G.R. No. 115414 August 25, 1998
PHILIPPINE TUBERCULOSIS SOCIETY, INC., petitioner, vs. NATIONAL LABOR UNION and NATIONAL LABOR RELATIONS COMMISSION, respondents.

FACTS

The Philippine Tuberculosis Society, Inc. (PTSI), a non-stock, non-profit corporation, began experiencing serious financial difficulties, incurring a deficit of P2 million in 1989 and P9.1 million in 1990. To address these losses, PTSI implemented various cost-cutting measures, including leasing property, selling assets, withdrawing from benefit programs, and finally, retrenching 116 employees. The National Labor Union (NLU) filed a notice of strike, charging unfair labor practice. The labor dispute was certified to the National Labor Relations Commission (NLRC). The NLRC declared the retrenchment invalid, finding that PTSI failed to employ the seniority factor in selecting employees for retrenchment, instead using subjective criteria like dependability, adaptability, and job performance. The NLRC ordered the reinstatement of 38 employees (the others having executed quitclaims). PTSI filed this petition, arguing the NLRC erred in invalidating the retrenchment program for not using seniority as a criterion.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in declaring the retrenchment program invalid for failure to employ the criterion of seniority in the selection process of employees to be retrenched.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion by the NLRC. The Court affirmed that while retrenchment due to serious financial losses is a valid ground for termination under Article 283 of the Labor Code, and is available even to non-profit organizations, it must be exercised subject to specific limitations. One such requirement is that the implementation must be fair and reasonable, utilizing criteria such as (a) less preferred status, (b) efficiency rating, and (c) seniority. The NLRC correctly found that PTSI’s omission of the seniority factor—a standard consistently required by jurisprudence—invalidated its retrenchment program, especially since evidence showed employees with longer service were retrenched while some with shorter service were retained. PTSI’s generalized justifications for retrenching specific senior employees based on other subjective criteria, without explaining why their long years of service were disregarded, were insufficient to discharge its burden of proof. The NLRC’s decision was thus upheld.