G.R. No. 106516 September 21, 1999
PANTRANCO NORTH EXPRESS, INC., petitioner, vs. THE HON. NATIONAL LABOR RELATIONS COMMISSION (NLRC), SECOND DIVISION and ALFONSO AYENTO, SR., respondents.

FACTS

Petitioner Pantranco North Express, Inc., a government-owned and controlled corporation, was in severe financial decline, leading to a management takeover by creditors, sequestration by the PCGG, and eventual turnover to the Asset Privatization Trust. In April 1987, due to financial losses, Pantranco implemented a job classification program for manpower reduction, reclassifying salary grades from a range of 1-23 to a new range of 1-19. Private respondent Alfonso Ayento, Sr., an employee since 1958 and Head of the Registration Section with a Salary Grade of 11, had his position abolished under the reorganization. He was appointed as Registration Assistant with a higher basic salary (increased from P1,320 to P1,855) but with a lower Salary Grade of 9, and he lost supervisory functions, overtime pay (averaging P700-P800), representation expenses, and a discretionary fund of P1,000, receiving instead a fixed amelioration allowance of P350. Ayento filed a complaint for unfair labor practice, alleging demotion and diminution of benefits. The Labor Arbiter ruled in Ayento’s favor, ordering his restoration to his previous position with all benefits, a decision affirmed by the NLRC. Pantranco filed this special civil action for certiorari, arguing the reorganization was a valid management prerogative exercised in good faith due to financial necessity.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in affirming the Labor Arbiter’s decision that the reorganization resulted in the illegal demotion of private respondent, thereby disregarding management’s prerogative to abolish positions in good faith.

RULING

The Supreme Court GRANTED the petition, SET ASIDE the challenged NLRC resolutions, and DISMISSED the complaint against petitioner. The Court held that the reorganization and abolition of Ayento’s position were done in good faith as a necessary cost-cutting measure due to Pantranco’s dire financial condition, constituting a valid exercise of management prerogative. The change in salary grade from 11 to 9 was part of a company-wide compression of the salary scale, not a singular demotion. The increase in Ayento’s basic salary indicated an accommodation, as his services could have been terminated. The loss of benefits was a natural consequence of the position’s abolition. The Court found no evidence of malice or bad faith in the reorganization, emphasizing that management has the right to abolish unnecessary positions absent such improper motives. The Temporary Restraining Order was made permanent.