FASAP v NLRC Labor: Compromise and Waiver

FACTS:
- Flight Attendants and Stewards Association of the Philippines v PAL: third of such case, they are
petitioning the SC to set aside CAs decision setting aside NLRCs finding of illegal retrenchment against
FASAP.
- PAL executed a retrenchment program claiming losses due to the Asian Financial Crisis. It states that it
would have to use Plan 14 (planes) in order to alleviate itself from losses. Such plan would necessitate the
retrenchment of several employees.
o Probationary employees were first terminated
o Regular employees were then retrenched based on PALs own assessments
- However, Plan 14 was not executed. Plan 14 expanded and was actually Plan 22.
- Thereafter, PAL recalled the probationary employees it previously removed. Nonetheless, it still continued
with retrenchment of the other regular employees.
- FASAP claims illegal retrenchment on the ff grounds:
o PAL failed to exhaust all means of cost-cutting measures before resorting to retrenchment as
required by Law
o PAL selected only 1997 as the sole year to base their performance review from which they will
base who will be retrenched
o Seniority was disregarded in violation of the CBA
o PAL maliciously misrepresented when it says it can only fly 14 planes where in fact they flew 22
o PAL did not use any reasonable criteria in effecting retrenchment
- QUITCLAIMS/WAIVERS: FASAP employees who were retrenched signed quitclaims/waivers
- COMPROMISE: In order to keep PAL running and prevent its closure, PALEA entered into an agreement
with PAL brokered by then President Estrada. Compromise includes suspension of the CBA for 10 years,
PALEA employees receive shares of stock of PAL, etc etc. (Not relevant to this case)
ISSUE:
WoN there was valid retrenchment <- MAIN ISSUE
WoN the quitclaims signed by the employees were valid
RULING:
- NO, there was no valid retrenchment:
o Retrenchment Requirements:
PAL failed to substantiate its claim for retrenchment due to actual/imminent substantial
losses. Settled is the rule that in retrenchment, the burden is upon the employer to
prove that they have actually suffered such losses to justify retrenchment. The fact that
PAL was under receivership and eventually temporarily suspended its operation is not
enough proof to substantiate such losses.
To Prove its losses, PAL could have submitted its financial statement to the Labor Arbiter
which they did not. Instead PAL listed a litany of losses which does not suffice the
evidentiary requirements.
PAL itself has proven that they did not know their actual financial standing when it
implemented Plan 14 (planes) but subsequently actually then implemented Plan 22
(planes)
o Retrenchment must be in good faith:
PALs changing from Plan 14 which was discussed with its employees to Plan 22 which
was not discussed belie the assertion of good faith. More, their termination of the
probationary employees, the subsequent rehiring AND THEN still retrenching their
regular employees shows bad faith.
In sum, we find that PAL had implemented its retrenchment program in an arbitrary
manner and with evident bad faith, which prejudiced the tenurial rights of the cabin
crew personnel.
o Reasonable Criteria in Effecting Retrenchment:
A significant number of people retrenched were retrenched for Other Reasons - no
actual reason stated, showing the arbitrariness of the retrenchment.
The fact that they disregarded Seniority in retrenchment makes the retrenchment
invalid as stated in Villena v NLRC
PAL only took 1997 as the basis of their retrenchment which discarded the tenure and
the years of service other employees of PAL have served under the company. It failed to
account for the service records of employees that have been with the company for a
long time.
- QUITCLAIM:
o Quitclaims executed as a result of PALs illegal retrenchment program are likewise annulled and
set aside because they were not voluntarily entered into by the retrenched employees; their
consent was obtained by fraud or mistake, as volition was clouded by a retrenchment program
that was, at its inception, made without basis. The law looks with disfavor upon quitclaims and
releases by employees pressured into signing by unscrupulous employers minded to evade legal
responsibilities. As a rule, deeds of release or quitclaim cannot bar employees from demanding
benefits to which they are legally entitled or from contesting the legality of their dismissal. The
acceptance of those benefits would not amount to estoppel. The amounts already received by
the retrenched employees as consideration for signing the quitclaims should, however, be
deducted from their respective monetary awards.