Emcor Incorporated vs. Ma. Lourdes D. Sienes

A retrenchment to prevent losses is invalid where the employer fails to prove substantial, serious, actual or reasonably imminent business losses and fails to use fair and reasonable criteria, including seniority. A.M. No. 00-2-03-SC, which counts the 60-day period under Section 4, Rule 65 from notice of denial of a motion for reconsideration, is curative and retroactive; and a Rule 65 petition filed within the 15-day period for a Rule 45 petition may be treated as a petition for review.

Emcor Incorporated is engaged in the business of selling, promoting and servicing National appliances and Kawasaki motorcycles and parts throughout Visayas and Mindanao. Ma. Lourdes D. Sienes was hired as a clerk in its Personnel Department. The company maintained a policy against husband and wife both working in the company. Article 283 of the Labor Code governs retrenchment to prevent losses, allowing termination only upon compliance with substantive and procedural requisites.

Emcor Incorporated was engaged in selling, promoting and servicing National appliances and Kawasaki motorcycles and parts throughout Visayas and Mindanao. Ma. Lourdes D. Sienes was hired by Emcor on March 29, 1992 as one of its clerks assigned to its Personnel Department. On June 6, 1996, Sienes married a Credit Officer of Emcor, who had to resign in view of Emcor’s policy against husband and wife both working in the company. On August 1, 1997, Sienes was terminated from employment due to Emcor’s retrenchment program.

Sienes alleged that her retrenchment was discriminatory and without basis. According to her, she was told on August 1, 1997 that she was being retrenched and was asked to sign a waiver and quitclaim, which she refused to sign; she was thereafter not allowed to report for work. She claimed that Emcor’s alleged business reverses were belied by its continuous hiring of new employees from January to July 1997; that she was the third most senior of the seven clerks assigned to the Personnel Department, yet she was chosen to be retrenched without any evaluation of her performance; and that Emcor committed bad faith in forcing her husband to resign in the guise of the alleged prohibition on spouses working in the same company. She prayed for moral and exemplary damages.

Emcor, in its position paper, argued that Sienes was retrenched as part of its cost-cutting measures to prevent further losses; that she was served a one-month advance notice, receipt of which she refused to acknowledge; that it suffered financial losses in the amount of P6,321,953.00 for the year 1997 as shown by its Comparative Income Statement for the year 1996 and from February to June 1997; that it was constrained to resort to downsizing its manpower complement because of the continuous slump in market demands by reducing or abolishing some job positions in each department and transferring the work activities of the abolished positions to the remaining job positions; that there were five other employees retrenched who had received their separation pay; and that Sienes’s termination was a valid exercise of management prerogative.

The Labor Arbiter found that Emcor’s retrenchment program was to prevent further losses, thus a valid exercise of management prerogative; that Emcor had served the affected employees one-month advance notice, a copy furnished the DOLE Regional Office, and they were properly paid their monetary benefits; that proof of actual losses incurred by the company was not a condition sine qua non for retrenchment, as it could be resorted to by an employer primarily to avoid or minimize business losses under Article 283 of the Labor Code; and that Sienes’s position was not indispensable to the operation of Emcor’s business. The Labor Arbiter also found that the hiring of new employees was necessary for the different stores located throughout the country; that Sienes failed to show that someone was hired to take her place and failed to controvert Emcor’s Comparative Income Statement; and that there appeared no evidence that Sienes’s husband was forced to resign, as he voluntarily left the company. The NLRC affirmed these findings.

The Court of Appeals found that Emcor failed to present the quantum of proof of its losses to justify Sienes’s retrenchment; that the best proof of the profit and loss performance of a company was not Emcor’s Comparative Income Statement but the Income Statement for the year 1996 bearing the accountant’s signature or showing that it was audited by an independent auditor; that since Sienes was terminated on August 1, 1997, when fiscal year 1997 had not yet ended, Emcor should have come up with its books of accounts and profit and loss statement signed by its accountant; that Emcor’s Comparative Income Statement, which covered only the year 1996 and two quarters of 1997, was not sufficient to show serious business losses, as it failed to show the income or losses for the years immediately preceding 1996; and that Emcor hired new employees when it could have offered Sienes any of the clerical positions for newly-hired employees. The Court of Appeals also found that the required one-month notice prior to termination was not complied with since Sienes was no longer allowed to work on August 2, 1997 despite the fact that the notice to terminate her was made only on August 1, 1997, and that there were no fair and reasonable criteria observed in terminating her. It found no evidence to substantiate Sienes’s claim for damages.

• Timeliness of Respondent’s CA Petition: Petitioner argued that the Court of Appeals gravely abused its discretion in giving due course to respondent’s petition for certiorari despite the fact that it was admittedly filed out of time, and that a liberal application of Section 4, Rule 65 of the 1997 Rules of Civil Procedure was uncalled for.
• Non-interference with Administrative Findings: Petitioner maintained that both the Labor Arbiter and the NLRC, being experts in their field and having a good grasp of the over-all conditions then prevailing, affirmed with definiteness the soundness of petitioner’s retrenchment program, and that the Court of Appeals gravely erred and abused its discretion when it reversed their findings, since the policy of the court is not to interfere with the exercise of the adjudicatory functions of administrative bodies unless there is a showing of arbitrary action or palpable and serious error.
• Propriety of Rule 65 and Docket Fees: Petitioner contended that an appeal under Rule 45 presupposes that the inferior court had jurisdiction to entertain the case; because respondent’s CA petition was filed beyond the 60-day period, the CA had no jurisdiction, making certiorari the appropriate remedy; it also raised for the first time respondent’s failure to pay the full amount of docket fees at the time of the filing of the petition with the CA, and argued that the instant petition was filed within the 15-day period to file a petition for review on certiorari.

• Wrong Remedy: Respondent argued that the petition should be dismissed because petitioner filed a petition for certiorari under Rule 65, which was a wrong remedy, since an appeal from a final disposition of the Court of Appeals should be under Rule 45 of the Rules of Court; certiorari cannot be used as a substitute for a lost or lapsed appeal.
• Timeliness Under A.M. No. 00-2-03-SC: Respondent countered that the petition for certiorari filed before the Court of Appeals was timely filed under A.M. No. 00-2-03-SC amending Section 4, Rule 65 of the Rules of Court.
• Insufficient Proof of Losses and Criteria: Respondent argued that the Court of Appeals correctly reversed the decision of the administrative bodies, since petitioner presented an unsigned and unaudited Comparative Income Statement for the year 1996 and from January to June 1997, and that there were no criteria applied to the selection of the employees to be terminated.

• Propriety of Remedy: Whether a petition for certiorari under Rule 65 is the proper remedy to challenge a final decision of the Court of Appeals, and whether it may be treated as a petition for review under Rule 45.
• Timeliness of Respondent’s CA Petition: Whether the Court of Appeals erred in giving due course to respondent’s petition for certiorari despite its apparent late filing under Circular No. 39-98, in light of A.M. No. 00-2-03-SC.
• Docket Fees and Estoppel: Whether petitioner may question the Court of Appeals’ jurisdiction based on respondent’s alleged incomplete payment of docket fees when the issue was raised for the first time on appeal.
• Review of NLRC Findings: Whether the Court of Appeals abused its discretion in reversing the factual findings of the Labor Arbiter and the NLRC.
• Validity of Retrenchment: Whether respondent’s retrenchment was valid under Article 283 of the Labor Code, specifically whether petitioner proved business losses, complied with the notice requirement, and used fair and reasonable criteria.

• Propriety of Remedy: No, not as a Rule 65 petition. A petition for review under Rule 45 is the proper remedy from a final CA decision; however, a Rule 65 petition filed within the 15-day reglementary period for a Rule 45 petition may be treated as a petition for review.
• Timeliness of Respondent’s CA Petition: No. The Court of Appeals did not err in giving due course. Although the petition was late under Circular No. 39-98, A.M. No. 00-2-03-SC is curative and retroactive, so the 60-day period is counted from denial of the motion for reconsideration; the March 25, 1999 filing was timely under that amendment.
• Docket Fees and Estoppel: No. Petitioner is estopped from questioning the Court of Appeals’ jurisdiction on incomplete docket fees because it never raised the issue before the Court of Appeals and raised it only in its Reply with the Supreme Court.
• Review of NLRC Findings: No. The Court of Appeals did not abuse its discretion. While administrative findings are respected, they may be reviewed when arbitrary or unsupported by substantial evidence; conflicting factual findings and the CA’s expanded jurisdiction over NLRC decisions justified review.
• Validity of Retrenchment: No. The retrenchment was invalid. Petitioner failed to prove substantial business losses and failed to use fair and reasonable criteria, particularly seniority; the notice requirement, however, was complied with.

• Propriety of Remedy: The proper remedy of a party aggrieved by a decision of the Court of Appeals is a petition for review under Rule 45, which is not identical to a petition for certiorari under Rule 65. Rule 45 provides that decisions, final orders or resolutions of the Court of Appeals in any case may be appealed to the Supreme Court by filing a petition for review, which is a continuation of the appellate process over the original case. Petitioner’s argument that certiorari was proper because the CA had no jurisdiction to entertain the petition filed before it, as the petition was filed beyond the 60-day period, deserved scant consideration; there was no reason why such issue could not have been raised on appeal. However, in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, the Court has discretion to treat a petition for certiorari as having been filed under Rule 45, especially if filed within the reglementary period for filing a petition for review. Petitioner received the CA resolution denying its motion for reconsideration on January 24, 2002, and filed the petition for certiorari on February 7, 2002; thus, the petition was filed within the 15-day reglementary period for filing a petition for review.

• Timeliness of Respondent’s CA Petition: Records show that respondent received the NLRC decision on December 2, 1998 and filed her motion for reconsideration on December 8, 1998. The NLRC denied the motion for reconsideration, which respondent received on January 25, 1999. Thus, she had only 54 days, or until March 20, 1999, to file the petition for certiorari with the CA, in consonance with Circular No. 39-98, which contained the amendments to Section 4, Rule 65 of the 1997 Rules of Civil Procedure in effect when the petition was filed. Respondent filed the petition on March 25, 1999, and not on March 29, 1999 as erroneously stated by the CA; thus, the petition was indeed filed out of time under the old rule. However, on September 1, 2000, A.M. No. 00-2-03-SC took effect, amending Section 4, Rule 65 of the 1997 Rules of Civil Procedure, whereby the 60-day period within which to file the petition shall be counted from notice of the denial of the motion for reconsideration, if one is filed. The Court ruled that A.M. No. 00-2-03-SC, being a curative statute, should be applied retroactively. In Narzoles vs. NLRC, the rationale for the retroactive application was stated: Circular No. 39-98 had generated tremendous confusion resulting in the dismissal of numerous cases for late filing, and the Court deemed it wise to revert to the old rule allowing a party a fresh 60-day period from notice of the denial of the motion for reconsideration. Thus, the petition, which was filed on March 25, 1999, was timely filed as provided under A.M. No. 00-2-03-SC. Although the CA erroneously found that the petition was filed only on March 29, 1999 and thus not timely even under A.M. No. 00-2-03-SC, it nonetheless gave due course to the petition based on the merit of the case. The Court has held that the application of technical rules of procedure may be relaxed to serve the demands of substantial justice, particularly in labor cases, because they must be decided according to justice and equity and the substantial merits of the controversy. However, as discussed, the petition was timely filed under A.M. No. 00-2-03-SC.

• Docket Fees and Estoppel: Petitioner’s claim regarding respondent’s failure to pay the full amount of docket fees at the time of the filing of the petition with the CA was rejected because petitioner is estopped from questioning the jurisdiction of the CA on this ground. Such issue had never been raised in any of the pleadings filed before the CA. The CA issued a minute resolution dated June 7, 1999 requiring respondent to remit the amount of P510.00 to complete the docket and other fees. Respondent complied, but due to inadvertence, the amount remitted lacked P10.00, thus the CA in a Resolution dated November 22, 1999 considered the appeal abandoned pursuant to Section 1(c), Rule 50 of the 1997 Rules of Court. Upon respondent’s motion for reconsideration, the appeal was reinstated on February 22, 2000. Petitioner was copy-furnished all the resolutions issued by the CA, but petitioner never raised the issue of incomplete payment of docket fees. In fact, such issue was only raised for the first time in its Reply filed with the Supreme Court.

• Review of NLRC Findings: Petitioner’s argument that the CA erred and abused its discretion in reversing the findings of the Labor Arbiter and the NLRC, as it is the court’s policy of non-interference in the exercise of the adjudicatory functions of administrative bodies, is devoid of merit. The Court agreed that factual findings of quasi-judicial and administrative bodies are accorded great respect and even finality by the courts. However, this rule is not absolute. When there is a showing that the factual findings of administrative bodies were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts. The CA can grant the petition for certiorari if it finds that the NLRC, in its assailed decision or resolution, made a factual finding not supported by substantial evidence. It is within the jurisdiction of the CA, whose jurisdiction over labor cases has been expanded to review the findings of the NLRC. In R & E Transport, Inc. vs. Latag, the Court held that the power of the CA to review NLRC decisions via a Rule 65 petition is a settled issue; as early as St. Martin Funeral Homes vs. NLRC, the Court definitively ruled that the proper remedy to ask for review of a decision of the NLRC is a special civil action for certiorari under Rule 65, and that such petition should be filed with the CA in strict observance of the doctrine on the hierarchy of courts. Under Section 9 of Batas Pambansa 129, as amended by Republic Act 7902, the CA, pursuant to the exercise of its original jurisdiction over petitions for certiorari, was specifically given the power to pass upon the evidence, if and when necessary, to resolve factual issues. The Court also noted that in the exercise of its power of review, it does not inquire into the sufficiency of the evidence presented, consistent with the rule that it is not a trier of facts; a fortiori, this rule applies to labor cases. However, there are recognized exceptions, such as when the findings of fact are conflicting, which was present in this case, thus a review was in order.

• Validity of Retrenchment: Article 283 of the Labor Code recognizes the right of management to retrench or lay off workers to meet clear and continuing economic threats or during a period of economic recession to prevent losses. In Flight Attendants and Stewards Association of the Philippines vs. Philippines Airlines, Inc., the Court stated the requisites of a valid retrenchment: (1) 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) 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) the employer pays the retrenched employees separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher; (4) 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) 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. Petitioner claimed that respondent was retrenched as part of its cost-cutting measures to prevent further losses as it had suffered financial losses in the amount of P6,321,953.00. The CA found that petitioner failed to present quantum of proof of losses, and the Court agreed. The burden of proving the validity of retrenchment is on the petitioner. Evidence did not sufficiently establish that petitioner had incurred losses that would justify retrenchment to prevent further losses. The Comparative Income Statement for the year 1996 and for the months of February to June 1997 which petitioner submitted did not conclusively show that petitioner had suffered financial losses. In fact, records showed that from January to July 1997, petitioner hired a total of 114 new employees assigned in petitioner’s stores located in different places of the country. The Court, however, disagreed with the CA finding that petitioner failed to comply with the notice requirement to be served on respondent and the Department of Labor and Employment at least one month prior to the intended date of retrenchment. Records showed that petitioner had served a written notice dated July 30, 1997 to respondent which was to be effective 30 days from receipt of the notice. Respondent received the notice on August 1, 1997 and she was no longer allowed to report for work the following day. Although respondent was asked not to report for work, still her termination was to be effective one month from receipt of notice and she would be paid whatever entitlements due her under the law. Thus, the notice requirement was indeed complied with by petitioner. Finally, the Court agreed with the CA in finding that petitioner failed to show that it used reasonable criteria in effecting retrenchment, such as, but not limited to: (a) less preferred status, (b) efficiency, and (c) seniority. Records did not show any criterion adopted or used by petitioner in dismissing respondent. Respondent was terminated without considering her seniority. Retrenchment scheme without taking seniority into account rendered the retrenchment invalid. While respondent was the third most senior employee among the seven employees in petitioner’s personnel department, she was retrenched while her other co-employees junior than her were either retained in the Personnel Department or were transferred to other positions in the company. There was no showing that respondent was offered to be transferred to other positions. The Court therefore found that the CA did not err, much less abuse, its discretion in finding that respondent’s dismissal was arbitrary and illegal.

• Curative Statutes and Retroactive Application of A.M. No. 00-2-03-SC — Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain legal requirements; they are intended to supply defects, abridge superfluities and curb certain evils, and by their very essence are retroactive. A.M. No. 00-2-03-SC amended Section 4, Rule 65 of the 1997 Rules of Civil Procedure so that the 60-day period to file a petition is counted from notice of the denial of a motion for reconsideration. The Court applied it retroactively to make respondent’s March 25, 1999 petition timely.

• Liberal Treatment of a Rule 65 Petition as a Rule 45 Petition — A petition for certiorari under Rule 65 may be treated as a petition for review under Rule 45 in accordance with the liberal spirit pervading the Rules of Court and in the interest of justice, especially if it is filed within the reglementary period for filing a petition for review. The Court applied this to petitioner’s February 7, 2002 petition, which was filed within 15 days from receipt of the CA resolution denying its motion for reconsideration.

• Requisites of Valid Retrenchment to Prevent Losses — Retrenchment to prevent losses is valid only if the employer proves: (1) 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) written notice was served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, was paid; (4) the employer exercised its prerogative in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and (5) fair and reasonable criteria were used in ascertaining who would be dismissed and who would be retained, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. The Court found the first and fifth requisites unsatisfied.

• Review of Administrative Factual Findings — Factual findings of quasi-judicial and administrative bodies are accorded great respect and even finality by the courts, but this rule is not absolute. When there is a showing that the factual findings were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts. The CA can grant a petition for certiorari if it finds that the NLRC made a factual finding not supported by substantial evidence. Under Section 9 of Batas Pambansa 129, as amended by Republic Act 7902, the CA has the power to pass upon the evidence, if and when necessary, to resolve factual issues. The Court applied this doctrine because the findings of fact were conflicting.

• Estoppel by Failure to Raise Docket Fee Issue — A party is estopped from questioning the jurisdiction of the Court of Appeals on the ground of incomplete payment of docket fees when it never raised the issue in any pleading before the Court of Appeals and raised it only for the first time in its Reply with the Supreme Court. The Court applied this to petitioner, which had been copy-furnished all CA resolutions but did not question the docket fee deficiency.

• Seniority in Retrenchment — A retrenchment scheme that does not take seniority into account is invalid. The Court applied this because respondent was the third most senior among seven employees in the Personnel Department, yet she was retrenched while junior co-employees were either retained or transferred to other positions.

• "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." — This passage states the ratio decidendi on the employer’s burden in retrenchment cases; it was applied to Emcor, which failed to prove substantial business losses.

• "Curative statutes, therefore, by their very essence, are retroactive." — This passage defines the retroactive character of curative statutes and supports the Court’s application of A.M. No. 00-2-03-SC to respondent’s March 25, 1999 petition.

• "Retrenchment scheme without taking seniority into account rendered the retrenchment invalid." — This passage is the Court’s controlling statement on the necessity of fair and reasonable criteria, particularly seniority, in a valid retrenchment.

• "The power of the CA to review NLRC decisions via a Rule 65 petition is now a settled issue." — This passage, quoted from R & E Transport, Inc. vs. Latag, establishes the CA’s authority to review NLRC decisions and to pass upon evidence when necessary.

• Narzoles vs. NLRC, G.R. No. 141959, September 29, 2000, 341 SCRA 533 — Cited for the rationale that A.M. No. 00-2-03-SC is curative and retroactive, allowing a fresh 60-day period from notice of denial of a motion for reconsideration.
• Flight Attendants and Stewards Association of the Philippines vs. Philippines Airlines, Inc., G.R. No. 178083, July 22, 2008, 559 SCRA 252 — Cited for the requisites of a valid retrenchment to prevent losses, which the Court applied to find the retrenchment invalid.
• R & E Transport, Inc. vs. Latag, G.R. No. 155214, February 13, 2004, 422 SCRA 698 — Cited for the settled rule that the CA may review NLRC decisions via a Rule 65 petition and may pass upon evidence to resolve factual issues.
• Philippine Tuberculosis Society Inc. vs. NLRC, 356 Phil. 63, 72 (1998) — Cited for the rule that a retrenchment scheme without taking seniority into account renders the retrenchment invalid.
• Delsan Transport Lines, Inc. vs. Court of Appeals, G.R. No. 112288, February 20, 1997, 268 SCRA 597, 605 — Cited for the discretion to treat a petition for certiorari as having been filed under Rule 45 if filed within the reglementary period for a petition for review.
• Romero vs. Court of Appeals, G.R. No. 142803, November 20, 2007, 537 SCRA 643, 648-649 — Cited for the retroactive application of A.M. No. 00-2-03-SC.
• Garcia vs. Philippine Airlines, Inc., G.R. No. 160798, June 8, 2005, 459 SCRA 768, 782 — Cited for the relaxation of technical rules of procedure in labor cases to serve substantial justice.

• Article 283, Labor Code — Recognizes the employer’s right to retrench or lay off workers to meet clear and continuing economic threats or during a period of economic recession to prevent losses, subject to a one-month written notice to the workers and the Department of Labor and Employment and payment of separation pay. The Court found the notice requirement complied with but the retrenchment invalid for failure to prove losses and criteria.
• Section 4, Rule 65, 1997 Rules of Civil Procedure, as amended by Circular No. 39-98 and A.M. No. 00-2-03-SC — Governs the filing of a petition for certiorari, including the 60-day period. Under Circular No. 39-98, the period was interrupted by a motion for reconsideration but counted from notice of the judgment or resolution; under A.M. No. 00-2-03-SC, the 60-day period is counted from notice of denial of the motion for reconsideration. The Court applied the latter retroactively.
• Section 1(c), Rule 50, 1997 Rules of Court — Cited in connection with the CA’s consideration of the appeal as abandoned due to incomplete payment of docket fees. The appeal was later reinstated upon respondent’s motion for reconsideration.
• Section 9, Batas Pambansa 129, as amended by Republic Act 7902 — Confers on the Court of Appeals original jurisdiction over petitions for certiorari and the power to pass upon evidence, if and when necessary, to resolve factual issues. The Court used this to justify CA review of the NLRC’s factual findings.
• Rule 45, Rules of Court — Provides that decisions, final orders or resolutions of the Court of Appeals may be appealed to the Supreme Court by petition for review. The Court treated petitioner’s Rule 65 petition as a Rule 45 petition because it was filed within the 15-day reglementary period.

Ynares-Santiago (Chairperson), Chico-Nazario, Velasco, Jr., and Nachura, JJ., concur.