1

LIGHT ATTENDANTS AND

STEWARDS ASSOCIATION OF
THE PHILIPPINES (FASAP),
Petitioner,
- versus PHILIPPINE AIRLINES, INC.,
PATRIA CHIONG and COURT
OF APPEALS,
Respondents.

G.R. No. 178083

Present:
Ynares-Santiago, J. (Chairperson),
Austria-Martinez,
Promulgated:
July 22, 2008

YNARES-SANTIAGO, J.:

Fair and reasonable criteria

Actual/imminent business losses
FACTS:

Petitioner FASAP is the duly certified collective bargaining representative of PAL

cabin crew personnel. Respondent PAL is a domestic corporation operating as a
common carrier transporting passengers and cargo through aircraft.

On June 15, 1998, PAL retrenched 5,000 of its employees, including more than 1,400
of its cabin crew personnel to cut costs and mitigate huge financial losses as a result of
a downturn in the airline industry brought about by the Asian financial crisis.

In implementing the retrenchment scheme, PAL adopted its so-called:

Plan 14 whereby PALs fleet of aircraft would be reduced from 54 to
14, requiring the services of only 654 cabin crew personnel.

PAL determined the cabin crew personnel efficiency ratings through an evaluation of
the individual cabin crew members overall performance for the year 1997 alone
On June 22, 1998, FASAP filed a Complaint1[24] against PAL for unfair labor
practice, illegal retrenchment with claims for reinstatement and payment of salaries,
allowances and backwages of affected FASAP members, actual, moral and exemplary
damages with a prayer to enjoin the retrenchment program then being implemented

On July 15, 1998, however, PAL carried out the retrenchment of its more than 1,400
cabin crew personnel.
On September 23, 1998, PAL ceased its operations and sent notices of termination to
its employees.
Instead of a position paper, respondents filed a Motion to Dismiss

1[24] Docketed as FASAP v. Philippine Airlines & Chiong, NLRC-NCR Case No. 06-05100-98;
rollo, p. 87.

LA
Denied respondents motion to dismiss;
Granted a writ of preliminary injunction against PALs implementation of its
retrenchment program with respect to FASAP members;
set aside the respective notices of retrenchment addressed to the cabin crew;
directed respondents to restore the said retrenched cabin crew to their positions and
PALs payroll until final determination of the case;

NLRC

reversed the decision of the Labor Arbiter.

The NLRC directed the lifting of the writ of injunction and to vacate the directive
setting aside the notices of retrenchment and reinstating the dismissed cabin crew to
their respective positions and in the PAL payroll.2[28]

On July 21, 2000, Labor Arbiter Jovencio Ll. Mayor rendered a Decision, 3[33] the
dispositive portion of which reads, as follows:
WHEREFORE, premises considered, this Office renders judgment declaring that
Philippine Airlines, Inc., illegally retrenched One Thousand Four Hundred (1,400) cabin
attendants including flight pursers for effecting the retrenchment program in a despotic and
whimsical manner. Philippine Airlines, Inc. is likewise hereby ordered to:
1.Reinstate the cabin attendants retrenched and/or demoted to their previous positions;
2.
Pay the concerned cabin attendants their full backwages from the time they
were illegally dismissed/retrenched up to their actual reinstatements;
3.
Pay moral and exemplary damages in the amount of Five Hundred Thousand
Pesos (P500,000.00); and
4.
Ten (10%) per cent of the total monetary award as and by way of attorneys
fees.
SO ORDERED.4[34]

Respondents appealed to the NLRC.

Meanwhile, FASAP moved for the implementation of the reinstatement aspect of the

2[28] Id. at 488, 1422-1443.

3[33] Id. at 483-517.
4[34] Id. at 516-517.

Labor Arbiters decision.

the Labor Arbiter issued a writ of execution with respect to the reinstatement directive
in his decision.
Respondents moved to quash the writ, but the Labor Arbiter denied the same. Again,
respondents took issue with the NLRC.

Meanwhile, on May 31, 2004, the NLRC issued its Decision 5[35] in the appeal with
respect to the Labor Arbiters July 21, 2000 decision. The dispositive portion thereof reads:

WHEREFORE, premises considered, the Decision dated July 21, 2000 is hereby SET
ASIDE and a new one entered DISMISSING the consolidated cases for lack of merit.
With respect to complainant Ms. Begonia Blanco, her demotion is hereby declared
illegal and respondent PAL is ordered to pay her salary differential covering the period from
the time she was downgraded in July 1998 up to the time she resigned in October 1999.
Respondent PAL is likewise ordered to pay the separation benefits to those
complainants who have not received their separation pay and to pay the balance to those who
have received partial separation pay.
The Order of the Labor Arbiter dated April 6, 2000 is also SET ASIDE and the Writ of
Execution dated November 13, 2000 is hereby quashed.
Annexes A and B are considered part of this Decision.
SO ORDERED.6[36]

FASAP moved for reconsideration but it was denied; hence it filed an appeal to the
Court of Appeals which was denied in the herein assailed Decision.

FASAPs motion for reconsideration was likewise denied; hence, the instant petition
raising the following issues:

WHETHER OR NOT THE COURT OF APPEALS DECIDED THE CASE A QUO IN A

WAY CONTRARY TO LAW AND/OR APPLICABLE JURISPRUDENCE WHEN IT
5[35] Id. at 672-708; penned by Presiding Commissioner Lourdes C. Javier and concurred in by
Commissioner Tito F. Genilo.
6[36] Id. at 707-708.

DENIED FASAPS PETITION FOR CERTIORARI UNDER RULE 65 AND

EFFECTIVELY VALIDATED THE RETRENCHMENT EXERCISED BY RESPONDENT
PAL WHICH WAS INITIALLY DECLARED AS ILLEGAL BY THE LABOR ARBITER A
QUO SINCE:
FIRST, the record shows that PAL failed or neglected to adopt less drastic
cost-cutting measures before resorting to retrenchment. No less than the
Supreme Court held that resort to less drastic cost-cutting measures is an
indispensable requirement for a valid retrenchment x x x.
SECOND, PAL arbitrarily and capriciously singled out the year 1997 as a
reference in its alleged assessment of employee efficiency. With this, it
totally disregarded the employees performance during the years prior to 1997.
This resulted in the unreasonable and unfair retrenchment or demotion of
several flight pursers and attendants who showed impeccable service records
during the years prior to 1997.
THIRD, seniority was totally disregarded in the selection of employees to
be retrenched, which is a clear and willful violation of the CBA.
FOURTH, PAL maliciously represented in the proceedings below that it
could only operate on a fleet of fourteen (14) planes in order to justify the
retrenchment scheme. Yet, the evidence on record revealed that PAL
operated a fleet of twenty two (22) planes. In fact, after having illegally
retrenched the unfortunate flight attendants and pursers, PAL rehired those
who were capriciously dismissed and even hired from the outside just to fulfill
their manning requirements.
FIFTH, PAL did not use any fair and reasonable criteria in effecting
retrenchment. If there really was any, the same was applied arbitrarily, if not
discriminatorily.
FINALLY, and perhaps the worst transgression of FASAPs rights, PAL used
retrenchment to veil its union-busting motives and struck at the heart of
FASAP when it retrenched seven (7) of its twelve (12) officers and demoted
three (3) others.7[37] (Emphasis supplied)

These issues boil down to the question of whether PALs retrenchment scheme was
justified.

It is a settled rule that in the exercise of the Supreme Courts power of review, the
Court is not a trier of facts and does not normally undertake the re-examination of the
evidence presented by the contending parties during trial. However, there are several
exceptions to this rule8[38] such as when the factual findings of the Labor Arbiter differ from
those of the NLRC, as in the instant case, which opens the door to a review by this Court. 9
[39]
7[37] Id. at 29-30.

Under the Labor Code, retrenchment or reduction of employees is authorized as

follows:
ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the:

installation of labor-saving devices,

redundancy,
retrenchment to prevent losses or
the closing or cessation of operation of the establishment or undertaking

unless the closing is for the purpose of circumventing the provisions of this Title, by serving a:
written notice on the workers and the Ministry of Labor and Employment at least one (1)
month before the intended date thereof.
In case of termination due to the installation of labor-saving devices or redundancy,
o the worker affected thereby shall be entitled to a:
separation pay equivalent to at least his one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher.
In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the:
separation pay shall be equivalent to one (1) month pay or at least one-half
(1/2) month pay for every year of service, whichever is higher. A fraction of at
least six (6) months shall be considered one (1) whole year.

The law recognizes the right of every business entity to reduce its work force if the
same is made necessary by compelling economic factors which would endanger its existence
or stability.10[40] Where appropriate and where conditions are in accord with law and
jurisprudence, the Court has authorized valid reductions in the work force to forestall
business losses, the hemorrhaging of capital, or even to recognize an obvious reduction in
the volume of business which has rendered certain employees redundant.11[41]

8[38] Mamsar Enterprises Agro-Industrial Corporation v. Varley Trading, Inc., G.R. No. 142729,
November 29, 2005, 476 SCRA 378, 382; The Insular Life Assurance Company, Ltd. v. Court of
Appeals, G.R. No. 126850, April 28, 2004, 428 SCRA 79, 85-86.
9[39] Perez v. Medical City General Hospital, G.R. No. 150198, March 6, 2006, 484 SCRA 138,
142.
10[40] Uichico v. National Labor Relations Commission, G.R. No. 121434, June 2, 1997, 273
SCRA 35, 41.
11[41] Id.

Nevertheless, while it is true that the exercise of this right is a prerogative of

management, there must be faithful compliance with substantive and procedural
requirements of the law and jurisprudence, for retrenchment strikes at the very heart of the
workers employment, the lifeblood upon which he and his family owe their survival.
Retrenchment is only a measure of last resort, when other less drastic means have been
tried and found to be inadequate.12[42]
The burden clearly falls upon the employer to prove economic or business losses with
sufficient supporting evidence. Its failure to prove these reverses or losses necessarily means
that the employees dismissal was not justified.13[43] Any claim of actual or potential
business losses must satisfy
certain established standards, all of which must concur, before any reduction of

personnel becomes legal.14[44]

These are:
(1)That 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 (1) month pay or at least one-half () 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,
efficiency,
seniority,
physical fitness,
age, and
12[42] Polymart Paper Industries, Inc. v. National Labor Relations Commission, 355 Phil. 592,
602 (1998).
13[43] F.F. Marine Corporation v. National Labor Relations Commission, G.R. No. 152039, April
8, 2005, 455 SCRA 154, 166-167.
14[44] Uichico v. National Labor Relations Commission, supra note 40 at 43.

financial hardship for certain workers.

FIRST ELEMENT: That 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.

The employers prerogative to layoff employees is subject to certain limitations. In

Lopez Sugar Corporation v. Federation of Free Workers,15[48] we held that:
Firstly, the losses expected should be substantial and not merely de minimis in extent. If the
loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bona fide nature of the retrenchment would appear to be
seriously in question. Secondly, the substantial loss apprehended must be reasonably
imminent, as such imminence can be perceived objectively and in good faith by the employer.
There should, in other words, be a certain degree of urgency for the retrenchment, which is
after all a drastic recourse with serious consequences for the livelihood of the employees
retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must,
thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off
substantial numbers of workers while continuing to dispense fat executive bonuses and
perquisites or so-called golden parachutes, can scarcely claim to be retrenching in good
faith to avoid losses. To impart operational meaning to the constitutional policy of providing
full protection to labor, the employers prerogative to bring down labor costs by retrenching
must be exercised essentially as a measure of last resort, after less drastic means - e.g.,
reduction of both management and rank-and-file bonuses and salaries, going on reduced time,
improving manufacturing efficiencies, trimming of marketing and advertising costs, etc. have been tried and found wanting.
Lastly, but certainly not the least important, alleged losses if already realized, and the
expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence.

The law speaks of serious business losses or financial reverses.

15[48] G.R. Nos. 75700-01, August 30, 1990, 189 SCRA 179, 186-187.

Sliding incomes or decreasing gross revenues are not necessarily losses, much less
serious business losses within the meaning of the law.
The fact that an employer may have sustained a net loss, such loss, per se, absent any
other evidence on its impact on the business, nor on expected losses that would have been
incurred had operations been continued, may not amount to serious business losses
mentioned in the law.
The employer must show that its losses increased through a period of time and that the
condition of the company will not likely improve in the near future,16[49] or that it expected
no abatement of its losses in the coming years.17[50] Put simply, not every loss incurred or
expected to be incurred by a company will justify retrenchment.18[51]

The employer must also exhaust all other means to avoid further losses without

retrenching its employees.19[52]

Retrenchment is a means of last resort; it is justified only when all other less drastic means
have been tried and found insufficient.20[53]
Even assuming that the employer has actually incurred losses by reason of the Asian
economic crisis, the retrenchment is not completely justified if there is no showing that the
retrenchment was the last recourse resorted to.21[54]
Where the only less drastic measure that the employer undertook was the rotation work
scheme, or the three-day-work-per-employee-per-week schedule, and it did not endeavor at
other measures, such as cost reduction, lesser investment on raw materials, adjustment of the
work routine to avoid scheduled power failure, reduction of the bonuses and salaries of both
management and rank-and-file, improvement of manufacturing efficiency, and trimming of
marketing and advertising costs, the claim that retrenchment was done in good faith to avoid
16[49] Philippine Carpet Employees Association v. Sto. Tomas, supra note 45 at 145.
17[50] Oriental Petroleum and Minerals Corp. v. Fuentes, G.R. No. 151818, October 14, 2005,
473 SCRA 106, 116.
18[51] Polymart Paper Industries, Inc. v. National Labor Relations Commission, supra note 42
at 600, 602.
19[52] Id. at 602.
20[53] Id.
21[54] F.F. Marine Corporation v. National Labor Relations Commission, supra note 43 at 171.

losses is belied.22[55]
Alleged losses if already realized, and the expected imminent losses sought to be
forestalled, must be proved by sufficient and convincing evidence. The reason for requiring
this is readily apparent: any less exacting standard of proof would render too easy the abuse
of this ground for termination of services of employees; scheming employers might be
merely feigning business losses or reverses in order to ease out employees.23[56]
In establishing a unilateral claim of actual or potential losses, financial statements
audited by independent external auditors constitute the normal method of proof of profit and
loss performance of a company.24[57]
The condition of business losses justifying retrenchment is normally shown by audited
financial documents like yearly balance sheets and profit and loss statements as well as
annual income tax returns.
Financial statements must be prepared and signed by independent auditors; otherwise,
they may be assailed as self-serving.25[58] A Statement of Profit and Loss submitted to
prove alleged losses, without the accompanying signature of a certified public accountant or
audited by an independent auditor, is nothing but a self-serving document which ought to be
treated as a mere scrap of paper devoid of any probative value.26[59]
The audited financial statements should be presented before the Labor Arbiter who is
in the position to evaluate evidence.
The requirement of evidentiary substantiation dictates that not even the affidavit of the
Assistant to the General Manager is admissible to prove losses, as the same is self-serving. 27
[62]
the mere citation by the employer of the economic setback suffered by the sugar
22[55] EMCO Plywood Corporation v. Abelgas, G.R.No. 148532, April 14, 2004, 427 SCRA 496,
511.
23[56] Id.; Guerrero v. National Labor Relations Commission, 329 Phil. 1069 (1996); Lopez
Sugar Corporation v. Federation of Free Workers, supra note 48 at 186-187.
24[57] TPI Philippines Cement Corporation v. Cajucom VII, G.R. No. 149138, February 28,
2006, 483 SCRA 494, 503.
25[58] Danzas Intercontinental, Inc. v. Daguman, supra note 45 at 393.
26[59] Uichico v. National Labor Relations Commission, supra note 40 at 45.
27[62] Polymart Paper Industries, Inc. v. National Labor Relations Commission, supra note 42
at 602.

10

industry as a whole cannot, in the absence of adequate, credible and persuasive evidence,
justify its retrenchment program,28[64] thus:

In Anino v. National Labor Relations Commission,29[66] the Court also held that the
employers claim that retrenchment was undertaken as a measure of self-preservation to
prevent losses brought about by the continuing decline of nickel prices and export volume in
the mining industry, as well as its allegation that the reduction of excise taxes on mining
from 5% to 1% on a graduated basis as provided under Republic Act No. 7729 was a clear
recognition by the government of the industrys worsening economic difficulties was a
bare claim in the absence of evidence of actual losses in its business operations.30[67]
In the instant case, PAL failed to substantiate its claim of actual and imminent
substantial losses which would justify the retrenchment of more than 1,400 of its cabin crew
personnel. Although the Philippine economy was gravely affected by the Asian financial
crisis, however, it cannot be assumed that it has likewise brought PAL to the brink of
bankruptcy. Likewise, the fact that PAL underwent corporate rehabilitation does not
automatically justify the retrenchment of its cabin crew personnel.
To prove that PAL was financially distressed, it could have submitted its audited
financial statements but it failed to present the same with the Labor Arbiter. Instead, it
narrated a litany of woes without offering any evidence to show that they translated into
specific and substantial losses that would necessitate retrenchment, thus:

The Labor Arbiters finding that PAL amply satisfied the rules imposed by law and
jurisprudence that sustain retrenchment, is without basis, absent the presentation of
documentary evidence to that effect.

PALs assertion that its finances were gravely compromised as a result of the 1997
Asian financial crisis and the pilots strike lacks basis due to the non-presentation of its
audited financial statements to prove actual or imminent losses. Law and jurisprudence
require that alleged losses or expected imminent losses must be proved by sufficient and
convincing evidence.

28[64] Id. at 596.

29[66] 352 Phil. 1098 (1998).
30[67] Id. at 1113.

11

it was grave error for the Labor Arbiter, the NLRC and the Court of Appeals, to have
simply assumed that PAL was in grievous financial state, without requiring the latter to
substantiate such claim. It bears stressing that in retrenchment cases, the presentation of
proof of financial difficulties through the required documents, preferably audited financial
statements prepared by independent auditors, may not summarily be done away with.
The foregoing principle holds true with respect to PALs claim in its Comment that
the only issue is the manner by which its retrenchment scheme was carried out because the
validity of the scheme has been settled in its favor.31[83] Respondents might have confused
the right to retrench with its actual retrenchment program, treating them as one and the
same. The first, no doubt, is a valid prerogative of management; it is a right that exists for all
employers. As to the second, it is always subject to scrutiny in regard to faithful compliance
with substantive and procedural requirements which the law and jurisprudence have laid
down.
The right of an employer to dismiss an employee differs from and should not be
confused with the manner in which such right is exercised.32[84]

FOURTH ELEMENT: 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.
Concededly, retrenchment to prevent losses is an authorized cause for terminating
employment and the decision whether to resort to such move or not is a management
prerogative.
However, the right of an employer to dismiss an employee differs from and should not
be confused with the manner in which such right is exercised.
It must not be oppressive and abusive since it affects one's person and property.33[85]

When PAL implemented Plan 22, instead of Plan 14, which was what it had originally
31[83] Rollo, pp. 1403-1404.
32[84] Remerco Garments Manufacturing v. Minister of Labor and Employment, G.R. Nos. L56176-77, February 28, 1985, 135 SCRA 167, 176.
33[85] AHS/Philippines Employees Union (FFW) v. National Labor Relations Commission, G.R.
No. L-73721, March 30, 1987, 149 SCRA 5, 14; Remerco Garments Manufacturing v. Minister
of Labor and Employment, supra note 84.

12

made known to its employees, it could not be said that it acted in a manner compatible with
good faith. It offered no satisfactory explanation why it abandoned Plan 14; instead, it
justified its actions of subsequently recalling to duty retrenched employees by making it
appear that it was a show of good faith; that it was due to its good corporate nature that the
decision to consider recalling employees was made. The truth, however, is that it was unfair
for PAL to have made such a move; it was capricious and arbitrary, considering that several
thousand employees who had long been working for PAL had lost their jobs, only to be
recalled but assigned to lower positions (i.e., demoted), and, worse, some as new hires,
without due regard for their long years of service with the airline.

The irregularity of PALs implementation of Plan 14 becomes more apparent when it

rehired 140 probationary cabin attendants whose services it had previously terminated, and
yet proceeded to terminate the services of its permanent cabin crew personnel.

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.

FIFTH ELEMENT: 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, efficiency, seniority,
physical fitness, age, and financial hardship for
certain workers.

In selecting employees to be dismissed, fair and reasonable criteria must be used, such
as but not limited to:
(a) less preferred status (e.g., temporary employee),
(b) efficiency and
(c) seniority.34[90]

34[90] Fernandez, P.V., The Law of Employee Dismissal, pp. 130-131, 1976 Ed.; Asiaworld
Publishing House, Inc. v. Ople, G.R. No. L-56398, July 23, 1987, 152 SCRA 219, 225; Asufrin, Jr.
v. San Miguel Corporation, G.R. No. 156658, March 10, 2004, 425 SCRA 270, 275.

13

the Court held that the implementation of a retrenchment scheme without taking
seniority into account rendered the retrenchment invalid
In the implementation of its retrenchment scheme, PAL evaluated the cabin crew
personnels performance during the year preceding the retrenchment (1997), based on the
following set of criteria or rating variables found in the Performance Evaluation Form of the
cabin crew personnels Grooming and Appearance Handbook:
A.INFLIGHT PROFICIENCY EVALUATION 30%
B.

JOB PERFORMANCE 35%

Special Award +5
Commendations +2
Appreciation +1
Disciplinary Actions Reminder (-3), Warning/Admonition & Reprimands (5), Suspension (-20), Passenger Complaints (-30), Appearance (-10)
C.

ATTENDANCE 35%
Perfect Attendance +2
Missed Assignment -30
Sick Leaves in excess of allotment and other leaves in excess of allotment
-20
Tardiness -10 35[93]

PAL was not obligated to consult FASAP regarding the standards it would use in
evaluating the performance of the each cabin crew.
This Court has repeatedly enjoined employers to adopt and observe fair and
reasonable standards to effect retrenchment. This is of paramount importance because an
employers retrenchment program could be easily justified considering the subjective nature
of this requirement. The adoption and implementation of unfair and unreasonable criteria
could not easily be detected especially in the retrenchment of large numbers of employees,
and in this aspect, abuse is a very distinct and real possibility. This is where labor tribunals
should exercise more diligence; this aspect is where they should concentrate when placed in
a position of having to judge an employers retrenchment program.
In sum, PALs retrenchment program is illegal because it was based on wrongful
premise (Plan 14, which in reality turned out to be Plan 22, resulting in retrenchment of more
cabin attendants than was necessary) and in a set of criteria or rating variables that is unfair
and unreasonable when implemented. It failed to take into account each cabin attendants
respective service record, thereby disregarding seniority and loyalty in the evaluation of
overall employee performance.
With respect to moral damages, we have time and again held that as a general rule, a
corporation cannot suffer nor be entitled to moral damages. A corporation, being an artificial
person and having existence only in legal contemplation, has no feelings, no emotions, no
35[93] Rollo, p. 924.

14

senses; therefore, it cannot experience physical suffering and mental anguish. Mental
suffering can be experienced only by one having a nervous system and it flows from real ills,
sorrows, and griefs of life all of which cannot be suffered by an artificial, juridical person.36
[98] The Labor Arbiters award of moral damages was therefore improper.
WHEREFORE, the instant petition is GRANTED.
The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87956 dated August
23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiters
findings of illegal retrenchment and its Resolution of May 29, 2007 denying the motion for
reconsideration, are REVERSED and SET ASIDE and a new one is rendered:

1.FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2.

ORDERING Philippine Air Lines, Inc. to reinstate the cabin crew

personnel who were covered by the retrenchment and demotion scheme
of June 15, 1998 made effective on July 15, 1998, without loss of
seniority rights and other privileges, and to pay them full backwages,
inclusive of allowances and other monetary benefits computed from the
time of their separation up to the time of their actual reinstatement,
provided that with respect to those who had received their respective
separation pay, the amounts of payments shall be deducted from their
backwages. Where reinstatement is no longer feasible because the
positions previously held no longer exist, respondent Corporation shall
pay backwages plus, in lieu of reinstatement, separation pay equal to one
(1) month pay for every year of service;

3.

ORDERING Philippine Airlines, Inc. to pay attorneys fees equivalent to

ten percent (10%) of the total monetary award.

Costs against respondent PAL.

SO ORDERED.

36[98] LBC Express, Inc. v. Court of Appeals, G.R. No. 108670, September 21, 1994, 236 SCRA
602, 607.