Petitioner for 2001-2004. HOWEVER,
sought to present its audited financial reports to prove its losses. Ultimately, the motion was filed AFTER the rendering of the Decision by
the SC upheld the decision of the LA that the retrenchment was illegal. The the LA, so the same was disregarded.
SC further held that the LA did not need to consider the financial reports of
 The NLRC affirmed the ruling of the LA. The CA likewise affirmed the
Petitioner as it the same were not presented as evidence-in-chief by
ruling of the NLRC.
Petitioner itself.
ISSUE/S: Whether Respondent was illegally dismissed. – YES
FACTS:
 Petitioner is a corporation engaged in the restaurant business. HELD:
 Respondent was hired by Petitioner as a Marketing Associate. Petitioner failed to establish that it had complied with the requisites for a valid
 Petitioner later sent a letter to Respondent which confirmed the retrenchment.
latter’s regular employment.
 Almost 2 years later, Respondent was informed that Petitioner would As correctly pointed out by Petitioner, retrenchment is an exercise of the
be implementing a retrenchment program that would affect 3 management’s prerogative to terminate the employment of its employees en
employees, 1 of them being Respondent. masse, to either minimize or prevent losses, or when the company is about to
 Petitioner claimed that the retrenchment was allegedly on account of close or cease operations for causes not due to business losses.
serious and adverse business conditions such as lack of demand in
the market, stiffer competition, devaluation of the Peso, and Retrenchment is used interchangeably with the term “lay-off.” It is the
escalating operation costs. termination of employment initiated by the employer. There is no fault on the
 Respondent questioned the choice to retrench him, considering his part of the employee. This is resorted to by the management during periods
good record and the fact that there were 6 other contractual of business recession, industrial depression, or seasonal fluctuations. In
employees while he was regular. He also pointed out that Petitioner’s simple terms, it is an act of the employer of dismissing employees because of
losses in the operation of a business, lack of work, and considerable
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 [ LABOR 2 | ATTY. NOLASCO ] 2

reduction on the volume of business. This is a right that is recognized and reports of Petitioner were annexes in the motion to file supplemental
affirmed by the Court. rejoinder, these reports were not in the evidence-in-chief and thus was not
considered by the LA. There was further no explanation why Petitioner did
However, this right is not absolute. It cannot be exercised in a cruel, not present such records when the evidence-in-chief was being considered.
repressive, or despotic manner. In case of business losses, such losses must Thus, the validity of the retrenchment was not shown.
be actual and real or reasonably imminent. Imagined or undocumented
business losses cannot justify retrenchment. Thus, retrenchment is a Further, Petitioner failed, and admitted, that it was unable to serve a written
measure of last resort when other less dramatic means have been tried and notice to the DOLE at least 1 month before the intended date of retrenchment
have been found inadequate. as required by the LC.

RULE: Thus, the quitclaim executed by Respondent is of no consequence.

Art. 298 of the LC provides that: “The employer may also terminate the Considering that the validity of the retrenchment was not proven, it was illegal
employment of any employee due to the installation of labor-saving devices, and of no effect.
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 DISPOSITIVE PORTION / RULING:
notice on the workers and the Ministry of Labor and Employment at least one WHEREFORE, the petition is hereby DENIED.
(1) month before the intended date thereof. xxx”

The following are the requirements a valid retrenchment, each of which must
be shown by clear and convincing evidence, as follows:
1. that the retrenchment is reasonably necessary and likely to prevent
business losses which, if already incurred, are not merely de
minimis, but substantial, serious, actual and real, or if only expected,
are reasonably imminent as perceived objectively and in good faith
by the employer;
2. that the employer served written notice both to the employees and to
the DOLE at least 1 month prior to the intended date of
retrenchment;
3. that the employer pays the retrenched employees separation pay
equivalent to 1 month pay or at least ½ month pay for every year of
service, whichever is higher;
4. that the employer exercises its prerogative to retrench employees in
good faith for the advancement of its interest and not to defeat or
circumvent the employees’ right to security of tenure; and
5. that the employer used fair and reasonable criteria in ascertaining
who would be dismissed and who would be retained among the
employees, such as status, efficiency, seniority, physical fitness, age,
and financial hardship for certain workers.

IN THIS CASE: Petitioner was unable to present clear and convincing

evidence as to their compliance with the LC. While the audited financial
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