Published — May 10, 2018
The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.
Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
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Despite the constitutional mandate to afford full protection to labor, the employer also has certain rights that need to be recognized. The employer enjoys what are commonly known as management prerogative, where interference with an employer’s judgment in the conduct of its business is discouraged. For this reason, even the labor authorities themselves, or our courts, often decline to interfere in legitimate business decisions of employers. It is so because the law must protect not only the welfare of employees, but also the right of employers [See: G.R. No. 161615].
Concept of management prerogative
Under the doctrine of management prerogative, every employer has the inherent right to regulate, according to his own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, the time, place and manner of work, work supervision, transfer of employees, lay-off of workers, and discipline, dismissal, and recall of employees [See: G.R. No. 198534].
Indeed, the manner in which management conducts its own affairs to achieve its purpose is within the management’s discretion [See: G.R. No. 179428]. The only limitations to the exercise of this prerogative are those imposed by labor laws and the principles of equity and substantial justice. The policies, rules, and regulations on work-related activities of the employees must always be fair and reasonable, and the corresponding penalties in enforcing discipline in the workplace must be commensurate to the offense involved and to the degree of the infraction [Ibid].
Rights of the management
It is important to know that management also has rights that need to be respected. Said rights are:
Right to Return of Investments (ROI) – The employer has the right to recover his investments and to make profit. There is nothing dirty about profit per se. It is profit that creates jobs and improves the workers’ lot. The Constitution provides that the State shall regulate the relations between workers and employers, recognizing the right not only of labor to its just share in the fruits of production, but also the right of enterprises to reasonable returns on investments, and to expansion and growth [See: Azucena, Labor Code with Comments and Cases, Vol. I, 2004].
The Right to Prescribe Rules – Employers have the right to make reasonable rules and regulations for the government of their employees, and when employees, with knowledge of an established rule, enter the service, the rule becomes part of the contract of employment [See: Ibid, citing G.R. No. 121004].
The Right to Select Employees – An employer has a right to select his employees and to decide when to engage them. The State has no right to interfere in a private employment and stipulate for the parties the terms of the services to be rendered. Surely, not even the government may interfere with the liberty of employers to stipulate with its employees the employment terms and conditions except in the exercise of its regulatory power. If the employer can compel the employee to work against the latter’s will, this is servitude. If the employee can compel the employer to give him work against the employer’s will, this is oppression [Ibid].
Right to Transfer or Discharge Employees – The employer has the right to transfer, reduce or lay off personnel in order to minimize expenses and to insure the stability of the business. It may even decide to close the business, provided that the resulting transfers or dismissals are done in good faith and are due to causes beyond control. To hold otherwise would be oppressive and inhuman [See: G.R. No. L-6846].
Labor standards as limitation to management prerogative
Labor standards refer to the minimum requirements prescribed by existing laws, rules, and regulations relating to wages, hours of work, cost of living allowance and other monetary and welfare benefits, including occupational, safety, and health standards [See: G.R. No. 78909]. The parties may stipulate the terms and conditions of employment, but such terms should never go below the standards prescribed by law. The parties, though, are not prohibited to stipulate terms above the minimum.
The relations between the employer and the employee are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects [See: Art. 1700, Civil Code]. For this reason, provisions of applicable laws are deemed written into every employment contract. Hence, the parties are not at liberty to insulate themselves and their relationships from the impact of labor laws and regulations by simply contracting with each other [See: G.R. No. 162839].
Rules on fairness as limitation to management prerogative
Also, employers cannot justify discrimination by claiming that it was merely exercising its prerogatives. Though the employer’s right to terminate employees on account of retrenchment to prevent losses or closure of business operations is recognized by law, it cannot justify unequal payment of separation benefits by simply claiming that it is their prerogative as employers. Surely, discrimination breeds resentment and ill-will among those who have been treated less generously than others. The employer may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but are subject to legal limits, collective bargaining agreements, or general principles of fair play and justice [See: G.R. No. 103575].
Given the foregoing, it is clear that while labor laws protect the welfare of the workers, interference with an employer’s judgment in the conduct of his business is likewise discouraged. As long as the employer’s exercise of its prerogatives is in good faith to advance its interests and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, then such exercise will be upheld [See: G.R. No. 106256].
Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding management prerogatives and rights, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.
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