MANAGEMENT PREROGATIVE

MANAGEMENT PREROGATIVE
FIRST DIVISION G.R. No. 161615 January 30, 2009 ARNULFO O. ENDICO, Vs QUANTUM FOODS DISTRIBUTION CENTER, CARPIO, J.: petition for review

Quantum Foods hired Endico as Field Supervisor of Davao City and was provided a service vehicle. The agreement was that after five years of continuous service and paying 10% of the vehicle’s book value, possession & ownership would transfer to Endico. His good performance over the years was noted. Economic circumstances and costsaving needs led Quantum to reduce Endico’s 12 merchandisers to five. He was also ordered immediately relieved and required to turn over all company properties issued to him including the service vehicle. Endico complied with the advise to report to the head office.
A show cause memorandum was issued regarding Endico’s "serious misconduct due to mismanagement of sales area resulting to lost sales and goodwill with number one major account.", referring to their SM Cebu account. On the same day, Endico filed an application for leave of absence. He also denied the allegation, claiming proper coordination with SM. Endico presented a 3 May 1999 letter , where he informed Acuros and the head office that the SM account wanted a merchandiser assigned to it for a whole day coverage and that SM had rejected the merchandiser assigned to it with a half-day schedule. In another letter dated 7 May 1999, Endico updated the head office on the status of the SM account. Endico claimed denial of due process by Quantum Foods because he was immediately relieved without being given the opportunity to explain his side. On the same day, Endico also withdrew his application for leave of absence.
On 17 June 1999, Quantum Foods recalled Endico’s application for leave of absence; required him to report to the head office, and issued a Personnel Action Request for Endico’s transfer to the Head Office still as Area Sales Manager effective 14 June 1999. Endico failed to report for work despite two telegrams directing him to report to the head office.
Endico filed a complaint for constructive illegal dismissal, praying for the payment of separation pay, backwages, other monetary benefits, damages, attorney’s fees and recovery of the service vehicle.

The Labor Arbiter rendered a decision in Endico’s favor. Quantum Foods appealed to the NLRC. The NLRC affirmed the Labor Arbiter’s decision with modification that Endico pay 10% of the purchase price of the service vehicle. Quantum Foods filed a motion for reconsideration but was denied. Quantum Foods filed a petition for certiorari before the Court of Appeals. The Court of Appeals ruled in favor of Quantum Foods.

The Issues raised by Endico are whether:
1. he was constructively dismissed;
2. he is entitled to separation pay, backwages, other monetary benefits, damages and attorney’s fees; and
3. he is entitled to acquire the service vehicle.

The Ruling of the Court: petition has no merit.

1. A petition for review on certiorari under Rule 45 is limited to questions of law. An exception is where the findings of the Labor Arbiter and the NLRC vary from the findings of the Court of Appeals.

Jurisprudence recognizes the exercise of management prerogatives. Labor laws also discourage interference with an employer’s judgment in the conduct of its business. The Court often declines to interfere in legitimate business decisions of employers, as the law must protect not only the welfare of employees, but also the right of employers.

In the pursuit of its legitimate business interests, especially during adverse business conditions, management has the prerogative to transfer or assign employees but there must be no demotion in rank or diminution of salary, benefits and other privileges; and the action is not motivated by discrimination, bad faith, or a form of punishment or demotion without sufficient cause.30 Employees have the right to security of tenure but they do not have vested rights to their positions such that management is deprived of its prerogative.

But Managerial prerogatives are subject to limitations provided by law, collective bargaining agreements, and general principles of fair play and justice.33 The test for determining the validity of the transfer of employees is 34 as follows:

Xxxxx the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Should the employer fail to overcome this burden of proof, the employee’s transfer shall be tantamount to constructive dismissal, which has been defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely; as an offer involving a demotion in rank and diminution in pay. Likewise, constructive dismissal exists when an act of clear discrimination, insensibility or disdain by an employer has become so unbearable to the employee leaving him with no option but to forego with his continued employment.35

The decision of Quantum Foods to transfer Endico pending investigation was a valid exercise of management prerogative to discipline its employees. It was a preventive measure to avoid further loss of sales and the destruction of Quantum Foods’ image and goodwill. It was not designed to be the culmination of the on-going administrative investigation.

There was no demotion in rank or any diminution of Endico’s salary, privileges and other benefits. He was being transferred to the head office with the same position he held in Cebu. There was also no proof that the transfer involved a diminution of Endico’s salary, privileges and other benefits.

On the alleged inconvenience on Endico and his family because of the transfer to the head office, the transfer is valid, as there is no showing of bad faith on the part of Quantum Foods. Quantum Foods, considering the declining sales and the loss of a major account in Cebu, was acting in the legitimate pursuit of what it considered its best interest in deciding to transfer Endico to the head office.

Since we have ruled that Quantum Foods did not constructively dismiss Endico, there is no need to discuss the other issues raised by Endico.

PETITION DENIED AND THE CA DECISION AFFIRMED.