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Supreme Court sustains SMC work force cut in 1992

The Supreme Court recently sustained the massive retrenchment of employees of food and beverage firm, San Miguel Corp. (SMC), in 1992 due to the company“s PHP 2.6-billion modernization programme.

The Supreme Court recently sustained the massive retrenchment of employees of food and beverage firm, San Miguel Corp. (SMC), in 1992 due to the company“s PHP 2.6-billion modernization programme. In an 18-page labour case decision, the High Tribunal second division said the termination of nearly 600 employees in a brewery in Cebu was justified as it was for a valid reason, that is, installation of labor-saving devices. Since SMC has paid complainant Edgar Agustilo his separation pay “which was more than what was entitled him under the Labour Code,” the Supreme Court said the corporation is no longer liable to him, either for separation pay or back wages. SMC hired Mr. Agustilo on July 1, 1979 as a temporary employee at its Mandaue Brewery in Cebu. After three months, he was made permanent and designated as safety clerk. He rose from the ranks and by August 1991 was already part of the quality-improvement team, under the office of the plant director. In Feb. 1992, Mr. Agustilo was informed that 584 employees, including him, would be retrenched due to the modernization program of the company. He was told his services would be terminated effective March 15, 1992. San Miguel also promptly informed the Labour department of its modernization programme, which entailed the automation of processes of brewing, bottling and auxiliary services. The Mandaue brewery, under the project, could increase its capacity to 45 million cases annually and support a 1,000-bottle-per minute bottling line, among others. The reduction of personnel was implemented in two phases, with the petitioner included in the first batch. Even after receiving payment of separation pay amounting to over PHP 302,000 “representing 175% of his entitlements under the Labour Code,” and signing a quit claim, Mr. Agustilo filed a complaint for unfair labour practices, illegal dismissal and payment of separation pay against his former employer. He claimed to have been dismissed due to his active participation in the union and accused SMC of union busting, among other charges. He requested his reinstatement and payment of damages and attorney“s fees totaling PHP 700,000. At the Labour department, the complainant insisted his separation was invalid as SMC failed to carry on with its modernization program. “As a matter of fact, three years from the time (I) was separated, the equipment and machinery installed have not been operational as certified by respective government agencies concerned. This implies that (I) was merely deceived into believing that an impending change was about to take place… which did not materialize,” said Agustilo. However, the Labour department said while it sympathized with the employees separation after 11 years of service, it also recognized the company“s “judgment in the conduct of its business for which the laws do not authorize interference.” “The employer is free to determine, using his own discretion and business judgment, all elements of employment from hiring to firing. Moreover, the freedom of management to conduct its business operations to achieve its purpose cannot be denied,” it said. Both the Court of Appeals and Supreme Court affirmed the decision. In separate rulings, they noted the reorganization was necessary to efficiently run its plant in light of the modernization program implemented by SMC. “In anticipation of this modernization effort, the plant has been reorganized and restructured to determine the appropriate manning requirement necessary to efficiently run a modern plant. This consequently resulted in reduction in manning,” the appellate court said.

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