I.

MANAGEMENT PREROGATIVE

In an employer-employee set-up, it takes two to tango. Employees

are integral part to the success of a business. Employers, on the other
hand, are like water that supplies the employees empty basin.
But while it is true that the State affords constitutional blanket of
protection to labor, it must also protect the right of employers to
exercise its management prerogatives as long as it is exercised in good
faith and without abuse of discretion.1
For over a long period of years, our laws has already recognized
and respected the exercise by managements of certain rights and
prerogatives. For this reason, courts often decline to interfere in
legitimate business decisions of employers. In fact, labor laws
discourage interference in employers judgment concerning the conduct
of their business.2

A. Management Prerogatives, Definition and Concept

Management prerogatives, as the Supreme Court tersely put,

allows employer to regulate, generally without restraint, according to
its own discretion and judgment, every aspect of its business. 3 This
privilege is inherent in the right of employers to control and manage
their enterprise effectively.4
Equally telling is the fact that the High Court recognized the
company policies and regulations, unless shown to be grossly
oppressive or contrary to law, to be generally valid and binding between
the parties and must be complied with until finally revised or amended,
unilaterally or preferably through negotiation, by competent authority.
The High Court always upholds the companys management prerogative
so long as they are exercised in good faith for the advancement of the
employers interest and not for the purpose of defeating or

1 Pantranco North Express, Inc. vs. NLRC, GR No. 106516, September 21, 1999.

2 Philippine Industrial Security Agency Corporation vs. Aguinaldo, G. R. No. 149974, June 15, 2005

3 Deles, Jr. vs. NLRC, G. R. No. 121348, March 9, 2000

4 Mendoza vs. Rural Bank of Lucban, G.R. No. 155421, 07 July 2004

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circumventing the rights of the employees under special laws or under
valid agreements.5

B. Limitations on the Exercise of Management Prerogatives

The exercise of management prerogative, however, is not

absolute. It is subject to the limitations imposed by law or by the
Collective Bargaining Agreement (CBA), employment contract, employer
policy or practice and general principles of fair play and justice.6

C. Extent of management prerogative to Prescribe working

methods, time, place, manner and other aspects of work

Employers have the freedom and prerogative, according to their

discretion and best judgment, to regulate and control all aspects of
employment in their business organizations. Such aspects of
employment include hiring, work assignments, working methods, time,
place and manner of work, tools to be used, processes to be followed,
supervision of workers, working regulations, transfer of employees, work
supervision, lay-off of workers and the discipline, dismissal and recall of
workers.7

D. Specific instances of management prerogatives

The Supreme Court has already ruled on the validity of the

following management prerogatives, to wit:

a) Transfer of Workers
The Supreme Court has recognized and upheld the prerogative
of management to transfer an employee from one office to another
within the business establishment, provided there is no demotion in
rank or diminution of salary, benefits, and other privileges; and the
action is not motivated by discrimination, made in bad faith, or effected
as a form of punishment or demotion without sufficient cause. This is a
5 Coca-Cola Bottlers Phils., Inc. vs. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, GR No. 148205,
Feb. 28, 2005.

6 The Philippine American Life and General Insurance Co. vs. Gramaje, G. R. No. 156963, Nov. 11,
2004

7 Philippine Airlines, Inc. vs. NLRC, G. R. No. 115785, Aug. 4, 2000

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privilege inherent in the employers right to control and manage its
enterprise effectively.8
But like all other rights, there are limits. The managerial
prerogative to transfer personnel must be exercised without grave
abuse of discretion and putting to mind the basic elements of justice
and fair play. Having the right should not be confused with the manner
that right is exercised. Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In particular, the
employer must be able to show that the transfer is not unreasonable,
inconvenient or prejudicial to the employee. Should the employer fail to
overcome this burden of proof, the employees transfer is tantamount to
constructive dismissal.9

b) Re assign workers
It is the employer's prerogative, based on its assessment
and perception of its employees' qualifications, aptitudes, and
competence, to move them around in the various areas of its business
operations in order to ascertain where they will function with maximum
benefit to the company. An employee's right to security of tenure does
not give him such a vested right in his position as would deprive the
company of its prerogative to change his assignment or transfer him
where he will be most useful. When his transfer is not unreasonable, nor
inconvenient, nor prejudicial to him, and it does not involve a demotion
in rank or diminution of his salaries, benefits, and other privileges, the
employee may not complain that it amounts to a constructive
dismissal.10

c) Reorganize its business

The Supreme Court, in a number of cases, has recognized
and affirmed the prerogative of management to implement a job

8 Mendoza vs. Rural Bank of Lucban, G. R. No. 155421, July 7, 2004

9 Globe Telecom, Inc. vs. Florendo-Flores, G. R. No. 150092, Sept. 27, 2002

10 Philippine Japan Active Carbon Corp. v. NLRC, March 8, 1989, Grio-Aquino, J., ponente: 171 SCRA
164

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evaluation program or a reorganization for as long as it is not contrary
to law, morals or public policy.11

d) Promote or not to promote employees

Promotion is the advancement from one position to another
involving increase in duties and responsibilities as authorized by law,
and increase in compensation and benefits.12
Apparently, the indispensable element for there to be a
promotion is that there must be an advancement from one position to
another or an upward vertical movement of the employees rank or
position. Any increase in salary should only be considered incidental but
never determinative of whether or not a promotion is bestowed upon an
employee. This can be likened to the upgrading of salaries of
government employees without conferring upon them, the concomitant
elevation to the higher positions.13
But although promotion is a gift or reward, an employee has
the right to refuse a promotion. There is no law which compels an
employee to accept a promotion. Any person may refuse to accept a gift
or reward. Such refusal to be promoted is a valid exercise of such right
and he cannot be punished therefor.14

e) Demote employees
There is demotion where there is reduction in position, rank
or salary as a result of a transfer.15
Under the law, the employer has the right to demote and
transfer an employee who has failed to observe proper diligence in his
work and incurred habitual tardiness and absences and indolence in his
assigned work.16
11 Hongkong and Shanghai Banking Corporation Employees Union vs. NLRC, G. R. No. 125038,
Nov. 6, 1997

12 Millares vs. Subido, 20 SCRA 954

13 Philippine Telegraph & Telephone Corporation vs. CA, G. R. No. 152057, Sept. 29, 2003

14 Erasmo vs. Home Insurance & Guaranty Corporation, G.R. No. 139251, Aug. 29, 2002

15 Philippine Wireless, Inc. [Pocketbell] vs. NLRC, G. R. No. 112963, July 20, 1999

16 Petrophil Corporation vs. NLRC, G. R. No. L-64048, Aug. 29, 1986

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 For instance, in the consolidated cases decided by the
Supreme Court, the employer claims that the employee was demoted
pursuant to a company policy intended to foster competition among its
employees. Under this scheme, its employees are required to comply
with a monthly sales quota. Should a supervisor such as the employee
(Fuerte) fail to meet his quota for a certain number of consecutive
months, he will be demoted, whereupon his supervisors allowance will
be withdrawn and be given to the individual who takes his place. When
the employee concerned succeeds in meeting the quota again, he is re-
appointed supervisor and his allowance is restored. The Supreme Court
said that this arrangement appears to be an allowable exercise of
company rights. An employer is entitled to impose productivity
standards for its workers, and in fact, non-compliance may be visited
with a penalty even more severe than demotion.17

f) Discipline erring workers

The power of the employers to subject its employees to
disciplinary measures and the need for discipline have been judicially
noted.
The employer has the prerogative to instill discipline in its
employees and to impose reasonable penalties, including dismissal, on
erring employees pursuant to company rules and regulations. 18
In another case, the Supreme Court ruled that the
employers right to conduct the affairs of his business, according to its
own discretion and judgment, includes the prerogative to instill
discipline in its employees and to impose penalties, including dismissal,
upon erring employees. This is a management prerogative where the
free will of management to conduct its own affairs to achieve its
purpose takes form. The only criterion to guide the exercise of its
management prerogative is that the policies, rules and regulations on
work-related activities of the employees must always be fair and
reasonable and the corresponding penalties, when prescribed,

17 Leonardo vs. NLRC, [G. R. No. 125303, June 16, 2000] and Fuerte vs. Aquino, [G. R. No.
126937, June 16, 2000]

18 San Miguel Corp. vs. NLRC, GR No. 74229, August 11, 1989

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commensurate to the offense involved and to the degree of the
infraction.19
Instilling discipline among its employees is a basic
management right and prerogative. Management may lawfully impose
reasonable penalties such as dismissal upon an employee who
transgresses the company rules and regulations.20
The employer cannot be compelled to maintain in his
employ the undeserving, if not undesirable, employees.21

g) Dismiss employees, to determine who to punish, to

prescribe rules and regulations and to impose a
penalty

The right of the employer to dismiss its erring employees is

a measure of self-protection.22 Additionally, the employer has wider
latitude to determine who among its erring officers or employees should
be punished, to what extent and what proper penalty to impose.23

On the other hand, the prerogative of an employer to

prescribe reasonable rules and regulations necessary or proper for the
conduct of its business and to provide certain disciplinary measures in
order to implement said rules, and to assure that the same would be
complied with has also been recognized.24
It is well recognized that company policies and regulations
are, unless shown to be grossly oppressive or contrary to law, generally
binding and valid on the parties and must be complied with until finally
revised or amended unilaterally or preferably through negotiation or by
competent authority.25 Hence, management may lawfully impose

19 St. Michaels Institute vs. Santos, G. R. No. 145280, Dec. 4, 2001

20 Deles, Jr. vs. NLRC, G. R. No. 121348, March 9, 2000

21 Shoemart, Inc. vs. NLRC, G. R. No. 74229, Aug. 11, 1989

22 Reyes vs. Minister of Labor, G. R. No. 48705, Feb. 9, 1989

23 Soriano vs. NLRC, G. R. No. 75510, Oct. 27, 1987

24 Phimco Industries, Inc. vs. NLRC, G. R. No. 118041, June 11, 1997

25 Alcantara, Jr. vs. CA, 386 SCRA 370 [2002]

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appropriate penalties on erring workers pursuant to company rules and
regulations.26
However, infractions committed by an employee should
merit only the corresponding sanction demanded by the circumstances.
The penalty must be commensurate with the act, conduct or omission
imputed to the employee and imposed in connection with the
employers disciplinary authority.27 Accordingly, in determining the
validity of dismissal as a form of penalty, the charges for which an
employee is being administratively cited must be of such nature that
would merit the imposition of the said supreme penalty. Dismissal
should not be imposed if it is unduly harsh and grossly disproportionate
to the charges. This rule on proportionality - that the penalty imposed
should be commensurate to the gravity of his offense - has been
observed in a number of cases.28

II. EMPLOYERS OBLIGATIONS

In order to attain and maintain industrial peace in the spirit of

harmony and cooperation, the employeremployee relationship should
be governed by law. The basic rights of employees should be respected
by the employers and the employees should render their obligations to
the employers. The success of any business enterprise does not rest
alone whimsically in the hands of one party. The law in the Philippines,
the Labor Code, the CBA and even the employment contract provides
for the rights and obligations of the two key players in the realm of
business.
Primarily, it is the employers obligation to advance and protect
the reputation and financial well-being of the company. The employer
has a moral obligation to make business decisions in a manner that
demonstrates concern for and seeks to advance the welfare of
employees. This includes but goes beyond a duty to treat employees
respectfully, to pay them fairly and provide good working conditions. An

26 Philippine Airlines, Inc. vs. NLRC, 337 SCRA 286 [2000]

27 Farrol vs. CA, G. R. No. 133259, Feb. 10, 2000

28 Felix vs. NLRC, G. R. No. 148256, Nov. 17, 2004

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ethical employer does not think of employees only as a means to an
end. Employees must be treated as an important element of a business.
Ethical employers consciously and consistently treat the promotion and
protection of the well-being of employees as an important business
obligation and objective.
Once the relationship between the employer and the employee
exists, an obligation on the part of the employer automatically begins.
Any employers in addition to special stipulations in the contract of
employment have the following obligations:

1) To provide work to the worker according to the contract of

employment for a normal 8 working hours.
2) To provide him with materials and implements necessary for the
performance of the work.
3) To pay the worker wages equivalent to the hours worked by
him/her and other necessary payments that should be made
including the payment of his/her benefits such as SSS
Premiums, PAG-IBIG Premiums, and Phil Health Insurance
Premiums.
4) To respect the workers human dignity.
5) To take all the necessary occupational safety and health
measures and to abide by the standards and directives given by
the appropriate authorities in respect of these measures.
6) To grant the worker incentives such as 13 th Month Pay, Service
Incentive Leave Credits if unsused, payment for overtime pay,
holiday pay and night shift differential if there is any.
7) To give the worker, weekly rest days public holidays and leaves.
8) To afford the worker due process in case of dismissal or
terminations.
9) When the contract of employment is terminated or whenever
the worker so requests, to provide the worker, free of charge,
with a certificate stating the type of work he performed, the
length of service and the salary he was earning.
10) To pay the worker a retirement pay compulsorily or after
he/she chooses to end his employment.

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 11) To provide and adapt programs for the welfare of the
workers and for the enhancement of the workers skills and
capabilities.
12) To maintain a harmonious and peaceful environment for the
workers to interact socially and intelligently.
13) To employ schemes to improve work conditions and to
exercise its management prerogatives accordingly.
14) To implement policies, rules and regulations in accordance
with the basic tenets of the law on labor and existing
jurisprudences.

The employer should not impede the worker in any manner in

exercise of his rights or take any measure against him because he
exercised his right. It is also unlawful to discriminate against female
workers, in matters of remuneration on the ground of their sex. Actually
the employer cannot discriminate between workers on the basis of
nationality, sex, religion, political outlook or any other conditions. The
contract of employment should be terminated, if necessary, accordingly.
Any employer cannot coerce any worker by force or in any other manner
to join or not to join or to cease to be a member of a trade union or to
vote for or against any given candidate in elections for trade union
offices. Every employee has the right to work in safe work place. So, the
employer should not require any worker to do any work which is
hazardous to his life.

III. Employees Obligations

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 Employees also have moral obligations, and they go beyond
giving a full days work for a full days pay. Loyalty goes both ways.
Employees should always be treated with respect and it is the
companys obligation to see that individual managers do not abuse their
power or mistreat their subordinates.

Every worker have the following obligations:

1) To perform in person the work specified in his contract of
employment
2) To follow instructions given by the employer based on the terms
of the contract and work rules
3) To handle with due care all instruments and tools entrusted to
him for work.
4) To report for work always in fit mental and physical conditions
5) To give all proper aid when an accident occurs or an imminent
danger threatens life or property in his place of work without
endangering his safety and health.
6) To inform the employer immediately of any act which endangers
himself or his fellow workers or which may prejudice the
interests of the undertakings.
7) To observe the provisions of this proclamation, collective
agreements, work rules and directives issued in accordance
with the law.
8) To abide by the policies, rules and regulations set forth by the
employer.

It is unlawful for a worker to intentionally commit, in the place of

work, any act which endangers life and property and to take away
property from the work place without the express authorizations of the
employer. If an employee report for work in a state of intoxication or
getting drunk he is trespassing employment law.
The employee should voluntarily submit himself for medical
examination when required by law or by employer for reasonable cause
except HIV/AIDS test.
IV. Role of Government

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 The Philippine government has played a major role in the
history of Labor in the country. It has created and promulgated laws that
protect the rights of the workers but did not oppress the welfare of the
employers.
The State has enshrined the basic policy of labor in the
articles of Labor Code; has guaranteed the rights of the workers in the
Constitution itself and laid down all other provisions pertaining to labor
in the Civil Code and related laws. In the declaration of basic policy, the
State shall afford protection of labor, promote full employment, ensure
equal work opportunities regardless of sex, age or creed, regulate the
relations between workers and employers and assured the rights of
workers to just and humane conditions of work, self-organization;
security of tenure and collective bargaining. It is a shared responsibility
aimed at a constitutional balance between protection to labor and
prevent oppression to capital.
Although the State affords full protection to the rights of
workers, the state has also provided limitations on the protection
afforded to the rights of the workers.
The Labor Code itself vests the Department of Labor with
the rule-making powers in the enforcement thereof.29 The Department of
Labor and Employment (DOLE) is the primary government agency
mandated to promote gainful employment opportunities, develop
human resources, protect workers and promote their welfare and
maintain industrial peace.
DOLE also recognizes the private sectors function as the
primary engine of economic growth. It bridges opportunities with more
significant employment generators. As a result, the Trade Union
Congress of the Philippines (TUCP) was established to map out
strategies for a unified labor center in its commitment to conduct and
support labor education, research and training programs, help achieve a
stable economy for the country through the medium of peaceful and
harmonious employer-employee relations, and to promote
democratization of wealth ownership as a means of achieving a sound,
stable and lasting economy.

29 PASEI vs. Drilon, GR No. 81958, June 30, 1988

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 Verily, the government has been very active in promoting
industrial peace and harmonious relationship between the two
significant key players in business since time immemorial. It is the
power of the Government laws, within constitutional limits, to promote
order, safety, health, morals and general welfare of society.30

V. Social Justice

The aim of the Government in enacting labor laws is social justice.

Social justice is neither communism nr despotism nor atomism nor
anarchy, but the humanization of laws and the equalization of social and
economic forces by the State so that justice in its rational and
objectively secular conception may at least be approximated. Social
justice means the PROMOTION OF THE WELFARE of all people, the
adoption by the government of measures calculated to ensure economic
stability of all the component elements of the society through the
maintenance of proper economic and social equilibrium in the
interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the
existence of all governments, on the time-honored principle of salus
populi est suprema lex.31
However, the cause of social justice is not served by upholding the
interest of the employees in disregard of the right of the company.
Social justice ceases to be an effective instrument for the equalization
of the social and economic forces by the State when it is used to shield
wrongdoing.32

The law in protecting the rights of the employees, authorizes

neither oppression nor self-destruction of the employer. It should be
made clear that when the law tilts the scales of justice in favor of labor,
it is in recognition of the inherent economic inequality between labor
and management. The intent is to balance the scales of justice; to put

30 People vs. Vera, GR No. 45478, April 5, 1939

31 Calalang vs. Williams, GR No. 47800, December 2, 1940

32 Jamer vs. NLRC, GR No. 112630, September 5, 1997

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the two parties on relatively equal positions. There may be cases where
the circumstances warrant favoring labor over the interests of
management but never should the scale be so tilted if the result is an
injustice to the employer. Justitia nemini neganda est -- justice is to
be denied to none.33

33 JPL Marketing Promotions v. Court of Appeals, G.R. No. 151966, 8 July 2005, 463 SCRA 136, 149-150

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