Case Digest: Pantoja v. SCA Hygiene

G.R. No. 163554: April 23, 2010




Respondent employed petitioner as a utility man on March 15, 1987. Petitioner was eventually assigned at respondent's Paper Mill No. 4, the section which manufactures the company's industrial paper products, as a back tender in charge of the proper operation of the sections machineries. In a Notice of Transfer dated March 27, 1999, respondent informed petitioner of its reorganization plan and offered him a position at Paper Mill No. 5 under the same terms and conditions of employment in anticipation of the eventual closure and permanent shutdown of Paper Mill No. 4 effective May 5, 1999.The closure and concomitant reorganization is in line with respondents decision to streamline and phase out the company's industrial paper manufacturing operations due to financial difficulties brought about by the low volume of sales and orders for industrial paper products. However, petitioner rejected respondents offer for his transfer. Thus, a notice of termination of employment effective May 5, 1999 was sent to petitioner as his position was declared redundant by the closure of Paper Mill No. 4.He then received his separation pay and thereafter executed a release and quitclaim in favor of respondent. On April 5, 1999, respondent informed the Department of Labor and Employment (DOLE) of its reorganization and partial closure by submitting with the said office an Establishment Termination Report together with the list of 31 terminated employees. Petitioner filed a complaint for illegal dismissal against respondent assailing his termination as without any valid cause.He averred that the alleged redundancy never occurred as there was no permanent shutdown of Paper Mill No. 4 due to its continuous operation since his termination.A co-employee, Nestor Agtang, confirmed this fact and further attested that several contractual workers were employed to operate Paper Mill No. 4. Petitioner also presented in evidence documents pertaining to the actual and continuous operation of Paper Mill No. 4 such as the Paper Mill Personnel Schedule for July 2-8, 2000 and 23-29, 2000 and Paper Machine No. 4 Production Report and Operating Data dated April 28, 2000 and May 18, 2000. In its defense, respondent refuted petitioners claim of illegal dismissal.It argued that petitioner has voluntarily separated himself from service by opting to avail of the separation benefits of the company instead of accepting reassignment/transfer to another position of equal rank and pay. According to respondent, petitioners discussion on the alleged resumption of operation of Paper Mill No. 4 is rendered moot by the fact of petitioner's voluntary separation.

The Labor Arbiter rendered a Decision dismissing petitioners complaint for lack of merit.Upon appeal by petitioner, the NLRC reversed the Labor Arbiters Decision by finding petitioners separation from employment illegal.Aggrieved, respondent filed a petition for certiorari with the CA. The CA reversed the NLRC's Decision and reinstated the Labor Arbiters Decision dismissing the complaint.
Whether or not respondent is guilty of illegal dismissal.


Respondent presented evidence of the low volume of sales and orders for the production of industrial paper in 1999 which inevitably resulted to the company's decision to streamline its operations. This fact was corroborated by respondents VP-Tissue Manufacturing Director and was not disputed by petitioner. Exercising its management prerogative and sound business judgment, respondent decided to cut down on operational costs by shutting down one of its paper mill. The determination of the need to phase out a particular department and consequent reduction of personnel and reorganization as a labor and cost saving device is a recognized management prerogative which the courts will not generally interfere with. In this case, the abolishment of Paper Mill No. 4 was undoubtedly a business judgment arrived at in the face of the low demand for the production of industrial paper at the time.Despite an apparent reason to implement a retrenchment program as a cost-cutting measure, respondent, however, did not outrightly dismiss the workers affected by the closure of Paper Mill No. 4 but gave them an option to be transferred to posts of equal rank and pay.As can be seen, retrenchment was utilized by respondent only as an available option in case the affected employee would not want to be transferred.Respondent did not proceed directly to retrench.This is an indication of good faith on respondents part as it exhausted other possible measures other than retrenchment.Besides, the employers prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting.Giving the workers an option to be transferred without any diminution in rank and pay specifically belie petitioners allegation that the alleged streamlining scheme was implemented as a ploy to ease out employees, thus, the absence of bad faith. Apparently, respondent implemented its streamlining or reorganization plan with good faith, not in an arbitrary manner and without prejudicing the tenurial rights of its employees.