LINTON COMMERCIAL CO., INC. and DESIREE ONG vs. ALEX A. HELLERA, FRANCISCO RACASA, ET AL.

G.R. No. 163147 October 10, 2007

Permissible Reduction of Working Hours

Facts: Linton issued a memorandum informing its employees decision to suspend its operations from 18 December 1997 to 5 January 1998 due to the currency crisis that affected its business operations. On 7 January 1997, Linton issued another memorandum informing them that effective 12 January 1998, it would implement a new compressed workweek of three (3) days on a rotation basis. On the same day, Linton submitted an establishment termination report concerning the rotation of its workers. Linton proceeded with the implementation of the new policy without waiting for its approval by DOLE. Aggrieved, sixty-eight (68) workers (workers) filed a Complaint for illegal reduction of workdays. The workers pointed out that Linton implemented the reduction of work hours without observing Article 283 of the Labor Code, which required submission of notice thereof to DOLE one month prior to the implementation of reduction of personnel, since Linton filed only the establishment termination report enacting the compressed workweek on the very date of its implementation.

Issue: Whether there was an illegal reduction of work when Linton implemented a compressed workweek by reducing from six to three the number of working days with the employees working on a rotation basis.

Held: Yes. The compressed workweek arrangement was unjustified and illegal. A close examination of petitioners’ financial reports for 1997-1998 shows that it retained a considerable amount of earnings and operating income. A year of financial losses would not warrant the immolation of the welfare of the employees, which in this case was done through a reduced workweek that resulted in an unsettling diminution of the periodic pay for a protracted period. Permitting reduction of work and pay at the slightest indication of losses would be contrary to the States policy to afford protection to labor and provide full employment. Management has the prerogative to come up with measures to ensure profitability or loss minimization. However, such privilege is not absolute. Management prerogative must be exercised in good faith and with due regard to the rights of labor. 

WHEREFORE, the Petition is GRANTED IN PART. The decision of the Court of Appeals reinstating the decision of the Labor Arbiter is AFFIRMED with MODIFICATION to the effect that the 21 workers who executed waivers and quitclaims are no longer entitled to back payments. Petitioners are ORDERED TO PAY respondents, except the aforementioned 21 workers, the monetary award as computed, pursuant to the decision of the Labor Arbiter with interest at the rate of 6% per annum from 12 December 2003, the date of promulgation of the Court of Appeals’ decision, until the finality of this decision, and thereafter at the rate of 12% per annum until full payment.