Serrano v. NLRC

Ruben Serrano, a regular employee since 1985, headed the Security Checkers Section of Isetann Department Store. In 1991, as a cost-cutting measure, Isetann decided to phase out its entire security section and engage an independent security agency. On October 11, 1991, it handed Serrano a memorandum "[i]n view of the retrenchment program of the company" that terminated him effective the same day. Serrano filed a complaint for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages and nonpayment of salary and overtime pay. The Labor Arbiter found the dismissal illegal, holding among other things that Isetann had not shown retrenchment to prevent losses and had not accorded him due process. He ordered reinstatement with backwages. The NLRC reversed. It held that the phase-out and the hiring of an agency were a legitimate business decision, and it awarded separation pay, unpaid salary and proportionate 13th month pay. Before the Supreme Court, Serrano argued that replacing the security section with an agency was not an authorized cause under Art. 283 of the Labor Code. He had received his notice of termination on the very day it took effect.

1. 1Whether replacing the security section with an independent security agency was a valid authorized cause for terminating Serrano's employment.
2. 2Whether the employer's failure to give the required written notice rendered the termination void, and what sanction applies.

The termination was for an authorized cause, redundancy. Management may decide whether work is done by its own personnel or contracted out, and without proof of malice or arbitrariness the Court will not interfere. Serrano's bare claim that the phase-out was meant to avoid CBA wage increases was not enough. However, Isetann violated the requirement of Art. 283 (now Art. 298) to serve written notice on the worker and the DOLE one month before termination. The Court re-examined the Wenphil rule, under which fines of P1,000 to P10,000 had failed to deter violations. It rejected the view that lack of notice voids the dismissal, for three reasons: the Due Process Clause limits governmental, not private, power; the 30-day notice is meant to let the employee prepare and the DOLE verify the cause, not to afford a hearing; and an employer cannot be an impartial judge of its own cause. Under Art. 279 (now Art. 294), only the absence of a just or authorized cause makes a dismissal illegal. Failure to give notice makes the termination "merely ineffectual", so the sanction is backwages for the period the employee is considered not effectively dismissed. For authorized causes, the employee gets separation pay under Art. 283 plus full backwages. For just causes under Art. 282 (now Art. 297), there is no reinstatement, but backwages run from termination until it is determined that the termination was for just cause. Isetann was ordered to pay separation pay of one month per year of service, unpaid salary, proportionate 13th month pay, and full backwages from October 11, 1991 until the decision became final.