ANDRO T. BACANI, RONALD F. CABRERA, CAMESORO T. CABATUAN, JR., JAYSON D. DELARA, RAULE R. ARGUEL, RE-ANN D. RIVERO, CRIZALDY N. WAJE, ARIEL Y. SUA, AND CHARLIE R. SEBOLINO, PETI…

Bacani versus Fiber Textile Manufacturing

The Case

This is a labor case about workers who were placed on a reduced workweek and then stopped reporting, and who claimed they had been constructively dismissed. The petitioners are Andro T. Bacani, Ronald F. Cabrera, Camesoro T. Cabatuan, Junior, Jayson D. Delara, Raule R. Arguel, Re-ann D. Rivero, Crizaldy N. Waje, Ariel Y. Sua, and Charlie R. Sebolino. The respondents are Fiber Textile Manufacturing Corporation, together with Sherly Que, Judy Que, and Jason Que. The petitioners sued for constructive illegal dismissal, reduction of workweek, and nonremittance of Social Security System, Philippine Health Insurance, and Pag-IBIG contributions. The case matters because the Supreme Court draws a clear line between flexible work arrangements that cut pay and those that do not, and lays down the requisites for the valid implementation of the former under the labor department's advisory.

Procedural History

The petitioners filed their complaint before the Department of Labor and Employment Regional Arbitration Branch Three. The Labor Arbiter found that Bacani, Cabrera, Delara, Arguel, Waje, Sua, and Sebolino were constructively dismissed, while the complaints of Cabatuan, Junior and Rivero were dismissed for failure to file their position papers. The Labor Arbiter awarded separation pay, backwages, service incentive leave pay, pro rata thirteenth month pay for 2018, and attorney's fees equivalent to ten percent of the total monetary award.

On appeal, the National Labor Relations Commission reversed. It set aside the Labor Arbiter's decision, dismissed the complaint for constructive dismissal, and ordered the corporation to pay service incentive leave pay and thirteenth month pay for 2018, plus ten percent attorney's fees. The Commission held that the absence of notice to the labor department of the adoption of a flexible workweek was a mere procedural infirmity that did not affect the valid exercise of management prerogative. It denied reconsideration.

The petitioners then filed a petition for certiorari under Rule 65 before the Court of Appeals, ascribing grave abuse of discretion on the part of the Commission. The Court of Appeals dismissed the petition. It held that the notice requirement under the labor department advisory is intended only to assist and guide employers, and it lent credence to the corporation's claim of lack of raw materials, finding the reduced workdays justified and within management prerogative. It affirmed the awards of thirteenth month pay, service incentive leave pay, and attorney's fees. It denied reconsideration. The petitioners then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Fiber Textile Manufacturing Corporation is engaged in textile manufacturing. Its factory is in Meycauayan, Bulacan, while its administrative office and warehouse used to be in Valenzuela City. Sherly Que is president, while Judy Que and Jason Que are human resource manager and plant manager, respectively. On June 16, 2017, the petitioners were employed as folding operator, chemical mixer, color man, receiver, dyeing operator, and folding operator, at a salary of 380 pesos per day. They initially had a six-day workweek, which was later reduced to two to three days per week. This prompted them to seek help from the Department of Labor and Employment in Malolos, but the corporation and its officers failed to appear at the single-entry approach conference on July 20, 2018.

On July 27, 2018, the petitioners went to the corporation's premises. Judy Que angrily told Bacani, Delara, Arguel, and Rivero to look for another job, while she told the others to resign. During a mediation conference, a certain Sammy Chua admitted that he advised the petitioners to look for another job. The petitioners then filed their complaint. For its part, the corporation claimed that on July 9, 2018, management and employees were unexpectedly prevented from entering its Valenzuela City compound, which became the subject of a pending ejectment case, and that it was prevented from removing its properties, including inventory and important office documents such as payrolls. Because raw materials were stored in that warehouse, production in Bulacan was gravely affected. On July 16, 2018, the corporation issued Company Memorandum 81, informing all personnel of the immediate implementation of a work rotation schedule, allegedly posted in a conspicuous place, with each worker allotted at least two working days a week.

The corporation also claimed that Arguel filed for leave and never returned, that Delara was suspended for twelve days for sleeping during work hours and never returned after serving his suspension, and that during the first week of August 2018, Bacani, Cabrera, Sua, and Sebolino did not report for work on their scheduled days. The corporation denied that Chua admitted telling the petitioners to look for another job, or that Judy Que told them to resign, get out, and never return. It maintained that there was no illegal dismissal, actual or constructive.

Issues

• Whether or not the National Labor Relations Commission gravely abused its discretion when it ruled on the issue of constructive dismissal although it was allegedly raised for the first time on appeal.
• Whether or not the petitioners were constructively dismissed as a result of the corporation's unilateral implementation of reduced workdays without notice to the Department of Labor and Employment as required under DOLE Department Advisory Number 2, Series of 2009.
• Whether or not the petitioners are entitled to monetary awards and attorney's fees.

Applicable Provisions

DOLE Department Advisory Number 2, Series of 2009 describes the flexible work arrangements it covers, including reduction of workdays and rotation of workers:

Reduction of Workdays refers to one where the normal workdays per week are reduced but should not last for more than six months.

Rotation of Workers refers to one where the employees are rotated or alternately provided work within the workweek.

These definitions fix the arrangements the corporation actually adopted, and so determine which regulatory requisites apply.

The same advisory states its purpose, which limits its coverage to arrangements that cushion lost income:

Under these flexible work arrangements, the employers and the employees are encouraged to explore alternative schemes under any agreement and company policy or practice in order to cushion and mitigate the effect of the loss of income of the employees.

This purpose clause is the basis for the Court's ruling that the advisory regulates only arrangements that mitigate loss of income, and not arrangements such as work-from-home or hybrid setups.

The Court also relied on the Explanatory Bulletin on the Effect of Reduction of Workdays on Wages and Living Allowances, which recognizes reduction of workdays as valid in defined circumstances:

In situations where the reduction in the number of regular working days is resorted to by the employer to prevent serious losses due to causes beyond his or her control, such as when there is a substantial slump in the demand for his or her goods or services or when there is lack of raw materials, it is the view of this Bureau that such reduction is valid.

This bulletin supplies the economic-difficulty justification that the employer must prove, and it likewise warns against reductions resorted to in bad faith.

Ruling

On the first issue, the Court held that the Commission did not gravely abuse its discretion in ruling on constructive dismissal. The contention that the issue was raised for the first time on appeal is incorrect, because the records bear the petitioners' allegations in their reply before the Labor Arbiter directly attacking the validity of the reduced workdays under Company Memorandum 81 for lack of notice to the labor department. The petitioners even identified their complaint as one for constructive dismissal and reduction of workweek. The Commission was fully empowered to treat the allegations of unlawful reduction of workdays as an additional ground for constructive dismissal, the latter being a necessary consequence of the former once established. In any case, in labor cases strict adherence to technical rules of procedure is not required.

On the second issue, the Court granted the petition and held that the corporation was guilty of illegal reduction of workdays and rotation of work. The Court first drew a delineation between flexible work arrangements that are entered into voluntarily as a matter of ordinary business practice without reducing pay or benefits, and those that result in a reduction in employee pay or benefits. Only the latter kind is regulated by DOLE Department Advisory Number 2, Series of 2009. The Court explained that the advisory's list is not exclusive, and that under the principle of ejusdem generis it regulates only arrangements that tend to cushion and mitigate the effect of the loss of income of employees, or those employed to address the economic difficulties of the employer. Work-from-home and hybrid setups do not fall within its ambit because they are not remedial measures against financial difficulties and do not result in diminution of pay or benefits.

The Court then set out the requisites for valid implementation. Quoting from the dissent in Alejandro versus Philippine Pizza, Incorporated, which it adopted as correctly encapsulating the tenor of the advisory, the Court summarized the conditions, and added another: that it was sufficiently proven that the company was suffering from economic difficulties or national emergencies, and that its adoption of the flexible work arrangement was done in good faith to cope with such circumstances. The Court stressed that while management is free to regulate all aspects of employment, the exercise of management prerogative is not absolute, as it must be exercised in good faith and with due regard to the rights of labor.

On the third issue, because the reduction of workdays and rotation of work were illegally implemented, the petitioners were constructively dismissed and are entitled to the monetary awards and attorney's fees.

Doctrine

Flexible work arrangements under DOLE Department Advisory Number 2, Series of 2009 are only those that reduce employee pay or benefits to cushion the effect of the employer's economic difficulties or a national emergency. Arrangements such as work-from-home and hybrid setups, which do not diminish pay or benefits, fall outside that advisory. For a flexible work arrangement that reduces pay or benefits to be valid, the employer must comply with the requisites: the arrangement must be adopted to address economic difficulties or a national emergency, the employer must sufficiently prove those circumstances, and the adoption must be in good faith. Management prerogative to reduce workdays is recognized, but it is not absolute; it must be exercised in good faith and with due regard to the rights of labor. A reduction of workdays resorted to without the required notice and without substantial proof of the justifying circumstances amounts to constructive dismissal.

Disposition

The Supreme Court granted the petition, reversed the Court of Appeals, and held the corporation guilty of illegal reduction of workdays and rotation of work, entitling the petitioners to the monetary awards and attorney's fees.

Remember This

Memorize this line: only flexible work arrangements that cut pay or benefits are governed by DOLE Department Advisory Number 2, Series of 2009, and they are valid only upon proof of genuine economic difficulty and good faith. Examiners use this case to test the distinction between regulated and unregulated flexible work arrangements, and the requisites for a valid reduction of workdays.