G.R. No. 76966 August 7, 1992
CAFFCO INTERNATIONAL LIMITED (Philippines Branch) herein represented by its General-Manager, JOSEPH C.K. TANG, petitioner, vs. OFFICE OF THE MINISTER-MINISTRY OF LABOR & EMPLOYMENT AND THE CAFFCO EMPLOYEES UNION-ASSOCIATION OF DEMOCRATIC LABOR ORGANIZATIONS, respondents.

FACTS

Petitioner CAFFCO International Limited, an export-oriented corporation manufacturing artificial flowers, contemplated retrenchment due to losses. It informed the MOLE Office in Region I of its plan to phase out its Vinyl Section due to a shortage of orders and stiff competition. On August 11, 1986, it filed a retrenchment program with the MOLE District Office in Baguio City, listing 130 employees to be retrenched, effective September 10, 1986. The private respondent union filed a notice of strike on September 1, 1986, alleging unfair labor practice, and staged a strike the following day, barricading company gates. Petitioner filed a petition for the MOLE to assume jurisdiction over the strike. In an Order dated September 16, 1986, the MOLE assumed jurisdiction, directed workers to return to work and management to hold its retrenchment in abeyance, and created a committee to formulate retrenchment guidelines. The committee recommended a departmental-wide retrenchment based on a “first in, last out” policy, which the MOLE adopted in its November 24, 1986 decision. The union filed a Motion for Reconsideration. In an Order dated December 22, 1986, the MOLE modified its decision, authorizing retrenchment only for the Vinyl Department effective December 31, 1986, and ordered petitioner to award separation pay “equivalent to 1 month pay for every year of service.” After another strike, the parties entered into an Agreement on January 7, 1987, whereby petitioner agreed to rehire all retrenched employees if they returned the separation pay and reported back to work by January 12, 1987. Not all employees returned. Petitioner filed this petition, arguing the award of one month pay per year of service for retrenchment was without legal basis, citing Article 283 of the Labor Code which provides for one-half month pay per year of service in cases of retrenchment to prevent losses.

ISSUE

Whether the separation from service of the workers is a result of retrenchment or redundancy, which determines the amount of severance pay they are entitled to receive.

RULING

The Supreme Court held that the petitioner’s action constituted a valid retrenchment to prevent losses, not redundancy. The Court modified the MOLE Order dated December 22, 1986. It ruled that under Article 283 of the Labor Code, in case of retrenchment to prevent losses, the separation pay shall be equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher. The employees who did not return to work as per the January 7, 1987 agreement are deemed to have availed of the retrenchment and are entitled to severance pay equivalent to one-half month pay for every year of service.