FASAP v. Philippine Airlines, G.R. No. 178083, October 2, 2009

Republic of the Philippines


G.R. No. 178083               October 2, 2009




For resolution is respondent Philippine Airlines, Inc.’s (PAL) Motion for Reconsideration1 of our Decision of July 22, 2008, the dispositive portion of which provides:

WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiter’s findings of illegal retrenchment and its Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED and SET ASIDE and a new one is rendered:

1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal;

2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were covered by the retrenchment and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority rights and other privileges, and to pay them full backwages, inclusive of allowances and other monetary benefits computed from the time of their separation up to the time of their actual reinstatement, provided that with respect to those who had received their respective separation pay, the amounts of payments shall be deducted from their backwages. Where reinstatement is no longer feasible because the positions previously held no longer exist, respondent Corporation shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of service;

3. ORDERING Philippine Airlines, Inc. to pay attorney’s fees equivalent to ten percent (10%) of the total monetary award.

Costs against respondent PAL.


In its Motion for Reconsideration, PAL maintains that it was suffering from financial distress which justified the retrenchment of more than 1,400 of its flight attendants. This, it argued, was an established fact. Furthermore, FASAP never assailed the economic basis for the retrenchment, but only the allegedly discriminatory and baseless manner by which it was carried out.

PAL asserts that it has presented proof of its claimed losses by attaching its petition for suspension of payments, as well as the June 23, 1998 Order of the Securities and Exchange Commission (SEC) approving the said petition for suspension of payments, in its Motion to Dismiss and/or Consolidation of Case filed with the Labor Arbiter in NLRC-NCR Case No. 06-05100-98, or the labor case subject of the herein petition. Also attached to the petition for suspension of payments were its audited financial statements for its fiscal year ending March 1998, and interim financial statements as of the end of the month prior to the filing of its petition for suspension of payments, as well as:

a) A summary of its debts and other liabilities;

b) A summary of its assets and properties;

c) List of its equity security shareholders showing the name of the security holder and the kind of interest registered in the name of each holder;

d) A schedule which contains a full and true statement of all of its debts and liabilities, together with a list of all those to whom said debts and liabilities are due;

e) An inventory which contains an accurate description of all the real and personal property, estate and effects of PAL, together with a statement of the value of each item of said property, estate and effects, their respective location and a statement of the encumbrances thereon.

In the instant Motion for Reconsideration, PAL attached a copy of its audited financial statements for fiscal years 1996, 1997 and 1998. It justifies the submission before the Court of Appeals of its 2002-2004, and not the 1996-1998, audited financial statements, to show that as of the time of their submission with the Court of Appeals, PAL was still under rehabilitation, and not for the purpose of establishing its financial problems during the retrenchment period.

PAL asserts further that the Court should have accorded the SEC’s findings as regards its financial condition respect and finality, considering that said findings were based on the financial statements and other documents submitted to it, which PAL now submits, albeit belatedly, via the instant Motion for Reconsideration. It cites the case of Clarion Printing House Inc. v. National Labor Relations Commission,2 where the Court declared that the appointment of a receiver or management committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due and there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties or paralyzation of business operations. On the other hand, it claims that in Rivera v. Espiritu,3 the Court made a finding that as a result of the pilots’ three-week strike that began on June 5, 1998, PAL’s financial situation went from bad to worse and it was faced with bankruptcy, requiring it to seek rehabilitation and downsize its labor force by more than one-third; and that said pilots’ strike was immediately followed by another four-day employee-wide strike on July 22, 1998, which involved 1,899 union4 members.

PAL likewise cites previous decisions of the Court which declared a suspension of claims against it in light of pending rehabilitation proceedings and the issuance of a stay order in the enforcement of all claims, whether for money or otherwise, which is effective from the date of its issuance until the dismissal of the petition or the termination of the rehabilitation proceedings.5 Moreover, it claims that the infusion of $200 million in PAL in June 1999 is proof of the airline’s financial distress, and was a condition sine qua non if PAL’s Amended and Restated Rehabilitation Plan were to be approved by the SEC, and if the absolute closure of PAL were to be averted.

PAL underscores that its situation in 1998 was unique, as it had to contend with—

the very distinct possibility that its losses would eventually result in default on its payments to creditors for its aircraft leases. If that happened, creditors could have immediately seized all its leased planes and that would have spelled PAL’s demise. The petition for rehabilitation and suspension of payments was precisely intended to avoid PAL’s collapse and eventual liquidation.6

Exercising its management prerogative and sound business judgment, it decided to cut its fleet of aircraft in order to minimize its operating losses and rescue itself from “total downfall;” which meant that a corresponding company-wide reduction in manpower necessarily had to be made. As a result, 5,000 PAL employees (including the herein 1,400 cabin attendants) were retrenched.

Further, PAL argues that aside from the confluence of simultaneous unfortunate events that occurred during the time, like successive strikes, peso depreciation and the Asian currency crisis, there was a serious drop in passenger traffic which necessitated the closure of PAL’s entire European, Australian, and Middle East operations and numerous Asian stations, as well as some of its domestic stations. Consequently, its 27 international routes were reduced to only 7, and its 37 domestic routes to just 17.

PAL claims that it did not act with undue haste in effecting the mass retrenchment of cabin attendants since, as early as February 17, 1998, consultations were being held in connection with the proposed retrenchment, and that twice-weekly meetings between the union and the airline were being held since February 12, 1998. It claims that it took PAL four months before the retrenchment scheme was finally implemented.

With regard to the implementation of Plan 22 instead of the original Plan 14, PAL asserts that, in so doing, it should not be found guilty of bad faith. It sets out the chronology of events that led it to implement Plan 22 instead of Plan 14, thus:

The initial plan was, indeed, to reduce PAL’s fleet from 54 planes to 14. With a smaller fleet, PAL necessarily had to reduce manpower accordingly, and this was the basis for the retrenchment. The retrenchment was done on the basis of the conditions and circumstances existing at that time. However, a series of events ensued—

PAL was placed under corporate rehabilitation by the SEC on June 23, 1998.

Later, on July 22, 1998, the rank-and-file employees belonging to PALEA staged a strike.

Then, on August 28, 1998, President Joseph Ejercito Estrada issued Administrative Order No. 16 creating Inter-Agency Task Force to aid PAL and its employees in solving the problem.

On September 4, 1998, PAL submitted an offer to the Task Force of a plan to transfer shares of stocks to its employees with a request to suspend existing Collective Bargaining Agreements, which was later rejected by the employees.

On September 23, 1998, PAL ceased operations.

Then, President Estrada intervened again through the request of PAL employees. PALEA made an offer, which was rejected by PAL. Finally, PALEA made an offer again which was successfully ratified by the employees on October 2, 1998 and accepted by PAL.

Subsequently, PAL partially resumed domestic operations on October 7, 1998 believing that the mutually beneficial terms of the suspension agreement could possibly redeem PAL. Later, it partially resumed its operations internationally (Los Angeles and San Francisco, United States).

True enough, with some degree of relief as a result of the suspension of payment and rehabilitation proceedings in the SEC and the suspension of the CBA, PAL began to see slow but steady improvements. Also, airline industry experts who were commissioned by PAL to assist in drafting its Amended and Restated Rehabilitation Plan came to a conclusion that PAL had to increase its fleet of planes to improve its financial and operational viability. This advice was adopted by PAL in its Amended and Restated Rehabilitation Plan, which was eventually approved by the SEC.

With these supervening events, PAL decided to implement Plan 22 upon reevaluation and optimistic future projection for its operations. The decision to abandon Plan 14 was not done with precipitate haste. The Honorable Court should appreciate that the chain of unfolding events after the retrenchment encouraged PAL, in the exercise of its sound business discretion, to implement Plan 22. This was not a capricious decision. In fact, the SEC approved PAL’s Amended and Restated Rehabilitation Plan, which includes, among others, PAL’s Fleet Plan composed of 22 planes.

Neither does it show that PAL was uncertain of its financial condition when it retrenched based on Plan 14. PAL would not have even petitioned the SEC for its rehabilitation were it not certain of its dire financial state. The decision to later abandon Plan 14 was a business judgment that PAL made in good faith upon the advice of foreign airline industry experts and in light of the supervening circumstances explained above.

In this regard, this Honorable Court has once held that—

“Questions of policy or of management are left solely to the honest decision of the board as the business manager of the corporation, and the court is without authority to substitute its judgment for that of the board, and as long as it acts in good faith and in the exercise of honest judgment in the interest of the corporation, its orders are not reviewable by the courts.”

On the basis of Plan 22, PAL decided to recall/rehire some of the retrenched employees.

With due respect, this Honorable Court is mistaken in its ruling that PAL acted in bad faith simply because it later on decided to recall or rehire the employees it initially retrenched. The decision to recall/rehire was a logical consequence of PAL’s decision to increase its fleet from 14 to 22 planes, which as discussed earlier, was a business judgment exercised in good faith by PAL after a series of significant events.

PAL did not even have any legal obligation to rehire the employees who have already been paid their separation pay and who have executed valid quitclaims. PAL, instead of being accused of bad faith for rehiring these employees, should in fact be commended. That the retrenched employees were given priority in hiring is certainly not bad faith. Noteworthy is the fact that PAL never hired NEW employees until November 2000 or more than 2 years after the 1998 retrenchment.

It is respectfully submitted that the legality of the retrenchment could not be made to depend on the fact that PAL recalled/rehired some of the employees after five months without taking into account the supervening events. At the exact time of retrenchment, PAL was not in a position to know with certainty that it could actually recover from the precarious financial problem it was facing and, if so, when.

The only thing PAL knew at that exact point in time was that it was in its most critical condition—when its liabilities amounted to about Php 85,109,075,351.00, while its assets amounted to only about Php 90,642,330,919.00 aggravated by many other circumstances as explained earlier. At the time of the retrenchment in June 1998, PAL was at the brink of total collapse and it could not have known that in five months, there will be supervening events that will impel it to reassess its initial decisions.

x x x x

In the present case, PAL beseeches this Honorable Court to take a second look at the peculiar facts and circumstances that clearly show that the recall/rehire was done in good faith. These facts and circumstances make the case of PAL totally different from the other cases decided by this Honorable Court where it found bad faith on the part of the employer for immediately rehiring or hiring employees after retrenchment.

x x x x

But even then, PAL still endeavored to recall or rehire the maximum number of FASAP members that it could. Thus, out of the 1,423 FASAP members who were retrenched, 496 were eventually recalled or reinstated (those who did not receive separation pay and opted to resume their employment with PAL with no loss of seniority).

On the other hand, 321 FASAP members were rehired (those who received separation pay and voluntarily rejoined PAL as new employees). In this regard, PAL would like to take exception to the Honorable Court’s observation that these employees were taken in as new hires without due regard to their long years of service. The FASAP members who were rehired as new employees were those who already received their separation pay because of the retrenchment but voluntarily accepted PAL’s offer for them to be rehired when Plan 22 was implemented. It cannot be said that they were prejudiced by the rehire process, as they already “cashed in” on their tenure when they accepted the separation pay. That they later on accepted PAL’s offer to rehire them as new employees was purely voluntary on their part.

Meanwhile, around 591 FASAP members opted not to return anymore after receiving their full separation pay. Thus, including those who voluntarily opted not to resume their employment with PAL, only about 591 can be considered to have remained unrecalled or unrehired.

It is significant to mention that FASAP directly and actively participated in the recall process, and even suggested the names of its members for prospective recall.

Likewise, in the recall process, PAL followed the provisions of the CBA and as a result, some of the recalled employees were assigned to lower positions (or “demoted” as noted by this Honorable Court). However, this was only because there were not enough positions for all of them to be restored to their previous posts. Evidently, with lesser planes flying international routes, not all international flight attendants would be restored to international flight posts. Some of them would be downgraded to domestic flights. This was the natural and logical effect of the fleet downsizing that PAL adopted. This could not be a badge of bad faith, as this Honorable Court seems to believe.

x x x x

Likewise, no bad faith should be inferred from PAL’s closure in September 1998. That decision was by no means easy being the national flag carrier and the oldest airline in Asia (having operated for 57 years at the time). The closure could not have been a mere retaliation for rejecting the offer of PAL, as it would have aggravated matters further and rendered rehabilitation impossible.

Hence, PAL’s decision to resume operations when the employees acceded to its request to suspend the CBA should be seen in this context. This was not a coercive posture. PAL resumed operations only because the suspension of the CBA, among others, gave it hope that it could recover.

Furthermore, any issue on the legality of the suspension of the CBA had already been put to rest by no less than this Honorable Court in the case of Rivera vs. Espiritu where it held that—

“The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the severe financial situation faced by the employer, with the peculiar and unique intention of not merely promoting industrial peace at PAL, but preventing the latter’s closure.”7 (Emphasis supplied)

PAL explains that the 140 probationary cabin attendants who were fired and subsequently rehired were part of an earlier retrenchment process in February and March 1998, a component of PAL’s “less drastic cost cutting measures” then being implemented. Eventually, these rehired probationary cabin attendants were included in the subject retrenchment of more than 1,400. Thus, it claims that it was inaccurate for the Court to have held that these 140 probationary cabin attendants were retained while those with permanent status were fired.

Finally, PAL begs the Court to reconsider its finding that the retrenchment scheme in question did not pass the test of fairness and reasonableness with respect to the criteria used in selecting those whose services should be retained or terminated. That it merely used the criteria stipulated in its CBA with FASAP where efficiency rating and inverse seniority are the basic considerations as carried over from the parties’ previous CBAs could allegedly be seen from the manner the retrenchment plan was carried out. The rating variables contained in the Performance Evaluation Form of each and every cabin crew personnel’s Grooming and Appearance Handbook are fair and reasonable since they are inherent requirements (“necessarily intertwined,” as PAL would put it) for employment as flight attendant or steward. More significantly, it claims that the criteria used in the implementation of the retrenchment scheme in question was based on the ratified PAL-FASAP 1996-2000 CBA, which should be considered as the law between the parties.

PAL believes that the Court may have misconstrued the significance of the term “other reasons” which the NLRC utilized in its summary of FASAP members and causes for their retrenchment,8 arguing that the use of the phrase does not necessarily mean that the employees were retrenched for obscure reasons that are not acceptable under the law; it simply points to the NLRC’s economy of language in lumping together various reasons for retrenchment, such as excess sick leaves, previous admonitions, suspensions, passenger complaints, poor performance, tardiness, etc. It claims that it used seniority in conjunction with a combination of these grounds in arriving at a conclusion of whether to retain or retrench.

PAL defends as well its use of a single year (1997) as basis for assessing the cabin attendants’ fitness for retention or retrenchment, stressing that its CBA with FASAP requires—as basis for reduction in personnel—only one efficiency rating, which should be construed as that obtained by each cabin attendant for a single year, in accordance with Section 112 of the CBA which provides:

In the event of redundancy, phase-out of equipment or reduction of operations, the following rules in the reduction of personnel shall apply:

A. Reduction in the number of Pursers:

1. In the event of a reduction of purser OCARs, pursers who have not attained an efficiency rating of 85% shall be downgraded to international Cabin Attendant in the reverse order of seniority.

2. If the reduction of purser OCARs would involve more than the number of pursers who have not attained an efficiency rating of 85%, then pursers who have attained an efficiency rating of 85% shall be downgraded to international Cabin Attendant in the inverse order of seniority.

B. In reducing the number of international Cabin Attendants due to reduction in international Cabin Attendant OCARs, the same process in paragraph A shall be observed. International Cabin Attendants shall be downgraded to domestic.

C. In the event of reduction of domestic OCARs thereby necessitating the retrenchment of personnel, the same process shall be observed.

In no case, however, shall a regular Cabin Attendant be separated from the service in the event of retrenchment until all probationary or contractual Cabin Attendant in the entire Cabin Attendants Corps, in that order, shall have been retrenched. (Emphasis and underscoring supplied)

PAL asserts that since efficiency ratings for each cabin or flight attendant are computed on an annual basis, it should therefore mean that when Section 112 referred to “an” efficiency rating of 85%, then it should logically and practically follow that only one year’s worth of performance should be used as criteria for the retrenchment of cabin attendants—that is, the most recent efficiency rating obtained by each of them. For purposes of the present case, it would necessarily be that for the year 1997, or the year immediately prior to the retrenchment, and no other.

Finally, regarding the quitclaims executed, PAL maintains that since the retrenchment scheme it implemented was essentially valid, then it should follow that the quitclaims are regular as well, and more so given the absence of mistake, duress, fraud or misrepresentation.

In its Comment9 to PAL’s Motion for Reconsideration, FASAP asserts that the issue is not centered on PAL’s financial condition but whether the retrenchment of the 1,400 cabin personnel was warranted. It alleges that:

The issue is whether or not the nature and extent of the financial circumstances and the methods used to resolve fiscal difficulties warranted the illegal and unceremonious dismissal of around 1,400 flight attendants, stewards, and cabin crew. It was the termination without considering the legal factors for retrenchment. Because of the difficulties that the entire nation was going through, the ostensible name given was retrenchment. But it was really an illegal dismissal and arbitrary termination. x x x

The casualties of illegal action, the ones sacrificed in the early stages of the situation and not as a last resort, are not the employer and its officers or owner. As the Honorable Court pointed out, the questioned action struck at the very heart of the workers’ employment, the lifeblood upon which the worker and his family owe their survival. No proof has been adduced in ten long years of litigation that retrenchment was only a measure of last resort, (that) other less drastic means were considered and tried and found inadequate.

x x x x

The Court has treated the instant case for what it truly is—an illegal retrenchment, one that was prematurely done and whimsically carried out. x x x

This is about a “bad faith” retrenchment—one which neither complied with the legal prerequisites therefor nor observed the provisions of the PAL-FASAP CBA thereon; one which was not employed as a last resort and which did not have any fair and reasonable criteria to serve as basis for selecting who would be retrenched; one which was capriciously and whimsically implemented; one which was illegally made.10

FASAP declares that although it recognized PAL’s financial difficulties in 1997 and 1998, it never conceded the same to be valid reason upon which to base the questioned retrenchment, citing that in proceedings below, the reasonable necessity of the retrenchment and its effectiveness in preventing losses to PAL had been squarely raised. FASAP maintains that prior negotiations with PAL (on the possible implementation of cost-cutting measures, employee rotation plans, triple and quadruple room sharing arrangements, allocation of vacation leaves without pay, etc.) is proof of that recognition, but that ultimately, it was incumbent upon PAL to have shown that it undertook a retrenchment scheme that was in proportion to and commensurate with the financial distress it was experiencing at the time.

Essentially, FASAP merely echoed our pronouncements, focusing upon our dissertation on each of the elements required in order to justify retrenchment, most of which were found lacking in PAL’s retrenchment program or scheme. Specifically, FASAP points to the lack of prior resort to cost-cutting measures, the rehiring of probationary employees, prior assurances by PAL that retrenchment was no longer necessary, and lack of fair and reasonable criteria in selecting the employees to retrench.

Specifically, mention is made that there is nothing in its then existing CBA with PAL which mandates that a single year—1997—should be used as the gauge or measure for determining the flight attendants’ performance for purposes of retrenchment. Asserting that PAL’s justification of its use of a single year was a “very strained interpretation” of the provisions in the CBA, FASAP insists that seniority, loyalty and past efficiency are requirements of law and jurisprudence which may not be summarily disregarded in choosing whom to retrench, demote or retain, a proposition it claims to find support in Article III, Section 7(A) of its CBA which provides:

The Association (FASAP) hereby acknowledges that the management of the Company (PAL) and the direction of its employees; x x x; and the lay-off and re-employment of employees in connection with increases or decreases in the work force are the exclusive rights and functions of management provided only that the Company act in accordance with applicable laws and the provisions of this Agreement.11 (Words in parentheses supplied)

FASAP goes on further to suggest that the basic criterion for effecting the retrenchment scheme should have been seniority, as enunciated in Maya Farms Employees Organization v. National Labor Relations Commission.12 In said case, the employer was constrained to streamline its manpower base owing to losses and setbacks in operations. Management sent notices of termination (due to redundancy) to 66 of its employees. In the labor case that ensued, the union pointed to a violation of a specific provision in its CBA which declared, thus:

Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in termination of employment in the line of work, the Last-In-First-Out (LIFO) Rule must always be strictly observed.

Ultimately, we held therein that the employer did not violate the LIFO rule in the CBA. We explained therein that—

It is not disputed that the LIFO rule applies to termination of employment in the line of work. Verily, what is contemplated in the LIFO rule is that when there are two or more employees occupying the same position in the company affected by the retrenchment program, the last one employed will necessarily be the first to go.

Moreover, the reason why there was no violation of the LIFO rule was amply explained by public respondent in this wise:

. . . The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment resulting in termination of employment in line of work, the employee who was employed on the latest date must be the first one to go. The provision speaks of termination in the line of work. This contemplates a situation where employees occupying the same position in the company are to be affected by the retrenchment program. Since there ought to be a reduction in the number of personnel in such positions, the length of service of each employee is the determining factor, such that the employee who has a longer period of employment will be retained.

In the case under consideration, specifically with respect to Maya Farms, several positions were affected by the special involuntary redundancy program. These are packers, egg sorters/stockers, drivers. In the case of packers, prior to the involuntary redundancy program, twenty-one employees occupied the position of packers. Out of this number, only 5 were retained. In this group of employees, the earliest date of employment was October 27, 1969, and the latest packer was employed in 1989. The most senior employees occupying the position of packers who were retained are as follows:

Santos, Laura C. Oct. 27, 1969

Estrada, Mercedes Aug. 20, 1970

Hortaleza, Lita June 11, 1971

Jimenez, Lolita April 25, 1972

Aquino, Teresita June 25, 1975

All the other packers employed after June 2, 1975 (sic) were separated from the service.

The same is true with respect to egg sorters. The egg sorters employed on or before April 26, 1972 were retained. All those employed after said date were separated.

With respect to the position of drivers, there were eight drivers prior to the involuntary redundancy program. Thereafter only 3 positions were retained. Accordingly, the three drivers who were most senior in terms of period of employment, were retained.

They are: Ceferino D. Narag, Efren Macaraig and Pablito Macaraig.

The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and Asst. Superintendent for meat processing respectively was presented by the union as an instance where the LIFO rule was not observed by management. The union pointed out that Lydia Bandong who was retained by management was employed on a much later date than Roberta Cabrera, and both are Assistant Superintendent. We cannot sustain the union’s argument. It is indeed true that Roberta Cabrera was employed earlier (January 28, 1961) and (sic) Lydia Bandong (July 9, 1966). However, it is maintained that in meat processing department there were 3 Asst. Superintendents assigned as head of the 3 sections thereat. The reason advanced by the company in retaining Bandong was that as Asst. Superintendent for meat processing she could “already take care of the operations of the other sections.” The nature of work of each assistant superintendent as well as experience were taken into account by management. Such criteria was not shown to be whimsical nor carpricious (sic).13

Finally, FASAP claims that PAL did not provide reasons for retrenching the more than 1,400 flight attendants; that it was only when it filed its Supplemental Memorandum before the Labor Arbiter in March 2000 that the airline submitted in evidence the ICCD Masterank and Seniority 1997 Ratings, which allegedly took into account the subjective factors such as appearance and good grooming, which supposedly require the written conformity of its members if they were to be considered at all, in accordance with Section 124, Article XXVI of the CBA.

By way of reply to FASAP’s Comment, PAL insists that its decision to downsize the flight fleet was the principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel; that the reduction in fleet size was an integral part of its SEC-approved rehabilitation plan; that the reduction in the number of its aircraft by 75%—from 54 to just 14—likewise necessitated a corresponding 75% reduction in its total cabin crew personnel; and that its subsequent decision to increase its remaining fleet from 14 aircraft to 22 was a “business judgment exercised in good faith after a series of significant events and upon the advice of airline industry experts who were assisting it in its rehabilitation efforts.”14 This increase from 14 to 22 aircraft was then included in its Amended and Restated Rehabilitation Plan, which was subsequently approved by the SEC. Because of this, it then had to increase its manpower; it recalled or rehired the services of the employees it had previously terminated.

PAL begs the Court to recognize this downsizing of aircraft as a valid exercise of its management prerogative to close its business operations, and not merely to reduce personnel. In other words, PAL would have the Court believe that its retrenchment program is not merely a reduction of personnel for the purpose of cutting on costs of operations, but as a closure of its business, a cessation of business operations to prevent further financial drain.15 PAL argues that cost-cutting measures could not have sufficed to nurse the airline back to financial health; it had to resort to partial closure of its business. Thus:

18. Moreover, how can PAL possibly implement the cost-cutting measures allegedly suggested by FASAP with 75% of its fleet already gone? The situation would be different if PAL retained its 54-plane fleet, and PAL’s only concern was to save on salaries and wages. In such a situation, PAL is indeed obliged to resort to “less drastic cost-cutting measures” before it can validly proceed with retrenchment. But this is not the case here. PAL’s financial condition could not have improved by merely adopting cost-cutting measures such as work rotation and forced leaves. In fact, retrenchment alone could not have saved PAL from financial ruin. PAL had to resort to the drastic action of partially closing its business operations by downsizing its fleet of aircrafts. This naturally resulted in the reduction of PAL’s personnel.

19. Assuming arguendo that the jurisprudence relied upon by FASAP apply, the proven facts in this case show that retrenchment was not the only option for PAL. The problem with FASAP is that it is taking a myopic view of what truly happened. It stubbornly claims that the reduction of employees is a simple case of retrenchment program that was implemented in the first instance. But it is clear from the record that when PAL suffered serious business losses, retrenchment was not the only option, obviously because the objective was to cut down on operating expenses as a whole, and not merely in terms of salaries and wages, which is the only purpose of a retrenchment.

20. What PAL did was to reduce its fleet of 54 planes to only 14 planes. It was only after PAL reduced its fleet of aircrafts that it had to terminate the employment of its employees who were already in excess of the workforce required under the reduced fleet set-up. In other words, retrenchment was merely a necessary and natural consequence of PAL’s earlier decision to downsize its fleet of aircrafts. There is thus simply no basis to say that PAL implemented retrenchment in the first instance.

x x x x

22. Neither is there basis to FASAP’s claim that PAL made the assurance that there will be no more need for retrenchment. How could have PAL given such assurance in light of its huge business losses, bordering on bankruptcy? The truth is, no such assurance was ever given by PAL. This is clear in the minutes of all of the meetings with FASAP where the only issue discussed was how to proceed with the retrenchment. These meetings were held in February to April 1998, or two to three months before the decision to reduce operations was made by PAL due to various serious supervening events—the strike staged by the Airline Pilots Association of the Philippines (ALPAP) and by the Philippine Airlines Employees Association (PALEA).16

On the use of efficiency ratings obtained for the year 1997 as singular basis for determining the fitness of cabin crew personnel to continue working with it, PAL explains that—

24. There is nothing unreasonable in using the year 1997 as basis for arriving at the efficiency ratings. FASAP’s insinuations that it ignored the employees’ alleged exceptional performance ratings and exemplary attendance records in the past are simply baseless, misleading and erroneous.

24.1. First, while an employee may rack up hundreds of awards and commendations and hundreds of hours of leave credits, it does not necessarily follow that the same employee, although admittedly of exceptional caliber, cannot be terminated if just or authorized cause subsequently exists. For instance, if there is redundancy, an employee holding a superfluous position may be terminated regardless of numerous awards and leave credits he may have earned. In this case, it cannot be denied that PAL’s reduction, or partial closure, of its business operations, i.e., downsizing its flight fleet from 54 to 14 aircrafts, in order to prevent business losses and avoid total closure of its business, is one of the recognized authorized causes expressly provided under Article 283 of the Labor Code.

PAL could, therefore, retrench employees regardless of the number of commendations, awards and accumulated leave credits the latter obtained in the course of employment provided, of course, that the retrenchment is valid and legal. In this case, the Labor Arbiter, the NLRC and the Court of Appeals unanimously found that the retrenchment is intrinsically valid and legal based on the same set of evidence. In fact, the Labor Arbiter categorically ruled:

there is no question that the rules imposed by law and jurisprudence to sustain retrenchment have been amply satisfied by PAL. The only issue at hand is whether or not the retrenchment can be upheld for complying with rules set forth in the collective bargaining agreement.

24.2. Second, in implementing retrenchment, the law does not require an employer to look back into far reaches of time to check every good deed performed by every employee. This would not only be highly impractical, but manifestly absurd as well. In evaluating job efficiency, it is enough for an employer to fix a determinate time frame within which to base its evaluation. It can be six months, one year, two years, three years or ten years. It can in fact be any period of time, subject to management’s sound discretion.

But to be fair and reasonable, the application of the period must be uniform and consistent. It cannot be one year for employee A, two years for employee B and three years for employee C. In this case, PAL selected a period of one year (the year 1997), which was uniformly and consistently applied to all, without exception.

The year 1997 was chosen by PAL as it was the most logical period being the year immediately preceding the retrenchment. All relevant records for the year 1997, such as attendance and performance evaluation, were complete and accurate. Certainly, the year 1997 was not selected for the purpose of discriminating against any employee, but with the sole objective of retaining the more efficient among the employees.

x x x x

26. FASAP then insists that the basic criterion to effect lay-off or retrenchment is seniority. FASAP cites Article VII, Section 23 of the PAL-FASAP 1995-2000 CBA:

The term “seniority” whenever used in this Agreement shall be deemed to mean a measure of a regular Cabin Attendant’s claim in relation to other regular Cabin Attendants holding similar positions, to preferential consideration whenever the Company exercises its right to promote to a higher paying position or lay-off of any Cabin Attendant.

27. FASAP obviously misread and misinterpreted Section 23 of the PAL-FASAP 1995-2000 CBA. The provision does not even mandate seniority to be a criterion whenever PAL implements a reduction or retrenchment, much less does it say that seniority is the one and only criterion to be applied. Section 23 simply defines seniority and states that seniority may be given “preferential consideration” whenever PAL exercises its right to promote to a higher paying position or lay-off of cabin attendants. PAL did just that in complying with Section 112 of the PAL-FASAP CBA 1995-2000 when seniority was applied whenever all other factors were found to be equal. PAL clearly followed Section 23 of the PAL-FASAP CBA in giving seniority preferential consideration. This is also reflected in the tabulation made by the NLRC in its Decision.17

PAL argues that in its past two CBAs with FASAP prior to the one under controversy, the same provisions and criteria for appearance, grooming, efficiency and performance were used, without objections having been advanced by FASAP.

During oral arguments, PAL advanced an altogether new line of reasoning that has, until now, never been advanced as the primary argument in defense of its retrenchment scheme: that the principal and true reason why PAL had to implement the mass lay-off of cabin personnel was not the downsizing of aircraft fleet size, but the June 5, 1998 pilots’ strike, where approximately six hundred (600) of its pilots apparently abandoned their planes and simultaneously refused to fly. Thus, counsel for PAL manifested to the Court that—


As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating because the pilots, if your Honors please, even left their place where they were at the time, somewhere in Bangkok, somewhere in Taipei and they just left the planes. Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and without airplanes flying, there would be no place for employment of cabin attendants.18 (Emphasis supplied)

As a result of this pilots’ strike, PAL claims to have suffered daily revenue losses equivalent to P100 million and P50 million of lost fixed costs, which came at a time when PAL had “no more money.”19 Owing to this pilots’ strike, PAL was brought to the brink of disaster and emergency that it needed to align the number of cabin attendants with the number of airplanes that were flying.20 After the pilots went on strike, PAL was left with only 68 pilots who chose to remain, but with 2,039 cabin attendants. Faced with this disproportionate ratio of pilots to cabin attendants, PAL immediately decided to terminate the services of more than 1,400 cabin attendants via the retrenchment scheme in question. At the same time, the reduction in fleet—which until that time remained a mere proposal—had to be immediately implemented, and cost-cutting measures were simply out of the question. Thus:


While meetings between PAL and FASAP may have occurred prior to June 1998 to discuss measures in which to possibly avoid retrenchment with its planned reduction of fleet, PAL’s financial circumstances drastically changed in June 1998 that necessitated immediate and corresponding measures. Harsh reality was that, there simply was no time. FASAP-suggested less drastic measures of work rotation, forced vacation leaves, hotel sharing etc. were no longer feasible. Indeed, reduction by about 5,000 employees, including 1,423 cabin crew, was the less drastic measure. The alternative, harsher obviously, was closure and liquidation.21 (Emphasis supplied)

All throughout, it has been impressed upon us that PAL’s decision to downsize its fleet size is the principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel. However, on oral arguments before us, PAL now makes a total turnaround and attributes the retrenchment to the June 5, 1998 pilots’ strike. Repeatedly, counsel for PAL blamed the pilots’ strike as the main culprit, thus:


As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating x x x. Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and without airplanes flying, there would be no place for employment of cabin attendants.

x x x x


Well, according to the Court, Your Honor, the Court principally invalidated this because, according to the Court it was fraudulent. And it was fraudulent because PAL misrepresented that it was losing, but in fact it was not as the Court found. So, in other words, if Your Honor please, as I have explained, there was no misrepresentation because the members of FASAP could not have but known that there were less planes that were flying. And they could not have but known that the number of cabin attendants cannot have exceed that which were required by the number of planes that were flying. So that was basically the reason for the redundancy and so it can never be said that this was redundant. But as I have said, if Your Honor please, if the Court reconsiders its finding that there was illegal dismissal there would really be no relevance to this quitclaim because, in any event, the separation pay has been received by some, except for those who declined it.

So therefore, if Your Honor please, if I may conclude since my time is practically up. First, there can hardly be any question, in fact, it is considered by FASAP and found by the National Labor Relations Commission, the Labor Arbiter, and the Court of Appeals that circumstances existed that did not only warrant the reduction of personnel including the members of FASAP and the cabin attendants but that these were compelled by circumstances. If the cabin attendants were not retrenched you would have a situation where cabin attendants would be there but were not needed but would earn compensation.

Second, if Your Honor please, as to the second issue, “cost-cutting measures”—they were contemplated. But when the pilots struck, an emergency situation arose and so there needed to be an immediate response to that situation and the only one of the components of that response is this retrenchment.

Incidentally, if Your Honor please, a basic core of the rehabilitation of PAL was for the creditors to agree. PAL is a different business than other businesses, Your Honor. An airline cannot stand still and the creditors’ demands are not met immediately, PAL would simply lose its airplanes. And so far as Point No. 3 is concerned, if Your Honor please, PAL did the best it could under the circumstances. And as to number 3, as I said, if Your Honor please, PAL acted in accordance with criteria in the Collective Bargaining Agreement which it followed meticulously and religiously.

Whereas for the fourth, if Your Honor please, there was no fraud in the execution of the quitclaim but I must emphasize once again that PAL’s case does not really rest on the quitclaims. PAL’s case rests on the response that we made on the first three (3) questions.

x x x x


Yes. As I explained, Your Honor, when the 1997 economic crisis took place and PAL saw that it was going to create a problem, PAL started studying measures already. But before it could implement any of these measures, even conclude the study the pilots struck, when the pilots struck the situations changed entirely. It put PAL in complete peril of total closure because no planes could fly, so that changed the picture, there was no more time to engage in cost-cutting measures. What needed to be done, if Your Honor please, is to do what was necessary to survive at that point? The first thing to do to survive was to fly as many planes as possible in order to earn some revenue. But you could only fly as many planes as there were pilots, and that was the reason for the initial flights.

x x x x


During these conferences, did FASAP not suggest any other cost-cutting measures in order to determine the immediate implementation of a retrenchment program?


Well, there was an endorsed initial conversation; there were suggestions if there is to be reduction of personnel, rotations, and so on and so forth, Your Honor. So, by the time the pilots struck you have to retrench quickly x x x.


Because related to this is a statement in our Decision that the retrenchment was illegal because it was not actually the last resort that PAL could have; it was not the last resort that PAL could have attended, well used. That means, there were other options that would probably have opened to PAL which would not be as detrimental to FASAP as retrenchment.


If Your Honor please, may I put it this way? It was not just the last; it was the only resort, Your Honor, because of these circumstances. There was no other option, but to operate flghts and spend only as necessary. If you have more cabin attendants than we required for those planes which were flying you are spending needlessly actually, Your Honor, and that is certainly not conducive to bring about a recovery of Philippine Airlines.

x x x x


You mentioned that…before that, that there is a need for rehabilitation because the PAL was in dire financial condition at that time, and it was…


Your Honor please, the rehabilitation came after the pilots’ strike. Actually, before the pilots’ strike the effort of PAL is to find the way to address the Asian economic crisis. It’s just like, if Your Honor please, a factory which is to be more efficient in order to be able to compete, let us say, with the imported goods, so you downsize or you may try to be more efficient but the situation PAL confronted after the pilots’ strike was entirely different. It was a case of survival already, Your Honor, because it meant closure and PAL was able to operate some planes only because of what they called management pilots. There were certain pilots who were occupying supervisory positions but who were employed still by PAL. They were the ones who actually flew the plane because the members of the pilots’ union simply stopped working.22 (Emphasis supplied)

On the other hand, FASAP argued and reiterated its original contentions, inter alia, that during negotiations for the implementation of cost-cutting measures, it was assured by PAL that since there were negotiations with possible investors who were being eyed as business partners, retrenchment was no longer necessary;23 that although it admitted PAL’s financial difficulties, it did not concede that these losses justified the urgency, necessity and extent of the questioned retrenchment scheme;24 that the ICCD Masterank Listing was an afterthought, the same having been presented only on March 13, 2000, and was never shown to the retrenched employees during the period of retrenchment;25 that the criteria for retrenchment did not conform to the CBA;26 and that no cost-cutting measures were implemented.27

PAL has all this time tried to convince the Court that its decision to downsize its flight fleet was the principal reason why it undertook a corresponding downsizing of cabin crew personnel. This time, however, it significantly changed stance and blamed the June 5, 1998 pilots’ strike as the real culprit which drove it to undertake the massive retrenchment under scrutiny. This time, PAL characterizes the retrenchment scheme and the downsizing of aircraft as mere necessary reactions to or unfortunate consequences of the pilots’ strike, which it claims likewise necessitated a disregard of all previous negotiations for the implementation of cost-cutting measures that could have rendered the retrenchment scheme unnecessary, and which cost-cutting measures it no longer found necessary to undertake.

We find this argument untenable. The strike was a temporary occurrence that did not necessitate the immediate and sweeping retrenchment of 1,400 cabin or flight attendants. By PAL’s own account, some of the striking pilots went back to work in July 1998, or less than one month after the strike began. Moreover, PAL admitted that it remedied the situation by employing “management pilots.”28 It could have hired new pilots as well. Certainly, it could have implemented the cost-cutting measures being discussed as a temporary measure to obviate the adverse effects of the pilots’ strike. There was no reason to drastically implement a permanent retrenchment scheme in response to a temporary strike, which could have ended at any time, or remedied promptly, if management acted with 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.

Besides, we cannot simply allow PAL to conveniently blame the striking pilots for causing the massive retrenchment of cabin personnel. Using them as scapegoats to validate a comprehensive retrenchment scheme of cabin personnel without observing the requirements set by law is both unfair and underhanded. PAL must still prove that it implemented cost-cutting measures to obviate retrenchment, which under the law should be the last resort. By PAL’s own admission, however, the cabin personnel retrenchment scheme was one of the first remedies it resorted to, even before it could complete the proposed downsizing of its aircraft fleet. It admittedly dropped all plans of implementing cost-cutting measures as soon as the pilots went on strike, and right away it sent notices of termination to its cabin personnel.29 This knee-jerk reaction would explain why it had to eventually recall and rehire some of the cabin attendants almost immediately after it retrenched them, because the retrenchment simply was not commensurate with the downsizing of aircraft fleet size. This outcome only proves to show that the decision to retrench came even before a final determination of how many aircraft were needed to be retained or discarded, or even before the rehabilitation plan could be approved.30

Again, it must be emphasized that in order for a retrenchment scheme to be valid, all of the following elements under Article 283 of the Labor Code must concur or be present, to wit:

(1) 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;

(2) 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;

(3) 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;

(4) 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,

(5) That the employer uses 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.

In the absence of one element, the retrenchment scheme becomes an irregular exercise of management prerogative. The employer’s obligation to exhaust all other means to avoid further losses without retrenching its employees is a component of the first element as enumerated above. To impart operational meaning to the constitutional policy of providing full protection to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting.31

In the instant case, PAL admitted that since the pilots’ strike allegedly created a situation of extreme urgency, it no longer implemented cost-cutting measures and proceeded directly to retrench. This being so, it clearly did not abide by all the requirements under Article 283 of the Labor Code. At the time it was implemented, the retrenchment scheme under scrutiny was not triggered directly by any financial difficulty PAL was experiencing at the time, nor borne of an actual implementation of its proposed downsizing of aircraft. It was brought about by—and resorted to as an immediate reaction to—a pilots’ strike which, in strict point of law and as herein earlier discussed, may not be considered as a valid reason to retrench, nor may it be used to excuse PAL for its non-observance of the requirements of the law on retrenchment under the Labor Code.

On the basis of the foregoing disquisition, we find no further need to discuss the other arguments advanced by the parties in their pleadings and during the oral arguments.

Therefore, this Court finds no reason to disturb its finding that the retrenchment of the flight attendants was illegally executed. As held in the Decision sought to be reconsidered, PAL failed to observe the procedure and requirements for a valid retrenchment. Assuming that PAL was indeed suffering financial losses, the requisite proof therefor was not presented before the NLRC which was the proper forum. More importantly, the manner of the retrenchment was not in accordance with the procedure required by law. Hence, the retrenchment of the flight attendants amounted to illegal dismissal. Consequently, the flight attendants affected are entitled to the reliefs provided by law, which include backwages and reinstatement or separation pay, as the case may be.

PAL begs the compassion of this Court and alleges that the monetary award it stands to pay to the affected flight attendants totals a whopping P2.3 billion, the payment of which will certainly paralyze its operations and even lead to its untimely demise. However, a careful review of the records of the case, as well as the respective allegations of the parties, shows that several of the crew members do not need to be paid full backwages or separation pay. A substantial fraction of the 1,400 flight attendants have already been either recalled, reinstated or relieved from the service. Still, some of them have reached the age of compulsory retirement or even died. Likewise, a significant portion of these retrenched flight attendants have already received separation pay and signed quitclaim. All of these factors, to the mind of the Court, will greatly reduce the quoted amount of the money judgment that PAL will have to pay.

After finality of this case, the records will have to be remanded to the Labor Arbiter who decided the case at the first instance. There, the actual amount of PAL’s liability to each and every flight attendant will be computed. Both parties will have a chance to submit further proof and argument in support of their respective proposed computations. For the guidance of the Labor Arbiter as well as the parties, this Court lays down the following yardsticks in the computation of the final amount of liability, in order to avoid any protracted and heated debates which can again lead to further delays in the final resolution of this case and the full realization by the retrenched flight attendants of the amounts necessary to compensate and indemnify them for the wrongful retrenchment.

1. Flight attendants who have been re-employed without loss of seniority rights shall be paid backwages but only up to the time of their actual reinstatement.

2. Flight attendants who have been re-employed as new hires shall be restored their seniority and other preferential rights. However, their backwages shall be computed only up to the date of actual re-hiring.

3. Flight attendants who have reached their compulsory age of retirement shall receive backwages up to the date of their retirement only. The same is true as regards the heirs of those who have passed away.

4. Flight attendants who have not been re-employed by PAL, including those who executed quitclaims and received separation pay or financial assistance, shall be reinstated without loss of seniority rights and paid full backwages. However, the amounts they already received should be deducted from whatever amounts are finally adjudged to them individually.

Four members of the Division voted to include a fifth (5th) criterion, namely that flight attendants who had obtained substantially equivalent or even more lucrative employment elsewhere in 1998 or thereafter are deemed to have severed their employment with PAL. They shall be entitled to full backwages from the date of their retrenchment only up to the date they found employment elsewhere.

On a final note, this Court finds that the award of attorney’s fees equivalent to 10% of the total monetary award should be tempered, considering the number of flight attendants who stand to receive monetary awards and the totality of all amounts due to them. To be sure, attorney’s fees in labor cases are awarded specifically in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests. In such cases, a maximum of 10% of the total monetary award is justifiable under Article 111 of the Labor Code, Section 8, Rule VIII, Book III of its Implementing Rules and paragraph 7, Article 2208 of the Civil Code.32 The award of attorney’s fees is proper where there is a showing that the lawful wages were not paid accordingly.33

x x x [T]here are two commonly accepted concepts of attorney’s fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances where these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically par. 7 thereof which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. The extraordinary concept of attorney’s fees is the one contemplated in Article 111 of the Labor Code, which provides:

Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered x x x

The afore-quoted Article 111 is an exception to the declared policy of strict construction in the awarding of attorney’s fees. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case.

In carrying out and interpreting the Labor Code’s provisions and its implementing regulations, the employee’s welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4 of the Labor Code which states that “[a]ll doubts in the implementation and interpretation of the provisions of [the Labor] Code including its implementing rules and regulations, shall be resolved in favor of labor”, and Article 1702 of the Civil Code which provides that “[i]n case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.” (Emphasis supplied)34

In the case of Concept Placement Resources, Inc. v. Funk,35 this Court reduced the amount of attorney’s fees which it ruled to be iniquitous and unconscionable after finding that the lawyer did not encounter difficulty in representing his client. It was held:

We observe, however, that respondent did not encounter difficulty in representing petitioner. The complaint against it was dismissed with prejudice. All that respondent did was to prepare the answer with counterclaim and possibly petitioner’s position paper. Considering respondent’s limited legal services and the case involved is not complicated, the award of P50,000.00 as attorney’s fees is a bit excessive. In First Metro Investment Corporation vs. Este del Sol Mountain Reserve, Inc., we ruled that courts are empowered to reduce the amount of attorney’s fees if the same is iniquitous or unconscionable. Under the circumstances obtaining in this case, we consider the amount of P20,000.00 reasonable.36

In the case at bar, we find that the flight attendants were represented by respondent union which, in turn, engaged the services of its own counsel. The flight attendants had a common cause of action. While the work performed by respondent’s counsel was by no means simple, seeing as it spanned the whole litigation from the Labor Arbiter stage all the way to this Court, nevertheless, the issues involved in this case are simple, and the legal strategies, theories and arguments advanced were common for all the affected crew members. Hence, it may not be reasonable to award said counsel an amount equivalent to 10% of all monetary awards to be received by each individual flight attendant. Based on the length of time that this case has been litigated, however, we find that the amount of P2,000,000.00 is reasonable as attorney’s fees. This amount should include all expenses of litigation that were incurred by respondent union.

WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED with FINALITY. The assailed Decision dated July 22, 2008 is AFFIRMED with MODIFICATION in that the award of attorney’s fees and expenses of litigation is reduced to P2,000,000.00. The case is hereby REMANDED to the Labor Arbiter solely for the purpose of computing the exact amount of the award pursuant to the guidelines herein stated.

No further pleadings will be entertained.


Associate Justice


Associate Justice

Associate Justice

Associate Justice

Associate Justice


I attest that the conclusions in the above resolution were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

Associate Justice
Chairperson, Third Division


Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Resolution were reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

Chief Justice


* Designated member vice Justice Teresita J. Leonardo-De Castro per raffle dated September 28, 2009.

1 Rollo, pp. 1549-1719.

2 G.R. No. 148372, June 27, 2005, 461 SCRA 272.

3 G.R. No. 135547, January 23, 2002, 374 SCRA 351.

4 Philippine Airlines Employees Association (PALEA).

5 Among others, Philippine Airlines v. Kurangking, G.R. No. 146698, September 24, 2002, 389 SCRA 588, cited in the main Decision of July 22, 2008.

6 Rollo, p. 1569.

7 Id. at 1571-1576.

8 Id. at 686.

9 Id. at 1726-1770.

10 Id. at 1727-1729.

11 Id. at 1752.

12 239 SCRA 508 (1994).

13 Id. at 515-517.

14 Id. at 1788.

15 Citing Alabang Country Club, Inc. v. NLRC, G.R. No. 157611, August 9, 2005, 466 SCRA 329.

16 Rollo, pp. 1793-1794.

17 Id. at 1796-1798.

18 Transcript of Stenographic Notes, March 18, 2009 Oral Arguments, pp. 10-11. (Emphasis supplied)

19 Id. at 11.

20 Id. at 12.

21 Rollo, p. 1925; Memorandum for PAL submitted after oral arguments. (Emphasis supplied)

22 Transcript of Stenographic Notes, March 18, 2009 Oral Arguments, pp. 10-11, 27-30, 62-66, 68-69. (Emphasis supplied)

23 Id. at 96.

24 Id. at 98.

25 Id. at 99.

26 Id. at 100.

27 Id. at 109-112.

28 Id. at 69.

29 The pilots’ strike was held on June 5, 1998; the retrenchment process (giving out of notices of retrenchment to the employees) was initiated on June 15, 1998, or just ten (10) days from the start of the pilots’ strike.

30 The rehabilitation plan was approved by the Securities and Exchange Commission (SEC) only on June 23, 1998.

31 Lopez Sugar Corporation v. Federation of Free Workers, 189 SCRA 179, 188 (1990).

32 San Miguel Corporation v. Del Rosario, G.R. Nos. 168194 & 168603, December 13, 2005, 477 SCRA 604, 619.

33 Id.

34 PCL Shipping Philippines, Inc. v. NLRC, G.R. No. 153031, December 14, 2006, 511 SCRA 44, 64-65, citing Reyes v. Court of Appeals, 456 Phil. 520, 539-540.

35 G.R. No. 137680, February 6, 2004, 422 SCRA 317.

36 Id. at 322-323