Pepsi Cola v.

Molon
Digest Author: Jet Garcia

Doctrine:
Absent any perceived threat to a union’s existence or a violation of an employee’s right to
self-organization, an employer cannot be said to have committed union busting or ULP.

Facts:

1. Petitioner Pepsi-Cola Products Philippines, Inc. (Pepsi) is a domestic corporation

engaged in the manufacturing, bottling and distribution of soft drink products. Pepsi
operates plants all over the Philippines, one of which is located in Sto. Niño,
Tanauan, Leyte (Tanauan Plant).
2. Respondents, on the other hand, are members of the Leyte Pepsi-Cola Employees
Union-Associated Labor Union (LEPCEU-ALU), a legitimate labor organization
composed of rank-and-file employees in Pepsi's Tanauan Plant
3. In 1999, Pepsi adopted a company-wide retrenchment program denominated as
Corporate Rightsizing Program.
a. To commence with its program, it sent a notice of retrenchment to the DOLE
as well as individual notices to the affected employees informing them of
their termination from work.
b. Subsequently, on July 13, 1999, Pepsi notified the DOLE of the initial batch of
47 workers. Among these employees were 6 elected officers and 29 active
members of the LEPCEU-ALU, including herein respondents
4. On July 19, 1999, LEPCEU-ALU filed a Notice of Strike before the National
Conciliation and Mediation Board (NCMB) due to Pepsi’s alleged acts of union
busting/ULP.
a. It claimed that Pepsi’s adoption of the retrenchment program was designed
solely to bust their union so that come freedom period, Pepsi’s company
union, the Leyte Pepsi-Cola Employees Union-Union de Obreros de Filipinas
#49 (LEPCEU-UOEF#49) – which was also the incumbent bargaining union
at that time – would garner the majority vote to retain its exclusive
bargaining status.
b. Hence, on July 23, 1999, LEPCEU-ALU went on strike.
5. On July 27, 1999, Pepsi filed before the NLRC a petition to declare the strike illegal
with a prayer for the loss of employment status of union leaders and some union
members. The DOLE Secretary Bienvenido A. Laguesma certified the labor dispute
to the NLRC for compulsory arbitration. A return-to-work order was also issued.
6. One of the respondents, respondent Saunder Santiago Remandaban III
(Remandaban), failed to report for work within twenty-four (24) hours from receipt
of the said order.
a. Because of this, he was served with a notice of loss of employment status
which he challenged before the NLRC, asserting that his absence on that day
was justified because he had to consult a physician regarding the persistent
and excruciating pain of the inner side of his right foot.
7. Eventually, Pepsi and LEPCEU-ALU agreed to settle their labor dispute arising from
the company’s retrenchment program and thus, executed the Agreement dated
September 17, 1999 which contained the following stipulations:
 a. 100% of the separation pay based on the employees’ basic salary and the
remaining 50% shall be released by Management after the necessary
deductions are made from the concerned employees;
b. Both parties agree that the release of these benefits is without prejudice to
the filing of the case by the Union with the NLRC
c. The Union undertakes to sign the Quitclaim but subject to the 2nd paragraph
of this Agreement.
8. Pursuant thereto, respondents signed individual release and quitclaim forms in
September 1999 (September 1999 quitclaims) stating that Pepsi would be released
and discharged from any action arising from their employment.
9. Notwithstanding the foregoing, respondents still filed separate complaints for illegal
dismissal with the NLRC.
10. The NLRC Ruling – in favor of Pepsi:
a. No union busting and No ULP
b. Strike illegal since LEPCEU-ALU was not the certified EBR.
i. Union also failed to comply with 7-day strike vote notice
requirement
c. But it also ruled:
i. Denial of Pepsi’s prayer to declare loss of employment status of the
union members and officers
ii. Order to reinstate Remandaban to former position
d. Dismissal of illegal dismissal case because of the quitclaim
11. MR denied. Certiorari to CA which reversed ruling of NLRC:
a. Pepsi could not have been in good faith when it retrenched the respondents
given that they were chosen because of their union membership with
LEPCEU-ALU.  no fail and reasonable criteria in retrenchment
b. Pepsi was guilty of ULP in the form of union busting as its retrenchment
scheme only served to defeat LEPCEU-ALU’s right to self-organization.
i. Pepsi hired 26 replacements and 65 new employees right after they
were retrenched contravenes Pepsi’s claim that the retrenchment
was necessary to prevent further losses.
c. The signing of the individual release and quitclaims did not have the effect of
settling all issues between them and Pepsi considering that the same should
have been read in conjunction with the September 17, 1999 Agreement.
d. CA upheld the validity of LEPCEU-ALU’s strike, ruling that LEPCEU-ALU "was
sure to be the certified collective bargaining agent in the event that a
certification election will be conducted" and thus, was authorized to conduct
the aforesaid strike.
i. It added that there was no need for LEPCEU-ALU to comply with the
fifteen (15) day cooling off period requirement given that the July 23,
1999 strike was conducted on account of union busting.40Dissatisfied
with the CA’s ruling, Pepsi moved for reconsideration which was,
however, denied by the CA in its September 18, 2006 Resolution.
12. Pepsi MR denied hence this petition.

Issues:
W/N the CA may review the factual findings of the NLRC  YES but the SC may also review
facts
W/N respondents’ retrenchment was valid  YES
W/N Pepsi committed ULP in the form of union busting  NO
W/N respondents’ execution of quitclaims amounted to a final settlement of the case  NO
W/N Remandaban was illegally dismissed

Ratio:
W/N the CA may review the factual findings of the NLRC  YES but the SC may also
review facts

1. Pepsi contends that the CA erred in evaluating and examining anew the evidence
and in making its own finding of facts when the findings of the NLRC have been fully
supported by substantial evidence. In contrast, respondents aver that the CA was
clothed with ample authority to review the factual findings and conclusions of the
NLRC, especially in this case where the latter misappreciated the factual
circumstances and misapplied the law. Pepsi’s arguments are untenable.
2. Parenthetically, in a special civil action for certiorari, the CA is authorized to
make its own factual determination when it finds that the NLRC gravely
abused its discretion in overlooking or disregarding evidence which are
material to the controversy. The Court, in turn, has the same authority to sift
through the factual findings of both the CA and the NLRC in the event of their
conflict. Thus, in Plastimer Industrial Corporation v. Gopo, the Court explained:
a. In a special civil action for certiorari, the Court of Appeals has ample
authority to make its own factual determination. Thus, the Court of Appeals
can grant a petition for certiorari when it finds that the NLRC committed
grave abuse of discretion by disregarding evidence material to the
controversy. To make this finding, the Court of Appeals necessarily has to
look at the evidence and make its own factual determination. In the
same manner, this Court is not precluded from reviewing the factual issues
when there are conflicting findings by the Labor Arbiter, the NLRC and the
Court of Appeals.
b. In this light, given the conflicting findings of the CA and NLRC in this case,
the Court finds it necessary to examine the same in order to resolve the
substantive issues.

W/N respondents’ retrenchment was valid  YES

1. Retrenchment is defined as the termination of employment initiated by the

employer through no fault of the employee and without prejudice to the latter,
resorted by management during periods of business recession, industrial
depression or seasonal fluctuations or during lulls over shortage of materials.
It is a reduction in manpower, a measure utilized by an employer to minimize
business losses incurred in the operation of its business.
a. Under Article 297 of the Labor Code, retrenchment is one of the authorized
causes to validly terminate an employment  ART. 297. Closure of
Establishment and Reduction of Personnel. – The employer may also
terminate the employment of any employee due to the installation of
labor saving devices, redundancy, retrenchment to prevent losses or the
closing or cessation of operation of the establishment or undertaking unless
the closing is for the purpose of circumventing the provisions of this Title, by
serving a written notice on the workers and the Ministry of Labor and
 Employment at least one (1) month before the intended date thereof. In case
of termination due to the installation of labor saving devices or redundancy,
the worker affected thereby shall be entitled to a separation pay equivalent
to at least his one (1) month pay or to at least one (1) month pay for every
year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to one (1) month pay or to at least one-
half (1/2) month pay for every year of service, whichever is higher. A
fraction of at least six (6) months shall be considered one (1) whole year.
(Emphasis supplied.)
2. As may be gleaned from the afore-cited provision, to properly effect a retrenchment,
the employer must: (a) serve a written notice both to the employees and to the
DOLE at least one (1) month prior to the intended date of retrenchment; and (b) pay
the retrenched employees separation pay equivalent to one (1) month pay or at
least one-half (½) month pay for every year of service, whichever is higher.
3. Essentially, the prerogative of an employer to retrench its employees must be
exercised only as a last resort, considering that it will lead to the loss of the
employees' livelihood. It is justified only when all other less drastic means have
been tried and found insufficient or inadequate. Corollary thereto, the employer
must prove the requirements for a valid retrenchment by clear and convincing
evidence; otherwise, said ground for termination would be susceptible to abuse by
scheming employers who might be merely feigning losses or reverses in their
business ventures in order to ease out employees. These requirements are:
a. That retrenchment is reasonably necessary and likely to prevent business
losses which, if already incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are reasonably imminent as
perceived objectively and in good faith by the employer;
b. That the employer served written notice both to the employees and to
the Department of Labor and Employment at least one month prior to the
intended date of retrenchment;
c. That the employer pays the retrenched employees separation pay
equivalent to one (1) month pay or at least one-half (½) month pay for every
year of service, whichever is higher;
d. That the employer exercises its prerogative to retrench employees in good
faith for the advancement of its interest and not to defeat or circumvent the
employees’ right to security of tenure; and
e. That the employer used fair and reasonable criteria in ascertaining who
would be dismissed and who would be retained among the employees, such
as status, efficiency, seniority, physical fitness, age, and financial hardship
for certain workers.
4. In due regard of these requisites, the Court observes that Pepsi had validly
implemented its retrenchment program:
a. Records disclose that both the CA and the NLRC had already determined that
Pepsi complied with the requirements of substantial loss and due notice to
both the DOLE and the workers to be retrenched. In the present action, the
NLRC held that PEPSI-COLA’s financial statements are substantial evidence
which carry great credibility and reliability viewed in light of the financial
crisis that hit the country which saw multinational corporations closing shops
and walking away, or adapting their own corporate rightsizing program.
 Since these findings are supported by evidence submitted before the NLRC,
we resolve to respect the same.
b. The notice requirement was also complied with by PEPSI-COLA when it
served notice of the corporate rightsizing program to the DOLE and to the
fourteen (14) employees who will be affected thereby at least one (1) month
prior to the date of retrenchment.
c. Records also show that the respondents had already been paid the requisite
separation pay as evidenced by the September 1999 quitclaims signed by
them. Effectively, the said quitclaims serve inter alia the purpose of
acknowledging receipt of their respective separation pays. Appositely,
respondents never questioned that separation pay arising from their
retrenchment was indeed paid by Pepsi to them. As such, the foregoing fact
is now deemed conclusive.
d. Contrary to the CA’s observation that Pepsi had singled out members of the
LEPCEU-ALU in implementing its retrenchment program, records reveal that
the members of the company union (i.e., LEPCEUUOEF#49) were
likewise among those retrenched.
e. Also, given the general applicability of its retrenchment program (done
in other areas – Iloilo, Zamboaganga, etc), Pepsi could not have
intended to decimate LEPCEUALU’s membership, much less impinge
upon its right to self-organization, when it employed the same.
f. Moreover, it must be underscored that Pepsi’s management exerted
conscious efforts to incorporate employee participation during the
implementation of its retrenchment program. Verily, the foregoing
incidents clearly negate the claim that the retrenchment was undertaken by
Pepsi in bad faith.
g. On the final requirement of fair and reasonable criteria for determining who
would or would not be dismissed, records indicate that Pepsi did proceed to
implement its rightsizing program based on fair and reasonable criteria
recommended by the company supervisors.
5. Therefore, as all the requisites for a valid retrenchment are extant, the Court finds
Pepsi’s rightsizing program and the consequent dismissal of respondents in accord
with law.

W/N Pepsi committed ULP in the form of union busting  NO

1. Under Article 276(c) of the Labor Code, there is union busting when the existence of
the union is threatened by the employer’s act of dismissing the former’s officers
who have been duly-elected in accordance with its constitution and by-laws.
2. On the other hand, the term unfair labor practice refers to that gamut of offenses
defined in the Labor Code which, at their core, violates the constitutional right of
workers and employees to self-organization, with the sole exception of Article
257(f) (previously Article 248[f]).
3. Unfair labor practice refers to acts that violate the workers' right to organize.
The prohibited acts are related to the workers' right to selforganization and to the
observance of a CBA. Without that element, the acts, no matter how unfair, are not
unfair labor practices. The only exception is Article 248(f) [now Article 257(f)].
4. Mindful of their nature, the Court finds it difficult to attribute any act of union
busting or ULP on the part of Pepsi considering that it retrenched its employees in
good faith. As earlier discussed, Pepsi tried to sit-down with its employees to arrive
 at mutually beneficial criteria which would have been adopted for their intended
retrenchment. In the same vein, Pepsi’s cooperation during the NCMB-supervised
conciliation conferences can also be gleaned from the records. Furthermore, the fact
that Pepsi’s rightsizing program was implemented on a company-wide basis dilutes
respondents’ claim that Pepsi’s retrenchment scheme was calculated to stymie its
union activities, much less diminish its constituency. Therefore, absent any
perceived threat to LEPCEU-ALU’s existence or a violation of respondents’
right to self-organization – as demonstrated by the foregoing actuations –
Pepsi cannot be said to have committed union busting or ULP in this case.

W/N respondents’ execution of quitclaims amounted to a final settlement of the case

 NO

1. A waiver or quitclaim is a valid and binding agreement between the parties,

provided that it constitutes a credible and reasonable settlement and the one
accomplishing it has done so voluntarily and with a full understanding of its import.
The applicable provision is Article 232 of the Labor Code which reads in part:
a. ART. 232. Compromise Agreements. — Any compromise settlement,
including those involving labor standard laws, voluntarily agreed upon by
the parties with the assistance of the Bureau or the regional office of the
Department of Labor, shall be final and binding upon the parties.
b. In Olaybar v. National Labor Relations Commission, the Court, recognizing
the conclusiveness of compromise settlements as a means to end labor
disputes, held that Article 2037 of the Civil Code, which provides that “a
compromise has upon the parties the effect and authority of res judicata,"
applies suppletorily to labor cases even if the compromise is not judicially
approved.
2. In the present case, Pepsi claims that respondents have long been precluded from
filing cases before the NLRC to assail their retrenchment due to their execution of
the September 1999 quitclaims. In this regard, Pepsi advances the position that all
issues arising from the foregoing must now be considered as conclusively settled by
the parties. The Court is unconvinced.
3. As correctly observed by the CA, the September 1999 quitclaims must be read in
conjunction with the September 17, 1999 Agreement, to wit:
a. Both parties agree that the release of these benefits is without prejudice to
the filing of the case by the Union with the National Labor Relations
Commission;
b. The Union undertakes to sign the Quitclaim but subject to the 2nd
paragraph of this Agreement.
4. The language of the September 17, 1999 Agreement is straightforward. The use of
the term "subject" in the 3rd clause of the said agreement clearly means that the
signing of the quitclaim documents was without prejudice to the filing of a case with
the NLRC. Hence, when respondents signed the September 1999 quitclaims, they did
so with the reasonable impression that that they were not precluded from
instituting a subsequent action with the NLRC. Accordingly, it cannot be said that
the signing of the September 1999 quitclaims was tantamount to a full and
final settlement between Pepsi and respondents.
W/N Remandaban was illegally dismissed  NO but since Pepsi failed to challenge
reinstatement order, the order became final

1. An illegally dismissed employee is entitled to either reinstatement, if viable, or

separation pay if reinstatement is no longer viable, and backwages. In certain cases,
however, the Court has ordered the reinstatement of the employee without
backwages considering the fact that (1) the dismissal of the employee would be too
harsh a penalty; and (2) the employer was in good faith in terminating the
employee. For instance, in the case of Cruz v. Minister of Labor and Employment the
Court ruled as follows:
a. The Court is convinced that petitioner's guilt was substantially
established. Nevertheless, we agree with respondent Minister's order of
reinstating petitioner without backwages instead of dismissal which may
be too drastic. Denial of backwages would sufficiently penalize her for
her infractions. The bank officials acted in good faith. They should be
exempt from the burden of paying backwages. The good faith of the
employer, when clear under the circumstances, may preclude or
diminish recovery of backwages. Only employees discriminately
dismissed are entitled to backpay.
b. Likewise, in the case of Itogon-Suyoc Mines, Inc. v. National Labor Relations
Commission,80 the Court pronounced that "the ends of social and
compassionate justice would therefore be served if private respondent is
reinstated but without backwages in view of petitioner's good faith." The
factual similarity of these cases to Remandaban’s situation deems it
appropriate to render the same disposition.
2. As may be gathered from the September 11, 2002 NLRC Decision, while
Remandaban was remiss in properly informing Pepsi of his intended absence, the
NLRC ruled that the penalty of dismissal would have been too harsh for his
infractions considering that his failure to report to work was clearly
prompted by a medical emergency and not by any intention to defy the July
27, 1999 return-to-work order.
a. On the other hand, Pepsi's good faith is supported by the NLRC's finding that
"the return-to-work-order of the Secretary was taken lightly by
.Remandaban."
b. In this regard, considering Remandaban 's ostensible dereliction of the said
order, Pepsi could not be blamed for sending him a notice of termination and
eventually proceeding to dismiss him. At any rate, it must be noted that
while Pepsi impleaded Remandaban as party to the case, it failed to
challenge the NLRC ruling ordering his reinstatement to his former position
without backwages. As such, the foregoing issue is now settled with finality.
c. The NLRC's directive to reinstate Remandaban without backwages is upheld.