ASIAN ALCOHOL CORPORATION vs. NATIONAL LABOR RELATIONS COMMISSION, FOURTH DIVISION, CEBU CITY and ERNESTO A. CARIAS, ROBERTO C. MARTINEZ, RAFAEL H. SENDON, CARLOS A. AMACIO, LEANDRO O. VERAYO and ERENEO S. TORMO (G.R. No. !"#$ PUNO, J.: Fa%&s: The Parsons family, who originally owned the controlling stocks in Asian Alcohol Corporation Corporation (AAC), was driven by mounting business losses to sell their maority rights to Prior !oldings which took over its management and operation the following month" Prior !olding implemented organi#ational plan and other cost$saving measures" %%& employees out of a total workforce of ' were separated" &* of them occupied redundant positions that were abolished" abolished" +f these positions, *% held by union members and % by non$union members" Private respondents are among those union members whose positions were abolished due to redundancy" Carias, -artine#, and .endon were water pump tenders/ Amacio was a machine shop mechanic/ 0erayo was a bri1uetting plant operator while Tormo was a plant helper under him" They were all assigned at the 2epair and -aintenance .ection of the Pulupandan plant" They received received individual individual notices of termination/ termination/ were were paid the e1uivalent of of one month salary salary for every year of service as separation pay, the money value of their unused sick, vacation, emergency and seniority leave credits, %'th month pay, medicine allowance, ta3 refunds, and goodwill cash bonuses for those with at least % years of service" All of them e3ecuted sworn releases, waivers and 1uitclaims" 43cept for 0erayo and Tormo, they all signed sworn statements of conformity to the company retrenchment program" And e3cept for -artine#, they all tendered letters of resignation" Private respondents 5led with the 672C complaints for illegal dismissal with a prayer for reinstatement reinstatement with backwages, moral damages and attorney8s fees" They alleged that Asian Alcohol used the retrenchment program as a subterfuge for union busting" They claimed that they were singled out for separation by reason of their active participation in the union" They also asseverated that AAC was not bankrupt as it has engaged in an aggressive scheme of contractual contractual hiring" 7A dismissed the complainants and held that the fact that respondent AAC incurred losses in its business operations was not seriously challenged by the complainants" The fact that it incurred losses in its business operations prior to the implementation of its retrenchment program is amply supported by the documents on records, indicating an accumulated de5cit of P*,%%&,99"" The law allows allows an employer to retrench retrench some of its employees to prevent prevent of its employees employees to prevent losses" ;n the case of respondent AAC, it implemented its retrenchment program not only to prevent losses but to prevent further losses as it was then incurring huge losses in its operations" The dismissal dismissal of complainants complainants on ground ground of redundancy redundancy < retrenchmen retrenchmentt was perfectly valid or legal" Private respondents appealed to the 672C" 672C ruled that the positions of private respondents were not redundant for the simple reason that they were replaced by casuals" The company at the time of retrenchment was not then in the state of business reverses" There is therefore no reason to retrench" " " " The alleged de5cits of the corporation did not prove anything for the respondent" The 5nancial status shown in records submitted was before Prior !oldings took over the operation and management of the corporation" This is no proof that when the termination of
complainant=s> took e?ect the company was e3periencing losses or at least imminent losses" Possible future losses do not authori#e retrenchment" 2etrenchment and
Iss's : @<6 there was no valid retrenchment thus making the dismissal of private respondents illegal" R')*n+: 6egative" The right of management to dismiss workers during periods of business recession and to install labor saving devices to prevent losses is governed by Art" *9' of the labor Code, as amended" 2etrenchment and redundancy are ust causes for the employer to terminate the services of workers to preserve the viability of the business" ;n e3ercising its right, however, management must faithfully comply with the substantive and procedural re1uirements laid down law and urisprudence" The re1uirements for valid &n%-n& which must be proved by clear and convincing evidence are: (%) that the 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 e3pected, are reasonably imminent as perceived obectively and in good faith by the employer/ (*) that the employer served written notice both to the employees and to the +74 at least one month prior to the intend date of retrenchment/ (') that the employer pays the retrenched employees separation pay e1uivalent to one month pay or at least %<* month pay for every year of service, whichever is higher/ (B) that the employer e3ercises its prerogative to retrench employees in good faith for the advancement of its interest of its interest and not to defeat or circumvent the employees8 right to security of tenure/ and () that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, eciency, seniority, physical 5tness, age, and 5nancial hardship for certain workers" The condition of business losses is normally shown by audited 5nancial documents like yearly balance sheets and pro5t and loss statements as well as annual income ta3 returns" ;t is our ruling that 5nancial statements must be prepared and signed by independent auditors" Dnless duly audited, they can be assailed as self$serving documents" ;t is necessary that the employer also show that its losses increased through a period of time and that the condition of the company is not likely to improve in the near future" Private respondents never contested the veracity of the audited 5nancial documents pro?ered by Asian Alcohol before the 7A" 6either did they obect to their admissibility" They show that petitioner has accumulated losses amounting to P',&B,'B" and showing nary a sign of abating in the near future" The allegation of union busting is bereft of proof" Dnion and non$union members were treated alike" The records show that the positions of % other non$union members were abolished due to business losses" Article *9' of the 7abor Code uses the phrase Eretrenchment to prevent lossesE" This means that retrenchment must be undertaken by the employer before losses are actually sustained" The employer need not keep all his employees until after his losses shall have materiali#ed" +therwise, the law could be vulnerable of attack as undue taking of property for the bene5t of another"
;rrefutable was the fact that losses have bled Asian Alcohol incessantly over a span of several years" The law gives the new management every right to undertake measures to save the company from bankruptcy" @e 5nd that the reorgani#ational plan and comprehensive cost$saving program to turn the business around were not designed to bust the union of the private respondents" 2etrenched were %%& employees" &* of them including private respondents were separated because their positions had become redundant" ;n this conte3t, what may technically be considered as redundancy may verily be considered as retrenchment measure" Their positions had to be declared redundant to cut losses" 2edundancy e3ists when the service capability of the work force is in e3cess of what is reasonably needed to meet the demands on the enterprise" A redundant position is one rendered superFuous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of a service activity priorly undertaken by the business" Dnder these conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business" Gor the implementation of a d'ndan%/ program to be valid, the employer must comply with the following re1uisites: (%) written notice served on both the employees and the epartment of 7abor and 4mployment at least one month prior to the intended date of retrenchment/ (*) payment of separation pay e1uivalent to at least one month pay or at least one month pay for every year of service, whichever is higher/ (') good faith in abolishing the redundant positions/ and (B) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished" AAC did not own the land where the wells stood" ;t only leased them" The lease contract, which also provided for a right of way leading to the site of the wells, was terminated" Also, the water from the wells had become salty due to e3tensive prawn farming nearby and could no longer be used by AAC for its purpose" The wells had to be closed and needless to say, the services of Carias, -artine# and .endon had to be terminated on the twin grounds of redundancy and retrenchment" The need for a bri1uetting plant operator ceased as the services of only two * helpers were all that was necessary to attend to the much lesser amount of coal re1uired to run the boiler" Thus, the position of 0erayo had to be abolished" +f the ' bri1uetting helpers, Tormo was the oldest" Age, with the physical strength that comes with it, was particularly taken into consideration by the management team in deciding whom to separate" !ence, it was Tormo who was separated from service" The management choice rested on a rational basis" Amacio was among the % mechanics who manned the machine shop at the plant site" ;t was more cost ecient to maintain only mechanics" ;n choosing whom to separate among the ten (%) mechanics, the management e3amined employment records and reports to determine the least ecient among them" Amacio appeared the least ecient because of his poor health condition" 6ot one of the private respondents refuted the foregoing facts" The characteri#ation of positions as redundant is an e3ercise of business udgment on the part of the employers" ;t will be upheld as long as it passes the test of arbitrariness" Private respondents failed to pro?er any proof that the management acted in a malicious or arbitrary manner in engaging the services of an independent contractor to operate the 7aura wells" Absent such proof, the Court has no basis to interfere with the bona fde decision of management to e?ect more economic and ecient methods of production"
Private respondent now claim that they signed the 1uitclaims, waivers and voluntary resignation letters only to get their separation package" They maintain that in principle, they did not believe that their dismissal was valid" Henerally, 0'*& %)a*s and )ass are contrary to public policy and therefore, void" 6onetheless, voluntary agreements that represent a reasonable settlement are binding on the parties and should not later be disowned" ;t is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of the settlement are unconscionable, that the law will step in to bail out the employee" @hile it is our duty to prevent the e3ploitation of employees, it also behooves us to protect the sanctity of contracts that do not contravene our laws" There is no showing that the 1uitclaims, waivers and voluntary resignation letters were e3ecuted by the private respondents under force or duress" ;n truth, the documents embodied separation bene5ts that were well beyond what the company was legally re1uired to give private respondents" @e note that out of the more than one hundred workers that were retrenched by Asian Alcohol, only these private respondents were not impressed by the generosity of their employer" Their late complaints have no basis and deserves our scant consideration"
