PHILIPPINE CARPET V. STO TOMAS (LABOR)

FACTS: A Memorandum was issued informing all employees that a comprehensive cost reduction program would be implemented by the corporation "on account of depressed business conditions brought about by currency crisis and the 9/11 incident." After the retrenchment program was implemented, more than 200 new workers were hired, including some who have been retrenched, and some were promoted.

HELD: The corporation failed to adduce clear and convincing evidence to prove the confluence of the essential requisites for a valid retrenchment of its employees. It acted in bad faith in terminating the employment of the members of the union.

The requirements are:

1. that the 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 DOLE at least 1 month prior to the intended date of retrenchment;
3. that the employer pays the retrenched employees separation 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 employees' right to security of tenure; and
5. that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers.