[G.R. No. 117040.

January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION
and ISETANN DEPARTMENT STORE, respondents.
DECISION
MENDOZA, J.:
This is a petition seeking review of the resolutions, dated March 30, 1994 and August
26, 1994, of the National Labor Relations Commission (NLRC) which reversed the
decision of the Labor Arbiter and dismissed petitioner Ruben Serranos complaint for
illegal dismissal and denied his motion for reconsideration. The facts are as follows:
Petitioner was hired by private respondent Isetann Department Store as a security
checker to apprehend shoplifters and prevent pilferage of merchandise. [1] 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.[2]
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.
For this reason, it wrote petitioner the following memorandum: [3]
October 11, 1991
MR. RUBEN SERRANO
PRESENT
Dear Mr. Serrano,
......In view of the retrenchment program of the company, we hereby reiterate our verbal
notice to you of your termination as Security Section Head effective October 11, 1991.
......Please secure your clearance from this office.
Very truly yours,
[Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager
The loss of his employment prompted petitioner to file a complaint on December 3,
1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages,
and nonpayment of salary and overtime pay.[4]

The parties were required to submit their position papers, on the basis of which the
Labor Arbiter defined the issues as follows: [5]
Whether or not there is a valid ground for the dismissal of the complainant.
Whether or not complainant is entitled to his monetary claims for underpayment of
wages, nonpayment of salaries, 13th month pay for 1991 and overtime pay.
Whether or not Respondent is guilty of unfair labor practice.
Thereafter, the case was heard. On April 30, 1993, 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; that private respondent failed to accord due process to
petitioner; that private respondent failed to use reasonable standards in selecting
employees whose employment would be terminated; that private respondent had not
shown that petitioner and other employees in the security section were so inefficient so
as to justify their replacement by a security agency, or that "cost-saving devices [such
as] secret video cameras (to monitor and prevent shoplifting) and secret code tags on
the merchandise" could not have been employed; instead, the day after petitioners
dismissal, private respondent employed a safety and security supervisor with duties and
functions similar to those of petitioner.
Accordingly, the Labor Arbiter ordered:[6]
WHEREFORE, above premises considered, judgment is hereby decreed:
(a)......Finding the dismissal of the complainant to be illegal and concomitantly,
Respondent is ordered to pay complainant full backwages without qualification or
deduction in the amount of P74,740.00 from the time of his dismissal until reinstatement
(computed till promulgation only) based on his monthly salary of P4,040.00/month at the
time of his termination but limited to (3) three years;
(b)......Ordering the Respondent to immediately reinstate the complainant to his former
position as security section head or to a reasonably equivalent supervisorial position in
charges of security without loss of seniority rights, privileges and benefits. This order is
immediately executory even pending appeal;
(c)......Ordering the Respondent to pay complainant unpaid wages in the amount
of P2,020.73 and proportionate 13th month pay in the amount of P3,198.30;
(d)......Ordering the Respondent to pay complainant the amount of P7,995.91,
representing 10% attorneys fees based on the total judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed
for lack of merit.
SO ORDERED.
Private respondent appealed to the NLRC which, in its resolution of March 30, 1994,
reversed the decision of the Labor Arbiter and ordered petitioner to be given separation
pay equivalent to one month pay for every year of service, unpaid salary, and
proportionate 13th month pay. Petitioner filed a motion for reconsideration, but his
motion was denied.
The NLRC held that the phase-out of private respondents security section and the hiring
of an independent security agency constituted an exercise by private respondent of "[a]
legitimate business decision whose wisdom we do not intend to inquire into and for
which we cannot substitute our judgment"; that the distinction made by the Labor Arbiter
between "retrenchment" and the employment of "cost-saving devices" under Art. 283 of
the Labor Code was insignificant because the company official who wrote the dismissal
letter apparently used the term "retrenchment" in its "plain and ordinary sense: to layoff
or remove from ones job, regardless of the reason therefor"; that the rule of "reasonable
criteria" in the selection of the employees to be retrenched did not apply because all
positions in the security section had been abolished; and that the appointment of a
safety and security supervisor referred to by petitioner to prove bad faith on private
respondents part was of no moment because the position had long been in existence
and was separate from petitioners position as head of the Security Checkers Section.
Hence this petition. Petitioner raises the following issue:
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE
RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID
GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE
LATTER?[7]
Petitioner contends that abolition of private respondents 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.
Petitioner Laid Off for Cause
Petitioners contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. - The employer may also
terminate the employment of any employee due to the installation of labor-saving
devices, redundancy, retrenchment to prevent losses or the closing or cessation of
operations of the establishment or undertaking unless the closing is for the purpose of

circumventing the provisions of this Title, by serving a written notice on the workers and
the Department of Labor and Employment at least one (1) month before the intended
date thereof. 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 one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure
or cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to at least 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 (6) months shall be considered as one (1) whole year.
In De Ocampo v. National Labor Relations Commission,[8] this Court upheld the
termination of employment of three mechanics in a transportation company and their
replacement by a company rendering maintenance and repair services. It held:
In contracting the services of Gemac Machineries, as part of the companys cost-saving
program, the services rendered by the mechanics became redundant and superfluous,
and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the
management abused its discretion or acted in a malicious or arbitrary manner, the court
will not interfere with the exercise of such prerogative. [9]
In Asian Alcohol Corporation v. National Labor Relations Commission, [10] the Court
likewise upheld the termination of employment of water pump tenders and their
replacement by independent contractors. It ruled that an employers good faith in
implementing a redundancy program is not necessarily put in doubt by the availment of
the services of an independent contractor to replace the services of the terminated
employees to promote economy and efficiency.
Indeed, as we pointed out in another case, the "[management of a 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."[11]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.[12]
In the case at bar, we have only the bare assertion of petitioner that, in abolishing the
security section, private respondents real purpose was to avoid payment to the security
checkers of the wage increases provided in the collective bargaining agreement
approved in 1990.[13] Such an assertion is not a sufficient basis for concluding that the

termination of petitioners employment was not a bona fide decision of management to

obtain reasonable return from its investment, which is a right guaranteed to employers
under the Constitution.[14] Indeed, that the phase-out of the security section constituted a
"legitimate business decision" is a factual finding of an administrative agency which
must be accorded respect and even finality by this Court since nothing can be found in
the record which fairly detracts from such finding.[15]
Accordingly, we hold that the termination of petitioners services was for an authorized
cause, i.e., redundancy. Hence, 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.
Sanctions for Violations of the Notice Requirement
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." In the case at bar, petitioner was given a notice of termination on October 11,
1991. On the same day, his services were terminated. He was thus denied his right to
be given written notice before the termination of his employment, and the question is the
appropriate sanction for the violation of petitioners right.
To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC,
[16]
workers in a garment factory were temporarily laid off due to the cancellation of
orders and a garment embargo. The Labor Arbiter found that the workers had been
illegally dismissed and ordered the company to pay separation pay and backwages.
The NLRC, on the other hand, found that this was a case of retrenchment due to
business losses and ordered the payment of separation pay without backwages. This
Court sustained the NLRCs finding. However, as the company did not comply with the
30-day written notice in Art. 283 of the Labor Code, the Court ordered the employer to
pay the workers P2,000.00 each as indemnity.
The decision followed the ruling in several cases involving dismissals which, although
based on any of the just causes under Art. 282, [17] were effected without notice and
hearing to the employee as required by the implementing rules. [18] As this Court said: "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." [19]
The rule reversed a long standing policy theretofore followed that even though the
dismissal is based on a just cause or the termination of employment is for an authorized
cause, the dismissal or termination is illegal if effected without notice to the employee.

The shift in doctrine took place in 1989 inWenphil Corp. v. NLRC.[20] In announcing the
change, this Court said:[21]
The Court holds that the policy of ordering the reinstatement to the service of an
employee without loss of seniority and the payment of his wages during the period of his
separation until his actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded due process, although
his dismissal was found to be for just and authorized cause in an appropriate
proceeding in the Ministry of Labor and Employment, should be re-examined. It will be
highly prejudicial to the interests of the employer to impose on him the services of an
employee who has been shown to be guilty of the charges that warranted his dismissal
from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.
....
However, the petitioner must nevertheless be held to account for failure to extend to
private respondent his right to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal
notice and conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.
The fines imposed for violations of the notice requirement have varied
from P1,000.00[22] to P2,000.00[23] to P5,000.00[24] to P10,000.00.[25]
Need for Reexamining the Wenphil Doctrine
Today, we once again consider the question of appropriate sanctions for violations of
the notice requirement in light of our experience during the last decade or so with
the Wenphil doctrine. The number of cases involving dismissals without the requisite
notice to the employee, although effected for just or authorized causes, suggests that
the imposition of fine for violation of the notice requirement has not been effective in
deterring violations of the notice requirement. Justice Panganiban finds the monetary
sanctions "too insignificant, too niggardly, and sometimes even too late." On the other
hand, Justice Puno says there has in effect been fostered a policy of "dismiss now, pay
later" which moneyed employers find more convenient to comply with than the
requirement to serve a 30-day written notice (in the case of termination of employment
for an authorized cause under Arts. 283-284) or to give notice and hearing (in the case
of dismissals for just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null
and void even though there are just or authorized causes for such dismissal or layoff.
Consequently, in their view, the employee concerned should be reinstated and paid
backwages.
Validity of Petitioners Layoff Not Affected by Lack of Notice
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we
should rethink the sanction of fine for an employers disregard of the notice requirement.
We do not agree, however, that disregard of this requirement by an employer renders
the dismissal or termination of employment null and void. Such a stance is actually a
reversion to the discredited pre-Wenphil rule of ordering an employee to be reinstated
and paid backwages when it is shown that he has not been given notice and hearing
although his dismissal or layoff is later found to be for a just or authorized cause. Such
rule was abandoned in Wenphil because it is really unjust to require an employer to
keep in his service one who is guilty, for example, of an attempt on the life of the
employer or the latters family, or when the employer is precisely retrenching in order to
prevent losses.
The need is for a rule which, while recognizing the employees right to notice before he
is dismissed or laid off, at the same time acknowledges the right of the employer to
dismiss for any of the just causes enumerated in Art. 282 or to terminate employment
for any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule
imposing a fine on an employer who is found to have dismissed an employee for cause
without prior notice is deemed ineffective in deterring employer violations of the notice
requirement, the remedy is not to declare the dismissal void if there are just or valid
grounds for such dismissal or if the termination is for an authorized cause. That would
be to uphold the right of the employee but deny the right of the employer to dismiss for
cause. Rather, the remedy is to order the payment to the employee of full backwages
from the time of his dismissal until the court finds that the dismissal was for a just cause.
But, otherwise, his dismissal must be upheld and he should not be reinstated. This is
because his dismissal is ineffectual.
For the same reason, if an employee is laid off for any of the causes in Arts. 283284, i.e., installation of a labor-saving device, but the employer did not give him and the
DOLE a 30-day written notice of termination in advance, then the termination of his
employment should be considered ineffectual and he should be paid backwages.
However, the termination of his employment should not be considered void but he
should simply be paid separation pay as provided in Art. 283 in addition to backwages.
Justice Puno argues that an employers failure to comply with the notice requirement
constitutes a denial of the employees right to due process. Prescinding from this

premise, he quotes the statement of Chief Justice Concepcion in Vda. de Cuaycong v.

Vda. de Sengbengco[26] that "acts of Congress, as well as of the Executive, can deny
due process only under the pain of nullity, and judicial proceedings suffering from the
same flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an employee without
notice and hearing, even if for a just cause, as provided in Art. 282, or for an authorized
cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized causes
exist, the employee should be reinstated with full back pay. On the other hand, Justice
Panganiban quotes from the statement inPeople v. Bocar[27] that "[w]here the denial of
the fundamental right of due process is apparent, a decision rendered in disregard of
that right is void for lack of jurisdiction."
Violation of Notice Requirement Not a Denial of Due Process
The cases cited by both Justices Puno and Panganiban refer, however, to the denial of
due process by the State, which is not the case here. 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 employees dismissal or
layoff.
The first is that 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. This is plain from the text of Art. III, 1
of the Constitution, viz.: "No person shall be deprived of life, liberty, or property without
due process of law. . . ." The reason is simple: 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.
The second reason is that notice and hearing are required under the Due Process
Clause before the power of organized society are brought to bear upon the individual.
This is obviously not the case of termination of employment under Art. 283. 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.
Even 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. The time for
notice and hearing is at the trial stage. Then that is the time we speak of notice and

hearing as the essence of procedural due process. Thus, compliance by the employer
with the notice requirement before he dismisses an employee does not foreclose the
right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any
decision taken by the employer shall be without prejudice to the right of the worker to
contest the validity or legality of his dismissal by filing a complaint with the regional
branch of the National Labor Relations Commission."
Indeed, to contend that the notice requirement in the Labor Code is an aspect of due
process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code
of Commerce of 1882 which gave either party to the employer-employee relationship
the right to terminate their relationship by giving notice to the other one month in
advance. In lieu of notice, an employee could be laid off by paying him
a mesada equivalent to his salary for one month.[28] This provision was repealed by Art.
2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954,
R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving
the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for
the giving of advance notice or the payment of compensation at the rate of one-half
month for every year of service.[29]
The Termination Pay Law was held not to be a substantive law but a regulatory
measure, the purpose of which was to give the employer the opportunity to find a
replacement or substitute, and the employee the equal opportunity to look for another
job or source of employment. Where the termination of employment was for a just
cause, no notice was required to be given to the employee. [30] It was only on September
4, 1981 that notice was required to be given even where the dismissal or termination of
an employee was for cause. This was made in the rules issued by the then Minister of
Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code.
And it was still much later when the notice requirement was embodied in the law with
the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the
former regime denied due process to the employee. Otherwise, there should now
likewise be a rule that, in case an employee leaves his job without cause and without
prior notice to his employer, his act should be void instead of simply making him liable
for damages.
The third reason why the notice requirement under Art. 283 can not be considered a
requirement of the Due Process Clause is that 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 latters immediate family or duly authorized representatives,
or other analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many
cases have been won by employees before the grievance committees manned by
impartial judges of the company." The grievance machinery is, however, different
because it is established by agreement of the employer and the employees and
composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. v. Court of Appeals,[31] which Justice Puno cites, it was held that
"Since the right of [an employee] to his labor is in itself a property and that the labor
agreement between him and [his employer] is the law between the parties, his summary
and arbitrary dismissal amounted to deprivation of his property without due process of
law." But here we are dealing with dismissals and layoffs by employers alone, without
the intervention of any grievance machinery. Accordingly inMontemayor v. Araneta
University Foundation,[32] although a professor was dismissed without a hearing by his
university, his dismissal for having made homosexual advances on a student was
sustained, it appearing that in the NLRC, the employee was fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual
Not all notice requirements are requirements of due process. Some are simply part of a
procedure to be followed before a right granted to a party can be exercised. Others are
simply an application of the Justinian precept, embodied in the Civil Code, [33] to act with
justice, give everyone his due, and observe honesty and good faith toward ones
fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the
failure either of the employer or the employee to live up to this precept is to make him
liable in damages, not to render his act (dismissal or resignation, as the case may be)
void. The measure of damages is the amount of wages the employee should have
received were it not for the termination of his employment without prior notice. If
warranted, nominal and moral damages may also be awarded.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers
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. It is similar to the failure to
observe the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code [34] in
rescinding a contract for the sale of immovable property. Under these provisions, while
the power of a party to rescind a contract is implied in reciprocal obligations,
nonetheless, in cases involving the sale of immovable property, the vendor cannot
exercise this power even though the vendee defaults in the payment of the price, except
by bringing an action in court or giving notice of rescission by means of a notarial
demand.[35] Consequently, a notice of rescission given in the letter of an attorney has no
legal effect, and the vendee can make payment even after the due date since no valid
notice of rescission has been given. [36]

Indeed, under the Labor Code, only the absence of a just cause for the termination of
employment can make the dismissal of an employee illegal. This is clear from Art. 279
which provides:
Security of Tenure. - In cases of regular employment, the employer shall not terminate
the services of an employee except for a just causeor when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.
[37]

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. To
contend, as Justices Puno and Panganiban do, that even if the termination is for a just
or authorized cause the employee concerned should be reinstated and paid backwages
would be to amend Art. 279 by adding another ground for considering a dismissal
illegal. What is more, it would ignore the fact that under Art. 285, if it is the employee
who fails to give a written notice to the employer that he is leaving the service of the
latter, at least one month in advance, his failure to comply with the legal requirement
does not result in making his resignation void but only in making him liable for damages.
[38]
This disparity in legal treatment, which would result from the adoption of the theory of
the minority cannot simply be explained by invoking President Ramon Magsaysays
motto that "he who has less in life should have more in law." That would be a
misapplication of this noble phrase originally from Professor Thomas Reed Powell of the
Harvard Law School.
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,[39] in support of his view that
an illegal dismissal results not only from want of legal cause but also from the failure to
observe "due process." The Pepsi-Cola case actually involved a dismissal for an alleged
loss of trust and confidence which, as found by the Court, was not proven. The
dismissal was, therefore, illegal, not because there was a denial of due process, but
because the dismissal was without cause. The statement that the failure of
management to comply with the notice requirement "taints the dismissal with illegality"
was merely a dictum thrown in as additional grounds for holding the dismissal to be
illegal.
Given the nature of the violation, therefore, the appropriate sanction for the failure to
give notice is the payment of backwages for the period when the employee is
considered not to have been effectively dismissed or his employment terminated. The
sanction is not the payment alone of nominal damages as Justice Vitug contends.

Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to
terminate employment either for an authorized or just cause can result in an injustice to
the employer. For not giving notice and hearing before dismissing an employee, who is
otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an
employer will be forced to keep in his employ such guilty employee. This is unjust.
It is true the Constitution regards labor as "a primary social economic force." [40] But so
does it declare that it "recognizes the indispensable role of the private sector,
encourages private enterprise, and provides incentives to needed investment." [41] The
Constitution bids the State to "afford full protection to labor." [42] But it is equally true that
"the law, in protecting the rights of the laborer, authorizes neither oppression nor selfdestruction of the employer."[43] And it is oppression to compel the employer to continue
in employment one who is guilty or to force the employer to remain in operation when it
is not economically in his interest to do so.
In sum, we hold that 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, to wit:
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 the employees 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.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor
Relations Commission is MODIFIED by ordering private respondent Isetann
Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay
for every year of service, his unpaid salary, and his proportionate 13th month pay and,
in addition, full backwages from the time his employment was terminated on October 11,
1991 up to the time the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the separation pay, backwages,
and other monetary awards to petitioner.
SO ORDERED.
Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, GonzagaReyes, and De Leon, Jr., JJ., concur.
Bellosillo, J., see separate opinion.
Puno, J., see dissenting opinion.
Vitug, J., see separate opinion.
Panganiban, J., see separate opinion.
Ynares-Santiago, J., joins the dissenting opinion of J. Puno.

Serrano vs. NLRC / ISETANN - GR No. 117040 Case Digest

FACTS:
Serrano was a regular employee of Isetann Department Store as the head of Security
Checker. In 1991, as a cost-cutting measure, Isetann phased out its entire security
section and engaged the services of an independent security agency. Petitioner filed a
complaint for illegal dismissal among others. Labor arbiter ruled in his favor as Isetann
failed to establish that it had retrenched its security section to prevent or minimize
losses to its business; that private respondent failed to accord due process to petitioner;
that private respondent failed to use reasonable standards in selecting employees
whose employment would be terminated. NLRC reversed the decision and ordered
petitioner to be given separation pay.
ISSUE:

Whether or not the hiring of an independent security agency by the private respondent
to replace its current security section a valid ground for the dismissal of the employees
classed under the latter.
RULING:
An employers good faith in implementing a redundancy program is not necessarily put
in doubt by the availment of the services of an independent contractor to replace the
services of the terminated employees to promote economy and efficiency. Absent proof
that management acted in a malicious or arbitrary manner, the Court will not interfere
with the exercise of judgment by an employer.
If termination of employment is not for any of the cause provided by law, it is illegal and
the employee should be reinstated and paid backwages. To contend that even if the
termination is for a just cause, the employee concerned should be reinstated and paid
backwages would be to amend Art 279 by adding another ground for considering
dismissal illegal.
If it is shown that the employee was dismissed for any of the causes mentioned in Art
282, the in accordance with that article, he should not be reinstated but 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 without legal effect.