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Linton Vs Hellera

Linton Commercial Co. implemented a compressed workweek that reduced employee working days from six to three days per week on a rotating basis. Sixty-eight employees filed a complaint alleging illegal reduction of work hours as Linton failed to notify the Department of Labor and Employment (DOLE) one month prior to implementation as required by law. While Linton claimed financial losses justified the change, court records showed the company remained profitable. The Supreme Court ruled the compressed workweek was unjustified and illegal as Linton did not demonstrate sufficient financial losses to warrant reducing employee work hours and pay.

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Jim M. Magadan
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216 views2 pages

Linton Vs Hellera

Linton Commercial Co. implemented a compressed workweek that reduced employee working days from six to three days per week on a rotating basis. Sixty-eight employees filed a complaint alleging illegal reduction of work hours as Linton failed to notify the Department of Labor and Employment (DOLE) one month prior to implementation as required by law. While Linton claimed financial losses justified the change, court records showed the company remained profitable. The Supreme Court ruled the compressed workweek was unjustified and illegal as Linton did not demonstrate sufficient financial losses to warrant reducing employee work hours and pay.

Uploaded by

Jim M. Magadan
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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LINTON COMMERCIAL CO., INC. et al. petitioner vs. ALEX A. HELLERA et al.

,
respondents.
G.R. No. 163147. October 10, 2007
TOPIC: Labor Law (Conditions of Employment)

FACTS:
Linton is a domestic corporation engaged in the business of importation,
wholesale, retail and fabrication of steel and its by-products. On 17 December 1997,
Linton issued a memorandum addressed to its employees informing them of the
company's decision to suspend its operations from 18 December 1997 to 5 January 1998
due to the currency crisis that affected its business operations. Linton submitted an
establishment termination report to the Department of Labor and Employment (DOLE)
regarding the temporary closure of the establishment covering the said period. The
company's operation was to resume on 6 January 1998. On 7 January 1998, Linton issued
another memorandum informing them that effective 12 January 1998, each worker would
be working on a rotation basis for three working days only instead for six days a week. On
the same day, Linton submitted an establishment termination report concerning the
rotation of its workers. Linton proceeded with the implementation of the new
policy without waiting for its approval by DOLE. Aggrieved, sixty-eight (68)
workers (workers) filed a Complaint for illegal reduction of workdays.
a) Private Respondent’s Argument (Hellera - won)
The workers pointed out that Linton implemented the reduction of work
hours without observing Article 283 of the Labor Code, which required submission
of notice thereof to DOLE one month prior to the implementation of reduction of
personnel, since Linton filed only the establishment termination report enacting
the compressed workweek on the very date of its implementation.

b) Petitioner’s Argument (Linton - lost)


Petitioners claimed that their business suffered a net loss primarily due to
currency devaluation and the slump in the market. Consequently, Linton decided
to reduce the working days of its employees to three (3) days on a rotation basis as
a cost-cutting measure. Further, petitioners alleged that the compressed workweek
was actually implemented on 12 January 1998 and not on 7 January 1998, and that
Article 283 was not applicable to the instant case.

ISSUE
Whether or not there was an illegal reduction of work when Linton implemented a
compressed workweek by reducing from six to three the number of working days with the
employees working on a rotation basis.

SC RULING
The Bureau of Working Conditions of the DOLE, released a bulletin providing for
in determining when an employer can validly reduce the regular number of working days.
The said bulletin states that a reduction of the number of regular working days is valid
where the arrangement is resorted to by the employer to prevent serious losses due to
causes beyond his control, such as when there is a substantial slump in the demand for
his goods or services or when there is lack of raw materials. Although the bulletin stands
more as a set of directory guidelines than a binding set of implementing rules, it has one
main consideration, consistent with the ruling in Philippine Graphic Arts Inc., in
determining the validity of reduction of working hours — that the company was suffering
from losses.

Petitioners attempt to justify their action by alleging that the company was suffering from
financial losses owing to the Asian currency crisis. A close examination of petitioners'
financial reports for 1997-1998 shows that, while the company suffered a loss of
P3,645,422.00 in 1997, it retained a considerable amount of earnings and operating
income. Clearly then, while Linton suffered from losses for that year, there remained
enough earnings to sufficiently sustain its operations. In business, sustained operations
in the black is the ideal but being in the red is a cruel reality. However, a year of financial
losses would not warrant the immolation of the welfare of the employees, which in this
case was done through a reduced workweek that resulted in an unsettling diminution of
the periodic pay for a protracted period. Permitting reduction of work and pay at the
slightest indication of losses would be contrary to the State's policy to afford protection to
labor and provide full employment.

Certainly, management has the prerogative to come up with measures to ensure


profitability or loss minimization. However, such privilege is not absolute. Management
prerogative must be exercised in good faith and with due regard to the rights of labor.

Financial losses must be shown before a company can validly opt to reduce the work hours
of its employees. However, to date, no definite guidelines have yet been set to determine
whether the alleged losses are sufficient to justify the reduction of work hours. If the
standards set in determining the justifiability of financial losses under Article 283 (i.e.,
retrenchment) or Article 286 (i.e., suspension of work) of the Labor Code were to be
considered, petitioners would end up failing to meet the standards. On the one hand,
Article 286 applies only when there is a bona fide suspension of the employer's operation
of a business or undertaking for a period not exceeding six (6) months. Records show that
Linton continued its business operations during the effectivity of the compressed
workweek, which spanned more than the maximum period. On the other hand, for
retrenchment to be justified, any claim of actual or potential business losses must satisfy
the following standards: (1) the losses incurred are substantial and not de minimis; (2)
the losses are actual or reasonably imminent; (3) the retrenchment is reasonably
necessary and is likely to be effective in preventing the expected losses; and (4) the alleged
losses, if already incurred, or the expected imminent losses sought to be forestalled, are
proven by sufficient and convincing evidence. Linton failed to comply with these
standards.

All taken into account, the compressed workweek arrangement was unjustified and
illegal. Thus, petitioners committed illegal reduction of work hours.

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