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PROJECT JURISPRUDENCE

21 basic doctrines on employer's prerogative to transfer.

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Transfer and demotion of employees

Termination or dismissal of employees is an inevitable reality in the course of running a business. The law provides for the just (retrenchment, closure, installation of labor saving devices, redundancy and disease) and authorized causes (serious misconduct, willful disobedience or insubordination, gross and habitual neglect of duties, fraud or willful breach of trust, loss of confidence, commission of a crime or offense, and analogous causes) as grounds for termination of employment.

On occasion, there may be an employee that the company considers to have talent and potential, but suddenly commits an offense that would otherwise be a ground for termination. There are also instances when an employee has performed poorly in his or her task, but the company sees the potential in the person.

Oftentimes, in such situations, the company resorts to termination of employment as it is not clear to them whether they can just transfer the employee to another role or demote the employee in order to give him or her  another chance.

The truth is, the transfer to another position or demotion of employees is actually provided for in our labor laws, and the proper standards and procedure are in place.

Transferring an employee is usually resorted to when an employee is not performing well in a role or performing below the expected standard. It may be based on management’s assessment of the qualifications, aptitude, and competence of its employees where, by moving them around in various areas of its business operations, it can ascertain where they will function with the maximum benefit to the company. (Philippine Japan Active Carbon Corporation v. NLRC, G.R. No. 83239 March 8, 1989)

On the other hand, demotion as a penalty is usually resorted to by the company when an employee has committed a violation or breach of company policy. In lieu of termination, some companies impose upon the erring employee the penalty of demotion from their rank or position.

Both transfer and demotion of an employee are allowed under our labor laws and when done properly, are considered an exercise of the employer’s management prerogative.

The Management Prerogative Doctrine provides that 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. (Peckson vs. Robinsons Supermarket Corp, G.R. No. 198534, July 3, 2013)

There are limitations on the exercise of management prerogative. It must be exercised in good faith, with due regard to the rights of labor, and not used to circumvent the laws and oppress labor. (Dongon vs. Rapid Movers and Forwarders Co. Inc., G.R. No. 163431, August 28, 2013)

Guidelines on transfer of position

In the case of transferring an employee to another position where the company feels the employee’s qualifications are better suited, the employer should take note of the following guidelines:

(a) the transfer is a movement from one position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another of equivalent rank or salary (b) the employer has the inherent right to transfer or reassign an employee for legitimate business purposes (c) a transfer becomes unlawful when it is motivated by discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient cause (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee

Again, a valid exercise of management prerogative for the maximum benefit of the company does not violate an employee’s right to security of tenure which does not give the employee such a vested right in a position as would deprive the company of its prerogative to change an assignment or transfer someone where they will be most useful. When a transfer is neither unreasonable, nor inconvenient, nor prejudicial to the employee, and it does not involve a demotion in rank or a diminution of salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. (G.R. No. 198534, July 3, 2013)

It is also an option for businesses to provide employees who have committed violations and breach of their duties and responsibilities another chance at redeeming themselves by way of the imposing the penalty of demotion instead of dismissal from employment.

Demotion is defined as a situation where an employee is appointed to a position resulting in a diminution in duties, responsibilities, status or rank, which may or may not involve a reduction in salary. Where an employee is appointed to a position with the same duties and responsibilities but a rank and salary higher than those enjoyed in his previous position, there is no demotion and the appointment is valid. (Virginia D. Bautista v. Civil Service Commission and Development Bank of the Philippines, G.R. No. 185215, July 22, 2010)

Generally, demotion is allowed as a valid exercise of management prerogative, often as a consequence of an employee’s failure to comply with company productivity standards. (Leonardo vs. NLRC, June 16, 2000 and Fuerte vs. Aquino, June 16, 2000)

Standards to follow in demotion of employees

When the penalty of demotion is to be imposed on an employee the employer must ensure that it shall follow the same standards and procedure for dismissal of employment. Accordingly, procedural and substantive due process should still be observed.

While an employer may demote an employee for valid reasons, it must first comply with the twin requirements of notice and hearing.

The Supreme Court has explained that while due process required by law is applied on dismissals, the same is also applicable to demotions as demotions likewise affect the employment of a worker whose right to continued employment, under the same terms and conditions, is also protected by law. Moreover, considering that demotion is, like dismissal, also a punitive action, the employee being demoted should as in cases of dismissals, be given a chance to contest the same. (Jarcia Machine Shop and Auto Supply, Inc. v. NLRC, GR No. 118045, January 2, 1997)

There must thus be a notice to explain that gives the employee an opportunity to submit an explanation and supporting evidence to refute any claim of violation or breach of duty or responsibility, the possibility of a hearing, and the notice of decision by the employer served upon the employee which clearly addresses the infraction and penalty imposed. This is referred to as due process.

Finally, when an employee is demoted, it may necessarily follow that the position will have a lower salary and benefit. Since demotion is recognized by law, there is no violation of the principle of diminution of benefits.

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The author, Atty. John Philip C. Siao, is a practicing lawyer and a Founding Partner of the Tiongco Siao Bello & Associates Law Offices, a Professor at the MLQU School of Law, and an Arbitrator of the Construction Industry Arbitration Commission of the Philippines. He may be contacted at [email protected] . The views expressed in this article belong to the author alone.

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Transfer of Employee Done in Good Faith is not Illegal Even if Costly and Inconvenient

Since the employees are viewed as having no vested rights over the position, the employer can transfer them whenever the exigencies of business require it.

In a number of cases, the Court has recognized and upheld the prerogative of management to transfer an employee from one office to another within the business establishment provided that there is no demotion in rank or diminution of his salary, benefits and other privileges. This is a privilege inherent in the employer’s right to control and manage its enterprise effectively. (Yuco Chemical Industries, Inc. v. MOLE et al., 185 SCRA 727.)

The employee cannot refuse the transfer insisting on the comfort of his position. The Supreme Court said:

An employee’s right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal. (Philippine Japan Active Carbon Corp. v. NLRC, 171 SCRA 164.)

In Benguet Electric Cooperative v. Fianza (G.R. No. 158606, March 9, 2004, 425 SCRA 41, 50.), the SC held that the management had the prerogative to determine the place where the employee is best qualified to serve the interests of the business given the qualifications, training and performance of the affected employee.

Although the employees’ transfer to a certain location might be potentially inconvenient for them because it would entail additional expenses on their part aside from their being forced to be away from their families, it was neither unreasonable nor oppressive. ( See Chateau Royale Sports and Country Club, Inc. vs. January 18, 2017, G.R.  No. 197492 )

Benefit of the “Transfer Clause” in Employment Contract

If the employee signed the transfer clause, the SC held that having expressly consented to the foregoing, the employees had no basis for objecting to their transfer. According to Abbot Laboratories (Phils.), Inc. vs. National Labor Relations Commission (No. L-76959, October 12, 1987, 154 SCRA 713, 719.) the

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employee who has consented to the company’s policy of hiring sales staff willing to be assigned anywhere in the Philippines as demanded by the employer’s business has no reason to disobey the transfer order of management.

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Prescinding from the above, the company cannot be held liable for a valid transfer. It is not under any obligation to pay for the costs of transfer of employees where the transfer is carried out in good faith on account of the exigencies of business.

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• About the Authors

Demotion of Employee Philippines

Important rules on how to demote an employee in the Philippines

• The Philippine Guide on Employee Transfers and Demotions

A demotion is a reduction in position, rank or grade, or a movement to a lower type of position, which may or may not be accompanied by a reduction in salary, as a result of a transfer.

It is different from a reassignment or transfer which is a movement from one position to another which is of equivalent rank, level or salary, without interruption in service.

As a rule, changes in rank or position within the company are considered valid only when they are based on just and valid grounds such as genuine business necessity.

Even when a demotion is justified such as a reorganization to streamline operations, the employer must observe the proper procedure required of valid terminations.  Part of due process in effecting a demotion is the presence of just cause.  Without just cause, an unjustified demotion may constitute constructive dismissal, for which an employer may be held liable for backwages and damages.

What is constructive dismissal? How then should an employer go about transferring or demoting an employee in order to promote the goals of business?

These are just some of the things that the authors of “44 Rules of Employee Transfer and Demotion” answers in this practical guidebook.

The Labor Code hardly deals with transfers and demotions and you won’t find official set of rules to rely on to guide employers and employees alike.  Instead, lawyers rely on Supreme Court rulings which deal with certain aspects of demotion.  44 Rules is a compilation of these rules which are embodied in numerous cases decided in the past few years.

If you don’t follow these basic rules, you could end up in a labor court defending a decision that may seem appropriate but which may lack certain legal requirements.  Worse, you may be found liable for failing to meet these requirements and compelled to pay an employee not only backwages but also huge amounts as damages.

This guide will help you make informed decisions before it’s too late.

The authors (who are HR practitioners and lawyers at the same time) know how HR specialists and managers (even small business owners) struggle with documenting HR decisions.  So, they’re doing their readers a favor—they have included sample notices and forms to guide you in laying down the basis of  transfers and demotions the LEGAL WAY.

This is one guide you’ll want to keep as one of your tools for managing employees and your business!

Paperback copies of 44 Rules on Transfers and Demotions are now available at National Bookstore, Fully Booked and Powerbooks stores nationwide.  If you are the type of person who wants to get hold of your copy now, an ebook version in PDF format is also available for purchase and delivery online.  Get quick access to this guide with sample forms and notices in less than the time it will take you to head for the bookstore.

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• The First Written Guide on Employee Transfers and Demotions and Why You Should Learn the Rules

Flexible Work Arrangements

▪ Flexible work arrangements refer to alternative arrangements or schedules other than the traditional or standard workhours, workdays, and workweek.

▪ The effectivity and implementation of any of the flexible work arrangements shall be based on voluntary agreements between the employer and the employees.

▪ The adoption of the flexible work arrangements provided herein shall in no case result in diminution of existing benefits of the employees.

▪ The employer shall notify DOLE of the adoption of any of the above flexible work arrangements.

Flexible work arrangements refer to alternative arrangements or schedules other than the traditional or standard workhours, workdays, and workweek. (Paragraph 1, Part II, DOLE LA 4-10)

In view of the rapid technological innovations, the continuing streamlining and transformation of the work processes brought about by the globalization phenomena, [DOLE LA 4-10] [was] issued to assist and guide employers and employees in the implementation of various flexible work arrangements. The adoption of flexible work arrangement is being considered to improve business competitiveness and productivity and give employers and employees flexibility in fixing hours of work compatible with business requirements and the employees’ need for balanced work life. (Part I, DOLE LA 4-10)

DOLE DA 4-09 was issued to guide employers and employees in the implementation of various flexible work arrangements as one of the coping mechanisms and remedial measures in times of economic difficulties and national emergencies. Adoption of flexible work arrangements is considered as a better alternative than the outright termination of the services of the employees or the total closure of the establishment. Anchored on the voluntary basis and conditions mutually acceptable to both the employer and the employees, it is recognized as beneficial in terms of reduction of business costs and helps in saving jobs while maintaining competitiveness and productivity in industries. (Part I, DOLE DA 2-09)

a. Voluntary Agreement

The effectivity and implementation of any of the flexible work arrangements shall be based on voluntary agreements between the employer and the employees. (Paragraph 2, Part II, Ibid. )

3. Types of Flexible Work Arrangements

The following are the flexible work arrangements which may be considered, among others:

1) Compressed workweek

2) Gliding or flexi-time schedule

3) Flexi-holidays schedule

4) Rotation of workdays

5) Rotation of Workers

6) Forced Leave

7) Broken-Time

(Part III, Ibid. and Part III, DOLE DA 2-09)

4. Administration

The parties to the flexible work arrangements shall be primarily responsible for its administration. (Paragraph 1, Part IV, DOLE LA 4-10)

In case of differences of interpretation, the following guidelines shall be observed:

1) The differences shall be treated as grievances under the applicable grievance mechanism of the company.

2) If there is no grievance mechanism of if this mechanism is inadequate, the grievance shall be referred to the Regional Office which has jurisdiction over the workplace for appropriate conciliation.

3) To facilitate the resolution of grievances, employers are required to keep and maintain, as part of their records, the documentary requirements proving that the flexible work arrangement was voluntarily adopted. ( Ibid. )

5. Non-diminution of benefits

The adoption of the flexible work arrangements provided herein shall in no case result in diminution of existing benefits of the employees. (Paragraph 3, Part II, Ibid. )

6. Notice to DOLE

The employer shall notify the DOLE through the Regional Office which has jurisdiction over the workplace, copy furnished the Bureau of Working Conditions, of the adoption of any of the above flexible work arrangements. (Part V, Ibid .)

▪ DOLE Labor Advisory No. 4, Series of 2010

▪ DOLE Department Advisory No. 2, Series of 2009

Philippine Labor Law Resource & Learning Site

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