Republic of the Philippines
COURT OF APPEALS
Manila
PAL EMPLOYEES
ASSOCIATION (PALEA),
Petitioner,
120977
C.A. G.R. No.
_________
-versus-
OFFICE OF THE
PRESIDENT represented by PAQUITO N. OCHOA, JR. in his capacity as Executive
Secretary, PHILIPPINE AIRLINES, INC. (PAL), SKY KITCHEN PHILIPPINES, SKY
LOGISTICS PHILIPPINES, ePLDT VENTUS (now SPi GLOBAL HOLDINGS, INC.),
Respondents.
x----------------------------------------------------x
PETITION FOR
CERTIORARI
The PAL Employees
Association (PALEA), by counsel, most respectfully states that:
PREFATORY
Philippine Airline’s
(PAL) operations for the fiscal year which ended on March 31, 2011 resulted in
a total comprehensive income of US$ 72.5 MILLION (net income of US$65.5 Million
plus other income). According to the company’s Financial Statement, this is “a
significant turnaround from the previous fiscal year’s total comprehensive loss
of US$ 14.4 million.”
Converted to
Philippine Pesos, PAL’s income for the previous year amounted to MORE THAN PhP
3 BILLION (computed at $1: PhP 42.50).
Despite these, PAL
will terminate more than 2,600 regular employees. What is PAL’s justification
for the mass termination? LOSSES
The Office of the
Secretary of Labor and the Office of the President upheld PAL’s mass
termination of more than 2,600 regular employees. How did these two government
offices that are supposed to protect the rights of Filipino workers justify
PAL’s mass termination? LOSSES
PAL’s Position Paper
that was filed before the Office of the Secretary of Labor is replete with
statements linking the termination of more than 2,600 regular rank and file
employees to the company’s financial situation:
“PAL is in such a
situation that constrains it to spin-off its non-core activities….” (page 1 of
PAL’s Position Paper)
“it is justified in
fact and in law in exercising a recognized management prerogative to reduce its
workforce as a means to avert an imminent bankruptcy…” (page 2)
“Still, PAL was
neither ready nor enticed to embark on another reduction of employees until it
is convinced that less stringent measures are unavailing to address its
financial predicament.”(page 8)
“the spin-off of
non-core activities…had to be considered as part of the survival plan.” (page
11)
“It was motivated by
a pressing need to prevent further financial drain and thus, save PAL from
eventual collapse.” (page 20)
“the spin-off is
necessary for to this very day, PAL’s economic downturn continues to threaten
its survival.” (page 21)
“it is a desperate
and unwanted course of action after substantial efforts exerted failed to
alleviate its failing viability.” (page 21)
“Unless the spin-off
is implemented at the soonest possible time, PAL will be forced to close down
for lack of cash for operational purposes.” (page 25)
In its Reply, just as
it did in its Position Paper, PAL’s pronouncements made it evident that the
employees are to be retrenched in order to avert losses, thus:
”PAL explained that
its equity is down to USD60.24 million and continues to deteriorate from a high
of USD353 million, thereby making it imperative to immediately implement the
spin-off.” (page 2 of PAL’s Reply)
“…the spin-off has to
be soon carried out since serious efforts by PAL proved inadequate to address
its pressing financial and operational problems, avert bankruptcy and/or
closure of the entire business.” (page 3)
“The spin-off is an
essential component of PAL’s survival plan” (page 3)
“The surge in fuel
prices in 2008 and its severe volatility; the downgrading of the Philippines to
Category II by the United States Federal Aviation Administration [FAA]; the
global financial crisis which began in 2008; PAL’s inclusion in the Eurpoean
Union [EU] Blacklist; the suspension by the International Air Transport
Association [IATA] of PAL’s remittance facilities through Bank Settlement Plan
[BSP]within the EU; Saudi Arabia’s threatened non-renewal of PAL’s permit to
fly its air space due to the EU blacklist, and the highly probable similar and
successive reaction of other non-EU countries; the helplessness of PAL not even
to overcome but just to cope with the aggressive competition posed by low-cost
carries – are incredibly but actually striking PAL where it has been hurting
most – its finances.” (page 3)
“The reason for the
spin-off is … to prevent a real and imminent disastrous financial situation.”
(page 19)
In its Decision, the
Secretary of Labor ruled that what is involved in this case is retrenchment due
to reorganization impelled by the need to “prevent continued heavy and
substantial losses.” The Secretary held that the outsourcing or contracting out
of the business operations is a mere incident flowing from the valid and lawful
decision to close the various departments of PAL “as a much needed cost cutting
measure.”
The Office of the
President, in turn, ruled that the consequent retrenchment of the regular
employees and union members is valid. The Decision stated that PAL is
encountering financial ordeals that justify the mass termination of the
employees. Quoting the Office of the President’s Decision:
“We cannot close our
eyes to the financial ordeals of the airline company laboriously presented and
the global and national developments enveloping the airline industry.”
MORE THAN THREE
BILLION PESOS INCOME!
MORE THAN 2,600
TERMINATED EMPLOYEES!
JUSTIFIED BECAUSE OF
LOSSES????!
The Department of
Labor and Employment and the Office of the President not only turned a blind
eye to the actual situation of the company, but also twisted reality in their
justification of PAL’s mass termination.
The workers now come
before the Honorable Court of Appeals and humbly ask that the Court correct
this great injustice.
THE PARTIES
The Philippine
Airlines Employees Association (“PALEA”) is a legitimate labor organization and
the exclusive bargaining representative of the rank-and-file employees of the
Philippine Airlines, Inc., with address at 2014 J. Gabriel St., Baclaran, Paranaque
City. It may be served summons and other process of this Honorable Court
through the undersigned counsel, DELLOSA MENDOZA BAG-AO & MANUEL, with
address at 3/F Prince David Condominium, Katipunan Ave., Loyola Heights, Quezon
City.
The Office of the
President, represented by Paquito N. Ochoa, Jr., the incumbent Executive
Secretary, is being sued for having rendered the assailed Decisions dated 25
March 2011 and the Resolution dated 11 August 2011, allowing Philippine
Airlines, Inc. to terminate more than 2,600 regular employees and union
members, and outsource their respective functions to service providers. He may
be served summons and other process of this Honorable Court at the Office of
the President, Malacañan Palace, Manila.
The Philippine Airlines,
Inc. (“PAL”), the national carrier, is a domestic corporation engaged in
domestic and international airline service, with business address at 8th Floor,
PNB Financial Center, D. Macapagal Ave., Pasay City. It may be served summons
and other process of this Honorable Court through its counsel of record,
LAGUESMA MAGSALIN CONSULTA & GASTARDO Law Office at 705-706 Prestige Tower,
Ortigas Center, Pasig City.
Sky Kitchen
Philippines, Inc. is a domestic corporation organized and existing under the
laws of the Republic of the Philippines with address at Suites 6/7, 2nd Floor,
Aseana Power Station, Macapagal Ave. cor. Bradco Av., Aseana Business Park,
Parañaque City. Sky Logistics Philippines, Inc. is a domestic corporation
organized and existing under the laws of the Republic of the Philippines with
principal office at Hilton Cebu Resort & Towers, Mactan Island, Lapu-Lapu
City, Cebu. ePLDT Ventus (now SPi Global Holdings, Inc.) is a domestic
corporation organized and existing under Philippine Laws, with offices at SPi
Building, Pascor Drive, Sto. Niño, Parañaque City. These corporations are being
impleaded as indispensible parties[1] to the instant case, after having been
ordered by the Office of the President, through the Executive Secretary, to
absorb all employees that are affected by the outsourcing of the three
departments of PAL.
NATURE OF THE
PETITION
This is a special
civil action for certiorari under Rule 65 of the Rules of Court to annul and
set aside, for having been issued by the public respondent with grave abuse of
discretion amounting to lack or excess of jurisdiction, Decision and Resolution
of the Office of the President in the case docketed as O.P. CASE No. 10-K-486
entitled “In Re: Petition for Presidential Intervention in the Labor Dispute at
Philippine Airlines, Inc. Pursuant to Article 263 (G) of the Labor Code” more
particularly, as follows:
1. Decision dated 25
March 2011 (received by Petitioner on 28 March 2011) upholding the 29 October
2010 Order of the Secretary of Labor and Employment; and 2. Resolution dated 11
August 2011 (received by Petitioner on 17 August 2011) denying the Motion for
Reconsideration of herein Petitioner.
The dispositive
portion of the 25 March 2011 Decision reads as follows:
WHEREFORE, the
foregoing considered, the 29 October 2010 Order of the Secretary, Department of
Labor and Employment, is hereby AFFIRMED but with the modification increasing
the additional gratuity from Fifty Thousand (P50,000.00) to One Hundred
Thousand (P100,000.00).
SO ORDERED.
A certified true copy
of the aforesaid Decision is hereto attached as Annex “A.”
On 12 April 2011,
herein Petitioner timely filed a Motion for Reconsideration, which Motion for
Reconsideration was denied by the Office of the President in a Resolution dated
11 August 2011, and received by Petitioner, through counsel, on 17 August 2011.
The dispositive portion of the Resolution reads as follows:
WHEREFORE, premises
considered, the Motion for Reconsideration is hereby DENIED.
SO ORDERED.
A certified true copy
of the Resolution dated 11 August 2011 is attached hereto as Annex “B.”
JURISDICTIONAL
ALLEGATIONS
Petitioner hereby
certifies, as shown by the attached Verification and Certification of Non-Forum
Shopping, that it has not commenced any action involving the same issues before
the Supreme Court, the Court of Appeals or different divisions thereof, or
before any other tribunal or agency, and that to the best of their knowledge,
except for an NLRC Case NLRC LCC No. 04-003-11 (NCMB-NCR-NS 03-018-11) entitled
“In Re: labor Dispute at Philippine Airlines, Inc. PAL Employees Association v.
Philippine Airlines, Inc.,” which is related to this case but covers a separate
issue, no such action or proceeding is pending in the Supreme Court, the Court
of Appeals or different divisions thereof, or any other tribunal or agency.
Petitioner also certifies that should it hereafter learn that a similar action
or proceeding has been filed or is pending in the Supreme Court, the Court of
Appeals or different divisions thereof, or any other tribunal or agency, it
undertakes to promptly inform the aforesaid courts and other tribunal or
agency, within five (5) days therefrom.
Petitioner further
certifies that upon filing of this Petition, it has paid the required docket
fees.
Proof of service of
copies of this petition on the respondents is submitted together with this
petition.
TIMELINESS OF THE
PETITION
The Resolution of the
Office of the President dated 11 August 2011, which denied Petitioner’s Motion
for Reconsideration was received by Petitioner’s counsel on 17 August 2011.
This Petition is filed within ten (10) days from receipt of the 11 August 2011
Order.
ANTECEDENT FACTS
In 1998, PALEA was
constrained to enter into a suspension of its Collective Bargaining Agreement
with PAL for ten years after the latter threatened to close due to alleged
financial losses. The factual circumstances surrounding this CBA suspension is
discussed in detail in the landmark case of Rivera vs. Espiritu, G.R. No.
135547, January 23, 2002, where the Supreme Court upheld the CBA moratorium.
For ten long years, PALEA sacrificed its right to collective bargaining in
order to help the nation’s flag carrier to recover while it went into
rehabilitation. PAL successfully exited rehabilitation in 2007. The CBA
Moratorium expired in 2008.
In August 2009, after
eleven years of CBA suspension, and during the period for negotiations for a
new CBA between the parties, PAL announced its intention to
“spin-off/outsource” its In-flight Catering operations, Airport Services
operations, and Call Center Reservations operations to service providers. These
divisions are core businesses of PAL as shown by the functions attached to
these departments, thus:
AIRPORT SERVICES
The Airport Services
Department is a department under the Operations Group of PAL. The employees in
this department, occupying the positions of Customer Service Agents, are at the
frontlines of PAL operations. These employees are responsible for passenger
handling, ramp handling, station control, central baggage services, airport
equipment maintenance, and cargo handling. Their functions include, among
others, (1) assisting passengers upon check-in, boarding, arrival, as well as
their transfer to other carriers in case of connecting flights; (2) handling of
passengers’ baggage and cargo at the departure, transit, and arrival areas,
including handling of mishandled baggage; (3) planning, organizing, and
monitoring the efficient and timely ground handling, servicing, and dispatch of
flights; and (4) traffic control and load control.
PAL intends to
dismiss around 2,000 regular employees and union members working under the
Airport Services Department.
IN-FLIGHT CATERING
SERVICES OPERATIONS
The In-Flight
Catering Services is a department under the Operations Group of Philippine
Airlines, Inc. This division is in-charge of the planning, preparation,
production, servicing, and delivery of in-flight snacks, meals, and beverages
for all PAL flights, all of which are part of the package of services that PAL
offers to its customers. This division is also tasked with the purchase of all
stocks and supplies needed for the mass production of onboard meals. Since
in-flight snacks and meals are in themselves a brand associated with PAL
flights, the In-Flight Catering Services division is also in-charge of assuring
the quality of the food served in all flights.
PAL intends to
terminate the employment of more than 400 regular rank-and-file employees and
union members working under this division.
CALL CENTER OPERATIONS
The Call Center
Operations falls under the Commercial Group of PAL. The employees under this
division handles reservations and bookings transactions received through fax,
telexes, telephone, and e-mail for all PAL flights, as well as marketing support
services for PAL.
PAL intends to
dismiss around 300 workers in this division.
As a result of this,
2,600 PAL regular employees and members of the union, PALEA, will be
terminated. The affected workers comprise around 70% of PALEA’s membership and
the total number of rank-and-file employees, 62% of the union leadership, and
around 35% of the total employee complement of PAL (other employees outside the
PALEA bargaining unit are the pilots, the flight attendants/stewardesses, and
the administrative staff). The intended outsourcing of the three departments is
just the first of a series of outsourcing that PAL intends to implement. These
figures are limited only to those that are listed in the company’s letters to
the Department of Labor and Employment and do not include those who have not
been covered by termination notices.
Hence, in two
consecutive letters, dated 10 and 11 September 2009, PALEA, through its
then-president, Mr. Edgardo Oredina, formally notified PAL President and Chief
Operating Officer Mr. Jaime J. Bautista of its intention to negotiate the terms
of the existing CBA. In these letters, PALEA stressed that the proper venue to
discuss matters involving the job security of its members is the negotiations
for the 2009-2013 CBA.
During the meetings
of the PAL-PALEA Labor-Management Cooperation Council where the intended mass
termination was discussed, PALEA consistently stressed that the CBA negotiation
is the most appropriate venue to thresh out unresolved issues on the planned
“outsourcing.” However, inasmuch as no date was set for the negotiation, and
due to the patently divergent positions of the parties on the intended
“outsourcing,” PALEA filed a Notice of Preventive Mediation on 22 September
2009 citing union busting as the sole and principal issue, docketed as case
number NCMB-NCR-PM-09-126-09.
Several conciliation
conferences were held between 25 September 2009 and 5 October 2009. The parties
did not reach any agreement on the issue of “outsourcing.” Meanwhile, during
this period, PAL offered an Early Retirement Program to its managers and
administrative personnel, which program was made “optional/voluntary” to the
rank-and-file employees.
On January 28, 2010,
PALEA withdrew the Notice of Preventive Mediation and filed a Notice of Strike,
docketed as NCMB-NCR-NS-01-009-10, on the ground of union busting,
particularly: (1) Intended mass lay-off of union members and officers by April
2010; (2) Illegal outsourcing of regular positions; (3) Direct negotiation with
union members for them to avail of ERP with promise of re-employment; (4)
Unresolved issues during preventive mediation / LMCC; (5) Non-compliance with
pay-scale review of the settlement of the wage distortion; and (6) Others.
Conciliation
conferences were held anew but the parties failed to reach an agreement.
Meanwhile, in an election that was conducted from 17 February to 25 February
2010, a new set of union officers was elected. The new set of officers affirmed
PALEA’s opposition to the intended “outsourcing” and maintained PALEA’s Notice
of Strike.
On 16 April 2010,
PALEA received a letter from the PAL President informing the union of the
complete closure of several departments of the company, and abolition of all
affected regular positions by 31 May 2010.
On 26 April 2010, PALEA
received an ORDER from the Secretary of Labor and Employment (“SECRETARY”)
assuming jurisdiction over the labor dispute between PALEA and PAL. The same
Order was received by PAL and its counsel on 27 April 2010. Significantly, the
Order enjoins the parties from committing any act that would worsen the
situation. The Order states in part:
In the event of an
actual strike, the strikers are ordered to return to work within twenty (24)
hours from receipt hereof and the Company to accept all strikers under the same
terms and conditions prior to the strike. Both parties are ordered to refrain
from committing any act that might exacerbate the situation.
A copy of the Order
dated 26 April 2011 is attached as Annex “C.”
On 27 April 2010, PAL
sent Notices of Termination to a number of rank-and-file employees who are all
PALEA members. The notices were sent by registered mail, instead of by
personally serving them on the affected employees. The mailed Notices of
Termination were received by some of the concerned employees starting 30 April
2010. Included among these employees are the union president, the
vice-president, secretary, and ten members of the PALEA Board of
Directors.
On the same day, PAL
filed Notices of Closure/Establishment Employment Report with the DOLE Regional
Offices in the National Capital Region and in Region VII (Cebu) attaching a
list of affected employees.
During the conference
on 7 May 2010 at the Department of Labor, National Conciliation and Mediation
Board, “the parties agreed that the Assumption Order dated April 23, 2010 has
suspended the effects of the notices of termination.” The said agreement is
clearly stated in the minutes of the May 7, 2010 conciliation conference which
was presided over by then Undersecretary and now Secretary of Labor and
Employment, Rosalinda Dimapilis-Baldoz, and the Director of the National
Conciliation and Mediation Board, Reynaldo Ubaldo. In the same conference, the
parties agreed to simultaneously file their respective position papers on 17
May 2010. A copy of the parties’ respective Position Papers are attached as
Annexes “D” and “ E”
On 27 May 2010, both
parties filed their respective Reply to the other’s position paper. A copy of
the parties respective Replies are attached as Annexes “ F“ and “G. “ On 7 June
2010, the parties filed their Rejoinders. A copy of the parties respective
Rejoinders are attached as Annexes “ H “ and “I. “ Meanwhile, PALEA filed a
Motion for the Production of Documents on the same date. A copy of the Motion
is attached as Annex “J.”
On 15 June 2010,
eight (8) calendar days (or a mere four (4) working days) after the parties
submitted their last pleading on 7 June 2010, and a mere 15 days before the new
administration would assume office, the Acting Secretary of Labor and Employment,
issued a “midnight” Decision ruling that the outsourcing of the functions and
positions that are currently performed and occupied by regular rank-and-file
employees and union members to independent service providers is valid, and the
consequent termination of these regular employees is legal. The dispositive
portion of the Decision reads:
“WHEREFORE, premises
considered, this Office holds that the intended closure of the Philippine
Airlines In-Flight Catering operations, Airport Services Operations and Call
Center Reservation Operations and the consequent severance from employment of
all affected employees as reported to the DOLE Regional Offices, as well as the
contracting out of these operations to the named service providers, are based
on lawful ground and all in a valid exercise of managerial prerogative and as
such valid and lawful in all respects.
The charges of unfair
labor practice brought by PALEA against PAL is hereby dismissed for lack of
merit.
The COMPANY shall pay
separation pay equivalent to one month salary for every year of service, to all
affected employees.
The COMPANY is held
bound and liable by way of guarantee in favor of all affected employees, for
payment for one year, of whatever salary is granted respectively by the service
providers to the employees upon their admission to employment with the service
providers.
SO ORDERED.”
A copy of the 15 June
2010 Decision is attached as Annex “ K. ”
PALEA viewed the
Decision as one based on an erroneous appreciation of facts and in complete
derogation of law and the parties’ Collective Bargaining Agreement. It erodes
the workers’ rights to self-organization, undermines their job security, and by
depriving each of them of his source of livelihood, throws them and their
families dependent upon them for support to the mercies of an uncertain and
precarious fate.
Hence, PALEA filed a
Motion for Reconsideration on 28 June 2010 in order to seek the reversal of the
15 June 2010 Decision upon the grounds of palpable and patent error in holding
that PAL can contract out the functions and positions that are currently
performed and occupied by regular rank-and-file employees and union members;
that the retrenchment of more than 2,600 regular rank-and-file employees and
union members, involving 70% of PALEA’s membership and 62% of Union leadership
is valid; and that PAL is not guilty of unfair labor practice. A copy of the
Motion for Reconsideration is attached as Annex “L.”
On 29 June 2010, PAL
filed an Opposition to PALEA’s Motion for Reconsideration, and a Manifestation
saying that it disagrees with the part of the ruling holding it liable by way
of guarantee for payment for one year, of whatever salary is granted by the
service providers . A copy of the Opposition is attached as Annex “M.” PALEA,
in the course of the proceedings, submitted PAL Annual Reports and Financial
Statements showing that PAL is swinging to profitability at the time it
announced the outsourcing. On 14 September 2010, PALEA submitted its Comment to
various documents submitted by PAL which demonstrates the increasing
profitability of PAL since 2009. A copy of the Comment Re: Various Documents is
attached as Annex “N.”
With grave abuse of
discretion and utter disregard of settled facts as well as unequivocal
jurisprudence on the issue of retrenchment and unfair labor practices,
Secretary Rosalinda Dimapilis-Baldoz handed down the 29 October 2010 Order. The
Order affirmed the earlier Decision of Acting Secretary Romeo C. Lagman, which
upheld the legality of PAL’s contracting out of the In-Flight Catering
Operations, Airport Services Operations, and Call Center Reservation
Operations. Secretary Baldoz’s Order introduced modifications to the previous
Order, by granting a “Transition Benefits Package,” which includes, among others,
the absorption of the affected employees by the contractors/service providers.
Its dispositive portion reads:
“WHEREFORE, the
Motion for Reconsideration filed by PALEA is hereby DENIED and the Decision of
the Acting Secretary of Labor and Employment dated 15 June 2010 is hereby
AFFIRMED, with MODIFICATION that the following components of the Transition
Benefits Package shall be given to all affected employees:
All employees
affected by the outsourcing of In-Flight Catering, Airport Services, and Call
Center Reservations Operations shall be absorbed by the respective service
providers and PAL shall be bound and held by way of guarantee in favor of al
affected employees, for payment for one year, of whatever salary is granted
respectively by the service providers upon their admission to employment with
said service providers;
Increase in
separation pay in the amount of 1.25% per year of service.
Additional gratuity
of fifty thousand pesos (P50,000) per affected employee;
Vacation leave
balance that is 100% commutable to case regardless of years of service;
Sick leave balance
that is 100% commutable to case regardless of years of service;
Trip pass benefits in
accordance with Article XX of the CBA and the PAL Personnel Policies and
Procedures and Manual, graduated under the following terms:
15 years in service
or more Lifetime
10-15 years 8 sets
5-10 years 5 sets
Less than 5 years 2
sets
Extension of one (1)
year of the medical and hospitalization package based on Articles XIII and XV
of the CBA consistent with the one (1) year period that PAL guarantees payment
of the affected workers’ salaries, as provided in item (a).
Finally, the parties
are enjoined to facilitate the early resolution/termination of all their “labor
related” cases pending before the Department of Labor and Employment and any of
its attached agencies. This is to ensure the smooth transition on the
relationship of the parties resulting from the termination of the workers’
employment brought about by the outsourcing of the concerned operations.
SO ORDERED.
A copy of the 29
October 2010 is attached as Annex “O.”
Immediately after the
issuance of the Order, and even if the Order is not yet final, the management
of PAL wrote a letter to PALEA on 3 November 2010, notifying that PAL will
“finally implement the spin-off/outsourcing” of the three departments and that
PAL “will conduct meetings with the employees to discuss and explain the manner
of implementing the spin-off/outsourcing program and the payment and availment
of separation benefits” of affected employees.
On 4 November 2010,
PAL started to conduct meetings with employees where PAL managers told them to
accept the separation package as PAL is purportedly bent on implementing the
mass termination immediately. Some employees have been told that the Order will
be implemented by November 9th and that the workers’ employment will be until
the end of November only. PALEA, in a letter on 4 November 2010 advised PAL
that the union will exhaust all remedies available to it under the law,
including, but not limited to, filing a Petition for Certiorari before the
Court of Appeals. Pending the final judicial resolution of this issue, PALEA
warned PAL from committing any act to undermine PALEA’s rights to question the
Order. Further, PALEA advised PAL against any premature and haphazard
implementation of the planned spin-off/outsourcing, and enjoined the management
from dealing directly and individually with the members of PALEA pending the
final judicial resolution of the dispute. Finally, PALEA warned the management
that the union shall treat any attempt by PAL to defeat PALEA’s rights as
unfair labor practice and union busting and that it shall act
accordingly.
However, PAL
persisted in its efforts to immediately implement the 29 October 2010 Order.
Thus, PALEA filed on November 5, 2010, a Notice of Strike before the Department
of Labor and Employment. This was docketed as NCMB-NCR-NS-11-128-10. A copy of
the 5 November 2010 Notice of Strike is attached as Annex “P.”
On 8 November 2010, PALEA
filed a Petition to Suspend the Effects of Mass Termination Pending Resolution
of the Labor Dispute at Philippine Airlines, Inc. It prayed that the Secretary
of Labor issue an Order under Article 277 (b) of the Labor Code, suspending the
effects of the mass termination pending the final judicial resolution of the
labor dispute. This was not acted upon by the Office of the Secretary of Labor
and Employment. A copy of the Petition is attached as Annex “Q.”
Because of the
rapidly deteriorating labor situation at PAL, on 12 November 2010, the Union
filed a Petition for Presidential Intervention in the Labor Dispute at
Philippine Airlines, Inc. Pursuant to Article 263 (G) of the Labor Code with
the Office of the President. This was docketed as O.P. CASE NO. 10-K-486. A
copy of the Petition is attached as Annex “R.” On 7 December 2010, PALEA filed
a Manifestation with the Office of the President notifying the O.P. of the
result of the strike votes conducted by PALEA. A copy of the Manifestation is
attached as Annex “ S. ”
On 15 December 2011,
the Office of the President issued an Order, which among others, stayed the 29
October 2010 Order and 15 June 2010 Decision of the Office of the Secretary of
Labor and Employment. It likewise directed the consolidation of the Notice of
Strike and Petition to Suspend the Effects of Mass Termination with the
Petition for Presidential Intervention. A copy of the 15 December 2011 Order is
attached as Annex “T.”
On 22 December 2011,
PAL filed its Comment to the Petition (Ex Abudante Ad Cautelam). A copy of the
Comment is attached as Annex “U.”
On 1 February 2011,
PALEA filed a Manifestation and Motion, which among others, moves for the
production of the latest Audited Financial Statements of PAL. A copy of the
Manifestation and Motion is attached as Annex “ V.” On 24 February 2011, PALEA
filed its Comment to the Audited Financial Statements and Reply to PAL’s
Opposition. A copy of this Comment and Reply is attached as Annex “W.”
On 25 March 2011, the
Office of the President issued the assailed Decision. Thus, on 12 April 2011,
PALEA filed a Motion for Reconsideration of the 25 March 2011 Decision. A copy
of the Motion for Reconsideration is attached as Annex “X.”
On 3 August 2011,
PALEA filed a Manifestation showing that PAL has earned $72.5M during the
fiscal year ended March 2011. A copy of the Manifestation is attached as Annex
“Y.” Then, on 12 August 2011, PALEA filed another Manifestation regarding PAL’s
continuing violations of the Certification Order issued by the Secretary of
Labor and Employment in NLRC Case NLRC LCC No. 04-003-11 (NCMB-NCR-NS
03-018-11). A copy of the Manifestation is attached as Annex “Z. ” On 17 August
2011, PALEA, through counsel, received a copy of the assailed Order. Hence,
this Petition for Review.
SCHEDULE OF ANNEXES
For the Honorable
Court’s easy reference, the following annexes are attached to this Petition:
“A”
-
25 March 2011
Decision of the Office of the President
“B”
-
11 August 2011
Resolution by the Office of the President
“C”
-
5 November 2010 Order
from the Secretary of Labor and Employment assuming jurisdiction over the
dispute
“D”
-
17 May 2010 PALEA’s
Position Paper.
“E”
-
14 May 2010 PAL’s
Position Paper
“F”
-
27 May 2010 PALEA’s
Reply to PAL’s Position Paper
“G”
-
26 May 2010 PAL’s
Reply to PALEA’s Position Paper.
“H”
-
7 June 2010 PALEA’s
Rejoinder
“I”
-
7 June 2010 PAL’s
Rejoinder
“J”
-
7 June 2010 PALEA’s
Motion for the Production of the Documents.
“K”
-
15 June 2010 Notice
of Order from the Office of the Secretary of Labor and Employment
“L”
-
28 June 2010 PALEA’s
Motion for Reconsideration
“M”
-
28 June 2010 PAL’s
Opposition to PALEA’s Motion for Reconsideration
“N”
-
14 September 2010
PALEA’s Manifestation/ Comments (Re Various Documents submitted by PAL)
“O”
-
29 October 2010
Notice of Order from the Secretary of Labor
“P”
-
5 November 2010
Notice of Strike
“Q”
-
8 November 2010
PALEA’s Petition to Suspend the Effects of Mass Termination Pending Resolution
of the Labor Dispute at Philippine Airlines
“R”
-
12 November 2011
PALEA’s Petition for Presidential Intervention in the Labor Dispute at the
Philippine Airlines, Inc. under Article 263 (g) of the Labor Code
“S”
-
7 December 2010
PALEA’s
Manifestation
regarding the PALEA’s conduct of strike vote.
“T”
-
15 December 2010
Order of the Office of the President consolidating the Petition to Suspend the
Effects of Mass Termination and the Notice of Strike with the main Petition for
Presidential Intervention
“U”
-
22 December 2010
PAL’s Comment on the Petition (Ex-Abundante Ad Cautelam)
“V”
-
1 February 2011
PALEA’s Manifestation and Motion directing PAL to submit its latest audited
financial statement
“W”
-
24 February 2011
PALEA’s Comment on PAL’s Financial Statements and Reply to PAL’s Comment on
Petition for Presidential Intervention
“X”
-
12 April 2011 Motion
for Reconsideration filed by PALEA
“Y”
-
3 August 2011
Manifestation filed by PALEA
“Z”
-
12 August 2011
Manifestation filed by PALEA
GROUNDS FOR THE
PETITION
THE OFFICE OF THE
PRESIDENT COMMITED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN DISREGARDING THE EVIDENCE OF THE PETITIONER PAL EMPLOYEES
ASSOCIATION (PALEA) IN ITS FINDINGS OF FACTS AND IN THE APPLICATION OF LAW AND
JURISPRUDENCE, IN DENYING THE MOTION FOR RECONSIDERATION OF PALEA, AND IN NOT
HOLDING THAT:
a. PHILIPPINE
AIRLINES CANNOT CONTRACT OUT ITS IN-FLIGHT CATERING, AIRPORT SERVICES, AND CALL
CENTER OPERATIONS BY OUTSOURCING THEM TO SERVICE PROVIDERS;
b. THE CONSEQUENT
RETRENCHMENT OF THE REGULAR EMPLOYEES AND UNION MEMBERS IS INVALID;
c. PAL IS LIABLE FOR
UNFAIR LABOR PRACTICES.
ARGUMENTS /
DISCUSSION
Philippine Airlines
cannot contract out its in-flight catering, airport services, and call center
operations by outsourcing them to service providers. The Collective Bargaining
Agreement explicitly prohibits PAL from contracting out the functions and
positions performed and held by regular employees.
In the Assailed
Decisions, the Office of the President ruled that PAL is justified in contracting
out the three departments. It adopted the ruling of the Secretary of Labor and
Employment and simply declared that, “the proper application and interpretation
of the various provisions in the CBA as well as in the Labor Code have been
extensively elucidated by the Labor Secretary in her Order. There is no reason
to reverse the same.” The Office of the President sparingly discussed its bases
in arriving at this very crucial conclusion. It merely glossed over the
outsourcing issue which lies in the heart of this dispute, and conveniently hid
behind the Secretary’s ruling that PAL can contract out the services performed
by the regular rank-and-file union members as this is within management
prerogatives and consistent with the Collective Bargaining Agreement between
the parties.
The conclusion of the
Office of the President is utterly erroneous. The Collective Bargaining
Agreement explicitly prohibits PAL from contracting out the functions and
positions performed and held by the regular employees.
In Section 4, Article
XXIV, of the CBA, PAL has undertaken not to contract out present and future
positions occupied by regular employees in the collective bargaining unit. The
CBA states:
Section 4. The
Company undertakes not to contract out existing positions, jobs, divisions, and
departments presently occupied by present or future regular employees within
the collective bargaining unit. xxx xxx
The undertaking not
to contract out is absolute such that PAL agreed that all other positions that
were being contracted out at the time when the CBA was entered will be
discontinued when the exigencies giving rise to the need to contract out these
positions cease. In order to ensure that these contracted out positions will be
reverted into regular positions, the parties agreed to review these programs in
the regular LMCC meetings. Meanwhile, in case of corporate restructuring, such
as spin-off and forming joint-ventures, the management has undertaken to
consult with the union within a certain period.
Here, PAL, through the
CBA, undertook not to do what the Office of the President now allows it to do,
i.e. to contract out the services being performed by regular employees who are
members of the bargaining unit. PAL’s undertaking in the CBA constitutes the
law between PAL and its employees who are part of the bargaining unit. However,
instead of applying the CBA as the law between the parties, the Office of the
President, just like the Secretary of Labor and Employment, allows PAL to
contract out the three departments, in complete derogation of the CBA.
The Office of the
President saw no reason to disturb the ruling of the Secretary of Labor and
Employment on this point. However, as pointed out in the Petition for
Presidential Intervention, “the Secretary failed to appreciate that the
prohibition against contracting out was one of the victories obtained by PALEA
after it struck in 1996 to protest PAL’s contracting out of the import division
of the cargo operations. It was the fruit of a strike against contracting out.
To hold now that the parties did not intend to absolutely prohibit contracting
out is to defeat the gains obtained by the workers in the exercise of their
rights to self-organization.” This is also the reason why the Secretary of
Labor and Employment’s ruling, now adopted by the Office of the President, that
Section 4, Article XXIV of the CBA should be reconciled with Article II on
Management Prerogatives, is erroneous. Section 4, Article XXIV of the CBA is a
limitation imposed by the parties to PAL’s management prerogatives. It is a
basic rule in the construction of an instrument that “the intention of the
parties is to be pursued; and when a general and a particular provision are
inconsistent, the latter is paramount to the former. So a particular intent
will control a general one that is inconsistent with it.” (See Section 12, Rule
130, Rules of Court).
In the case of Shell
Oil Workers Union v. Shell Oil Company (GR No. 28607, May 31, 1971), the
Supreme Court ruled that the contracting out of security services to an outside
private security agency to undertake the work of the company security guards
who were re-assigned to other sections of the company, is violative of the
existing CBA. The Court added that it could have been purely an exercise of
management prerogative on the part of the employer if it were not bound by what
was stipulated in the CBA to continue to maintain a security guard section at
least during the lifetime of the agreement. This ruling applies squarely to
PAL’s case.
PAL conceals the true
nature of the mass termination by calling the outsourcing as spin-off. As
explained in PALEA’s Reply however, (Annex “F” hereof) PAL’s mass termination
of more than 2,600 employees is not a “spin-off” but an “outsourcing” which is
equivalent to “contracting-out” of services.
In the letter to the
employees (see Annex I of PALEA’s Position Paper, Annex “E” hereof), PAL used
the term “spin-off/outsource”. In the letter to the DOLE Regional Directors of
NCR and Region VII, however, the term “outsource” was not used. (see Annexes J
and K of PALEA’s Position Paper, Annex “E” hereof) In PAL’s Position Paper,
there was no mention of “outsourcing,” PAL consistently used the term
“spin-off.” Is there a “spin-off” in this case? What is a “spin-off” in the
first place? The following explanation is helpful:
A spin-off has the
opposite effect of merger or consolidation, whereby a department, division, or
portions of the corporate business enterprise is sold-off or assigned into a
new corporation that will arise by the process which may constitute it into a
subsidiary of the original corporation.
American literature
describes "a spin-off to exist when parent corporation organizes a
subsidiary, to which is transferred part of parent's asset in exchange for all
capital stock of subsidiary and stock of subsidiary is transferred to parent's
shareholders without surrender of their stock in parent." It is also
described as one "where part of the assets of corporation is transferred
to a new corporation and stock of transferee is distributed to shareholders of
transferor without surrender by them of the stock in the transferor."
Unlike in merger or
consolidation where the Corporation Code has provided for specific procedures
and voting requirements to accomplish the same, spin-offs are not regulated
specifically under the Code. The nearest provision of the Code by which
spin-offs may be governed would be Section 40 which provides that in the sale,
lease, exchange, mortgage, pledge, or other disposition of all or substantially
all of the corporations property or assets "whereby the corporation would
be rendered incapable of continuing the business," would require the
majority vote of stockholders representing at least two-thirds (2/3) of the
outstanding capital stock, or two-thirds (2/3) of the entire membership as the
case may be. (Philippine Corporate Law by Cesar Villanueva, 2002 ed., pp.
617-618.)
The Supreme Court had
the opportunity to decide a case involving a “spin-off,” in San Miguel
Corporation Employees Union-PTGWO v. Confesor, (G.R. No. 111262. September 19,
1996). In the said case, the Court explained:
Magnolia and SMFI
were spun-off to operate as distinct companies on October 1, 1991. Management
saw the need for these transformations in keeping with its vision and long term
strategy as it explained in its letter addressed to the employees dated August
13, 1991:
x x x As early as
1986, we announced the decentralization program and spoke of the need for
structures that can react fast to competition, a changing environment, shorter
product life cycles and shifts in consumer preference. We further stated in the
1987 Annual Report to Stockholders that San Miguel’s businesses will be more
autonomous and self sufficient so as to better acquire and master new
technologies, cope with a labor force with different expertises and
expectations, and master and satisfy the changing needs of our customers and
end-consumers. As subsidiaries, Magnolia and FLD will gain better industry
focus and flexibility, greater awareness of operating results, and speedier,
more responsive decision making.
x x x
We only have to look
at the experience of Coca-Cola Bottlers Philippines, Inc., since this company
was organized about ten years ago, to see the benefits that arise from
restructuring a division of San Miguel into a more competitive organization. As
a stand-alone enterprise, CCBPI engineered a dramatic turnaround and has
sustained its sales and market share leadership ever since.
We are confident that
history will repeat itself, and the transformation of Magnolia and FLD will be
successful as that of CCBPI.
Undeniably, the
transformation of the companies was a management prerogative and business
judgment which the courts can not look into unless it is contrary to law,
public policy or morals. Neither can we impute any bad faith on the part of SMC
so as to justify the application of the doctrine of piercing the corporate
veil. Ever mindful of the employees’ interests, management has assured the
concerned employees that they will be absorbed by the new corporations without
loss of tenure and retaining their present pay and benefits according to the
existing CBAs. They were advised that upon the expiration of the CBAs, new
agreements will be negotiated between the management of the new corporations and
the bargaining representatives of the employees concerned. As a result of the
spin-offs:
1. Each of the
companies are run by, supervised and controlled by different management teams
including separate human resource/personnel managers.
2. Each Company enforces
its own administrative and operational rules and policies and are not dependent
on each other in their operations.
3. Each entity
maintains separate financial statements and are audited separately from each
other.
Indubitably,
therefore, Magnolia and SMFI became distinct entities with separate juridical
personalities. Thus, they can not belong to a single bargaining unit as held in
the case of Diatagon Labor Federation Local 110 of the ULGWP v. Ople.
Both Villanueva and
the San Miguel case explained spin-off as resulting in the creation of distinct
entities. It entails the reorganization of the corporate structure, not just
the reorganization of the business operations. These explanations are important
in the present case in the light of the factual circumstances attending PAL’s
planned mass termination.
Clearly then, the
alleged spin-off must be unmasked for what it truly is, an illegal outsourcing
of function which is equivalent to contracting out that is prohibited by the
parties’ CBA. For being violative of the CBA, the outsourcing must be struck
down for being illegal.
The consequent
retrenchment of the regular employees and union members is invalid. PAL’s mass
termination of more than 2,600 employees is neither necessitated nor justified
by the company’s financial situation.
Second, the Office of
the President declared that the retrenchment of the regular employees and union
members is valid. It ruled that PAL is encountering financial ordeals that
justify the mass termination of the employees, and states that “We cannot close
our eyes to the financial ordeals of the airline company laboriously presented
and the global and national developments enveloping the airline industry.”
The conclusion of the
Office of the President flies in the face of undisputed facts. PAL’s mass
termination of more than 2,600 employees is neither necessitated nor justified
by the company’s financial situation.
PAL is a profitable
business enterprise as shown by PAL’s Financial Statements. From the time that
this dispute arose, PAL has been posting increased profitability that negates
the doomsday scenario that it sought to depict when it embarked on the mass
termination of its employees.
PAL’S latest
financial statements for the year ended March 31, 2011, reveal that PAL’s
operations for the fiscal year ended with “a total comprehensive income of US$
72.5 Million, a significant turnaround from the previous fiscal year’s total
comprehensive loss of US$ 14.4 Million.” Please see 2011 Audited Financial
Statements of PAL attached as Annex “A” of the Manifestation dated 3 August
2011, Annex “Y” hereof.
There is no business
exigency that may justify the retrenchment. PAL’s robust financial position
negates its good faith in contracting out the three departments. The Office of
the President, in grave abuse of discretion, has disregarded that the
recognition of outsourcing in jurisprudence is premised on the principle that
“a company can determine in its best judgment whether it should contract out a
part of its work for as long as the employer is motivated by good faith; the
contracting out is not for purposes of circumventing the law; and does not
involve or be the result of malicious or arbitrary action.” PAL has failed
these tests, and the Office of the President conveniently upholds such failure,
ignoring the fact that from the company’s own financial records, it is crystal
clear that PAL has not reached the “tempest” that it foretold when it first
attempted to justify the mass termination of employees.
Contracting out the
three departments to service providers violates Article 248 (c) of the Labor
Code and DOLE Department Order No. 18-02.
Third, the Office of
the President ruled that PAL can contract out In-Flight Catering, Airport
Services, and Call Center Reservation Operations by outsourcing them to service
providers. It declared that contracting out of a job, work or service is
prohibited only when not done in good faith and not justified by the exigencies
of the business. The O.P. asserts that “We fail to see this devious motivation
here.”
What the Office of
the President fails to see, in utter grave abuse of discretion, is the fact
that contracting out the three departments to service providers, aside from
violating the CBA, violates Article 248 (c) of the Labor Code and DOLE
Department Order No. 18-02.
Article 248 (c) of
the Labor Code is clear and unequivocal, thus:
Article 248. It shall
be unlawful for an employer to commit any of the following unfair labor
practice:
(c) To contract out
services or functions already performed by union members when such will
interfere with, restrain, or coerce employees in the exercise of their rights
to self-organization.
Section 6 (f) of
Department Order No. 18-02 prohibits “contracting out of a job, work, or
service being performed by union members when such will interfere with,
restrain or coerce employees in the exercise of their rights to
self-organization as provided in Art. 248 (c) of the Labor Code, as amended.”
In this case, PAL’s
scheme of engaging service providers, terminating the regular employees, and
then passing them off as employees of these service providers, is in direct
violation of Article 248 (c) and D.O. 18-02.
This scheme is very
clearly explained in the “Primer on the Spin-Off/Outsourcing of PAL Business
Support Functions,” an information material that was prepared and distributed
by PAL to its employees, thus:
03. What happens to
the affected employees?
All the affected
employees will be separated from PAL and will be given a separation package in accordance
with applicable law or CBA.
Apart from the
separation package, each one will be offered jobs by the service providers.
Based on PAL’s
primer, the termination of the employees by PAL, and the job offer by the
service providers, will be synchronized, thus:
Implementation of
Separation and Re-employment of Affected Employees
How will the affected
employee be notified regarding his separation from PAL? Regarding employment
offer from the service providers?
All affected employee
will receive a Notice of Separation through the Human Resource Department (HRD)
at least 30 days prior to the effective date thereof. This letter will specify
the effective date of the employee’s separation and the spin-off separation
package he will be entitled to.
The affected employee
will also be given an Employment Offer letter from the service providers. In
this letter, the employee shall indicate whether he would be interested to work
with the service providers.
Details of the
employment offer from the service providers will be contained in a separate
letter.
A copy of the primer
is attached as Annex “O” of PALEA’s Reply, Annex “ F” hereof.
According to PAL’s
plan, three service providers will be employed – SkyKitchen, SkyLogistics, and
ePLDT Ventus (now SPi Global Holdings, Inc.). SkyKitchen, in turn, will offer
employment to PAL’s dismissed employees either directly, or through the 4th
Dimension Multi-Purpose Cooperative. A copy each of the respective primers of
the three service providers, and the cooperative, are attached as Annexes “P,”
“Q,” “R,” and “S,” respectively of PALEA’s Reply, Annex “F” hereof. The primers
of the service providers confirm the integral connection between PAL’s
termination of its employees and the subsequent offer of employment by the
service providers.
In a case involving
PAL, Philippine Airlines v. Ligan et al. (GR No. 146408, February 29, 2008),
the Supreme Court ruled that Synergy Services Corporation (Synergy) acted as a
labor-only contractor of PAL, under their Agreement dated July 15, 1991. In the
said case, PAL contracted out to Synergy various services like janitorial,
aircraft cleaning, baggage-handling, etc. The Court’s conclusion that PAL and
Synergy entered into a labor-only contracting arrangement was based, in part,
in the finding that the work performed by almost all of the employees – loading
and unloading of baggage and cargo of passengers – is directly related to the
main business of PAL, and the equipment used by the employees as station
loaders, such as trailers and conveyors, are owned by PAL.
PAL’s plan to
terminate more than 2,600 regular employees and contract-out the services that
they are performing to various service providers is a repeat of PAL’s
labor-only contracting arrangement with Synergy in 1991.
The involvement of
the service providers, and PAL’s scheme of terminating its regular employees,
and then passing them off as employees of these service providers, is in direct
violation of Article 248 (c) and D.O. 18-02 which declares that it shall be unlawful
for an employer “(T)o contract out services or functions already performed by
union members when such will interfere with, restrain, or coerce employees in
the exercise of their rights to self-organization.”
PAL’s device of
terminating the employees and availing of their services through contractors
effectively reduces the scope of the bargaining unit. These employees are not
performing specific and special jobs or services but core functions. PAL’s
illegal practice of contracting out jobs that are directly related, usually
necessary and desirable, indeed, integral, to its business operations,
constitutes a clear violation of the workers’ right to self – organization and
collective bargaining.
The termination of
employees because of the closure of the three departments constitutes
retrenchment. PAL did not comply with the legal and jurisprudential parameters
of a valid retrenchment.
Fourth, in an attempt
to justify the mass termination of the regular employees, the Office of the
President declared that this is not a case of retrenchment, but closure. The
Office of the President’s grave abuse of discretion is so glaring on this
point.
The weight of
authority supports the conclusion that the termination of employees because of
the closure of the three departments constitutes retrenchment. In this case,
PAL did not comply with the legal and jurisprudential parameters of a valid
retrenchment.
In the case of San
Miguel v. Aballa (G.R. No. 149011, June 28, 2005), the Supreme Court ruled that
the closure or cessation of operations of a particular department of a company
constitutes retrenchment, and not closure of enterprise. Applying the standards
of retrenchment in a situation where only a department of a company was closed,
but the company itself as SMC has not totally ceased operations but is still
very much an on-going and highly viable business concern, the Court ruled:
Retrenchment is a
management prerogative consistently recognized and affirmed by this Court. It
is, however, subject to faithful compliance with the substantive and procedural
requirements laid down by law and jurisprudence.
For retrenchment to
be considered valid the following substantial requirements must be met: (a) the
losses expected should be substantial and not merely de minimis in extent; (b)
the substantial losses apprehended must be reasonably imminent such as can be
perceived objectively and in good faith by the employer; (c) the retrenchment
must be reasonably necessary and likely to effectively prevent the expected
losses; and (d) the alleged losses, if already incurred, and the expected
imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.
In the discharge of
these requirements, it is the employer who has the onus, being in the nature of
an affirmative defense.
In the case of Flight
Attendants and Stewards Association of the Philippines (FASAP) v. PAL (G.R. No.
178083, July 22, 2008), the Supreme Court, ruling on the mass termination of
employees that PAL conducted in 1998, stated:
The law recognizes
the right of every business entity to reduce its work force if the same is made
necessary by compelling economic factors which would endanger its existence or
stability. Where appropriate and where conditions are in accord with law and jurisprudence,
the Court has authorized valid reductions in the work force to forestall
business losses, the hemorrhaging of capital, or even to recognize an obvious
reduction in the volume of business which has rendered certain employees
redundant.
Nevertheless, while
it is true that the exercise of this right is a prerogative of management,
there must be faithful compliance with substantive and procedural requirements
of the law and jurisprudence, for retrenchment strikes at the very heart of the
worker’s employment, the lifeblood upon which he and his family owe their
survival. Retrenchment is only a measure of last resort, when other less
drastic means have been tried and found to be inadequate.
The burden clearly
falls upon the employer to prove economic or business losses with sufficient
supporting evidence. Its failure to prove these reverses or losses necessarily
means that the employee’s dismissal was not justified. Any claim of actual or
potential business losses must satisfy certain established standards, all of
which must concur, before any reduction of personnel becomes legal. These are:
(1) That 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 Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3) That the employer
pays the retrenched employees separation pay equivalent to one (1) month pay or
at least one-half (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 the Supreme
Court’s resolution of PAL’s Motion for Reconsideration in the same case (G.R.
No. 178083, October 2, 2009), the Supreme Court further clarified the stated
requirements, thus:
In the absence of one
element, the retrenchment scheme becomes an irregular exercise of management
prerogative. The employer’s obligation to exhaust all other means to avoid
further losses without retrenching its employees is a component of the first
element as enumerated above. To impart operational meaning to the
constitutional policy of providing full protection to labor, the employer’s
prerogative to bring down labor costs by retrenching must be exercised
essentially as a measure of last resort, after less drastic means have been
tried and found wanting.
In the present case,
PAL failed to establish with adequate proof the existence of substantial, serious,
actual and real, or reasonably imminent, business losses, and, further, that
retrenchment is reasonably necessary and likely to prevent such losses. PAL
presented its “Consolidated Financial Statements March 31, 2009 and 2008 and
Years Ended March 31, 2009, 2008 and 2007 and Independent Auditors’ Report,” as
the proof of its losses, but, during the fiscal years ended 2010 and 2011, PAL
posted significant income that belies the allegation that it is suffering from
serious business losses.
In a number of cases,
the Supreme Court clarified that it is not enough that only the financial
statements for the year during which the retrenchment was effected are
presented by the employer. It must also be shown that the employer expected no
abatement of such losses in the coming years, and that the condition of the
company is not likely to improve in the near future. (see Manatad v. PT &
T, GR No. 172363, March 7, 2008). As clearly shown in the documents presented
before the Office of the Secretary of Labor and Employments and in the Office
of the President, even PAL itself, through its officers and documents, project
a significantly improved future for its operations, starting year 2010, the
year of the planned mass termination.
In the FASAP case
that was cited earlier, the Supreme Court reiterated the important rule that
the retrenchment is only a measure of last resort, when other less drastic
means have been tried and found to be inadequate. Apparently aware of this
rule, PAL attempts to justify the mass termination of thousands of employees by
citing in its Position Paper a long list of supposed “cost management, revenue
enhancement and short-term cash generation strategies.” (see page 8-11 of PAL’s
Position Paper, Annex “E” hereof). As proof for these strategies, PAL presented
mere “memoranda” (Annexes 9 to 14 of Annex “E” hereof) that only exposes the
flimsiness of these strategies. Most of the memoranda covered adjustments in
cabin crew baggage weight allowance (Annexes 9 to 12 of Annex “E” hereof), one
memoranda contained a very broadly described “Cost Management Program” (Annex
13 of Annex “E” hereof), and another memoranda asking Department Heads to
“revisit (their) respective organization’s manpower requisitions.” (Annex 14 of
Annex “E” hereof) Aside from covering token “cost management” strategies, these
memoranda do not constitute substantial proof about the success or failure of
the strategies, and how they have been tried and proved inadequate.
On the assumption
that PAL really instituted these “cost management” strategies, as evidenced by
the various memoranda, PAL could still not explain, why from these very small
steps of “less drastic” strategies, PAL would then immediately proceed to the
mass termination of more than 2,600 employees. The gigantic leap from cabin
crew weight allowance adjustment to mass termination is simply unexplainable.
To paraphrase the Supreme Court’s ruling in the Fasap case, PAL failed to
establish that it has exhausted all other means to avoid further losses without
retrenching its employees.
PAL likewise attempts
to establish the value of the mass termination in terms of cost savings by
presenting a table of purported savings (in pesos and dollars). (see page 11
and 18 of PAL’s Position Paper, Annex “E” hereof) In the absence of proof of
these savings, however, the table and the figures are mere self-serving
statements that will not suffice as proof that retrenchment is reasonably
necessary and likely to prevent business losses.
On the contrary, PAL
cites contradictory statements concerning the likelihood of the mass
termination to prevent the losses. PAL claims that the spin-off would be an
opportunity for PAL to pursue “(c)onservation of cash and other resources in
order to focus on strategic investments and expand core business operations.
(see page 12 of PAL’s Position Paper, Annex “E” hereof) PAL also argues that it
“will be forced to close down for lack of case for operational purposes” unless
the spin-off is implemented. (see page 25 of PAL’s Position Paper, Annex “E” hereof)
What PAL does not explain is how the termination of more than 2,600 employees
and the payment of separation pay equivalent to 125% of the monthly salary of
each employee for every year of service, will help alleviate the company’s cash
position. In its media releases of late, which the Honorable Court can take
judicial notice of, PAL declared that it will shell out Php2.5 Billion in
separation package in order to save on costs. There is an inherent illogic in
this proposition, and PAL has never attempted to justify its position.
What is clear is that
PAL failed to establish with adequate proof the existence of substantial,
serious, actual and real, or reasonably imminent, business losses, and,
further, that retrenchment is reasonably necessary and likely to prevent such
losses. It is evident from PAL’s pronouncements that the employees are to be
retrenched in order to avert losses. But PAL is not in the doomsday situation
that it claims to be in. It is not suffering from a precarious financial position
that justifies the mass termination.
Pal is liable for
unfair labor practices.
Finally, the Office
of the President, in clear grave abuse of discretion, declared that “for
pursuing a legitimate exercise of management prerogative, PAL is not liable for
unfair labor practice.” Such conclusion is contrary to established
jurisprudence as applied in the concrete circumstances of this case.
The Office of the
President’s total reliance on unrestrained “management prerogative” is
unavailing. The Office of the President regretfully refuses to acknowledge that
management prerogative is not unlimited. It completely disregarded the ruling
in PAL v. NLRC, 225 SCRA 301 where the Supreme Court circumscribed the exercise
of management prerogative within the greater sphere occupied by the protection
afforded workers and their right to participate in formulating and implementing
policies which affect their rights.
Thus, in the exercise
of its management prerogative, PAL cannot disregard and ignore its obligations
under the CBA. This is especially true in the case at hand where the proposed
management act has a direct and ruinous impact upon the employees’ rights to
security of tenure and self-organization.
Instructive as they
are, the pertinent portions of the ruling in PAL v. NLRC are reproduced in
length:
xxx xxx xxx
All this points to
the conclusion that the exercise of managerial prerogatives is not unlimited.
It is circumscribed by limitations found in law, a collective bargaining
agreement, or the general principles of fair play and justice (University of
Sto. Tomas vs. NLRC, 190 SCRA 758 [1990]). Moreover, as enunciated in Abbott
Laboratories (Phil.), vs. NLRC (154 713 [1987]), it must be duly established
that the prerogative being invoked is clearly a managerial one.
A close scrutiny of
the objectionable provisions of the Code reveals that they are not purely
business-oriented nor do they concern the management aspect of the business of
the company as in the San Miguel case. The provisions of the Code clearly have
repercusions on the employee's right to security of tenure. The implementation
of the provisions may result in the deprivation of an employee's means of
livelihood which, as correctly pointed out by the NLRC, is a property right
(Callanta, vs Carnation Philippines, Inc., 145 SCRA 268 [1986]). In view of these
aspects of the case which border on infringement of constitutional rights, we
must uphold the constitutional requirements for the protection of labor and the
promotion of social justice, for these factors, according to Justice Isagani
Cruz, tilt "the scales of justice when there is doubt, in favor of the
worker" (Employees Association of the Philippine American Life Insurance
Company vs. NLRC, 199 SCRA 628 [1991] 635).
Verily, a line must
be drawn between management prerogatives regarding business operations per se
and those which affect the rights of the employees. In treating the latter,
management should see to it that its employees are at least properly informed
of its decisions or modes action. PAL asserts that all its employees have been
furnished copies of the Code. Public respondents found to the contrary, which
finding, to say the least is entitled to great respect.
xxx xxx xxx
Indeed, industrial
peace cannot be achieved if the employees are denied their just participation
in the discussion of matters affecting their rights. Thus, even before Article
211 of the labor Code (P.D. 442) was amended by Republic Act No. 6715, it was
already declared a policy of the State, "(d) To promote the enlightenment
of workers concerning their rights and obligations . . . as employees."
This was, of course, amplified by Republic Act No 6715 when it decreed the
"participation of workers in decision and policy making processes
affecting their rights, duties and welfare." PAL's position that it cannot
be saddled with the "obligation" of sharing management prerogatives
as during the formulation of the Code, Republic Act No. 6715 had not yet been
enacted (Petitioner's Memorandum, p. 44; Rollo, p. 212), cannot thus be
sustained. While such "obligation" was not yet founded in law when
the Code was formulated, the attainment of a harmonious labor-management
relationship and the then already existing state policy of enlightening workers
concerning their rights as employees demand no less than the observance of
transparency in managerial moves affecting employees' rights.
Petitioner's
assertion that it needed the implementation of a new Code of Discipline
considering the nature of its business cannot be overemphasized. In fact, its
being a local monopoly in the business demands the most stringent of measures
to attain safe travel for its patrons. Nonetheless, whatever disciplinary
measures are adopted cannot be properly implemented in the absence of full
cooperation of the employees. Such cooperation cannot be attained if the
employees are restive on account, of their being left out in the determination
of cardinal and fundamental matters affecting their employment.
…
From the foregoing,
it is clear that management prerogatives is limited by law, by the provisions
of the collective bargaining agreement, and by the fundamental rules of fair
play and justice. The manifest disregard by PAL of the pertinent provisions of
the CBA taints the termination of the 2,600 employees and union members with
invalidity.
In ruling that PAL
did not commit unfair labor practice, the Office of the President committed
grave abuse of discretion in totally ignoring the Supreme Court’s decision in
the case of The Insular Life Assurance Co., Ltd., Employees Association-NATU
vs. The Insular Life Assurance Co., Ltd., 37 SCRA 244 (1971), where the Supreme
Court held:
“The test of whether
an employer has interfered with and coerced employees within the meaning of
subsection (a) (1) is whether the employer has engaged in conduct which it may
reasonably be said tends to interfere with the free exercise of employees’
rights under section 3 of the Act, and it is not necessary that there be direct
evidence that any employee was in fact intimidated or coerced by statements of
threats of the employer if there is a reasonable interference that anti-union
conduct of the employer does have an adverse effect on self-organization and
collective bargaining.” (Francisco, Labor Laws 1956, Vol. II, p. 323, citing
NLRB v. Ford, C.A., 1948, 170 F2d 735)
Besides, the letters,
exhibits A and B, should not be considered by themselves alone but should be
read in the light of the preceding and subsequent circumstances surrounding
them. The letters should be interpreted according to the “totality of conduct
doctrine,”
“x x x whereby the
culpability of an employer’s remarks were to be evaluated not only on the basis
of their implicit implications, but were to be appraised against the background
of and in conjunction with collateral circumstances. Under this ‘doctrine’
expressions of opinion by an employer which, though innocent in themselves,
frequently were held to be culpable because of the circumstances under which
they were uttered, the history of the particular employer’s labor relations or
anti-union bias or because of their connection with an established collateral
plan of coercion or interference.” (Rothenberg on Relations, p. 374, and cases
cited therein.) (37 SCRA 244, at 260)
In the Insular Life
case, the Supreme Court explained that the test of whether the employer has
committed unfair labor practice is whether such employer has engaged in conduct
which it may reasonably be said “tends to interfere with the free exercise of
employees’ rights”. If, under the Insular Life case ruling, the mere tendency
to interfere will suffice to prove unfair labor practice by the employer, then
more so in the present case, when there is clear showing of the direct effect
of the PAL’s act of unlawful contracting out, to the workers’ rights to
self-organization and collective bargaining.
The scheme being
implemented by PAL will dramatically decrease, if not eradicate, union
membership. Likewise, it will exclude from the coverage of the bargaining unit
the positions that are now held by union members. This will result to the
abolition of PALEA.
This grim scenario is
made even worse when the timing for implementing the retrenchment program is
considered. The closure of the various departments and the consequent
retrenchment of union members are being undertaken at a time when a new CBA between
the parties is about to be negotiated. It should not be amiss to state that the
CBA negotiation is being proposed by PALEA after more than a decade of
suspension of the CBA between the parties. The timing of the intended
termination is thus perfect from PAL’s perspective. It is aimed at defeating
the negotiation of a new CBA.
The foregoing exceeds
a mere tendency to interfere with the free exercise of the employees’ rights to
self-organization. Under the law, this constitutes a clear case of unfair labor
practice.
The Supreme Court’s
ruling in the case of Alhambra Industries, Inc. v. Court of Industrial
Relations, 35 SCRA 550 (1970), is applicable. In the said case, the employer
denied the privileges and benefits of the collective bargaining agreement to
fifteen drivers and helpers by trying to pass them as “employees” of its
salesmen and propagandists. The Supreme Court declared the employer’s act as an
unfair labor practice by the employer, to wit:
Petitioner’s failure
to comply with its duty under the collective bargaining agreement to extend
privileges, rights and benefits thereof to the drivers and helpers as its
actual employees clearly amounted to the commission of an unfair labor
practice.
Further explaining
such statement, the Court stated:
Failure on the
petitioner’s (employer) part to live up in good faith to the terms of its
collective bargaining agreement by denying the privileges and benefits thereof
to the fifteen drivers and helpers through its device of trying to pass them
off as “employees” of its salesmen and propagandists was a serious violation of
petitioner’s duty to bargain collectively and constituted unfair labor practice
in any language. (35 SCRA 550, at 555)
PAL attempts to adopt
the same devious strategy, i.e., terminating its regular employees, and then
passing them off as employees of various contractors. As regular rank and file
employees of PAL, the employees who will be terminated and eventually hired
through the contractors are currently covered by the existing collective
bargaining agreement for the regular rank and file employees of PAL. Hence they
should receive the benefits provided in the said collective bargaining
agreement.
PAL’s device of
terminating the employees and availing of their services through contractors
effectively reduces the scope of the bargaining unit. In this case, the
employees who will be terminated are not performing specific and special jobs
or services. These workers perform tasks that are directly related, in fact,
integral and indispensable, to PAL’s main business. PAL’s illegal practice of
contracting out jobs that are directly related, usually necessary and
desirable, indeed, integral, to its business operations, constitutes a clear
violation of the workers’ right to self – organization and collective
bargaining.
At the risk of being
repetitive, the mass termination of thousands of employees, at the start of
collective bargaining negotiations, done in violation of the parties’ CBA, and
which is not commensurate to the improving financial condition of PAL, is a
clear illustration of bad faith on the part of an employer. The scheme being
implemented by PAL will eradicate union membership and exclude from the
coverage of the bargaining unit the positions that are now being held by
regular employees who are union members. These acts are deliberate interference
with the employees’ rights to self-organization. As shown by recent
developments, the mass termination is aimed at defeating the negotiation of a
new CBA. When PALEA sent its proposed CBA, PAL declared that it would only
negotiate with PALEA after the implementation of the outsourcing program, and
its CBA counter-proposal covered only those remaining employees after the
implementation of the mass termination.
There is no clearer
example of unfair labor practice than this, but the Office of the President,
chose to close its eyes on these very clear circumstances.
PRAYER
WHEREFORE, Petitioner
prays that the Assailed Decisions be ANNULLED and SET ASIDE, and a DECISION be
issued:
Declaring PAL’s
contracting out of the three departments as illegal; Declaring the termination
of the regular employees as illegal; and Declaring PAL guilty of unfair labor
practice.
Other just and
equitable reliefs are likewise prayed for.
Quezon City for Manila,
26 August 2011.
DELLOSA MENDOZA
BAG-AO & MANUEL
Counsel for PALEA
3/F Prince David
Condominium, Katipunan Ave.
Loyola Heights,
Quezon City 1108
(632) 436-5727
dmbm@dmbmlaw.com
By:
MARLON J. MANUEL
Roll No. 40046
IBP No.
801636/1-06-11/Bulacan
PTR No.
4609358/1-07-11/Quezon City
with pending
application for MCLE exemption
JOEVEN D. DELLOSA
Roll No. 54056
IBP No.
841752/1-03-11/Makati City
PTR No.
4645635/1-12-11/Quezon City
MCLE Compliance No.
III – 0013046, 19 April 2010
Copy furnished:
Hon. Paquito N. Ochoa
Executive Secretary
Office of the
President
Malacanan Palace,
Manila
Office of the
Solicitor General
OSG Bldg., 134
Amorsolo St.
Legaspi Village,
Makati City
Atty. Jocelyn T. Dela
Paz
Counsel for PAL
705 Prestige Tower,
F. Ortigas Jr. Road
Ortigas Center, Pasig
Sky Kitchen
Philippines, Inc.
Suites 6/7, 2nd Floor
Aseana Power Station
Macapagal Ave. cor.
Bradco Ave.
Aseana Business Park,
Parañaque City
Sky Logistics
Philippines, Inc.
Hilton Cebu Resort
& Towers
Mactan Island,
Lapu-Lapu City
Cebu
SPi Global Holdings,
Inc.
SPi Building, Pascor
Drive
Sto. Niño, Parañaque
City
EXPLANATION
Copies of this
Petition for Certiorari were served to the other parties through registered
mail due to the lack of personnel to effect personal service, the lack of
material time, and the distance between the parties’ offices.
JOEVEN D. DELLOSA
Republic of the
Philippines )
Quezon City ) S.S.
VERIFICATION AND
CERTIFICATION
OF NON-FORUM SHOPPING
I, GERARDO F. RIVERA,
Filipino, of legal age, with business address at Philippine Airlines Employees
Association, 2014 J. Gabriel St. Baclaran, Paranaque City, states under oath
that:
I am the duly-elected
president and authorized representative of Philippine Airlines Employees
Association (PALEA) as shown by the attached Secretary’s Certificate and Board
Resolution No. 2011-007 dated 25 August 2011. I caused the preparation of the
foregoing Petition for Certiorari. I have read the same, and the allegations
contained therein are true and correct of my own personal knowledge and based
on authentic records. Petitioner hereby certifies, as shown by the attached
Verification and Certification of Non-Forum Shopping, that it has not commenced
any action involving the same issues before the Supreme Court, the Court of
Appeals or different divisions thereof, or before any other tribunal or agency,
and that to the best of their knowledge, except for an NLRC Case NLRC LCC No.
04-003-11 (NCMB-NCR-NS 03-018-11) entitled “In Re: labor Dispute at Philippine
Airlines, Inc. PAL Employees Association v. Philippine Airlines, Inc.,” which
is related to this case but concerns a separate issue, no such action or
proceeding is pending in the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency. Petitioner also certifies
that should it hereafter learn that a similar action or proceeding has been
filed or is pending in the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency, it undertake to promptly
inform the aforesaid courts and other tribunal or agency, within five (5) days
therefrom. We execute this Affidavit to attest to the truth of the
foregoing.
IN WITNESS WHEREOF, I
sign this affidavit in Quezon City this 26th of August 2011.
GERARDO F. RIVERA
Affiant
SUBSCRIBED AND SWORN
TO before me this 26th day of August 2011 in Quezon City, affiant exhibiting to
me his SSS ID No. 0104349434 as competent proof of identification.
Doc. No. _____;
Page No. _____;
Book No. _____;
Series 2011.
Republic of the
Philippines )
Quezon City ) S.S.
VERIFIED STATEMENT OF
MATERIAL DATES
I, Joeven D. Dellosa,
of legal age, single, with business address at DELLOSA MENDOZA BAG-AO &
MANUEL, 3/F Prince David Condominium, Katipunan Ave., Loyola Heights, Quezon
City, subscribing under oath, state that:
I am the counsel for
the petitioner PAL Employees Association; On 28 March 2011, we received a copy
of the Decision of the Office of the President in O.P. Case No. 10-K-486,dated
25 March 2011, On 12 April 2011, we filed a Motion for Reconsideration of the
aforesaid Decision; On 17 August 2011, we received a copy of the Resolution
denying the Motion for Reconsideration, which was dated 11 August 2011. On 26
August 2011, or within ten (10) days from receipt of the 11 August 2011
Resolution, the Petitioners filed a Petition for Certiorari pursuant to Rule 65
of the Rules of Court, paying the docket and other fees, and the deposit for
costs. I have prepared this affidavit to attest to the truth of the foregoing
statements.
IN WITNESS WHEREOF, I
have hereunto affixed my hand, this 26th day of August 2011 at Quezon City.
JOEVEN D. DELLOSA
SSS ID No.
05-0933604-2
SUBSCRIBED AND SWORN
to before me this 26 August 2011 affiant exhibiting to me a competent proof of
identity indicated above.
Doc. No.___;
Page No.___;
Book. No.__;
Series of 2011.
REPUBLIC OF THE
PHILIPPINES )
QUEZON CITY ) S.S.
AFFIDAVIT OF SERVICE
I, ROSEMARIE A.
BANANIA, Filipino, of legal age, married, with business address at DELLOSA
MENDOZA BAG-AO & MANUEL, 3/F Prince David Condominium, Katipunan Ave.,
Loyola Heights, Quezon City, after being sworn in accordance with law, hereby
depose and state that:
1. I am employed as
office manager at DELLOSA MENDOZA BAG-AO & MANUEL, 3/F Prince David Condominium,
Katipunan Ave., Loyola Heights, Quezon City, counsel for the Petitioner PAL
Employees Association.
2. I filed the
Petition for Certiorari with the Court of Appeals.
3. I served copies of
the same to the following by means of registered mail:
Hon. Paquito N. Ochoa
Executive Secretary
Office of the
President
Malacanan Palace,
Manila
Office of the
Solicitor General
OSG Bldg., 134
Amorsolo St.
Legaspi Village,
Makati City
Atty. Jocelyn T. Dela
Paz
Counsel for PAL
705 Prestige Tower,
F. Ortigas Jr. Road
Ortigas Center, Pasig
Sky Kitchen
Philippines, Inc.
Suites 6/7, 2nd Floor
Aseana Power Station
Macapagal Ave. cor.
Bradco Ave.
Aseana Business Park,
Parañaque City
Sky Logistics
Philippines, Inc.
Hilton Cebu Resort
& Towers
Mactan Island, Lapu-Lapu
City
Cebu
SPi Global Holdings,
Inc.
[1] Section 7, Rule
3, Rules of Court – Parties in interest without whom no final determination can
be had of an action shall be joined either as plaintiff or defendants.
