Bataan Shipyard and Engineering Co., Inc. vs. NLRC

A valid and legal retrenchment does not preclude a finding of unfair labor practice where the employer discriminates in selecting the employees to be retrenched on the basis of union affiliation; the manner of exercising the retrenchment prerogative must not be tainted with abuse of discretion and must comply with due process.

BASECO is a corporation organized under Philippine laws with its principal office in Port Area, Manila. It employed around one thousand employees, more than one hundred of whom belonged to NAFLU, a labor organization registered with the Department of Labor and Employment. Under the Labor Code, employer interference with the employees' right to self-organization is an unfair labor practice.

Bataan Shipyard & Engineering Co., Inc. (BASECO) was a corporation organized under Philippine laws with its principal office in Port Area, Manila. It maintained around one thousand employees on its payroll, more than one hundred of whom were members of the National Federation of Labor Unions (NAFLU), a labor organization registered with the Department of Labor and Employment.

Sometime before 1984, BASECO filed with the National Labor Relations Commission an application for the retrenchment of 285 employees, citing heavy losses the firm had incurred since the end of 1979. The case was docketed as NLRC Case No. RABIII-2-53682. In the meantime, some employees who had earlier been on sick leave were considered retrenched. All of those retrenched were officers and members of NAFLU.

NAFLU opposed the application on behalf of the affected employees, and the employees retrenched earlier joined the case as individual complainants. The parties submitted papers and memoranda. The Executive Labor Arbiter found that BASECO had discriminated against NAFLU members in selecting the employees to be retrenched. The NLRC Third Division affirmed that finding, noting that BASECO had failed to satisfactorily explain why all the employees it retrenched were officers and members of NAFLU and that management was in a position to know which employees on leave were affiliated with the labor organization. The Commission concluded that the NAFLU officers and members retrenched were discriminated against by reason of their affiliation.

• Grave Abuse of Discretion and Loss of Jurisdiction: Petitioner maintained that the NLRC committed grave abuse of discretion amounting to loss of jurisdiction in finding BASECO guilty of unfair labor practice when the retrenchment it had sought was held legal and valid.
• Valid Retrenchment as Defense: Petitioner argued that it cannot be considered guilty of unfair labor practice in effecting a valid retrenchment.
• Discrimination Ruling: Petitioner challenged the legality of the NLRC ruling that it had discriminated in the retrenchment arrangements.
• Backwages: Petitioner questioned the legality of the award of backwages.

• Validity of Retrenchment Distinguished from Manner of Exercise: Respondent Commission, through the Office of the Solicitor General, argued that while the retrenchment was legal, the prerogative to retrench should not be confused with the manner of its exercise, which must not be abused because employment and livelihood are at stake.
• Discriminatory Selection as Unfair Labor Practice: Respondent argued that because BASECO was found guilty of discriminatory acts in selecting employees to be retrenched, it could not escape liability by merely claiming the retrenchment was legal; otherwise discriminatory dismissals in other business enterprises would be encouraged.
• Substantial Evidence: Respondent maintained that the substantial evidence test was met because membership or non-membership in NAFLU was the determining factor in selecting employees for retrenchment.
• Absence of Guidelines: Respondent pointed out that the record contained no guidelines used by BASECO in determining who were to be laid off, such as ability to perform work, physical fitness, old age, disablement, security in work, and financial hardship of certain workers, which should at least be decided by a committee; absent such guidelines and with only NAFLU members retrenched, unfair labor practice was evident in the implementation of a valid retrenchment.
• Prayer: Respondent sought dismissal of the petition for lack of merit.

• Unfair Labor Practice Despite Valid Retrenchment: Whether the NLRC committed grave abuse of discretion amounting to loss of jurisdiction in finding BASECO guilty of unfair labor practice despite the retrenchment being legal and valid.
• Discriminatory Selection: Whether the finding that BASECO discriminated against NAFLU officers and members in selecting employees for retrenchment is supported by the record.
• Backwages: Whether the award of six months backwages as penalty for unfair labor practice is lawful.

• Unfair Labor Practice Despite Valid Retrenchment: No. The NLRC did not commit grave abuse of discretion; a valid retrenchment does not preclude a finding of unfair labor practice where the manner of selection discriminates against union members, in violation of Article 249(a) of the Labor Code.
• Discriminatory Selection: Yes. The finding of discrimination is supported by the fact that all retrenched employees were NAFLU officers and members and BASECO offered no satisfactory explanation, making the action highly suspect.
• Backwages: Sustained. The petition challenging the award was dismissed for lack of merit; no grave abuse of discretion attended the NLRC Resolution.

• Unfair Labor Practice Despite Valid Retrenchment: The validity of the retrenchment was not disputed. However, the manner of exercising the prerogative must not be tainted with abuse of discretion. Labor is a person's means of livelihood and cannot be deprived without due process. The right to dismiss in a valid retrenchment differs from the manner in which that right is exercised; it must not be oppressive or abusive because it affects one's person and property. Thus, a valid retrenchment does not immunize discriminatory selection.
• Discriminatory Selection: All retrenched employees were NAFLU officers and members. The record lacked any satisfactory explanation from BASECO. This made the action highly suspect and led to the conclusion that BASECO discriminated against NAFLU membership, amounting to interference with the employees' right to self-organization. Under Article 249 of the Labor Code, such interference is an unfair labor practice. The Commission and Executive Labor Arbiter considered these matters, so no grave abuse of discretion was shown.
• Backwages: Because the finding of unfair labor practice stands, the penalty of six months backwages imposed by the Executive Labor Arbiter and affirmed by the NLRC was not disturbed. The petition seeking annulment or modification of the Resolution and Decision on unfair labor practice and backwages was dismissed for lack of merit.

• Valid Retrenchment vs. Manner of Exercise — The employer's right to retrench, even when validly exercised, is distinct from the manner in which that right is exercised. The manner must not be tainted with abuse of discretion, oppressive, or abusive, because labor is a means of livelihood and is protected by due process. In this case, although the retrenchment was valid, BASECO's selection of employees was discriminatory and therefore unlawful.
• Unfair Labor Practice by Interference with Right to Self-Organization — Under Article 249(a) of the Labor Code, it is unlawful for an employer to interfere with, restrain, or coerce employees in the exercise of their right to self-organization. Discrimination against employees because of union membership in the selection of those to be retrenched constitutes such interference. The Court applied this where all retrenched employees were NAFLU officers and members and BASECO gave no satisfactory explanation.
• Due Process in Labor — Labor is a person's means of livelihood; a worker cannot be deprived of labor or work without due process of law. The employer's retrenchment prerogative must therefore be exercised without abuse of discretion and not oppressively or abusively. The Court invoked this to uphold the finding of unfair labor practice despite the valid retrenchment.

• "It is not disputed that the retrenchment undertaken by the Company is valid. However, the manner in which this prerogative is exercised should not be tainted with abuse of discretion. Labor is a person's means of livelihood. He cannot be deprived of his labor or work without due process of law." — This passage states the ratio: a valid retrenchment does not excuse an abusive or discriminatory manner of selecting employees for retrenchment.
• "Under the circumstances obtaining in this case, We are inclined to believe that the Company had indeed been discriminatory in selecting the employees who were to be retrenched. All of the retrenched employees are officers and members of the NAFLU. The record of the case is bereft of any satisfactory explanation from the Company regarding this situation. As such, the action taken by the firm becomes highly suspect. It leads Us to conclude that the firm had been discriminating against membership in the NAFLU, an act which amounts to interference in the employees' exercise of their right of self-organization." — This passage supplies the factual basis for the unfair labor practice finding.
• "Under Article 249 of the Labor Code of the Philippines, such interference is considered an act of unfair labor Practice on the part of the Company, to wit —" — This passage identifies the statutory basis for the unfair labor practice ruling.

• Phil. Movie Pictures Workers' Association vs. Premiere Productions Inc., 92 Phil. 843 (1953) — Cited for the principle that the right to dismiss in a valid retrenchment differs from and should not be confused with the manner in which the right is exercised, which must not be oppressive or abusive because it affects one's person and property.
• De Leon vs. National Labor Relations Commission, 100 SCRA 691 (1980) — Cited in support of the due process requirement that labor, as a means of livelihood, cannot be taken away without due process of law.

• Article 249(a), Labor Code of the Philippines — Makes it unlawful for an employer to interfere with, restrain, or coerce employees in the exercise of their right to self-organization. The Court applied it to hold that discriminatory selection of NAFLU officers and members for retrenchment amounted to interference and thus unfair labor practice.
• Rule 65, Rules of Court — The petition was filed as a Petition for certiorari under Rule 65 seeking to set aside the NLRC Resolution. The Court dismissed it for lack of merit, finding no grave abuse of discretion amounting to loss of jurisdiction.
• Due process of law — The Court invoked the constitutional guarantee to hold that labor is a person's means of livelihood and cannot be deprived without due process; the retrenchment prerogative must be exercised without abuse of discretion.

Justices Narvasa, Cruz, and Griño-Aquino concurred.