PURISIMO M. CABAOBAS, EXUPERIO C. MOLINA, GILBERTO V. OPINION, VICENTE R. LAURON, RAMON M. DE PAZ, JR., ZACARIAS E. CARBO, JULITO G. ABARRACOSO, DOMINGO B. GLORIA, AND FRANCISCO…

Cabaobas versus Pepsi-Cola Products Philippines

The Case

This is Cabaobas versus Pepsi-Cola Products Philippines, a labor case about the validity of a company retrenchment program and the legality of the dismissal of a second batch of employees. The petitioners are former employees of Pepsi-Cola Products Philippines who were retrenched, and the respondent is the company itself. They ask the Supreme Court to reconsider its earlier decision upholding the retrenchment and to refer the matter to the Court en banc. The case matters because it shows how the doctrine of stare decisis — the rule that a settled ruling stands — binds later employees who challenge the very same program already sustained in an earlier case, and because it teaches the requisites of a valid retrenchment under the Labor Code.

Procedural History

The petitioners' labor complaint was decided by the Labor Arbiter, who ruled that the last two requisites for a valid retrenchment under Article 283 of the Labor Code were complied with, namely written notices to the employees and to the Department of Labor and Employment, and the payment of separation pay. On appeal, the National Labor Relations Commission ruled that the petitioners were validly retrenched and so were not entitled to reinstatement with full backwages, but it ordered the company to pay separation benefits of one half month salary for every year of service, plus commutation of leave credits. The Court of Appeals, in its decision dated July 31, 2006, held that the requisite of payment of separation pay was evidenced by the notices sent by the company to the petitioners. The petitioners then elevated the matter to the Supreme Court by petition for review on certiorari. The Supreme Court rendered a decision dated March 25, 2015 upholding the retrenchment. The petitioners filed a motion for reconsideration of that decision, with a motion to refer the case to the Court en banc. That motion is what this resolution resolves.

Facts

Pepsi-Cola Products Philippines implemented a retrenchment program. The first batch of employees was retrenched on July 31, 1999; that batch included Molon and others, whose case, Pepsi-Cola Products Philippines versus Molon, had already reached and been sustained by the Supreme Court. The petitioners in this case belong to the second batch, retrenched on February 15, 2000.

The petitioners challenged their dismissal, contending that the company failed to prove financial losses, that it hired replacements and additional workers, and that its true motive was to prevent their union from becoming the certified bargaining agent. They also claimed that a few days after service of their notices of termination, four employees were regularized, and replacements to the forty-seven dismissed employees were hired, and that they had not yet received their separation pay.

In their motion for reconsideration, the petitioners argued that the factual setting of their case differs from that in Molon, so stare decisis should not apply, and that the company failed to prove the third, fourth, and fifth requisites of a valid retrenchment. They also moved that the case be referred to the Court en banc.

Issues

• Whether or not the principle of stare decisis applies, given the petitioners' claim that the facts of this case diverge from those in the earlier Molon case.
• Whether or not the company complied with the requisites of a valid retrenchment, particularly the payment of separation pay and the requirements of good faith and fair and reasonable criteria.
• Whether or not the case should be referred to the Court en banc.

Applicable Provisions

Article 283 of the Labor Code, as cited in the decision, provides:

Article 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one month pay or to at least one month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one month pay or at least one half month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered as one whole year.

This provision supplies the requisites of a valid retrenchment that the petitioners invoke, including the written notices and the payment of separation pay.

Section 3 of the Internal Rules of the Supreme Court, on Court en banc matters and cases, provides in part:

Section 3. Court en banc matters and cases. The Court en banc shall act on the following matters and cases: (a) cases in which the constitutionality or validity of any treaty, international or executive agreement, law, executive order, presidential decree, proclamation, order, instruction, ordinance, or regulation is in question; (b) cases raising novel questions of law; (c) cases affecting ambassadors, other public ministers, and consuls; (d) cases involving decisions, resolutions, and orders of the Civil Service Commission, the Commission on Elections, and the Commission on Audit; (e) cases where the penalty recommended or imposed is the dismissal of a judge, the disbarment of a lawyer, the suspension of any of them for a period of more than one year, or a fine exceeding forty thousand pesos; (f) cases covered by the preceding paragraph and involving the reinstatement in the judiciary of a dismissed judge, the reinstatement of a lawyer in the roll of attorneys, or the lifting of a judge's suspension or a lawyer's suspension from the practice of law; (g) cases involving the discipline of a Member of the Court, or a Presiding Justice, or any Associate Justice of the collegial appellate court; (h) cases where a doctrine or principle laid down by the Court en banc or by a Division may be modified or reversed; (i) cases involving conflicting decisions of two or more divisions; (j) cases where three votes in a Division cannot be obtained; (k) division cases where the subject matter has a huge financial impact on businesses or affects the welfare of a community; (l) subject to Section 11 (b) of this rule, other division cases that, in the opinion of at least three Members of the Division who are voting and present, are appropriate for transfer to the Court en banc; (m) cases that the Court en banc deems of sufficient importance to merit its attention; and (n) all matters involving policy decisions in the administrative supervision of all courts and their personnel.

This provision defines which cases must be heard by the Court en banc, and the Court used it to test the petitioners' motion to refer.

Ruling

On the first issue, the Court held that the principle of stare decisis applies because the factual circumstances of this case and those in Molon are not divergent. The issues, subject matters, and causes of action are identical, namely the validity of the company's retrenchment program and the legality of its employees' termination. There is also substantial identity of parties because there is a community of interest between the parties in the two cases, even if the petitioners were not impleaded in the first. The only difference is the date of termination, the Molon batch having been retrenched on July 31, 1999 and the petitioners on February 15, 2000. Since the validity of the same program had already been passed upon and sustained, the Court was impelled to accord a similar disposition.

On the second issue, the Court found no merit in the claim that the company failed to comply with the requisites. On the alleged replacements, the Court upheld the Commission's ruling that the persons said to have replaced the petitioners were employees of service contractors, not regular employees of the company, and that engaging the services of service contractors does not expand the size of the corporate structure, so the retrenched workers were not replaced. On separation pay, the Court noted that the petitioners had only sought reinstatement, backwages, damages, and attorney's fees, while the company had offered a separation package and served individual notices advising them to claim their separation pay. The Court held that the company cannot be faulted for the petitioners' failure to receive their separation pay. On the fourth and fifth requisites, the Court held that the petitioners raised them only for the first time in the motion for reconsideration, which explains why the Commission and the Court of Appeals did not discuss them, and that, as a rule, no question will be entertained on appeal unless it has been raised in the proceedings below.

On the third issue, the Court held that this case does not fall among those that must be acted upon by the Court en banc under the Internal Rules.

Doctrine

A Bar candidate should retain these rules. First, stare decisis — the rule that a settled ruling stands — applies where the issues, subject matters, and causes of action are identical and there is a community of interest between the parties, even if the later parties were not impleaded in the earlier case; a prior ruling sustaining a retrenchment program binds later employees retrenched under the same program. Second, a valid retrenchment under Article 283 of the Labor Code requires, among others, written notice to the workers and to the Department of Labor and Employment at least one month before the intended date, and the payment of separation pay equivalent to one month pay or at least one half month pay for every year of service, whichever is higher. Third, engaging the services of service contractors does not amount to replacing retrenched regular workers, because it does not expand the size of the corporate structure. Fourth, points of law, theories, issues, and arguments not brought to the attention of the lower court, administrative agency, or quasi-judicial body cannot be raised for the first time on appeal, as this is barred by estoppel and offends fairness and due process.

Disposition

The Court denied the petitioners' motion for reconsideration and their motion to refer the case to the Court en banc, so the company prevailed and the earlier decision upholding the retrenchment stands.

Remember This

The single line worth memorizing is that a retrenchment program already sustained in an earlier case binds later employees under the same program by stare decisis, and that issues not raised below cannot be raised for the first time on appeal. Examiners like to use this case to test stare decisis in labor retrenchment, the requisites of a valid retrenchment under Article 283, and the rule against raising new issues on appeal.