Monday, 22 August 2011

Do We Have Management Prerogative In The Philippines?

Last night, at a sumptuous dinner hosted by a Singaporean client and friend of mine, I had the opportunity to discuss the state and nature of management-labor relations in the Philippines with one of the guests, an American businessman who, after learning that I practice labor law, recalled that he received a very biased decision from a Labor Arbiter in a case filed against his local company by fifteen of its terminated workers. He was very frustrated because he cannot understand why the Labor Arbiter ruled in favor of the workers, whom he alleged were hopelessly incompetent and considered to be great liabilities to his business. Feeling very much aggrieved by the decision (which gave a generous award to the workers and granted them reinstatement), he lamented that our pro-labor policy is one of the reasons why foreign investors are apprehensive about doing business in our country. He talked about management prerogative in the United States, and the absolute right of the employer to fire employees; then, he asked me if there is such a law or concept in the Philippines.

            At this point, several guests, mostly foreigners, joined and listened to the discussion. Put on the spot, I explained that we actually have management prerogative in the Philippines, and that there might be other reasons why the case was lost. Factors like compliance with due process, sufficiency of evidence, and skill of the handling lawyer should be considered. I even ventured that our economic system, which is capitalism, is essentially and inherently pro-management, although admittedly, we have a lot of laws and policies that protect labor.

            Our Supreme Court has consistently upheld the management prerogative of employers. In Hongkong and Shanghai Banking Corporation Employees Union v. National Labor Relations Commission (281 SCRA 509), it ruled that “the hiring, firing, transfer, demotion, and promotion of employees have been traditionally identified as a management prerogative subject to limitations found in the law, collective bargaining agreement, or in general principles of fair play and justice. This is a function associated with the employer’s inherent right to control and manage effectively its enterprise.  Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives.  The free will of management to conduct its own business affairs to achieve its purpose cannot be denied.”

            Management prerogative emanates from ownership of property. A business enterprise is the property of the employer or business-owner. Article 428 of the Civil Code provides that: “the owner has the right to enjoy and dispose of a thing, without other limitations other than those established by law.” The so-called “right to enjoy and dispose of property” is actually a bundle of rights which includes the right to possess and control; the right to use and abuse; the right to sell, transfer, and encumber; the right to appropriate the income, profit and other fruits; and the right to destroy (or close down) the property (read: business establishment).

            Management prerogative is inherent in the rationale of business enterprise. The Supreme Court eloquently calls it the elbow room or leeway of the businessman in his quest for profit. It is granted to the employer or business-owner because society wants him to succeed.       

            The Supreme Court, however, repeatedly cautioned employers because management prerogative is not absolute. While it is undisputed that the employer owns the business enterprise, he cannot treat his employees as if they are his properties. Although he is given all chances to make a profit, he cannot treat his workers unfairly or unjustly. Like the Bill of Rights, the Labor Code imposes checks and limitations on the exercise of management’s inherent and almost absolute powers.

            One of the guests intently listening to our discussion protested, “But Philippine labor law is a mine field!” I quickly replied, “Ah, that’s true, my friend! That’s why you need an expert minesweeper like me!” And everyone had a good laugh.

[Atty. Pol is the Managing Partner of The Firm of Parungao, Malimas, Sangalang & Gapasin, Lawyers, 2180 Chino Roces Ave., Makati City, Tel. 892-1442; former Executive Director, NLRC; graduate, U.P. College of Law. Email:]

1 comment:

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