ARABIT Vs JARDINE

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C.
FUNTANOZ,
GERARDO F. PUNZALAN, FREDDIE M. MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB
FINANCE EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF FREE WORKERS),
petitioners, vs. JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), respondent.
FACTS:
Petitioners were former regular employees of respondent Jardine Pacific Finance,
Inc. (formerly MB Finance) (Jardine). The petitioners were also officers and
members of MB Finance Employees Association-FFW Chapter (the Union), a legitimate
labor union and the sole exclusive bargaining agent of the employees of Jardine.
Petitioners’ previously occupied positions of Field Collector (Arabit), Senior
Credit Investigator, Senior Accounting Clerk and had a total length of service
ranging from 3 years to 20 years.
On the claim of financial losses, Jardine decided to reorganize and implement a

redundancy program among its employees. The petitioners were among those affected
by the redundancy program. Jardine thereafter hired contractual employees to
undertake the functions these employees used to perform.
The Union questioned the termination of employment of the petitioners who were also
union officers. The Union alleged unfair labor practice on the part of Jardine, as
well as discrimination in the dismissal of its officers and members.
Negotiations ensued between the Union and Jardine and both parties eventually
reached an amicable settlement. the petitioners accepted their redundancy pay
without prejudice to their right to question the legality of their dismissal with
the NLRC. Jardine paid the petitioners a separation package composed of their
severance pay, plus their grossed up transportation allowance
On June 1, 1999, the petitioners and the Union filed a complaint against Jardine
with the NLRC for illegal dismissal and unfair labor practice.
The petitioners alleged that: their dismissal was illegal and was tainted with bad
faith as their positions were not superfluous, arguing that if their positions had
really been redundant, then Jardine should have not hired contractual workers to
replace them; that the act of hiring contractual employees as replacements was a
restraint on the Union’s right to self-organization, pointing out that they were
Union officers and panel members in the scheduled collective bargaining agreement
(CBA) negotiations between Jardine and the Union.
Jardine argued in its defense that the company had been incurring substantial
business losses from 1996 to 1998. However, they admitted that it hired contractual
employees to replace petitioners in their previous posts, reasoning out that no bad
faith took place since the hiring of contractual employees was a valid exercise of
its management prerogative. Respondent also argued that the distinction between
redundancy and retrenchment is not material
LA: ruled in the petitioners’ favor.

The LA held that:
- the hiring of contractual employees to replace the petitioners directly
contradicts the concept of redundancy.
- t was error for Jardine to simply lump together the seven petitioners as
employees whose positions have become redundant without explaining why their
respective positions became superfluous
NLRC: Dismissed the appeals and affirmed the LA’s decision in its entirety
CA: the CA reversed the LA’s and the NLRC’s rulings.

- the hiring of contractual employees is a management prerogative that Jardine has
the right to exercise.
- In the absence of any showing of malice or arbitrariness, the courts must not
interfere with the company’s exercise of a bona fide management decision
- Respondent successfully established that for the years 1996 to 1998, the company
incurred serious losses
The petitioners argue that there is a difference between financial loss and decline
of earnings. They posit that what Jardine actually experienced was a decline in
capital and not substantial financial losses for the years 1996 to 1998; and that
they are all regular employees whose years of service range from three (3) to
twenty (20) years. Since Jardine immediately terminated their services without
evaluating their performance in relation with those of the other employees and
without considering other relevant factors.
The Court:
- We cannot accept Jardine’s shallow understanding of the concepts of redundancy
and retrenchment. The fact that they are found together in just one provision does
not necessarily give rise to the conclusion that the difference between them is
immaterial.
- Retrenchment is an act of the employer of dismissing employees because of losses
in the operation of a business, lack of work, and considerable reduction on the
volume of his business.
- Redundancy does not need to be always triggered by a decline in the business.
Even if a business is doing well, an employer can still validly dismiss an employee
from the service due to redundancy if that employee’s position has already become
in excess of what the employer’s enterprise requires.
- It is illogical for Jardine to terminate the petitioners’ employment and replace
them with contractual employees. The replacement effectively belies Jardine’s claim
that the petitioners’ positions were abolished due to superfluity. Redundancy could
have been justified if the functions of the petitioners were transferred to other
existing employees of the company
- the petitioners’ services have not really become in excess of what Jardine’s
business requires. To replace the petitioners who were all regular employees with
contractual ones would amount to a violation of their right to security of tenure;
the subsequent contracting out to an agency the functions or duties that used to be
the domain of individual complainants herein is a circumvention of their
constitutional rights to security of tenure, and therefore illegal.
- The exercise of management prerogative is subject to the caveat that it should
not performed in violation of any law and that it is not tainted by any arbitrary
or malicious motive on the part of the employer.
- Cited Golden Thread case: "The employer must use fair and reasonable criteria in
the selection of employees who will be dismissed from employment due to redundancy.
Such fair and reasonable criteria may include the following, but are not limited
to: (a) less preferred status (e.g. temporary employee); (b) efficiency; and (c)
seniority. The presence of these criteria used by the employer shows good faith on
its part."
- Cited Asian Alcohol case: "For the implementation of a redundancy program to be
valid, the employer must comply with the following requisites: (1) written notice
served on both the employees and the Department of Labor and Employment at least
one month prior to the intended date of retrenchment; (2) payment of separation pay
equivalent to at least one month pay or at least one month pay for every year of
service, whichever is higher; (3) good faith in abolishing the redundant positions;
and (4) fair and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished"
- Jardine never undertook what the employer in Asian Alcohol did. Jardine was never
able to explain in any of its pleadings why the petitioners’ positions were
redundant.
- Respondent lumped together the seven petitioners into one group whose positions
had become redundant and failed to set the required fair and reasonable criteria in
the termination of the petitioners’ employment, leading to the conclusion that the
termination from the service was arbitrary and in bad faith.
DECISION: UPHELD NLRC & LA DECISION

ARABIT Vs JARDINE

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EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C.

On the claim of financial losses, Jardine decided to reorganize and implement a

LA: ruled in the petitioners’ favor.

CA: the CA reversed the LA’s and the NLRC’s rulings.

DECISION: UPHELD NLRC & LA DECISION

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