Serrano vs National Labor Relations Commission (NLRC)

G.R. No. 117040. January 27, 2000


Petitioner was hired by private respondent Isetann Department St. ore as a security checker to apprehend shoplifters and prevent pilferage of merchandise. Initially hired on October 4, 1984 on contractual basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he became head of the Security Checkers Section of private respondent.  Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section and engage the services of an independent security agency.

The loss of his employment prompted the petitioner to file a complaint for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay. Serrano asserts that the real purpose was to avoid payment of the wage increases provided in the collective bargaining agreement approved in 1990.

The Labor Arbiter rendered a decision finding petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it had retrenched its security section to prevent or minimize losses to its business.

NLRC reversed the decision of the Labor Arbiter and held that the phase-out of private respondent’s security section and the hiring of an independent security agency constituted an exercise by private respondent of legitimate business decision whose wisdom we do not intend to inquire into and for which we cannot substitute our judgment.


(1) WON  abolition of private respondent’s Security Checkers Section and the employment of an independent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of the Labor Code.

NO. The phase-out of the security section constituted a “legitimate business decision”. The termination is was for authorized cause – redundancy thus, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the rate of one month pay for every year of service.

The management of the Company cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what management decides.” Consequently, absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an employer.

(2) WON petitioner was denied of his right to due process when he is not given written notice before the termination of his employment

NO. There are three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a denial of due process resulting in the nullity of the employee’s dismissal or layoff.

(1) The Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of private power, such as the termination of employment under the Labor Code.

Section 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.

Only the State has authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered civilized methods.

(2) In cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with Due Process Clause of the Constitution. Here the employee is not faced with an aspect of the adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist justifying the termination of his employment.

(3) The employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer or the latter’s immediate family or duly authorized representatives, or other analogous cases).

With respect to Art. 283 of the Labor Code, the employer’s failure to comply with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination of employment which makes the termination of employment merely ineffectual.

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the employee should be reinstated and paid backwages.

In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one month for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one (1) whole year.

if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must be granted separation pay in accordance with Art. 283

If the employee’s separation is without cause, instead of being given separation pay, he should be reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full backwages if he has been laid off without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the just causes mentioned in said Art 282, then, in accordance with that article, he should not be reinstated. However, he must be paid backwages from the time his employment was terminated until it is determined that the termination of employment is for a just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect.

Petitioner was given a notice of termination on October 11, 1991 and on the same day, his services were terminated.  Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employer must serve “a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof.”

It is now settled that where the dismissal of one employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process.”

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