SC affirms 2006 CA decision upholding PAL retrenchment

After two decades, the Supreme Court reinstated the 2006 Court of Appeals decision upholding the retrenchment of flight attendants and stewards of the Philippine Airlines (PAL).

The Court of Appeals, in 2006 upheld the legality of the retrenchment of some 1,400 flight attendants in 1998 as part of PAL’s counter financial losses worth P90.6-billion.

In its 55-page decision made public Monday, the high court’s en banc said PAL’s retrenchment was made in good faith.

The high court noted that PAL could not have been motivated by ill will or bad faith as evidenced by its conduct before, during and after the implementation of the retrenchment plan.

The high court has commended PAL for its candor in relaying to Flight Attendants and Stewards Association of the Philippines (FASAP) its retrenchment program in 1998.

PAL, in its motion for reconsideration, said their financial constraints was never considered when in fact it could have been taken as a judicial notice as per records of the case since the early 2000.

The high court, in its recent ruling, said that PAL had been placed under corporate rehabilitation. It cited previous ruling that “consistently recognized PAL’s financial troubles while undergoing rehabilitation and suspension of payments.”

Some of the cases mentioned by the high court include Philippine Airlines vs. Kurangking, Philippine Airlines vs. Court of Appeals, Philippine Airlines vs. PALEA and Philippine Airlines vs. National Labor Relations Commission (NLRC).

“The Court uniformly upheld the suspension of monetary claims against PAL because of the SEC’s (Securities and Exchange Commission) order placing it under receivership. The Court emphasized the need to suspend the payment of the claims pending the rehabilitation proceedings in order to enable the management committee/receiver to channel the efforts towards restructuring and rehabilitation,” the high court said in the decision penned by Associate Justice Lucas Bersamin.

“Through these rulings, the Court consistently recognized PAL’s financial troubles while undergoing rehabilitation and suspension of payments. Considering that the ruling related to conditions and circumstances that had occurred during the same period as those obtaining in [this case], the Court cannot take a different view,” the high court said.

PAL’s financial woes started when members of the Airline Pilots Association of the Philippines (ALPAP) supposedly crippled its operations.

The high court said given the records of measures taken by PAL to recover from its financial woes, retrenchment was the last resort.

“As between maintaining the number of its flight crew and PAL’s survival, it was reasonable for PAL to choose the latter alternative. This Court cannot legitimately force PAL as a distressed employer to maintain its manpower despite its dire financial condition.”

“To be sure, the right of PAL as the employer to reasonable returns on its investments and to expansion and growth is also enshrined in the 1987 Constitution. Thus, although labor is entitled to the right to security of tenure, the State will not interfere with the employer’s valid exercise of its management prerogative,” the high court said.

The ruling recalled the high court’s July 22, 2008, decision which invalidated PAL’s order to cut down its number of employees and affirmed the Aug. 23, 2006 resolution of the Court of Appeals which upheld the legality of PAL’s retrenchment program.

Voting in favor of PAL were Associate Justices Lucas Bersamin, Diosdado Peralta, Estela Perlas Bernabe, Alfredo Benjamin Caguioa, Noel Tijam, Samuel Martires and Alexander Gesmundo

Associate Justices Marvic Leonen and Andres Reyes dissented from the ruling.

On the other hand, those who inhibited or took no part in deliberating the case were Acting Chief Justice Antonio Carpio and Associate Justices Presbitero Velasco Jr, Teresita Leonardo De Castro, Mariano Del Castillo and Francis Jardeleza.