United Laboratories, Inc. vs. Domingo

Employees who demand severance under a redundancy package, refuse transfer pursuant to a legitimate management reorganization, and then claim constructive dismissal are not entitled to relief where the employer's actions constitute a valid exercise of management prerogative, no demotion or diminution in pay occurred, and continued employment was not rendered impossible, unreasonable, or unlikely. Security of tenure is correlative to the right of enterprises to reasonable returns on investments and growth, and does not deprive management of its prerogative to transfer and reassign employees according to business requirements.

United Laboratories, Inc. (Unilab) is a domestic corporation engaged in the manufacture, sale, marketing, and distribution of pharmaceutical products. Respondents Jaime Domingo, Anonuevo Remigio, Rodolfo Marcelo, Raul Norico, and Eugenio Ozaraga were former employees assigned to the Distribution Accounting Department (DAD), which serviced the accounting requirements of Unilab's sixteen provincial depots — fourteen distribution centers and two area offices — spread nationwide. Sometime in 2001, Unilab implemented a Physical Distribution Master Plan (PDMP), a cost restructuring measure that consolidated finished goods inventories and logistics activities into one distribution center in Metro Manila, resulting in the closure of all sixteen provincial depots and the declaration of redundancy for the employees working thereat. In the first half of 2002, Unilab implemented a Shared Services Policy (SSP), which consolidated and centralized all accounting functions of the Unilab Group of Companies under the Finance Division at its main office. These two company-wide programs form the backdrop against which respondents' claims arose.

United Laboratories, Inc. (Unilab) is a prominent domestic corporation engaged in the manufacture, sale, marketing, and distribution of pharmaceutical products. Respondents Jaime Domingo, Anonuevo Remigio, Rodolfo Marcelo, Raul Norico, and Eugenio Ozaraga were employees of Unilab assigned to the Distribution Accounting Department (DAD), which serviced the accounting requirements of Unilab's sixteen provincial depots — fourteen distribution centers and two area offices — spread nationwide. All respondents were accountants or were performing accounting functions.

Sometime in 2001, Unilab implemented a Physical Distribution Master Plan (PDMP), a cost restructuring strategy that consolidated finished goods inventories and logistics activities — warehousing, order processing, and shipping — into one distribution center located in Metro Manila. As a result, Unilab closed down all sixteen provincial depots. The job functions of the employees working at those depots were declared redundant and their positions abolished. Unilab gave the redundant employees a separation package of two and one-half months' pay for every year of service. The closing of the provincial depots, however, did not result in the abolition of respondents' positions as accountants, as they did not perform goods distribution or warehousing functions.

On January 7, 2002, respondents wrote Unilab requesting separation or retirement from service under a separation package similar or equivalent to that given to the redundant employees in the provincial depots, referring to this package as the "Bagong Sibol Program." On April 9, 2002, respondents' counsel reiterated the request, emphasizing that respondents should be retired under the same redundancy plan because their positions were similarly situated to the retired employees of the distribution centers, invoking the principle that "things that are alike should be treated alike." Unilab denied the claims in a letter dated April 15, 2002, pointing out that the PDMP was not a retirement program but a cost restructuring measure; that there was no Bagong Sibol Program; that the only existing early retirement program was the United Retirement Plan (URP); that respondents were not assigned to the provincial depot centers performing decentralized distribution functions; and that respondents' positions were not redundant.

In the first half of 2002, Unilab implemented a Shared Services Policy (SSP) that consolidated and centralized all accounting functions of the Unilab Group of Companies, its affiliates and subsidiaries, under the Finance Division at Unilab's main office. After the closure of the provincial depots, respondents were transferred and reassigned to the accounting work pool pursuant to the SSP. Respondents, along with four co-employees — Rosemarie Cortez, Exequiel Sioson, Wilfredo Tumalad, and William Obedencia — filed three complaints for constructive dismissal, nonpayment/underpayment of separation pay, damages, and attorney's fees against Unilab, which were eventually consolidated. The denial of their request for the higher retirement package was the root of respondents' grievance.

While their cases were pending before the NLRC and thereafter before the CA, Cortez and respondents Domingo and Remigio remained working at Unilab. The three remained employed until their actual separation therefrom, receiving monies as full retirement benefits and as settlement of all claims. Respondents Norico, Marcelo, and Ozaraga, for their part, resigned from Unilab — Marcelo to venture into business and Ozaraga to pay off mounting debt. During the pendency of the CA petition, Remigio and Cortez separately arrived at an amicable settlement with Unilab; Remigio received ₱4,077,897.87 as full settlement and signed a Quitclaim, and his counsel filed a Motion for Leave to Withdraw as Petitioner. Despite this, the CA retained Remigio as a party, claiming it had no record of his withdrawal motion.

• Improper Inclusion of Remigio: Petitioner argued that the CA departed from the usual course of judicial proceedings when it included Remigio in the decision despite his motion to withdraw as a party, his abandonment of claims, and his execution of a Quitclaim in favor of Unilab, all of which had been presented before the CA.
• No Constructive Dismissal: Petitioner maintained that the CA's reversal of both the NLRC and the Labor Arbiter on the matter of constructive dismissal was arbitrary and contrary to settled jurisprudence, as the PDMP and SSP were legitimate management prerogatives not designed to ease respondents out of employment.
• Voluntary Resignation: Petitioner argued that the CA's finding that respondents Norico, Marcelo, and Ozaraga were forced to resign was highly speculative and unsupported by evidence, running counter to well-settled jurisprudence.
• No Legal Basis for Separation Pay: Petitioner contended that the CA's directive to pay respondents separation pay in the same manner it paid redundant employees had no legal basis, as respondents' positions were not redundant.
• Improper Award of Both Separation and Retirement Pay: Petitioner argued that the CA's ruling entitling respondents to both separation pay and retirement pay, notwithstanding the provisions of Unilab's Retirement Plan to the contrary, violated well-settled jurisprudence — the same Retirement Plan this Court had earlier sustained as valid.

• Similarly Situated to Redundant Employees: Respondents argued that they should be retired under the same redundancy plan or retirement scheme because their positions were similarly situated to the retired employees of the distribution centers, invoking the principle that "things that are alike should be treated alike" since they also held the position of "distribution personnel."
• Constructive Dismissal: Respondents claimed that after the closure of the provincial depots, the jobs or work subsequently assigned to them were either menial or servile, or they were never given new assignments at all, effectively constituting constructive dismissal.
• Involuntary Resignation: Respondents Norico, Marcelo, and Ozaraga contended that their resignations were involuntary, as evidenced by their continued need for employment — Marcelo and Ozaraga having children still studying — and the incredulity of their stated reasons for resigning, which forewent a steady income.

• Propriety of Retaining Remigio as Party: Whether the CA erred in including Remigio in its decision despite his motion to withdraw as petitioner, his abandonment of claims, and his execution of a Quitclaim.
• Existence of Constructive Dismissal: Whether the CA correctly reversed the NLRC and the Labor Arbiter in finding that respondents were constructively dismissed.
• Voluntariness of Resignation: Whether the CA correctly ruled that respondents Norico, Marcelo, and Ozaraga were forced to resign.
• Entitlement to Separation Pay Equivalent to Redundant Employees: Whether the CA had legal basis to direct Unilab to pay respondents separation pay in the same manner it paid its redundant employees.
• Entitlement to Both Separation and Retirement Pay: Whether respondents are entitled to both separation pay and retirement pay notwithstanding the provisions of Unilab's Retirement Plan to the contrary.

• Propriety of Retaining Remigio as Party: No. The CA erred in retaining Remigio as a party, as records confirmed that his counsel filed a Motion for Leave to Withdraw as Petitioner with an attached Quitclaim, which Remigio did not disavow.
• Existence of Constructive Dismissal: No. The concept of constructive dismissal is inapplicable to respondents, as the PDMP and SSP were legitimate management prerogatives, not schemes to ease respondents out, and two respondents never resigned while remaining employed.
• Voluntariness of Resignation: No. The CA's finding that Norico, Marcelo, and Ozaraga were forced to resign was speculative and conjectural, unsupported by substantial evidence, and contradicted by plausible reasons for voluntary resignation.
• Entitlement to Separation Pay Equivalent to Redundant Employees: No. Respondents' positions were not redundant; their accounting functions remained necessary and were properly consolidated under the SSP. Employees cannot demand redundancy benefits where their services are still required.
• Entitlement to Both Separation and Retirement Pay: No. Redundancy and retirement are distinct statutory concepts with different requirements and benefits; employees cannot "mix and match" rights and obligations set by law or by the parties' agreement.

• Propriety of Retaining Remigio as Party: The Court checked the records and found that respondents' counsel, Atty. Alexander Versoza, on behalf of Remigio, indeed filed a Motion for Leave to Withdraw as Petitioner with the CA, with an attached Quitclaim executed by Remigio in favor of Unilab. Remigio did not disavow the Quitclaim. The CA's categorical declaration that no such motion existed was therefore mistaken. The Court noted the disingenuousness of respondents' counsels — Atty. Versoza did not forthrightly acknowledge the motion he had filed, and Atty. Macalintal only belatedly and reluctantly admitted that Remigio had signed a Quitclaim. The Court reminded counsel of Canon 10 of the Code of Professional Responsibility, particularly Rule 10.01, requiring candor, fairness, and good faith to the Court.

• Existence of Constructive Dismissal: Constructive dismissal is a derivative of dismissal without cause — an involuntary resignation, a dismissal in disguise. It occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely, as when there is a demotion in rank or diminution in pay, or when clear discrimination, insensibility, or disdain by the employer becomes unbearable, leaving the employee no option but to quit. Two facts were not given sufficient weight by the CA: the PDMP, which consolidated warehousing and distribution into one Metro Manila center, and the SSP, which centralized all accounting services into one pool. Both had company-wide application and were not conceptualized to ease respondents out. The CA did not dispute the uniform findings of the Labor Arbiter and NLRC that the PDMP was a cost restructuring strategy and the SSP a recognized management prerogative. Respondents were accountants whose work was appropriately covered by the SSP; the closure of the provincial depots did not abolish their positions. Security of tenure is correlative to the right of enterprises to reasonable returns on investments and growth, and does not deprive management of its prerogative to transfer and reassign employees according to business requirements. Transfer becomes objectionable only when it is a convenient cover for oppression, which was not shown here. Crucially, a claim of involuntary resignation presupposes an employee actually quitting, but Domingo and Remigio never resigned and remained employed — Domingo until retirement and Remigio until settlement — fatally undermining any claim that employment circumstances were unbearable.

• Voluntariness of Resignation: The CA's reasoning that Marcelo and Ozaraga's resignations were involuntary because they had children still studying and thus had "great need for continued employment" was specious and pure conjecture. The CA found their stated reasons — venturing into business and paying off debt — incredible because they forewent a steady income. The Court rejected this reasoning as easily debunked by similarly plausible reasons: employees who avail of early retirement commonly use the windfall to start businesses or pay debts, trading steady income for independence or freedom from debt. The CA's vaguely drawn theory was insufficient to overturn the uniform factual findings of the labor tribunals that the resignations were voluntary. Absent a showing that the PDMP and SSP were illegal or meant to defeat security of tenure, the proposition that respondents must be treated as redundant employees could not be upheld. The prerogative to determine where an employee is best qualified to serve the company belongs to the employer.

• Entitlement to Separation Pay Equivalent to Redundant Employees: Respondents demanded either the redundancy of their services in the face of the employer's continuing need for such services, or the benefits from redundancy upon their retirement or resignation. The demand could not be honored because respondents' accounting functions remained necessary and were properly consolidated under the SSP. Redundancy exists when an employee's position is superfluous or in excess of what is reasonably demanded by the actual requirements of the business — a condition the employer itself confirmed was not present for respondents. Respondents could not refuse their assignment to the Finance Division and simultaneously demand the same package given to employees whose positions were genuinely abolished.

• Entitlement to Both Separation and Retirement Pay: Retirement and redundancy, while both resulting in cessation of employment, are entirely different concepts. The Labor Code divides Book VI on Post-Employment into two titles: Title I on Termination of Employment (Article 283, listing redundancy as an authorized cause) and Title II on Retirement from the Service (Article 287). The requirements for, and benefits from, the different manners of termination are distinct. Unilab had an elaborate Retirement Plan with separate articles on normal retirement, early retirement, resignation benefits, and involuntary separation due to redundancy. Employees cannot mix and match rights and obligations set by law or by agreement of the parties. Respondents' attempt to invoke a hodgepodge of provisions from the Unilab Retirement Plan, the purported Bagong Sibol Program, and the Labor Code to secure the most favorable package was legally untenable.

• Constructive Dismissal — Constructive dismissal is a derivative of dismissal without cause; an involuntary resignation, a dismissal in disguise. It occurs when there is cessation of work because continued employment is rendered impossible, unreasonable, or unlikely, as when there is a demotion in rank or diminution in pay, or when a clear discrimination, insensibility, or disdain by the employer becomes unbearable to the employee, leaving the latter with no option but to quit. A crucial element is a cessation of employment relations between the parties. A claim of involuntary resignation presupposes an employee actually quitting or resigning; where employees never resigned and remained employed, constructive dismissal cannot lie.

• Management Prerogative in Transfer and Reassignment — Management has a wide latitude to regulate all aspects of employment, including the freedom to transfer and reassign employees according to the requirements of its business. The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or transfer them. Transfer or assignment becomes objectionable only when it is not for reasonable returns on investments and expansion and growth, but is sought merely as a convenient cover for oppression. Managerial prerogatives are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.

• Security of Tenure as Correlative Right — The entitlement of workers to security of tenure is correlative to the right of enterprises to reasonable returns on investments and to expansion and growth. The rights are measured each in relation to the other. Security of tenure is not an absolute right and cannot be pleaded to avoid the transfer or assignment of employees according to the requirements of the employer's business.

• Distinction Between Redundancy and Retirement — Redundancy (Article 283, Labor Code) is an authorized cause for the employer to terminate employment; retirement (Article 287, Labor Code) is a separate concept providing for retirement from service upon reaching a specified age. While both result in cessation of employment, they have distinct requirements and benefits. Employees cannot mix and match rights and obligations from these separate statutory and contractual schemes.

• "We are confronted with a curious case of employees demanding the severance of their employment, insisting on the redundancy of their work and thereafter, when the demands went unheeded, crying constructive dismissal by the employer." — This opening passage frames the unusual posture of the case, where employees themselves sought severance and then claimed constructive dismissal when denied, highlighting the self-contradictory nature of their position.

• "Security of tenure from which springs the concept of constructive dismissal is not an absolute right. It cannot be pleaded to avoid the transfer or assignment of employees according to the requirements of the employer's business. Such transfer or assignment becomes objectionable only when it is not for 'reasonable returns on investments,' and for 'expansion and growth' which are constitutionally recognized employer's rights, but is sought merely as a convenient cover for oppression." — This passage articulates the ratio decidendi, balancing employee security of tenure against management prerogative and establishing the threshold for when transfer becomes actionable.

• "Retirement and redundancy, while both resulting in the cessation of employment relations, are two entirely different things." — This formulation defines the doctrinal distinction between two commonly conflated post-employment concepts, precluding employees from selecting the more favorable package across separate statutory schemes.

• "The employees cannot mix and match rights and obligations which are set and settled by law or agreement of the parties." — This statement establishes the principle that employees cannot combine benefits from distinct termination schemes to secure the most advantageous package, a rule with broad application in labor disputes involving multiple benefit claims.

• Benguet Electric Cooperative vs. Fianza, 468 Phil. 980 (2004) — Cited for the doctrine that factual findings of administrative or quasi-judicial bodies are generally accorded respect and even finality, binding the Court when supported by substantial evidence. Applied to justify review of the CA's conflicting factual findings.
• Merck Sharp & Dohme vs. Robles, G.R. No. 176506, 25 November 2009, 605 SCRA 488 — Cited for the definition of constructive dismissal as occurring when continued employment is rendered impossible, unreasonable, or unlikely, and for the proposition that the Court is not a trier of facts.
• The University of the Immaculate Concepcion vs. National Labor Relations Commission, G.R. No. 181146, 26 January 2011 — Cited for the principle that a crucial element in a finding of constructive dismissal is a cessation of employment relations between the parties, applied to defeat the claims of respondents who never resigned.
• Philippine Japan Active Carbon Corporation vs. National Labor Relations Commission, 253 Phil. 149 (1989) — Cited for the rule that the right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to transfer or reassign them.
• San Miguel vs. NLRC — Cited by the Labor Arbiter for the proposition that the abolition of departments or positions in a company is a recognized management prerogative.
• Castillo vs. NLRC — Cited by the Labor Arbiter for the long-standing rule that it is the prerogative of the employer to transfer and reassign employees for valid reasons and according to the requirements of its business.

• Article XIII, Section 3, 1987 Constitution — Provides that workers shall be entitled to security of tenure, humane conditions of work, and a living wage, and that the State shall recognize the right of enterprises to reasonable returns on investments and to expansion and growth. Applied to establish the correlative nature of employee and employer rights.
• Article 3, Labor Code — Declares as basic policy the State's assurance of workers' rights to security of tenure and humane conditions of work. Applied as the statutory foundation for security of tenure.
• Article 279, Labor Code — Provides that in cases of regular employment, the employer shall not terminate services except for just cause or when authorized, and that an unjustly dismissed employee is entitled to reinstatement and full backwages. Applied to define the parameters of lawful termination.
• Article 283, Labor Code — Lists redundancy as an authorized cause for termination and prescribes the corresponding separation pay. Applied to distinguish redundancy from retirement and to show that respondents' positions were not redundant.
• Article 287, Labor Code — Provides for retirement from service upon reaching the retirement age and prescribes retirement benefits. Applied to distinguish retirement as a separate statutory concept from redundancy.
• Canon 10, Rule 10.01, Code of Professional Responsibility — Provides that a lawyer owes candor, fairness, and good faith to the Court and shall not do any falsehood or mislead the Court. Applied to admonish respondents' counsels for their disingenuous conduct regarding Remigio's quitclaim and withdrawal.

Presbitero J. Velasco, Jr., Arturo D. Brion (Acting Chairperson), Maria Lourdes P. A. Sereno, and Bienvenido L. Reyes concurred.