Cosico, Jr. vs. NLRC

An employer's appeal from a labor arbiter's monetary award is perfected upon posting a bond equivalent to the monetary award exclusive of moral and exemplary damages and attorney's fees, and substantial compliance with that bond requirement may be accepted in the interest of substantial justice; the abolition of a managerial position is a valid exercise of management prerogative absent malice or arbitrariness.

Conrado Cosico, Jr. was employed by Eva Airways Corporation, through its general sales agent Don Tim Air Service, Inc., as Assistant Station Manager of its Manila office. The position was managerial, and Eva Air's Manila operations were measured against passenger-load targets. The dispute implicated Article 223 of the Labor Code, as amended by Republic Act No. 6715, which conditions an employer's appeal from a labor arbiter's monetary award on the posting of a cash or surety bond, and the NLRC's implementing rules on how that bond is computed.

Conrado Cosico, Jr. was hired by Eva Airways Corporation (Eva Air), through its General Sales Agent, Don Tim Air Service, Inc., on April 4, 1992 as Assistant Station Manager for the Manila office, with a mutually agreed monthly salary of P30,000.00. As Assistant Station Manager, Cosico was tasked, among others, to supervise the construction of Eva Air's office in a space reserved for the purpose at the Ninoy Aquino International Airport and to see to it that Eva Air's target of flying at least sixty passengers per flight was realized in order to maintain the company's overhead operations.

After five months of operation, a performance audit of Eva Air's Manila office was undertaken. The audit yielded the finding that the airline had only an average of twenty-five passengers per flight, way below its targeted passenger load. After further evaluation, Eva Air decided to implement measures to make the Manila office cost-efficient, and it decided that the position of Assistant Station Manager be abolished.

On September 24, 1992, Cosico was advised of Eva Air's decision in a letter signed by Lewis Chang, Deputy Senior Vice President of the Personnel Division. The letter stated that reviews of the past four and one-third months showed passenger and cargo loads below target; that management had decided to abolish the position of Assistant Station Manager and keep the Station Manager position vacant; that the EVA Taipei representative in Manila was given charge of the operation of the Manila station and would handle its day-to-day activities; and that Cosico's position was abolished and his services terminated fifteen days upon receipt of the notice, within which period he was to effect the necessary turnover. Eva Air likewise offered to pay Cosico separation pay equivalent to one month salary and proportionate thirteenth month pay for his six months and eleven days of service.

Cosico rejected the offer and instead filed a complaint for illegal dismissal, underpayment of wages, and moral and exemplary damages against Eva Air and its officers Lewis Chang and Allen Soong. The case was docketed as NLRC NCR Case No. 00-10-05891-92.

The NLRC found that the Manila office had low passenger yield, that the functions of the Assistant Station Manager had become redundant and could be performed by trained personnel already in the company's employ, and that the abolition was a cost-effective measure to cut operational expenses and avoid further losses. It also noted that Cosico occupied a managerial position prior to the abolition of his position.

• Appeal Bond / Perfection of Appeal: Petitioner argued that the NLRC gravely abused its discretion in giving due course to private respondents' appeal notwithstanding the fact that the appeal was not duly perfected because they failed to post the correct supersedeas bond in an amount equivalent to the monetary award.
• Illegal Dismissal: Petitioner maintained that the NLRC gravely abused its discretion when it set aside the decision of Labor Arbiter Ernesto Dinopal and instead ruled that petitioner was not illegally dismissed.
• Abolition of Position: Petitioner claimed that the position he was occupying was not duly abolished, hence his employment was illegally terminated.
• Damages: Petitioner argued that the NLRC gravely abused its discretion in ruling that he is not entitled to damages.

• Appeal Bond / Perfection of Appeal: Whether the NLRC gravely abused its discretion in giving due course to private respondents' appeal notwithstanding their failure to post a supersedeas bond equivalent to the monetary award.
• Illegal Dismissal: Whether the NLRC gravely abused its discretion in setting aside the Labor Arbiter's decision and ruling that petitioner was not illegally dismissed.
• Abolition of Position: Whether the NLRC gravely abused its discretion in ruling that petitioner's position was duly abolished.
• Damages: Whether the NLRC gravely abused its discretion in ruling that petitioner is not entitled to damages.

• Appeal Bond / Perfection of Appeal: No. The bond need only be equivalent to the monetary award exclusive of moral and exemplary damages and attorney's fees, and the P270,000.00 bond posted constituted at least substantial compliance with the appeal-bond requirement.
• Illegal Dismissal: No. The NLRC correctly set aside the Labor Arbiter's decision because the abolition of petitioner's position was a valid exercise of management prerogative, not an illegal dismissal.
• Abolition of Position: No. The position was duly abolished; the functions of the Assistant Station Manager had become redundant and unnecessary, and the abolition was a cost-effective measure absent malice or arbitrariness.
• Damages: No. Moral and exemplary damages are recoverable only where the dismissal was attended by bad faith or fraud, was oppressive to labor, or was contrary to morals, good customs, or public policy; none of those circumstances obtained.

• Appeal Bond / Perfection of Appeal: Article 223 of the Labor Code, as amended by Republic Act No. 6715, provides that in a judgment involving a monetary award, an appeal by the employer may be perfected only upon posting a cash or surety bond in an amount equivalent to the monetary award in the judgment appealed from. The NLRC's New Rules of Procedure, Section 6, Rule VI, originally provided that an appeal is deemed perfected upon posting a bond equivalent to the monetary award exclusive of moral and exemplary damages and attorney's fees. That phrase was later deleted in 1991 and 1992, then restored by Resolution No. 11-01-93 effective November 20, 1993. The successive changes showed that the NLRC ultimately adopted the correct rule excluding moral and exemplary damages and attorney's fees from the computation of the appeal bond. Even when the phrase was deleted, the NLRC retained the power to reduce excessive bonds. The latest amendment was more consonant with the employer's statutory right of appeal, because an unreasonable and excessive bond would be oppressive and unjust and would deprive a party of the right to appeal. In this case, the backwages and thirteenth month pay awarded to petitioner amounted only to P270,000.00, while the moral and exemplary damages plus ten percent attorney's fees were almost ten times greater than the basic monetary judgment. Private respondents posted a supersedeas bond of P270,000.00, obviously on the honest belief that the amount was sufficient. At the very least, there was substantial compliance with the appeal-bond requirement. The rules of procedure in labor cases are to be liberally construed, and the Court cited Ruga vs. NLRC, Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., YBL (Your Bus Line) vs. NLRC, and Star Angel Handicraft vs. NLRC in support of resolving labor controversies on the merits rather than on technicalities. Since private respondents filed a bond they honestly believed sufficient, the NLRC should have called their attention to its inadequacy if it considered the bond insufficient; it did not. The NLRC therefore properly took cognizance of the appeal.
• Illegal Dismissal: The termination was not illegal because the position itself was validly abolished. It is a management prerogative to abolish a position deemed no longer necessary, and absent findings of malice and arbitrariness, the Court will not interfere. The Assistant Station Manager position was deemed a superfluity because its functions could be performed by trained personnel already in the company's employ. The abolition was also a cost-effective measure to cut operational expenses and avoid further losses caused by low passenger yield at the Manila office. The position was not abolished because petitioner occupied it, but because its functions had become redundant and unnecessary. The deletion of the position was therefore a valid exercise of management prerogative, and the NLRC did not gravely abuse its discretion in setting aside the Labor Arbiter's finding of illegal dismissal.
• Abolition of Position: The NLRC's ruling that the position was duly abolished was sustained. The Court quoted with favor the NLRC's reasoning that petitioner occupied a managerial position prior to the abolition and, as such, had a limited tenure because the company has the prerogative to abolish managerial and confidential positions or create new ones as necessity requires, citing Bondoc vs. People's Bank and Trust Company. A managerial position is distinguished from ordinary rank-and-file employment, whose termination on the same ground requires a higher proof of involvement in the events in question. The NLRC also cited Caffco International Limited vs. Office of the Minister — Ministry of Labor and Employment and Caffco Employees Union ADLO, which differentiated redundancy from retrenchment: when an employer reduces personnel to prevent further losses, it exercises the right to retrench; when, for economy, a company reorganizes departments by imposing on employees of one department the duties performed by employees of another, rendering the latter's job unnecessary, the service of the employees whose functions are not being performed by others may be validly terminated on the ground of redundancy. The NLRC found that respondent company's action was justified and without abuse of discretion amounting to a malicious and arbitrary manner constituting bad faith.
• Damages: Petitioner's claim for moral and exemplary damages failed because such damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. None of those circumstances obtained. The dismissal was effected through a valid exercise of management prerogative, so there was no legal basis for moral and exemplary damages.

• Management Prerogative to Abolish Positions — An employer may abolish a position it deems no longer necessary, and courts will not interfere absent findings of malice and arbitrariness on the part of management. The doctrine protects the employer's prerogative to reorganize and economize. In this case, the Assistant Station Manager position was abolished because its functions had become redundant and could be performed by trained personnel already employed, and because abolition was a cost-effective measure to cut operational expenses and avoid further losses due to low passenger yield. The Court also recognized that managerial positions have a limited tenure and may be abolished as necessity requires.
• Appeal Bond in Labor Cases / Liberal Construction — Under Article 223 of the Labor Code, as amended by Republic Act No. 6715, an employer's appeal from a labor arbiter's monetary award is perfected only upon posting a cash or surety bond equivalent to the monetary award in the judgment appealed from. The NLRC's rules, as ultimately amended, compute the bond on the monetary award exclusive of moral and exemplary damages and attorney's fees. The requirement is to be liberally construed, and substantial compliance may suffice to allow the appeal to be resolved on the merits. In this case, the P270,000.00 bond matched the backwages and thirteenth month pay award, while moral and exemplary damages and attorney's fees were excluded; this was at least substantial compliance.
• Redundancy vs. Retrenchment — When an employer decides to reduce the number of its personnel in order to prevent further losses, it exercises the right to retrench. When, for purposes of economy, a company reorganizes its departments by imposing on employees of one department the duties performed by employees of another, thereby rendering unnecessary the job of the latter, the service of the employees whose functions are not being performed by others may be validly terminated on the ground of redundancy. The Court cited this distinction in upholding the abolition of petitioner's position as a valid redundancy measure.
• Moral and Exemplary Damages in Illegal Dismissal — Moral and exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs, or public policy. Because petitioner's dismissal was effected through a valid exercise of management prerogative, none of these circumstances obtained, and the damages were properly denied.
• Statutory Construction — Avoid Absurdity — Statutes should receive a sensible construction that gives effect to legislative intention and avoids an unjust or absurd conclusion; where there is ambiguity, the interpretation that avoids inconvenience and absurdity is adopted. The Court used this principle to support the rule that the appeal bond should not be computed to include moral and exemplary damages and attorney's fees, since an excessive bond would oppress the employer and deprive it of the statutory right to appeal.

• "In case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in the amount equivalent to the monetary award in the judgment appealed from." — This is the Court's quotation of Article 223 of the Labor Code, as amended by Republic Act No. 6715, which supplies the statutory basis for the appeal-bond requirement.
• "an appeal by the employer shall be perfected only upon the posting of a cash or surety bond issued by a reputable bonding company duly accredited by the Commission or the Supreme Court in an amount equivalent to the monetary award, exclusive of moral and exemplary damages and attorney's fees." — This is the latest amended NLRC rule on the bond, which the Court upheld as the correct computation for purposes of perfecting an employer's appeal.
• "At the very least, therefore, there was substantial compliance with the requirement of appeal bond." — This states the Court's ratio on why the NLRC properly gave due course to the appeal despite the bond not covering moral and exemplary damages and attorney's fees.
• "It is a management prerogative to abolish a position which it deems no longer necessary and this Court, absent any findings of malice and arbitrariness on the part of management, will not efface such privilege if only to protect the person holding that office." — This is the Court's canonical formulation of the management-prerogative doctrine applied to uphold the abolition of petitioner's position.
• "Moral and exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy." — This states the controlling rule on moral and exemplary damages in dismissal cases and explains why petitioner's damages claim failed.

• Ruga vs. NLRC, 181 SCRA 266, 272 [1990] — Cited to support deciding the case on the merits rather than dismissing it on a mere technicality, invoking fundamental considerations of substantial justice.
• Firestone Filipinas Employees Association, et al. vs. Firestone Tire and Rubber Co. of the Philippines, Inc., 61 SCRA 340 (1974) — Cited in Ruga for the doctrine that in labor cases no undue sympathy is to be accorded to any claim of procedural misstep, the power being exercised according to justice and equity and the substantial merits of the controversy.
• YBL (Your Bus Line) vs. NLRC, 190 SCRA 160 [1990] — Held that while Article 223's bond requirement may be considered jurisdictional, it should be given a liberal interpretation so that the appeal may be resolved on the merits by the NLRC.
• Star Angel Handicraft vs. NLRC, 236 SCRA 580, 585 [1994] — Declared that the Labor Code provisions requiring a bond on appeals involving monetary awards must be given liberal interpretation in line with the objective of resolving controversies on the merits.
• Bondoc vs. People's Bank and Trust Company, L-43835, March 31, 1981, 103 SCRA 599 — Cited by the NLRC to support the principle that a managerial employee has a limited tenure and that the company has the prerogative to abolish managerial and confidential positions or create new ones as necessity requires.
• Caffco International Limited vs. Office of the Minister — Ministry of Labor and Employment and Caffco Employees Union ADLO, G.R. No. 76966, Aug. 7, 1992 — Cited to differentiate redundancy from retrenchment and to support the validity of terminating services on the ground of redundancy when a company reorganizes departments for economy.
• Great Pacific Life Assurance Corporation vs. NLRC, 188 SCRA 139 [1990] — Cited for the management prerogative to abolish a position deemed no longer necessary, absent malice and arbitrariness.
• Commissioner of Internal Revenue vs. TMX Sales, Inc., 205 SCRA 184 (188) [1992] — Cited for the rule of statutory construction that statutes should receive a sensible construction that avoids an unjust or absurd conclusion.
• Zamboanga City Electric Cooperative, Inc. vs. Buat, 243 SCRA 47 [1995] — Cited for the rule that moral and exemplary damages are recoverable only where the dismissal was attended by bad faith or fraud, was oppressive to labor, or was contrary to morals, good customs, or public policy.
• Spartan Security and Detective Agency, Inc. vs. National Labor Relations Commission, 213 SCRA 528 [1992] — Cited together with Zamboanga City Electric Cooperative for the same rule on moral and exemplary damages in dismissal cases.

• Article 223, Labor Code, as amended by Republic Act No. 6715 — Provides that decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission within ten calendar days from receipt; in case of a judgment involving a monetary award, an appeal by the employer may be perfected only upon posting a cash or surety bond issued by a reputable bonding company duly accredited by the Commission in an amount equivalent to the monetary award in the judgment appealed from. Applied to hold that the bond requirement was substantially complied with.
• Section 6, Rule VI, NLRC New Rules of Procedure (as amended by Resolution No. 11-01-93) — Provides that an appeal by the employer shall be perfected only upon posting a cash or surety bond equivalent to the monetary award, exclusive of moral and exemplary damages and attorney's fees; the employer and counsel must submit a joint declaration under oath attesting that the surety bond is genuine and shall be in effect until final disposition; and the Commission may reduce the bond in meritorious cases. Applied to validate the P270,000.00 bond as sufficient for purposes of perfecting the appeal.
• Section 2, Rule I, NLRC New Rules of Procedure — Provides that the Rules shall be liberally construed to carry out the objectives of the Constitution and the Labor Code and to assist the parties in obtaining a just, expeditious, and inexpensive settlement of labor disputes. Applied to justify liberal construction of the appeal-bond requirement.
• Article 218, Labor Code — Grants the Commission the power and authority to promulgate rules and regulations governing the hearing and disposition of cases before it and its regional branches. Cited as the basis for the NLRC's adoption and amendment of its rules on the appeal bond.

Bellosillo, Vitug, and Hermosisima, Jr., JJ., concurred. Padilla, J., was on leave.