GR 172363; (March, 2008) (Digest)
G.R. No. 172363 March 7, 2008
JUVY M. MANATAD, petitioner, vs. PHILIPPINE TELEGRAPH AND TELEPHONE CORPORATION, respondent.
FACTS
Petitioner Juvy M. Manatad was employed by respondent PT&T and was later promoted to Account Executive. In 1998, she was temporarily laid off under a Temporary Staff Reduction Program due to alleged serious business reverses. She declined a subsequent separation package offer. In February 1999, she received a Notice of Retrenchment, permanently dismissing her. Manatad filed a complaint for illegal dismissal, arguing the retrenchment was illegal because PT&T was profitable, citing regional operating margin reports showing net profits from July 1997 to June 1998 and a special order granting salary increases in 1998.
PT&T asserted retrenchment was necessary due to substantial financial losses. It presented audited financial statements by SGV & Co. showing massive net losses from 1995 to 1999, including a P558 million loss in 1998, resulting in a significant deficit and necessitating negotiations with creditors for debt restructuring. The Labor Arbiter and NLRC ruled in favor of Manatad, declaring the dismissal illegal, finding PT&T’s evidence of losses insufficient.
ISSUE
Was petitioner Juvy M. Manatad illegally dismissed?
RULING
No, the dismissal was legal. Retrenchment is a valid management prerogative under Article 283 of the Labor Code to prevent losses. For retrenchment to be justified, the employer must prove: (1) the retrenchment is reasonably necessary and likely to prevent business losses; (2) the employer served written notice to both the employee and the DOLE at least one month before the termination; and (3) the employer paid separation pay equivalent to one month pay or at least one-half month pay for every year of service.
The Court upheld the Court of Appeals’ reversal of the NLRC. PT&T sufficiently established serious financial losses through its audited financial statements prepared by the independent and reputable auditing firm SGV & Co. These statements, showing consistent and substantial net losses culminating in a P558 million deficit, constitute the “most reliable evidence” of a company’s financial condition. The regional profit reports presented by Manatad, reflecting only a specific area and period, do not negate the overall dire financial state of the corporation as a whole, which is the proper perspective for evaluating retrenchment. PT&T complied with procedural requirements, including notice. However, as the termination was due to serious business losses, the separation pay awarded was correctly reduced to one-half month pay per year of service, not full backwages.