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G.R. No. 175002. February 18, 2013.*

PEPSI-COLA PRODUCTS PHILIPPINES, INC., petitioner,

vs. ANECITO MOLON, AUGUSTO TECSON, JONATHAN
VILLONES, BIENVENIDO LAGARTOS, JAIME
CADION,+ EDUARDO TROYO, RODULFO MENDIGO,
AURELIO MORALITA, ESTANISLAO MARTINEZ,
REYNALDO VASQUEZ, ORLANDO GUANTERO,
EUTROPIO MERCADO, FRANCISCO GABON,
ROLANDO ARANDIA, REYNALDO TALBO, ANTONIO
DEVARAS, HONORATO ABARCA, SALVADOR
MAQUILAN, REYNALDO ANDUYAN, VICENTE CINCO,
FELIX RAPIZ, ROBERTO CATAROS, ROMEO
DOROTAN, RODOLFO ARROPE, DANILO CASILAN, and
SAUNDER SANTIAGO REMANDABAN III, respondents.

Remedial Law; Civil Procedure; Courts; Supreme Court; The

Supreme Court has the authority to sift through the factual findings
of both the Court of Appeals and the National Labor Relations
Commission in the event of their conflict.·Parenthetically, in a
special civil action for certiorari, the CA is authorized to make its
own factual determination when it finds that the NLRC gravely
abused its discretion in overlooking or disregarding evidence which
are material to the controversy. The Court, in turn, has the same
authority to sift through the factual findings of both the CA and the
NLRC in the event of their conflict. Thus, in Plastimer Industrial
Corporation v.

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* SECOND DIVISION.

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Pepsi-Cola Products Philippines, Inc. vs. Molon

Gopo, 643 SCRA 502 (2011), the Court explained: In a special civil
action for certiorari, the Court of Appeals has ample authority to
make its own factual determination. Thus, the Court of Appeals can
grant a petition for certiorari when it finds that the NLRC
committed grave abuse of discretion by disregarding evidence
material to the controversy. To make this finding, the Court of
Appeals necessarily has to look at the evidence and make its own
factual determination. In the same manner, this Court is not
precluded from reviewing the factual issues when there are
conflicting findings by the Labor Arbiter, the NLRC and the Court
of Appeals. x x x x.
Labor Law; Termination of Employment; Retrenchment; Words
and Phrases; Retrenchment is defined as the termination of
employment initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted by
management during periods of business recession, industrial
depression or seasonal fluctuations or during lulls over shortage of
materials.·Retrenchment is defined as the termination of
employment initiated by the employer through no fault of the
employee and without prejudice to the latter, resorted by
management during periods of business recession, industrial
depression or seasonal fluctuations or during lulls over shortage of
materials. It is a reduction in manpower, a measure utilized by an
employer to minimize business losses incurred in the operation of
its business. Under Article 297 of the Labor Code, retrenchment is
one of the authorized causes to validly terminate an employment.
Same; Same; Same; The employer must prove the requirements
for a valid retrenchment by clear and convincing evidence;
otherwise, said ground for termination would be susceptible to abuse
by scheming employers who might be merely feigning losses or
reverses in their business ventures in order to ease out employees.·
Essentially, the prerogative of an employer to retrench its
employees must be exercised only as a last resort, considering that
it will lead to the loss of the employeesÊ livelihood. It is justified only
when all other less drastic means have been tried and found
insufficient or inadequate. Corollary thereto, the employer must
prove the requirements for a valid retrenchment by clear and
convincing evidence; otherwise, said ground for termination would
be susceptible to abuse by scheming employers who might be

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merely feigning losses or reverses in their business ventures in

order to ease out employees. These requirements are: (1) That
retrenchment is reasonably necessary and likely

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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
(½) 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 employeesÊ 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 financial hardship for certain workers.
Same; Union Busting; Under Article 276(c) of the Labor Code,
there is union busting when the existence of the union is threatened
by the employerÊs act of dismissing the formerÊs officers who have
been duly-elected in accordance with its constitution and by-laws.·
Under Article 276(c) of the Labor Code, there is union busting when
the existence of the union is threatened by the employerÊs act of
dismissing the formerÊs officers who have been duly-elected in
accordance with its constitution and by-laws. On the other hand,
the term unfair labor practice refers to that gamut of offenses
defined in the Labor Code which, at their core, violates the
constitutional right of workers and employees to self-organization,
with the sole exception of Article 257(f) (previously Article 248[f]).
As explained in the case of Philcom Employees Union v. Philippine
Global Communications, 495 SCRA 214 (2006): Unfair labor
practice refers to acts that violate the workersÊ right to

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organize. The prohibited acts are related to the workersÊ right to

self-organization and to the observance of a CBA. Without that
element, the acts, no matter how unfair, are not unfair labor
practices. The only exception is Article 248(f) [now Article 257(f)].
Same; Quitclaims; A waiver or quitclaim is a valid and binding
agreement between the parties, provided that it constitutes a credible
and reasonable settlement and the one accomplishing it has done so
voluntarily and with a full understanding of its import.·A waiver
or

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quitclaim is a valid and binding agreement between the parties,

provided that it constitutes a credible and reasonable settlement
and the one accomplishing it has done so voluntarily and with a full
understanding of its import. The applicable provision is Article 232
of the Labor Code which reads in part: ART. 232. Compromise
Agreements.―Any compromise settlement, including those
involving labor standard laws, voluntarily agreed upon by the
parties with the assistance of the Bureau or the regional office of
the Department of Labor, shall be final and binding upon the
parties. x x x
Same; Illegal Dismissals; Reinstatement; Backwages; An
illegally dismissed employee is entitled to either reinstatement, if
viable, or separation pay if reinstatement is no longer viable, and
backwages.·An illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement is no
longer viable, and backwages. In certain cases, however, the Court
has ordered the reinstatement of the employee without backwages
considering the fact that (1) the dismissal of the employee would be
too harsh a penalty; and (2) the employer was in good faith in
terminating the employee. For instance, in the case of Cruz v.
Minister of Labor and Employment, 120 SCRA 15 (1983), the Court
ruled as follows: The Court is convinced that petitionerÊs guilt was
substantially established. Nevertheless, we agree with respondent
MinisterÊs order of reinstating petitioner without backwages instead
of dismissal which may be too drastic. Denial of backwages

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would sufficiently penalize her for her infractions. The bank

officials acted in good faith. They should be exempt from the burden
of paying backwages. The good faith of the employer, when
clear under the circumstances, may preclude or diminish
recovery of backwages. Only employees discriminately dismissed
are entitled to backpay. x x x.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.
The facts are stated in the opinion of the Court.

PERLAS-BERNABE, J.:
Assailed in this Petition for Review on Certiorari1 are
the March 31, 2006 Decision2 and September 18, 2006
Resolution3 of the Court of Appeals (CA) in CA-G.R. S.P.
No. 82354 which reversed and set aside the September 11,
2002 Decision4 of the National Labor Relations
Commission (NLRC) in NLRC Certified Case No. V-000001-
2000.5 The assailed CA issuances declared the illegality of
respondentsÊ retrenchment as well as held petitioner guilty
of unfair labor practice (ULP), among others.
The Facts
Petitioner Pepsi-Cola Products Philippines, Inc. (Pepsi)
is a domestic corporation engaged in the manufacturing,
bottling and distribution of soft drink products. In view of
its business, Pepsi operates plants all over the Philippines,
one of which is located in Sto. Niño, Tanauan, Leyte
(Tanauan Plant).

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1 Rollo, pp. 3-53.
2 Id., at pp. 55-70. Penned by Associate Justice Pampio A. Abarintos,
with Associate Justices Enrico A. Lazanas and Apolinario D. Bruselas,
Jr., concurring.
3 Id., at pp. 72-73. Penned by Associate Justice Pampio A. Abarintos,
with Associate Justices Agustin S. Dizon and Priscilla Baltazar-Padilla,
concurring.
4 CA Rollo, pp. 103-136. Penned by Presiding Commissioner Irenea E.
Ceniza, with Commissioner Oscar S. Uy, concurring and Commissioner
Edgardo M. Enerlan, dissenting.
5 Id., at pp. 103-104. Certified Case In Re: Labor Dispute at Pepsi-
Cola Products Philippines, Inc. NLRC Certified Case No. V-000001-2000

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(NCR CC No. 000171-99), NCMB-RBVIII-NS-07-10-99 and NCMB-

RBVIII-NS-07-14-99. Subsumed Cases: (1) RAB Case No. VIII-7-0301-
99 (For: Illegal Strike Under Article 217 of the Labor Code); (2) NLRC
Injunction Case No. V-000013-99; (3) RAB Case No. VIII-9-0432-99 to 9-
0560-99; and (4) RAB Case No. VIII-9-0459-99; Consolidated Cases: (1)
RAB Case No. VIII-03-0246-2000 to 03-0259-2000; and (2) NLRC
Injunction Case No. V-000003-2001.

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Respondents, on the other hand, are members of the

Leyte Pepsi-Cola Employees Union-Associated Labor Union
(LEPCEU-ALU), a legitimate labor organization composed
of rank-and-file employees in PepsiÊs Tanauan Plant, duly
registered with the Department of Labor and Employment
(DOLE) Regional Office No. 8.6
In 1999, Pepsi adopted a company-wide retrenchment
program denominated as Corporate Rightsizing Program.7
To commence with its program, it sent a notice of
retrenchment to the DOLE8 as well as individual notices to
the affected employees informing them of their termination
from work.9 Subsequently, on July 13, 1999, Pepsi notified
the DOLE of the initial batch of forty-seven (47) workers to
be retrenched.10 Among these employees were six (6)
elected officers and twenty-nine (29) active members of the
LEPCEU-ALU, including herein respondents.11
On July 19, 1999, LEPCEU-ALU filed a Notice of Strike
before the National Conciliation and Mediation Board
(NCMB) due to PepsiÊs alleged acts of union busting/ULP.12
It claimed that PepsiÊs adoption of the retrenchment
program was designed solely to bust their union so that
come freedom period, PepsiÊs company union, the Leyte
Pepsi-Cola Employees Union-Union de Obreros de Filipinas
#49 (LEPCEU-UOEF#49)―which was also the incumbent
bargaining union at that time―would garner the majority
vote to retain its

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6 Id., at p. 44. Registered on February 25, 1997, with Registration

Number R0800-97-02-UR-63.
7 Rollo, p. 56.
8 NLRC records, pp. 439-440. Through a letter dated June 28, 1999
sent by Eduardo T. Dabbay, General Manager of the Tanauan Plant.
9 Rollo, p. 56.
10 Id.
11 NLRC records, p. 44.
12 CA Rollo, p. 107.

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exclusive bargaining status.13 Hence, on July 23, 1999,

LEPCEU-ALU went on strike.14
On July 27, 1999, Pepsi filed before the NLRC a petition
to declare the strike illegal with a prayer for the loss of
employment status of union leaders and some union
members.15 On even date, then DOLE Secretary
Bienvenido A. Laguesma certified the labor dispute to the
NLRC for compulsory arbitration.16 A return-to-work order
was also issued.17
Incidentally, one of the respondents, respondent
Saunder Santiago Remandaban III (Remandaban), failed to
report for work within twenty-four (24) hours from receipt
of the said order. Because of this, he was served with a
notice of loss of employment status (dated July 30, 1999)
which he challenged before the NLRC, asserting that his
absence on that day was justified because he had to consult
a physician regarding the persistent and excruciating pain
of the inner side of his right foot.18
Eventually, Pepsi and LEPCEU-ALU agreed to settle
their labor dispute arising from the companyÊs
retrenchment program and thus, executed the Agreement
dated September 17, 1999 which contained the following
stipulations:

1. The union will receive 100% of the separation pay based on

the employeesÊ basic salary and the remaining 50% shall be released
by Management after the necessary deductions are made from the

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concerned employees;

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13 Rollo, p. 56.
14 CA Rollo, p. 110. Docketed as NCMB RBVIII-NS-07-10-99.
15 Id., at pp. 110, 112. Docketed as RAB Case No. VIII-7-0301-99.
16 Id., at p. 104. See also Rollo, p. 57.
17 Rollo, p. 57.
18 CA Rollo, pp. 113-114. Docketed as RAB Case No. VIII-9-0459-99.

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2. Both parties agree that the release of these benefits is

without prejudice to the filing of the case by the Union with the
National Labor Relations Commission;
3. The Union undertakes to sign the Quitclaim but subject to
the 2nd paragraph of this Agreement.19

Pursuant thereto, respondents signed individual release

and quitclaim forms in September 1999 (September 1999
quitclaims)20 stating that Pepsi would be released and
discharged from any action arising from their employment.
Notwithstanding the foregoing, respondents21 still filed
separate complaints for illegal dismissal with the NLRC.22
The NLRC Ruling
On September 11, 2002, the NLRC rendered a Decision23
in NLRC Certified Case No. V-000001-2000. Among the
cases subsumed and consolidated therein are the following
with the pertinent dispositions involving herein
respondents:
(1) In NCMB RBVIII-NS-0710-99 and NCMB-
RBVIII-NS-07-14-99, the NLRC absolved Pepsi of
the charge of union busting/ULP as it was not shown
that it (Pepsi) had any design to bust the union;24
(2) In NLRC Case No. 7-0301-99, the NLRC
declared LEPCEU-ALUÊs July 23, 1999 strike as
illegal for having

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19 Rollo, pp. 501-502.

20 Id., at pp. 360-407. Annexes „A to WW‰ of petitionerÊs February 1,
2011 Memorandum.
21 With the exception of Remandaban who did not execute any release
and quitclaim document and filed a separate complaint based on
different grounds.
22 CA Rollo, pp. 114. These were docketed as NLRC-RAB VIII Case
Nos. 9-0432-99 to 9-0458-99 and subsequently subsumed under NLRC
Certified Case No. V-000001-2000.
23 Id., at pp. 103-136.
24 Id., at pp. 106-110.

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been conducted without legal authority since

LEPCEU-ALU was not the certified bargaining agent
of the company. It was also observed that LEPCEU-
ALU failed to comply with the seven (7)-day strike
vote notice requirement. However, the NLRC denied
PepsiÊs prayer to declare loss of employment status of
the union officers and members who participated in
the strike for its failure to sufficiently establish the
identity of the culpable union officers as well as their
illegal acts;25
(3) In NLRC RAB VIII Case No. 9-0459-00, the
NLRC ordered Pepsi to reinstate Remandaban to his
former position without loss of seniority rights but
without backwages considering the lack of evidence
showing that he willfully intended to disregard the
July 27, 1999 return-to-work order;26 and
(4) In NLRC RAB VIII Case Nos. 9-0432-99 to 9-
0458-99, the NLRC dismissed respondentsÊ
complaints for illegal dismissal for having been finally
settled by the parties through the execution of
quitclaim documents by the respondents in favor of
Pepsi.27
Respondents moved for reconsideration, mainly alleging
that the NLRC erred when it declared that PepsiÊs
retrenchment program was valid.28 The motion was,

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however, denied by the NLRC in its Resolution dated

September 15, 2003.29
Aggrieved, respondents filed a petition for certiorari
before the CA,30 imputing grave abuse of discretion on the
part of the

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25 Id., at pp. 110-113.
26 Id., at pp. 113-114.
27 Id., at pp. 117-120.
28 Id., at pp. 14a-17.
29 Id., at pp. 14-19.
30 The petition (Id., at pp. 5-8) was initially dismissed due to
procedural flaws through the CAÊs March 19, 2004 Resolution (Id., at pp.
53-54). Respondents thereafter filed a Motion for Reconsideration With
Prayer To Submit Supplemental Brief In Support of Petition

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NLRC when it upheld the validity of their retrenchment.

They argued that the fact that Pepsi hired new employees
as replacements right after retrenching forty-seven (47) of
its workers negated the latterÊs claim of financial losses.31
In any event, the evidence was inadequate to prove that
Pepsi did suffer from any economic or financial loss to
legitimize its conduct of retrenchment.32
In opposition, Pepsi pointed out that the respondents
failed to assail the NLRCÊs finding that the controversy was
not about the validity of the retrenchment program but
only about the underlying conflict regarding the selection of
the employees to be retrenched;33 hence, the latter fact
should only remain at issue. Further, it claimed that its
financial/business losses were sufficiently substantiated by
the audited financial statements and other related evidence
it submitted.34
The CA Ruling
On March 31, 2006, the CA issued a Decision35 which
reversed and set aside the NLRCÊs ruling.

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It observed that Pepsi could not have been in good faith

when it retrenched the respondents given that they were
chosen because of their union membership with LEPCEU-
ALU. In this accord, it ruled that the subject retrenchment
was invalid because there was no showing that Pepsi em-

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For Certiorari and With Formal Appearance of Counsel (Id., at pp. 66-
97) which was granted by the CA in its August 17, 2004 Resolution (Id.,
at pp. 240-242).
31 Id., at p. 74.
32 Id., at pp. 76-77.
33 Id., at pp. 330-331.
34 Id., at pp. 334-338.
35 Rollo, pp. 55-70.

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ployed fair and reasonable criteria in ascertaining who

among its employees would be retrenched.36
Moreover, the CA held that Pepsi was guilty of ULP in
the form of union busting as its retrenchment scheme only
served to defeat LEPCEU-ALUÊs right to self-organization.
It also pointed out that the fact that Pepsi hired twenty-six
(26) replacements and sixty-five (65) new employees right
after they were retrenched contravenes PepsiÊs claim that
the retrenchment was necessary to prevent further losses.37
Further, the CA pronounced that the respondentsÊ
signing of the individual release and quitclaims did not
have the effect of settling all issues between them and
Pepsi considering that the same should have been read in
conjunction with the September 17, 1999 Agreement.38
Finally, the CA upheld the validity of LEPCEU-ALUÊs
July 23, 1999 strike, ruling that LEPCEU-ALU „was sure
to be the certified collective bargaining agent in the event
that a certification election will be conducted‰ and thus,
was authorized to conduct the aforesaid strike.39 It added
that there was no need for LEPCEU-ALU to comply with

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the fifteen (15) day cooling-off period requirement given

that the July 23, 1999 strike was conducted on account of
union busting.40 In support thereof, the CA noted41 that in
a related case involving the same retrenchment incident
affecting, however, other members of LEPCEU-
ALU―entitled „George C. Beraya, Arsenio B. Mercado,
Romulo A. Orongan, Pio V. Dado and Primo C. Palana v.
Pepsi Cola Products Philippines, Inc. (PCPPI), Pres. Jorge
G. Sevilla and Area GM Edgar D. Del Mar‰

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36 Id., at pp. 64-65.
37 Id., at pp. 67-68.
38 Id., at pp. 65-67.
39 Id., at pp. 61.
40 Id., at pp. 61-62.
41 Id., at p. 62.

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(Beraya)42―the NLRC issued a Decision dated November

24, 200343 finding Pepsi guilty of union busting/ULP.
Notably, in Beraya, the NLRC ruled that PepsiÊs
retrenchment program and the consequent dismissal of the
retrenched employees were valid.44
Dissatisfied with the CAÊs ruling, Pepsi moved for
reconsideration which was, however, denied by the CA in
its September 18, 2006 Resolution.45 Hence, the instant
petition.
Issues Before the Court
As culled from the records, the following issues have
been raised for the CourtÊs resolution: (1) whether the CA
may reverse the factual findings of the NLRC; (2) whether
respondentsÊ retrenchment was valid; (3) whether Pepsi
committed ULP in the form of union busting; (4) whether
respondentsÊ execution of quitclaims amounted to a final
settlement of the case; and (5) whether Remandaban was
illegally dismissed.

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The CourtÊs Ruling

The petition is meritorious.
A.  Appellate CourtÊs Evaluation of
the NLRCÊs Findings
Pepsi contends that the CA erred in evaluating and
examining anew the evidence and in making its own
finding of facts when the findings of the NLRC have been
fully supported by substantial evidence. It therefore claims
that the validity of the corporate rightsizing program,
integrity and binding effect of the executed quitclaims as
well as the issues

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42 Docketed as NLRC Case No. V-000115-2002.
43 NLRC records, pp. 743-748.
44 Id., at p. 748.
45 Rollo, at pp. 72-73.

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relating to union busting and ULP constitute factual

matters which have already been resolved by the NLRC
and are now beyond the authority of the CA to pass upon
on certiorari.
In contrast, respondents aver that the CA was clothed
with ample authority to review the factual findings and
conclusions of the NLRC, especially in this case where the
latter misappreciated the factual circumstances and
misapplied the law.
PepsiÊs arguments are untenable.
Parenthetically, in a special civil action for certiorari, the
CA is authorized to make its own factual determination
when it finds that the NLRC gravely abused its discretion
in overlooking or disregarding evidence which are material
to the controversy. The Court, in turn, has the same
authority to sift through the factual findings of both the CA
and the NLRC in the event of their conflict. Thus, in
Plastimer Industrial Corporation v. Gopo,46 the Court

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explained:

In a special civil action for certiorari, the Court of Appeals has

ample authority to make its own factual determination. Thus, the
Court of Appeals can grant a petition for certiorari when it finds
that the NLRC committed grave abuse of discretion by disregarding
evidence material to the controversy. To make this finding, the
Court of Appeals necessarily has to look at the evidence and make
its own factual determination. In the same manner, this Court is
not precluded from reviewing the factual issues when there are
conflicting findings by the Labor Arbiter, the NLRC and the Court
of Appeals. x x x x (Citations omitted.)

In this light, given the conflicting findings of the CA and

NLRC in this case, the Court finds it necessary to examine
the same in order to resolve the substantive issues.
Separately, it must be pointed out that the CA erred in
resolving the issues pertaining to LEPCEU-ALUÊs July 23,
1999

_______________
46 G.R. No. 183390, February 16, 2011, 643 SCRA 502, 509.

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strike in its March 31, 2006 Decision47 and September 18,

2006 Resolution48 (in CA-G.R. SP No. 82354) considering
that the parties therein―now, the respondents in this
case―do not have any legal interest in the said issue. To be
clear, NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99
are the cases which involve herein respondents; their
concern in those cases was the illegality of their
retrenchment. On the other hand, the strike issue was
threshed out in RAB Case No. VIII-7-0301-99 which
involved other members of LEPCEU-ALU. Although all
these cases were subsumed under NLRC Certified Case
No. V-000001-2000, the legality of the July 23, 1999 strike
was not raised by the respondents in NLRC-RAB VIII Case
Nos. 9-0432-99 to 9-0458-99. In view of these incidents,

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given that the CA has taken cognizance of a matter (i.e.,

the legality of the strike) where the parties (i.e.,
respondents) are devoid of any legal interest, the Court
sees no reason to perpetuate the misstep and delve upon
the same.
B.  Validity of Retrenchment
Retrenchment is defined as the termination of
employment initiated by the employer through no fault of
the employee and without prejudice to the latter, resorted
by management during periods of business recession,
industrial depression or seasonal fluctuations or during
lulls over shortage of materials. It is a reduction in
manpower, a measure utilized by an employer to minimize
business losses incurred in the operation of its business.49

_______________
47 Rollo, pp. 55-70.
48 Id., at pp. 72-73.
49 Philippine Carpet Employees Association v. Secretary of Labor and
Employment, G.R. No. 168719, February 22, 2006, 483 SCRA 128, 143,
citing Trendline Employees Association-Southern Philippines Federation
of Labor v. NLRC, 338 Phil. 681, 688; 272 SCRA 172, 179 (1997).

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Under Article 297 of the Labor Code,50 retrenchment is

one of the authorized causes to validly terminate an
employment. It reads:

ART. 297. 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, the worker

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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 closure 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 to 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. (Emphasis supplied.)

As may be gleaned from the afore-cited provision, to

properly effect a retrenchment, the employer must: (a)
serve a written notice both to the employees and to the
DOLE at least one (1) month prior to the intended date of
retrenchment; and (b) pay the retrenched employees
separation pay equivalent to one (1) month pay or at least
one-half (½) month pay for every year of service, whichever
is higher.
Essentially, the prerogative of an employer to retrench
its employees must be exercised only as a last resort,
considering that it will lead to the loss of the employeesÊ
livelihood. It is justified only when all other less drastic
means have been

_______________
50 Renumbered pursuant to Republic Act No. 10151.

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tried and found insufficient or inadequate.51 Corollary

thereto, the employer must prove the requirements for a
valid retrenchment by clear and convincing evidence;
otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be
merely feigning losses or reverses in their business
ventures in order to ease out employees.52 These
requirements are:
(1) That retrenchment is reasonably necessary and likely to prevent

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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 (½) 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 employeesÊ 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 financial hardship for certain workers.53

_______________
51 Supra note 46, at p. 144, citing Guerrero v. NLRC, 329 Phil. 1069,
1076; 261 SCRA 301, 307 (1996); and Somerville Stainless Steel
Corporation v. NLRC, 350 Phil. 859, 870; 287 SCRA 420, 431 (1998).
52 Id.
53 Id., at pp. 144-145, citing Asian Alcohol Corporation v. NLRC, 364
Phil. 912, 926-927; 305 SCRA 416, 429-430 (1999).

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In due regard of these requisites, the Court observes

that Pepsi had validly implemented its retrenchment
program:
(1) Records disclose that both the CA and the NLRC
had already determined that Pepsi complied with the
requirements of substantial loss and due notice to both the
DOLE and the workers to be retrenched. The pertinent
portion of the CAÊs March 31, 2006 Decision reads:

In the present action, the NLRC held that PEPSI-COLAÊs

financial statements are substantial evidence which carry great

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credibility and reliability viewed in light of the financial crisis that

hit the country which saw multinational corporations closing shops
and walking away, or adapting [sic] their own corporate rightsizing
program. Since these findings are supported by evidence submitted
before the NLRC, we resolve to respect the same. x x x x
The notice requirement was also complied with by PEPSI-COLA
when it served notice of the corporate rightsizing program to the
DOLE and to the fourteen (14) employees who will be affected
thereby at least one (1) month prior to the date of retrenchment.
(Citations omitted)54

It is axiomatic that absent any clear showing of abuse,

arbitrariness or capriciousness, the findings of fact by the
NLRC, especially when affirmed by the CA―as in this case
―are binding and conclusive upon the Court.55 Thus, given
that there lies no discretionary abuse with respect to the
foregoing findings, the Court sees no reason to deviate from
the same.
(2) Records also show that the respondents had already
been paid the requisite separation pay as evidenced by the
September 1999 quitclaims signed by them. Effectively, the
said quitclaims serve inter alia the purpose of
acknowledging

_______________
54 Rollo, p. 64.
55 See Acevedo v. Advanstar Company, Inc., G.R. No. 157656,
November 11, 2005, 474 SCRA 656, 664.

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receipt of their respective separation pays.56 Appositely,

respondents never questioned that separation pay arising
from their retrenchment was indeed paid by Pepsi to them.
As such, the foregoing fact is now deemed conclusive.
(3) Contrary to the CAÊs observation that Pepsi had
singled out members of the LEPCEU-ALU in implementing
its retrenchment program,57 records reveal that the
members of the company union (i.e., LEPCEU-UOEF#49)

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were likewise among those retrenched.58

Also, as aptly pointed out by the NLRC, PepsiÊs
Corporate Rightsizing Program was a company-wide
program which had already been implemented in its other
plants in Bacolod, Iloilo, Davao, General Santos and
Zamboanga.59 Consequently, given the general applicability
of its retrenchment program, Pepsi could not have intended
to decimate LEPCEU-ALUÊs membership, much less
impinge upon its right to self-organization, when it
employed the same.
In fact, it is apropos to mention that Pepsi and its
employees entered into a collective bargaining agreement
on October 17, 1995 which contained a union shop clause
requiring membership in LEPCEU-UOEF#49, the
incumbent bargaining union, as a condition for continued
employment. In this regard, Pepsi had all the reasons to
assume that all employees in the bargaining unit were all
members of LEPCEU-UOEF#49; otherwise, the latter
would have already lost their

_______________
56 Rollo, pp. 360-407.
57 Id., at p. 64. The CA disposed as follows; „Gleaned from the records,
the members of the LEPCEU-ALU were singled out to be retrenched.
Note that members of the other rival union did not file any case before
the Labor Arbiter and the NLRC. This scenario creates a suspicion in the
mind of the Court and bolsters our finding that indeed, the members of
the LEPCEU-ALU were among those chosen to be retrenched because of
their union membership.‰
58 NLRC records, pp. 43-44. Among the forty-seven (47) employees
retrenched only thirty-five (35) belonged to LEPCEU-ALU.
59 CA Rollo, p. 107.

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employment. In other words, Pepsi need not implement a

retrenchment program just to get rid of LEPCEU-ALU
members considering that the union shop clause already

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gave it ample justification to terminate them. It is then

hardly believable that union affiliations were even
considered by Pepsi in the selection of the employees to be
retrenched.60
Moreover, it must be underscored that PepsiÊs
management exerted conscious efforts to incorporate
employee participation during the implementation of its
retrenchment program. Records indicate that Pepsi had
initiated sit-downs with its employees to review the criteria
on which the selection of who to be retrenched would be
based. This is evidenced by the report of NCMB Region
VIII Director Juanito Geonzon which states that „[PepsiÊs]
[m]anagement conceded on the proposal to review the
criteria and to sit down for more positive steps to resolve
the issue.‰61
Lastly, the allegation that the retrenchment program
was a mere subterfuge to dismiss the respondents
considering PepsiÊs subsequent hiring of replacement
workers cannot be given credence for lack of sufficient
evidence to support the same.
Verily, the foregoing incidents clearly negate the claim
that the retrenchment was undertaken by Pepsi in bad
faith.
(5) On the final requirement of fair and reasonable
criteria for determining who would or would not be
dismissed, records indicate that Pepsi did proceed to
implement its rightsizing program based on fair and
reasonable criteria recommended by the company
supervisors.62
Therefore, as all the requisites for a valid retrenchment
are extant, the Court finds PepsiÊs rightsizing program and
the consequent dismissal of respondents in accord with law.

_______________
60 Id., at pp. 107-108.
61 Id., at p. 109.
62 Id., at p. 110.

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At this juncture, it is noteworthy to mention that in the

related case of Beraya―which involved the same
retrenchment incident affecting the respondents, although
litigated by other LEPCEU-ALU employees―the NLRC in
a Decision dated November 24, 2003 had already
pronounced that PepsiÊs retrenchment program was valid.63
Subsequently, the petitioners in Beraya elevated the case
via petition for certiorari to the CA64 which was, however,
denied in a Decision dated November 28, 2006.65 They
appealed the said ruling to the Court66 which was equally
denied through the Resolutions dated April 24, 200867 and
August 4, 2008.68 The fact that the validity of the same
Pepsi retrenchment program had already been passed upon
and thereafter sustained in a related case, albeit involving
different parties, behooves the Court to accord a similar
disposition and thus, finally uphold the legality of the said
program altogether.
C.  Union Busting and ULP
Under Article 276(c) of the Labor Code, there is union
busting when the existence of the union is threatened by
the employerÊs act of dismissing the formerÊs officers who
have been duly-elected in accordance with its constitution
and by-laws.69

_______________
63 NLRC records, p. 748.
64 Docketed as CA-G.R. SP No. 84383.
65 Rollo, pp. 517-533. Penned by Associate Justice Priscilla Baltazar-
Padilla, with Associate Justices Isaias P. Dicdican and Romeo F. Barza,
concurring.
66 Docketed as G.R. No. 181694 (George C. Beraya, et al. v. Pepsi-Cola
Products Phils., Inc.).
67 Rollo, p. 539.
68 Id., at p. 540.
69 Article 276(c) of the Labor Code provides in part:
(c)  In cases of bargaining deadlocks, the duly certified or
recognized bargaining agent may file a notice of strike or the
employer may file a notice of lockout with the Department at least
thirty (30) days before the intended date

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On the other hand, the term unfair labor practice refers

to that gamut of offenses defined in the Labor Code70
which, at their core, violates the constitutional right of
workers and employees to self-organization,71 with the sole
exception of Article 257(f) (previously Article 248[f]).72 As
explained in the

_______________
thereof. In cases of unfair labor practice, the period of notice
shall be fifteen (15) days and in the absence of a duly certified or
recognized bargaining agent, the notice of strike may be filed by
any legitimate labor organization in behalf of its members.
However in case of dismissal from employment of union
officers duly elected in accordance with the union
constitution and by-laws, which may constitute union
busting where the existence of the union is threatened, the
15-day cooling-off period shall not apply and the union may take
action immediately. (Emphasis supplied.)
70 Art. 257 of the Labor Code enumerates the unfair labor practices
by employers, while Art. 258 enumerates the unfair labor practices of
labor organizations.
71 Article 256 of the Labor Code provides in part:
ART.  256. Concept of Unfair Labor Practice and Procedure
for Prosecution Thereof.―Unfair labor practices violate the
constitutional right of workers and employees to self-
organization, are inimical to the legitimate interests of
both labor and management, including their right to bargain
collectively and otherwise deal with each other in an atmosphere
of freedom and mutual respect, disrupt industrial peace and
hinder the promotion of healthy and stable labor-management
relations.
Consequently, unfair labor practices are not only violations of
the civil rights of both labor and management but are also
criminal offenses against the State which shall be subject to
prosecution and punishment as herein provided. x x x x (Emphasis
supplied.)
72 (f)  To dismiss, discharge, or otherwise prejudice or discriminate
against an employee for having given or being about to give testimony

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under this Code; x x x.

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case of Philcom Employees Union v. Philippine Global

Communications:73

Unfair labor practice refers to acts that violate the workersÊ

right to organize. The prohibited acts are related to the workersÊ
right to self-organization and to the observance of a CBA. Without
that element, the acts, no matter how unfair, are not unfair labor
practices. The only exception is Article 248(f) [now Article 257(f)].
(Emphasis and underscoring supplied)

Mindful of their nature, the Court finds it difficult to

attribute any act of union busting or ULP on the part of
Pepsi considering that it retrenched its employees in good
faith. As earlier discussed, Pepsi tried to sit-down with its
employees to arrive at mutually beneficial criteria which
would have been adopted for their intended retrenchment.
In the same vein, PepsiÊs cooperation during the NCMB-
supervised conciliation conferences can also be gleaned
from the records. Furthermore, the fact that PepsiÊs
rightsizing program was implemented on a company-wide
basis dilutes respondentsÊ claim that PepsiÊs retrenchment
scheme was calculated to stymie its union activities, much
less diminish its constituency. Therefore, absent any
perceived threat to LEPCEU-ALUÊs existence or a violation
of respondentsÊ right to self-organization―as demonstrated
by the foregoing actuations―Pepsi cannot be said to have
committed union busting or ULP in this case.
D.  Execution of Quitclaims
A waiver or quitclaim is a valid and binding agreement
between the parties, provided that it constitutes a credible
and

_______________
73 Philcom Employees Union v. Philippine Global Communications,
G.R. No. 144315, July 17, 2006, 495 SCRA 214 citing Great Pacific Life

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Employees Union v. Great Pacific Life Assurance Corporation, G.R. No.

126717, 11 February 1999, 303 SCRA 113; and Cesario A. Azucena, Jr., II
The Labor Code with Comments and Cases 210 (5th ed. 2004).

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reasonable settlement and the one accomplishing it has

done so voluntarily and with a full understanding of its
import.74 The applicable provision is Article 232 of the
Labor Code which reads in part:

ART. 232. Compromise Agreements.―Any compromise settlement,

including those involving labor standard laws, voluntarily agreed
upon by the parties with the assistance of the Bureau or the
regional office of the Department of Labor, shall be final and
binding upon the parties. x x x (Emphasis and underscoring
supplied)

In Olaybar v. National Labor Relations Commission,75

the Court, recognizing the conclusiveness of compromise
settlements as a means to end labor disputes, held that
Article 2037 of the Civil Code, which provides that „[a]
compromise has upon the parties the effect and authority of
res judicata,‰ applies suppletorily to labor cases even if the
compromise is not judicially approved.76
In the present case, Pepsi claims that respondents have
long been precluded from filing cases before the NLRC to
assail their retrenchment due to their execution of the
September 1999 quitclaims. In this regard, Pepsi advances
the position that all issues arising from the foregoing must
now be considered as conclusively settled by the parties.
The Court is unconvinced.
As correctly observed by the CA, the September 1999
quitclaims must be read in conjunction with the September
17, 1999 Agreement, to wit:

_______________
74 Alabang Country Club, Inc. v. NLRC, G.R. No. 157611, August 9,
2005, 466 SCRA 329, 346, citing Wack Wack Golf and Country Club v.

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NLRC, G.R. No. 149793, April 15, 2005, 456 SCRA 280.
75 Olaybar v. NLRC, G.R. No. 108713, October 28, 1994, 237 SCRA
819.
76 J-Phil Marine, Inc. v. NLRC, G.R. No. 175366, August 11, 2008,
561 SCRA 675, 680, citing Olaybar at pp. 823-824.

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2. Both parties agree that the release of these benefits is

without prejudice to the filing of the case by the Union
with the National Labor Relations Commission;
3. The Union undertakes to sign the Quitclaim but
subject to the 2nd paragraph of this Agreement. x x x
(Emphasis and underscoring supplied)77

The language of the September 17, 1999 Agreement is

straightforward. The use of the term „subject‰ in the 3rd
clause of the said agreement clearly means that the signing
of the quitclaim documents was without prejudice to the
filing of a case with the NLRC. Hence, when respondents
signed the September 1999 quitclaims, they did so with the
reasonable impression that that they were not precluded
from instituting a subsequent action with the NLRC.
Accordingly, it cannot be said that the signing of the
September 1999 quitclaims was tantamount to a full and
final settlement between Pepsi and respondents.
E.  Dismissal of Remandaban
An illegally dismissed employee is entitled to either
reinstatement, if viable, or separation pay if reinstatement
is no longer viable, and backwages.78 In certain cases,
however, the Court has ordered the reinstatement of the
employee without backwages considering the fact that (1)
the dismissal of the employee would be too harsh a penalty;
and (2) the employer was in good faith in terminating the
employee. For instance, in the case of Cruz v. Minister of
Labor and Employment79 the Court ruled as follows:

_______________
77 Rollo, p. 501.

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78 Macasero v. Southern Industrial Gases Philippines, G.R. No.

178524, January 30, 2009, 577 SCRA 500, 507, citing Mt. Carmel College
v. Resuena, G.R. No. 173076, October 10, 2007, 535 SCRA 518, 541.
79 Cruz v. Minister of Labor and Employment, G.R. No. L-56591,
January 17, 1983, 120 SCRA 15, 20.

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The Court is convinced that petitionerÊs guilt was substantially

established. Nevertheless, we agree with respondent MinisterÊs
order of reinstating petitioner without backwages instead of
dismissal which may be too drastic. Denial of backwages
would sufficiently penalize her for her infractions. The bank
officials acted in good faith. They should be exempt from the burden
of paying backwages. The good faith of the employer, when
clear under the circumstances, may preclude or diminish
recovery of backwages. Only employees discriminately dismissed
are entitled to backpay. x x x (Emphasis and underscoring supplied)

Likewise, in the case of Itogon-Suyoc Mines, Inc. v.

National Labor Relations Commission,80 the Court
pronounced that „[t]he ends of social and compassionate
justice would therefore be served if private respondent is
reinstated but without backwages in view of petitionerÊs
good faith.‰
The factual similarity of these cases to RemandabanÊs
situation deems it appropriate to render the same
disposition.
As may be gathered from the September 11, 2002 NLRC
Decision, while Remandaban was remiss in properly
informing Pepsi of his intended absence, the NLRC ruled
that the penalty of dismissal would have been too harsh for
his infractions considering that his failure to report to work
was clearly prompted by a medical emergency and not by
any intention to defy the July 27, 1999 return-to-work
order.81 On the other hand, PepsiÊs good faith is supported
by the NLRCÊs finding that „the return-to-work-order of the
Secretary was taken lightly by Remandaban.‰82 In this
regard, considering RemandabanÊs ostensible dereliction of

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the said order, Pepsi could not be blamed for sending him a
notice of termination and eventually proceeding to dismiss
him. At any rate, it must be noted that while Pepsi
impleaded Remandaban as

_______________
80 Itogon-Suyoc Mines, Inc. v. NLRC, G.R. No. L-54280, September 30,
1982, 117 SCRA 523, 529.
81 CA Rollo, p. 114.
82 Id.

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party to the case, it failed to challenge the NLRC ruling

ordering his reinstatement to his former position without
backwages. As such, the foregoing issue is now settled with
finality.
All told, the NLRCÊs directive to reinstate Remandaban
without backwages is upheld.
WHEREFORE, the petition is GRANTED. The assailed
March 31, 2006 Decision and September 18, 2006
Resolution of the Court of Appeals in CA-G.R. S.P. No.
82354 are hereby REVERSED and SET ASIDE.
Accordingly, the September 11, 2002 Decision of the
National Labor Relations Commission is hereby
REINSTATED insofar as (1) it dismissed subsumed cases
NLRC-RAB VIII Case Nos. 9-0432-99 to 9-0458-99 and; (2)
ordered the reinstatement of respondent Saunder Santiago
Remandaban III without loss of seniority rights but
without backwages in NLRC-RAB VIII Case No. 9-0459-99.
SO ORDERED.

Carpio (Chairperson), Brion, Del Castillo and Perez,

JJ., concur.

Petition granted, judgment and resolution reversed and

set aside.

Notes.―Retrenchment to prevent losses is an

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authorized cause to dismiss an employee. (Talam vs.

National Labor Relations Commission, 617 SCRA 408
[2010])
The determination of the need to phase out a particular
department and consequent reduction of personnel and
reorganization as a labor and cost saving device is a
recognized management prerogative which the courts will
not generally interfere with. (Pantoja vs. SCA Hygiene
Products Corporation, 619 SCRA 216 [2010])
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