FASAP VS.

PAL PAL must still prove that it implemented cost-cutting

measures to obviate retrenchment, which under the
October 2, 2009/ G.R. No. 178083
law should be the last resort. By PAL’s own admission,
FACTS: Cabin crew personnel were covered by the however, the cabin personnel retrenchment scheme
retrenchment and demotion scheme of PAL due to was one of the first remedies it resorted to, even before
financial distress which is evidenced by proof of its it could complete the proposed downsizing of its
claimed losses in a petition for suspension of payments, aircraft fleet.
as well as the Order of the Securities and Exchange
The following elements under Article 283 of the Labor
Commission (SEC) approving the said petition for
Code must concur or be present, to wit:
suspension of payments, together with proof of
summary of its debts and other liabilities. (1) That retrenchment is reasonably necessary and
likely to prevent business losses which, if already
Exercising its management prerogative and sound
incurred, are not merely de minimis, but substantial,
business judgment, it decided to cut its fleet of aircraft
serious, actual and real, or if only expected, are
in order to minimize its operating losses and rescue
reasonably imminent as perceived objectively and in
itself from “total downfall;” which meant that a
good faith by the employer;
corresponding company-wide reduction in manpower
necessarily had to be made. As a result, 5,000 PAL (2) That the employer served written notice both to
employees (including the herein 1,400 cabin the employees and to the Department of Labor and
attendants) were retrenched. Employment at least one month prior to the intended
date of retrenchment;
PAL, however, gave a whole different reason for
retrenchment when the pilots went on strike. (3) That the employer pays the retrenched
Accordingly, what really brought about “the really employees separation pay equivalent to one (1) month
perilous situation of closure was that on June 5, 1998, pay or at least one-half (½) month pay for every year of
the pilots went on strike, ninety (90%) per cent of the service, whichever is higher;
pilots went on strike, approximately six hundred (600).”
(4) That the employer exercises its prerogative to
These pilots’ strike was so devastating x x x. Without
retrench employees in good faith for the advancement
any pilots no plane can fly, your Honor, that is the stark
of its interest and not to defeat or circumvent the
reality of the situation, and without airplanes flying,
employees’ right to security of tenure; and,
there would be no place for employment of cabin
attendants. (5) That the employer uses fair and reasonable
criteria in ascertaining who would be dismissed and
ISSUE: Whether or not the strike, which PAL used as
who would be retained among the employees, such as
basis to undertake the massive retrenchment under
status, efficiency, seniority, physical fitness, age, and
scrutiny, is an authorized cause.
financial hardship for certain workers.
RULING: The strike was a temporary occurrence that did
In the absence of one element, the retrenchment
not necessitate the immediate and sweeping
scheme becomes an irregular exercise of management
retrenchment of 1,400 cabin or flight attendants.
prerogative.
There was no reason to drastically implement a
The retrenchment scheme under scrutiny was not
permanent retrenchment scheme in response to a
triggered directly by any financial difficulty PAL was
temporary strike, which could have ended at any time,
experiencing at the time, nor borne of an actual
or remedied promptly, if management acted with
implementation of its proposed downsizing of aircraft.
alacrity. Juxtaposed with its failure to implement the
required cost-cutting measures, the retrenchment
scheme was a knee-jerk solution to a temporary
problem that beset PAL at the time.