Shimizu Phils. Constractors, Inc. v. Callanta G.R. No.

165923 1 of 6

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 165923 September 29, 2010
SHIMIZU PHILS. CONTRACTORS, INC., Petitioner,
vs.
VIRGILIO P. CALLANTA, Respondent.
DECISION
DEL CASTILLO, J.:
By this Petition for Review on Certiorari, Shimizu Phils. Contractors, Inc. (petitioner) assails the Decision dated
June 10, 2004 and Resolution dated October 5, 2004 of the Court of Appeals (CA) in CA-G.R. SP. No. 66888,
which reversed the Decision dated December 14, 2000 of the National Labor Relations Commission (NLRC) and
ordered petitioner to reinstate Virgilio P. Callanta (respondent) and pay him his backwages for not having been
validly dismissed.
Antecedent Facts
Petitioner, a corporation engaged in the construction business, employed respondent on August 23, 1994 as Safety
Officer assigned at petitioners Yutaka-Giken Project and eventually as Project Administrator of petitioners
Structural Steel Division (SSD) in 1995.
In a Memorandum dated June 7, 1997, respondent was informed that his services will be terminated effective July
9, 1997 due to the lack of any vacancy in other projects and the need to re-align the companys personnel
requirements brought about by the imperatives of maximum financial commitments.
Respondent then filed an illegal dismissal complaint against petitioner assailing his dismissal as without any valid
cause.
Petitioner advanced that respondents services was terminated in accordance with a valid retrenchment program
being implemented by the company since 1996 due to financial crisis that plague the construction industry. To
prove its financial deficit, petitioner presented financial statements for the years 1995 to 1997 as well as the
Securities and Exchange Commissions approval of petitioners application for a new paid-in capital amounting to
P330,000,000. Petitioner alleged that in order not to jeopardize the completion of its projects, the abolition of
several departments and the concomitant termination of some employees were implemented as each project is
completed. When respondents Honda Project was completed, petitioner offered respondent his separation pay
which the latter refused to accept and instead filed an illegal dismissal complaint.
Respondent claimed that petitioner failed to comply with the requirements called for by law before implementing a
retrenchment program thereby rendering it legally infirmed. First, it did not comply with the provision of the Labor
Code mandating the service of notice of retrenchment. He pointed out that the notice sent to him never mentioned
retrenchment but only project completion as the cause of termination. Also, the notice sent to the Department of
Labor and Employment (DOLE) did not conform to the 30-day prior notice requirement. Second, petitioner failed
Shimizu Phils. Constractors, Inc. v. Callanta G.R. No. 165923 2 of 6

to use fair and reasonable criteria in determining which employees shall be retrenched or retained. As shown in the
termination report submitted to DOLE, he was the only one dismissed out of 333 employees. Worse, junior and
inexperienced employees were appointed/assigned in his stead to new projects thus also ignoring seniority in hiring
and firing employees.
In reply, petitioner reiterated its progressive implementation of the retrenchment program and finds this as basis
why respondents termination coincided with project completion. Petitioner argued that when it submitted the
retrenchment notice/termination report to DOLE, there was already substantial compliance with the requirement. It
explained that such termination report reflects only the number of employees retrenched for the particular month of
July of 1997 and cannot be deemed as evidence of the total number of employees affected by the retrenchment
program. Petitioner also accused respondent of giving false narration of facts about his employment position and
further disclosed that respondent has been saddled with complaints subject of administrative investigations for
violations of several company rules, i.e., cited for discrepancies in his time sheet, unauthorized use of company
vehicle, stealing of company property and abandonment of work, so much so that petitioners decision to appoint
more competent and more senior employees in his stead cannot be questioned.
Ruling of the Labor Arbiter
On April 14, 2000, the Labor Arbiter rendered a Decision holding that respondent was validly retrenched. He found
that sufficient evidence was presented to establish company losses; that petitioner offered respondent his separation
pay; and that petitioner duly notified DOLE about the retrenchment. The Labor Arbiter further relied on
petitioners factual version relating to respondents employment background with regard to his position and
behavioral conduct.
Pertinent portions of the Labor Arbiters Decision read:
In terminating the services of complainant, respondent Shimizu had complied with the requirements of law on
retrenchment. It had prepared a check for the amount of P 29,320.30 as payment for his separation pay and other
entitlements. However, as afore-stated, complainant refused to receive the amount, for reasons known only to him.
Also, respondent company had duly notified the Department of Labor and Employment (DOLE) about the
retrenchment of the complainant.
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered dismissing the instant complaint
for lack of merit.
SO ORDERED.
Ruling of the National Labor Relations Commission
Upon appeal, the NLRC upheld the ruling that there was valid ground for respondents termination but modified
the Labor Arbiters Decision by holding that petitioner violated respondents right to procedural due process. The
NLRC found that petitioner failed to comply with the 30-day prior notice to the DOLE and that there is no proof
that petitioner used fair and reasonable criteria in the selection of employees to be retrenched. The dispositive
portion of the NLRC Decision reads:
WHEREFORE, in view of the foregoing, the finding of the Labor Arbiter a quo is MODIFIED.
Respondent Shimizu Philippine Contractor, Inc., is ordered to pay complainant-appellant Virgilio P. Callanta his
separation pay equivalent to one (1) month pay for every year of service. For want of due notice, respondent is
Shimizu Phils. Constractors, Inc. v. Callanta G.R. No. 165923 3 of 6

further directed to pay complainant an indemnity equivalent to one (1) month salary.
SO ORDERED.
Both parties sought reconsideration of the NLRCs Decision. Respondent, in his Motion for Reconsideration,
attributed grave error upon the NLRC in ruling that the absence of fair and reasonable criteria in effecting the
retrenchment affected only the requirements of due process, arguing that such failure should have invalidated the
entire retrenchment program. Petitioner, for its part, filed a Motion for Partial Reconsideration questioning the
amount of separation pay awarded to respondent.
The NLRC, in its Resolution dated June 29, 2001, denied respondents motion and found merit in petitioners
motion by modifying the amount of separation pay to an amount equivalent to one month or one-half month pay
for every year of service, whichever is higher, in consonance with Article 283 of the Labor Code. Thus:
WHEREFORE, premises considered, the complainants Motion for Reconsideration is hereby DENIED for lack of
merit. The respondents partial motion for reconsideration is hereby GRANTED. Consequently, our Decision
promulgated on December 14, 2000 is hereby MODIFIED in that the separation pay granted to complainant should
be one (1) month pay or one-half (1/2) month pay for every year of service, whichever is higher, a fraction of at
least six months to be considered one (1) whole year.
Other dispositions in our said Decision stand Affirmed.
SO ORDERED.
Ruling of the Court of Appeals
Undaunted, respondent filed a petition for certiorari with the CA. On June 10, 2004, the CA reversed and set aside
the NLRCs ruling. The CA opined that petitioner failed to prove that there were employees other than respondent
who were similarly dismissed due to retrenchment and that respondents alleged replacements held much higher
ranks and were more deserving employees. Moreover, there were no proofs to sustain that petitioner used fair and
reasonable criteria in determining which employees to retrench. According to the CA, petitioners failure to
produce evidence raises the presumption that such evidence will be adverse to it. Consequently, the CA invalidated
the retrenchment, held respondent to have been illegally dismissed, and ordered respondents reinstatement and
payment of backwages.
The dispositive portion of the Decision reads:
WHEREFORE, the assailed Decision dated December 14, 2000 and the Resolution dated June 29, 2001 both of the
National Labor Relations Commission, Third Division in NLRC Case No. CA 024643-00 are REVERSED and
SET ASIDE.
Private Respondent Shimizu Philippine Contractors, Inc. is hereby ORDERED to reinstate Petitioner VIRGILIO P.
CALLANTA with backwages computed from the date of his dismissal on July 9, 1997 up to the finality of this
Decision without loss of seniority rights and benefits appurtenant to his position.
SO ORDERED.
The CA denied petitioners Motion for Reconsideration and reiterated that petitioner offered no proof of any
standard or program intended to implement the retrenchment program.
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Issues
Thus, the instant petition raising the following issues:
A.
WHETHER X X X THE HONORABLE COURT OF APPEALS EXCEEDED ITS JURISDICTION WHEN IT
REVERSED THE FACTUAL FINDINGS OF THE LABOR ARBITER AND THE NLRC BY RE-EVALUATING
THE EVIDENCE ON RECORD.
B.
WHETHER X X X THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT
PETITIONER FAILED TO OBSERVE FAIR AND REASONABLE STANDARDS OR CRITERIA IN
EFFECTING THE DISMISSAL OF [RESPONDENT].
Petitioner contends that the CAs corrective power in petitions for certiorari is confined only to jurisdictional issues
and a determination of whether there is grave abuse of discretion amounting to lack or excess of jurisdiction. It
does not encompass the reevaluation and reassessment of factual findings and conclusions of the Labor Arbiter
which should be accorded great weight and respect when affirmed by the NLRC. According to petitioner, the CA
gravely erred in finding that no valid retrenchment exists contrary to the prior findings of the Labor Arbiter and
NLRC.
Petitioner also insists that all the requisites for a valid retrenchment have been established by substantial evidence
and that it observed fair and reasonable standards in implementing its retrenchment program, to wit: ability to
perform work efficiently and seniority. As succinctly found by the Labor Arbiter, respondent is notorious for
violating company rules which adversely reflected on his ability to perform work effectively. Petitioner further
denies that junior officers/employees were retained and that respondent was singled out for termination.
Our Ruling
We find the petition meritorious.
At the outset, the power of the CA to review a decision of the NLRC "in a petition for certiorari under Rule 65 of
the Rules of Court does not normally include an inquiry into the correctness of the NLRCs evaluation of the
evidence." However, under certain circumstances, the CA is allowed to review the factual findings or the legal
conclusions of the NLRC in order to determine whether these findings are supported by the evidence presented and
the conclusions derived therefrom are accurately ascertained. It has been held that "[i]t is within the jurisdiction of
the CA x x x to review the findings of the NLRC."
From the foregoing, the CA, in the present case, cannot be faulted in re-evaluating the NLRCs findings as it can
undoubtedly affirm, modify or reverse the same if the evidence warrants. Having settled thus, we shall now
proceed to review whether the CA correctly appreciated the NLRCs finding and if the CAs resultant decision was
in accord with law and evidentiary facts.
There was substantial compliance for a valid retrenchment; petitioner used fair and reasonable criteria in effecting
retrenchment.
As an authorized cause for separation from service under Article 283 of the Labor Code, retrenchment is a valid
exercise of management prerogative subject to the strict requirements set by jurisprudence:
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(1) That the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;
(2) That the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3) That the employer pays the retrenched employees separation pay equivalent to one month pay or at least
month pay for every year of service, whichever is higher;
(4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of
its interest and not to defeat or circumvent the employees right to security of tenure; and
(5) That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who
would be retained among the employees, such as status, x x x efficiency, seniority, physical fitness, age, and
financial hardship for certain workers.
In the present case, both the Labor Arbiter and the NLRC found sufficient compliance with these substantive
requirements, there being enough evidence to prove that petitioner was sustaining business losses, that separation
pay was offered to respondent, and that notices of termination of service were furnished respondent and DOLE.
However, the NLRC modified the Decision of the Labor Arbiter by granting respondent indemnity since the notice
to DOLE was served short of the 30-day notice requirement and that there is no proof of the use of fair and
reasonable criteria in the selection of employees to be retrenched or retained. The CA, then, reversed the Decision
of the NLRC by ruling that the absence of fair and reasonable criteria in implementing the retrenchment invalidates
altogether the retrenchment.
Petitioner presented proof that it incurred substantial losses as shown by its financial statements and that it
substantially complied with the requirements of serving written notices of retrenchment. It was also shown that it
offered to pay respondents separation pay. The CA, however, ruled that petitioner failed to show that it
implemented its retrenchment program in a just and proper manner in the absence of reasonable criteria in effecting
such.
We disagree. In implementing its retrenchment scheme, petitioner was constrained to streamline its operations and
to downsize its complements in a progressive manner in order not to jeopardize the completion of its projects.
Thus, several departments like the Civil Works Division, Electro-mechanical Works Division and the Territorial
Project Management Offices, among others, were abolished in the early part of 1996 and thereafter the Structural
Steel Division, of which respondent was an Administrator. Respondent was among the last batch of employees who
were retrenched and by the end of year 1997, all of the employees of the Structural Steel Division were severed
from employment.
Respondent, in any of the pleadings filed by him, never refuted the foregoing facts. Respondents argument that he
was singled out for termination as allegedly shown in petitioners monthly termination report for the month of July
1997 filed with the DOLE does not persuade this Court. Standing alone, this document is not proof of the total
number of retrenched employees or that respondent was the only one retrenched. It merely serves as notice to
DOLE of the names of employees terminated/ retrenched only for the month of July. In other words, it cannot be
deemed as an evidence of the number of employees affected by the retrenchment program. Thus we cannot
conclude that no other employees were previously retrenched.
Shimizu Phils. Constractors, Inc. v. Callanta G.R. No. 165923 6 of 6

Respondent then claimed that petitioner did not observe seniority in retrenching him. He further alleged that he is
more qualified and efficient than those retained by petitioner. Notably, however, the records do not bear any proof
that these allegations were substantiated. On the contrary, the Labor Arbiter found respondents notoriety due to
pieces of evidence showing numerous company violations imputed against respondent. This fact of being subject
of several administrative investigations, respondent failed to refute. Moreover, the Labor Arbiter likewise found
respondent guilty of several misrepresentations in the pleadings filed before the tribunal with regard to the latters
employment position. By advancing that other employees were less efficient, qualified and senior than him,
respondent has the burden of proving these allegations which he failed to discharge.
On the contrary, we find that petitioner implemented its retrenchment program in good faith because it undertook
several measures in cutting down its costs, to wit, withdrawing certain privileges of petitioners executives and
expatriates; limiting the grant of additional monetary benefits to managerial employees and cutting down expenses;
selling of company vehicles; and infusing fresh capital into the company. Respondent did not attempt to refute that
petitioner adopted these measures before implementing its retrenchment program.
In fine, we hold that petitioner was able to prove that it incurred substantial business losses, that it offered to pay
respondent his separation pay, that the retrenchment scheme was arrived at in good faith, and lastly, that the criteria
or standard used in selecting the employees to be retrenched was work efficiency which passed the test of fairness
and reasonableness.
The termination notice sent to DOLE did not comply with the 30-day notice requirement, thus, respondent is
entitled to indemnity for violation of due process.
However, although there was authorized cause to dismiss respondent from the service, we find that petitioner did
not comply with the 30-day notice requirement. Petitioner maintains that it substantially complied with the
requirement of the law in that it, in fact, submitted two notices or reports with the DOLE. However, petitioner
admitted that the reports were submitted 21 days, in the case of the first notice, and 16 days, in the case of the
second notice, before the intended date of respondents dismissal.
The purpose of the one month prior notice rule is to give DOLE an opportunity to ascertain the veracity of the
cause of termination. Non-compliance with this rule clearly violates the employees right to statutory due process.
Consequently, we affirm the NLRCs award of indemnity to respondent for want of sufficient due notice. But to be
consistent with our ruling in Jaka Food Processing Corporation v. Pacot, the indemnity in the form of nominal
damages should be fixed in the amount of P50,000.00.
WHERFORE, the petition is GRANTED. The challenged June 10, 2004 Decision and October 5, 2004
Resolution of the Court of Appeals in CA- G.R. SP. No. 66888 are REVERSED and SET ASIDE. The Decision
and Resolution of the National Labor Relations Commission dated December 14, 2000 and June 29, 2001,
respectively, upholding the legality of respondents dismissal and awarding him separation pay equivalent to one
(1) month pay or one-half (1/2) month pay for every year of service, whichever is higher, are REINSTATED and
AFFIRMED with MODIFICATION that the indemnity to be awarded to respondent is fixed in the amount of
P50,000.00 as nominal damages.
SO ORDERED.
Corona, C.J., (Chairperson), Velasco, Jr., Leonardo-De Castro, and Perez, JJ., concur