MANAGEMENT PREROGATIVE 1.

Good Faith Requirement – actions must not

be arbitrary, capricious, or oppresive
Management prerogative is the right of the Er
to regulate all aspects of employment, such as: 2. Compliance with the law – Labor standards,
contractual obligations and social legislation
1. Freedom to prescribe work assignments; must be observed.
2. Working methods
3. Processes to be followed; 3. Non – Discrimination – Policies must not
4. Regulation regarding transfer of Ees; infringe on constitutional rights to due process
5. Supervision of their work, lay-off and and equal protection
discipline; and
6. Dismissal and recall of work. 4. Union and CBA – Provisions in CBAs take
precedence over unilateral management
“So long as the company’s prerogatives are actions or terms covered by the agreement.
exercised in good faith for the advancement of
the Er’s interest and not for the purpose of SPECIFIC PREROGATIVES
defeating or circumventing the rights of the Ees
under special laws or under valid agreements, PREROGATIVE TO HIRE
the SC will uphold them. (San Miguel Brewery
Sales Force Unio n v. Ople, G.R. No. L-53515, The ER has the sole and exclusive right and
08 Feb. 1989)” prerogative to determine the nature and kind of
work of its employees and manage its own
An Er is free to regulate, according to his best operations. But this prerogative is limited by
discretion and best business judgement, all law.
aspects of employment, from hiring to firing,
except in cases of unlawful discrimination or Thus, an ER cannot, by means of a written or
those which may be provided by law. oral agreement, determine the status of its
(Philippine Telegraph and Telephone Co. v. employee or prevent an employee from
NLRC, G.R. No. 118978, 23 May 1997) attaining regular appointment. What
determines whether a certain employment is
The prerogative accorded management cannot regular or casual is not the will and word of the
defeat the very purpose for which our labor ER. It is the nature of the activities performed
laws exist: to balance the conflicting interests in relation to the particular business or the
of labor and management, not to tilt the scale length of time of its performance and its
in favor of one over the other, but to guaranty continued existence. The primary standard for
that labor and management stand on equal determining a regular employment is the
footing when bargaining in good faith with each reasonable connection between the particular
other. (Unicorn Safety Glass, Inc. v. Basarte, activity performed by the EE in relation to the
G.R. No. 154689, 25 Nov. 2004) usual business or trade of the ER. The test is
whether the activity performed is usually
Limitations on Management Prerogative necessary or desirable to the usual business or
trade of the ER.
Management Prerogative is not absolute. It is
circumscribed by the following: TWO KINDS OF REGULAR EEs
 1. Those EEs who are engaged to considered in law as insubordination, or willful
perform activities which are usually disobedience of a lawful order of the employer,
necessary or desirable to the usual hence, it cannot be the basis of an employee's
business or trade of the ER dismissal from service. (Echo 2000
Commercial Corporation vs. Obrero
2. Those EEs who have rendered at least Filipino-Echo 2000 Chapter-CLO (G.R. No.
one year of service, whether 214092, January 11, 2016)
continuous or broken with respect to
the activity in which they are employed.

NOTE: In the second kind, an EE originally Difference between TRANSFER,

hired as casual is deemed a regular EE PROMOTION, and DEMOTION
because the repeated and continuing need for
his service sufficiently evidenced the necessity A transfer is a movement from one position to
of that activity to the business another which is of equivalent rank, level or
salary, without break in service.
NOTE: A probationary employee still enjoys
the constitutional protection of security of Promotion, on the other hand, is the
tenure. During his tenure of employment advancement from one position to another with
therefore, or before his contract expires, the an increase in duties and responsibilities as
probationary EE cannot be removed except for authorized by law, and usually accompanied by
causes as provided by law. an increase in salary.

MANAGEMENT PREROGATIVE TO Conversely, demotion involves a situation

PROMOTE where an employee is relegated to a
subordinate or less important position
Promotion – refers to the advancement from constituting a reduction to a lower grade or rank,
one position to another with an increase in with a corresponding decrease in duties and
duties and responsibilities as authorized by law, responsibilities, and usually accompanied by a
and usually accompanied by an increase in decrease in salary.
salary.

For promotion to occur, there must be an MANAGEMENT PREROGATIVE TO

advancement from one position to another or DEMOTE
an upward vertical movement of the
employee’s rank or position. Any increase in
salary should only be considered incidental but The Labor Code of the Philippines does not
never determinative of whether or not a specifically prohibit the demotion of an
promotion is bestowed upon an employee. employee, but any demotion must follow
(Coca-Cola Bottlers Philippines, Inc. v. Del principles of due process and must not be used
Villar, G.R. No. 163091, 06 October 2010) as a means of unjust discrimination, retaliation,
or harassment. Demotions typically occur due
NOTE: An employee is not bound to accept a to restructuring, reorganization, or poor
promotion, which is in the nature of a gift or performance. However, for a demotion to be
reward. Refusal to be promoted is a valid valid, it must meet the following conditions:
exercise of a right. Such exercise cannot be
 1. Just or Authorized Cause: Demotion without break in the service or a lateral
must be based on valid reasons such movement from one position to another of
as organizational restructuring, job equivalent rank or salary;
redundancy, or poor performance. If
the demotion results from poor 2. The employer has the inherent right to
performance, the employee must have transfer or reassign an employee for legitimate
been given notice and an opportunity to business purposes;
improve before any action is taken.
2. Due Process: The employee should 3. A transfer becomes unlawful where it is
be informed of the reason for the motivated by discrimination or bad faith or is
demotion in writing and given the effected as a form of punishment or is a
opportunity to respond. In some cases, demotion without sufficient cause; and,
the employee may challenge the
demotion if it is deemed to be a form of 4. The employer must be able to show that the
constructive dismissal or if it transfer is not unreasonable, inconvenient, or
significantly affects their employment prejudicial to the employee.
status without just cause.
3. No Violation of Employment The managerial prerogative to transfer
Contract: Demotion must not violate personnel must be exercised without grave
any terms stipulated in the employee’s abuse of discretion, bearing in mind the basic
contract unless there is mutual consent elements of justice and fair play. Having the
or clear legal justification. The right should not be confused with the manner
company cannot unilaterally reduce an in which that right is exercised. Thus, it cannot
employee's salary without due cause, be used as a subterfuge by the employer to rid
as this could constitute illegal himself of an undesirable worker. In particular,
diminution of benefits. the employer must be able to show that the
transfer is not unreasonable, inconvenient or
MANAGEMENT PREROGATIVE TO prejudicial to the employee. Nor does it involve
TRANSFER a demotion in rank or a diminution of his
salaries, privileges and other benefits.
Management has the prerogative to transfer an
EE from one office to another within the BURDEN OF PROOF
business establishment provided there is no Burden of proof is on the employer to show
demotion in rank or a diminution of salary, that: (a) the transfer is not unreasonable,
benefits or other privileges. Management has inconvenient or prejudicial to the employee;
the right to move the EE around various areas and (2) it does not involve a demotion in rank
of the business operations in order to ascertain or a diminution of his salaries, privileges and
where the EE will function with utmost other benefits.
efficiency and maximum productivity or benefit
of the company. MANAGEMENT PREROGATIVE TO
DISCIPLINE EMPLOYEES AND DISMISS
JURISPRUDENCIAL GUIDELINES ON
TRANSFER OF EEs Concept

1. A transfer is a movement from one position

to another of equivalent rank, level or salary
“Under the doctrine of management general rule, justifies termination of the
prerogative, every employer has the inherent contract of service and the dismissal of the
right to regulate, according to his own employee.” (St. Luke’s Medical Center, Inc. v.
discretion and judgment, all aspects of Sanchez, G.R. No. 212054, 11 March 2015)
employment, including hiring, work
assignments, working methods, the time, place
and manner of work, work supervision, transfer “It is true that an employer is given a wide
of employees, lay-off of workers, and discipline, latitude of discretion in managing its own affairs.
dismissal, and recall of employees.” (Rural The broad discretion includes the
Bank of Cantilan, Inc. v. Julve, G.R. No. implementation of company rules and
169750, 27 February 2007) regulations and the imposition of disciplinary
measures on its employees.” (Dongon v. Rapid
Movers and Fowarders Co., Inc., G.R. No.
“In general, management has the prerogative 163431, 28 August 2013)
to discipline its employees and to impose
appropriate penalties on erring workers
pursuant to company rules and regulations.” “It is axiomatic that appropriate disciplinary
(Philippine Airlines v. National Labor Relations sanction is within the purview of management
Commission, G.R. No. 115785, 04 August imposition. What should not be overlooked is
2000) the prerogative of an employer company to
prescribe reasonable rules and regulations
necessary for the proper conduct of its
“Disciplinary action against an erring employee business and to provide certain disciplinary
is a management prerogative which, generally, measures in order to implement said rules to
is not subject to judicial interference. However, assure that the same would be complied with.”
this policy can be justified only if the disciplinary (Areno, Jr. v. Skycable PCC-Baguio)
action is dictated by legitimate business
reasons and is not oppressive” (Areno, Jr. v.
Skycable PCC-Baguio, G.R. No. 180302, 05 EE’s Obligation to comply
February 2010)
“It is basic in any enterprise that an employee
has the obligation of following the rules and
Right to Discipline
regulations of its employer. More basic further
is the elementary obligation of an employee to
be honest and truthful in his work. It should be
“Among the employer’s management noted that honesty is one of the foremost
prerogatives is the right to prescribe criteria of an employer when hiring a
reasonable rules and regulations necessary or prospective employee. Thus, we see
proper for the conduct of its business or employers requiring an NBI clearance or
concern, to provide certain disciplinary police clearance before formally accepting an
measures to implement said rules and to applicant as their employee. Such rules and
assure that the same would be complied with. regulations are necessary for the efficient
At the same time, the employee has the operation of the business.” (Dongon v. Rapid
corollary duty to obey all reasonable rules, Movers and Fowarders Co., Inc., supra.)
orders, and instructions of the employer; and
willful or intentional disobedience thereto, as a
“While the law imposes many obligations upon exercised humanely, and the penalty imposed
the employer, nonetheless, it also protects the should be commensurate to the offense
employer’s right to expect from its employees involved and degree of infraction. The ER
not only good performance, adequate work, should bear in mind that, in the exercise of such
and diligence, but also good conduct and right, what is at stake is not the EEs position
loyalty. In fact, the Labor Code does not but his livelihood as well. The law regards the
excuse employees from complying with valid workers with compassion. (De Guzman vs
company policies and reasonable regulations NLRC G.R. No. 130617 August 11, 1999)
for their governance and guidance.” (Rural
Bank of Cantilan, Inc. v. Julve, G.R. No.
169750, 27 February 2007)
Management prerogative includes the right to
discipline employees, which necessarily
Effects of Non-Compliance includes dismissal of employees based on just
and authorized causes. For a dismissal from
employment to be valid, both the substantial
“Employees who violate such rules and
and procedural due process requirements
regulations are liable for the penalties and
must be satisfactorily complied with.
sanctions so provided, e.g., the Company’s
Substantial due process pertains to the
Manual of Discipline (as in this case) and the
"employee's right not to be dismissed without
Labor Code.” (Dongon v. Rapid Movers and
just or authorized cause, as provided by law."
Fowarders Co., Inc., supra.)
Procedural due process pertains to the
employer's compliance with the procedure in
An employer may terminate an employment effecting a dismissal as provided in the Labor
for just causes, such as serious misconduct or Code and implementing rules. The burden of
willful disobedience by the employee of the proving that the dismissal was valid rests on
lawful orders of his employer or his the employer; failure to do so renders the
representative in connection with his work. dismissal illegal. A dismissal based on a just
(Article 296[a], Labor Code) cause implies that the employee has
committed some violation against the employer,
hence, it can be said that the employee initiated
“The constitutional protection afforded to labor the dismissal process. (Susan M. Bance vs
does not condone wrongdoings by the University of St. Anthony G.R. No. 202724,
employee; and an employer’s power to February 3, 2021)
discipline its workers is inherent to it.”
(Dongon v. Rapid Movers and Fowarders Co., To comply with the requirements of substantial
Inc., due process, the cause of the dismissal must
have basis under the law. Failure to observe
substantial due process renders the dismissal
DISMISSAL illegal and entitles the employee to
reinstatement without loss of seniority rights
and other privileges, full back wages inclusive
Must be exercised without abuse of discretion.
of allowances, and other benefits or their
Its implementation should be tempered with
monetary equivalent.
compassion and understanding. While an ER
has the inherent right to discipline its EEs, we
have always held that this right must always be
The case of King of Kings Transport, Inc. v.
Mama standardized the requirements of 1. explain and clarify their defenses to
procedural due process in termination of the charge against them;
employment, applying Article 292 and its 2. present evidence in support of their
corresponding implementing rules. The case defenses; and
provides that the following should be 3. rebut the evidence presented
considered in terminating the services of against them by the management.
employees:
During the hearing or conference, the
1. The first written notice to be served to employees are given the chance to defend
the employees should contain the specific themselves personally, with the assistance of a
causes or grounds for termination against representative or counsel of their choice.
them, and a directive that the employees are Moreover, this conference or hearing could be
given the opportunity to submit their written used by the parties as an opportunity to come
explanation within a reasonable period. to an amicable settlement.

"Reasonable opportunity" under the 3) After determining that termination of

Omnibus Rules means every kind of employment is justified, the employers shall
assistance that management must accord to serve the employees a written notice of
the employees to enable them to prepare termination indicating that:
adequately for their defense.
1. all circumstances involving the
This should be construed as a period of at least charge against the employees have been
five (5) calendar days from receipt of the notice considered; and
to give the employees an opportunity to study 2. grounds have been established to
the accusation against them, consult a union justify the severance of their employment.
official or lawyer, gather data and evidence,
and decide on the defenses they will raise To comply with the requirements of
against the complaint. Moreover, in order to procedural due process, two notices must be
enable the employees to intelligently prepare served to the employee. Failure to comply with
their explanation and defenses, the notice procedural due process (although the
should contain a detailed narration of the facts dismissal is based on just or authorized
and circumstances that will serve as basis for causes) will entitle the employee to nominal
the charge against the employees. A general damages: if the dismissal is based on just
description of the charge will not suffice. cause, the employee is entitled to P30,000.00;
if the dismissal is based on authorized cause,
Lastly, the notice should specifically mention the employee is entitled to P50,000.00.
which company rules, if any, are violated
and/or which among the grounds under Art. The conduct of a hearing or conference though
282 (now 297) is being charged against the is mandatory only "when requested by the
employees. employee in writing or substantial evidentiary
disputes exist or a company rule or practice
2. After serving the first notice, the employers requires it, or when similar circumstances
should schedule and conduct a hearing or justify it. (Perez v. Philippine Telegraph and
conference wherein the employees will be Telephone Company)
given the opportunity to:
 exercise of its prerogative to devise means to
Grounds for Termination improve its operations. Thus, we have held that
management is free to regulate, according to
ART. 297. [282] Termination by Employer. An its own discretion and judgment, all aspects of
employer may terminate an employment for employment, including hiring, work
any of the following causes: assignments, working methods, time, place
and manner of work, processes to be followed,
supervision of workers, working regulations,
(a) Serious misconduct or willful disobedience transfer of employees, work supervision, lay off
by the employee of the lawful orders of his of workers and discipline, dismissal and recall
employer or representative in connection with of workers. Further, management retains the
his work; prerogative, whenever exigencies of the
service so require, to change the working hours
of its employees.” (Unicorn Safety Glass, Inc. v.
(b) Gross and habitual neglect by the employee
Basarte, G.R No. 154689, 25 November 2004)
of his duties;

The Supreme Court has consistently refused to

(c) Fraud or willful breach by the employee of interfere with the exercise by management of
the trust reposed in him by his employer or duly its prerogative to regulate the employees’ work
authorized representative; assignments, the working methods and the
place and manner of work… As we all know,
there are various laws imposing all kinds of
(d) Commission of a crime or offense by the burdens and obligations upon the employer in
employee against the person of his employer relation to his employees, and yet as a rule (the
or any immediate member of his family or his Supreme Court) has always upheld the
duly authorized representatives; and employer’s prerogative to regulate all aspects
of employment relating to the employees’ work
assignment, the working methods and the
(e) Other causes analogous to the foregoing.
place and manner of work. Indeed, labor laws
discourage interference with an employer’s
Management Prerogative to Manage the judgment in the conduct of his business.”
Operation of the Business (Peckson v. Robinsons Supermarket
Corporation, G.R. No. 198534, 03 July 2013)
Business Judgment Rule
Indeed, labor laws discourage interference in
- It is a general principle of labor law to
employers’ judgments concerning the conduct
discourage interference with an
of their business. The law must protect not only
employer's judgment in the conduct of
the welfare of employees, but also the right of
his business.
employers. (Mendoza v. Rural Bank of Lucban,
G.R. No. 155421, 07 July 2004)
The Supreme Court “is mindful that every
business strives to keep afloat during these
times when prevailing economic situations Productivity Standard
turns such endeavor into a near struggle. With
as much latitude as our laws would allow, the Concept
Court has always respected a company’s
 standards. Failure to comply may be a just
An employer is entitled to impose productivity cause for their dismissal. Certainly, employers
standards for its employees, and the latter’s cannot be compelled to retain the services of
non-compliance therewith can lead to his an employee who is guilty of acts that are
termination from work. (Puncia v. Toyota inimical to the interest of the employer.
Shaw/Pasig, Inc., G.R. No. 214399, 28 June (Sameer Overseas Placement Agency, Inc. v.
2016) Cabiles, G.R. No. 170139, 05 August 2014)

An employer is entitled to impose productivity Non-observance/compliance with

standards for its workers, and in fact, non- productivity or work standards may be a
compliance may be visited with a penalty even just cause to dismiss the employment of an
more severe than demotion. Thus, the practice employee.
of a company in laying off workers because
they failed to make the work quota has been
recognized in this jurisdiction (Leonardo v. [The Complainant-employee’s] failure to
NLRC, Reynaldo’s Marketing Corporation, G.R. observe [the Company’s] work standards
Nos. 125303, 126937, 16 June 2000) constitutes inefficiency that is a valid cause for
dismissal. Failure to observe prescribed
standards of work, or to fulfill reasonable work
The employees’ failure to meet the sales quota assignments due to inefficiency may constitute
assigned to each of them constitute a just just cause for dismissal. Such inefficiency is
cause of their dismissal, regardless of the understood to mean failure to attain work goals
permanent or probationary status of their or work quotas, either by failing to complete the
employment. Failure to observe prescribed same within the alloted reasonable period, or
standards of work, or to fulfill reasonable work by producing unsatisfactory results. As the
assignments due to inefficiency may constitute operator of [the Company’s] printer, he is
just cause for dismissal. Such inefficiency is mandated to check whether the colors that
understood to mean failure to attain work goals would be printed are in accordance with the
or work quotas, either by failing to complete the client’s specifications and for him to do so, he
same within the allotted reasonable period, or must consult the General Manager and the
by producing unsatisfactory results. This color guide used by [the Company] before
management prerogative of requiring making a full run. Unfortunately, he failed to
standards may be availed of so long as they observe this simple procedure and proceeded
are exercised in good faith for the to print without making sure that the colors
advancement of the employer’s interest. were at par with the client’s demands. This
(Leonardo v. NLRC, Reynaldo’s Marketing resulted to delays in the delivery of output,
Corporation, G.R. Nos. 125303, 126937, 16 client dissatisfaction, and additional costs on
June 2000) [the Company’s] part. (Realda v. New Age [the
Company], G.R. No. 192190, 25 April 2012)

Employers have the prerogative to impose

productivity and quality standards at work. BONUS

“Bonus” – refers to a gratuity or act of liberality

They may also impose reasonable rules to of the giver which the recipient has no right to
ensure that the employees comply with these demand as a matter of right. It is something
given in addition to what is ordinarily received 3) A company’s long and regular practice
by or strictly due the recipient. (Philippine (Eastern Telecommunications Philippines, Inc.
National Construction Corporation v. NLRC, v. Eastern Telecoms Employees Union, G.R.
PNCC-TOEWU, G.R. No. 117240, 02 October No. 185665, 08 February 2012)
1997)

Part of the wage, salary or compensation

The granting of a bonus is a management
prerogative, something given in addition to A bonus or special incentive is demandable if
what is ordinarily received by or strictly due the they are integrated into the employee’s wage,
recipient. Thus, a bonus is not a demandable salary, or compensation. This is similar to
and enforceable obligation, except when it is regular allowances received by employees and
made part of the wage, salary or compensation thus considered as part of their pay.
of the employee. A bonus is an amount granted
and paid to an employee for his industry and
The grant of a bonus or special incentive, being
loyalty which contributed to the success of the
a management prerogative, is not a
employer’s business and made possible the
demandable and enforceable obligation,
realization of profits. It is an act of generosity
except when the bonus or special incentive is
granted by an enlightened employer to spur the
made part of the wage, salary or compensation
employee to greater efforts for the success of
of the employee, or is promised by the
the business and realization of bigger profits.
employer and expressly agreed upon by the
(Producers Bank of the Philippines v. NLRC,
parties. (Mega Magazine Publications, Inc. v.
Producers Bank Employees Association, G.R.
Defensor, G.R. No. 162021, 16 June 2014)
No. 100701, 28 March 2001)

GENERAL RULE: The grant of a bonus or Contractual Obligation

special incentive, being a management
For a bonus to be enforceable, it must have
prerogative, is not a demandable and
been promised by the employer and expressly
enforceable obligation.
agreed upon by the parties, or it must have
had a fixed amount and had been a long and
EXCEPTION: except when the bonus or regular practice on the part of the employer.
special incentive is: (American Wire and Cable Daily Rated
Employees Union v. American Wire and Cable
Co., Inc., G.R. No. 155059, 29 April 2005)
1) Made part of the wage, salary or
compensation of the employee (MEGA
Magazine Publications, Inc. v. Defensor, G.R. Generally, a bonus is not a demandable and
No. 162021, 16 June 2014) enforceable obligation. For a bonus to be
enforceable, it must have been promised by
the employer and expressly agreed upon by
2) Promised by the employer and expressly the parties. Given that the bonus in this case
agreed upon by the parties (Contractual is integrated in the CBA, the same partakes
Obligation. the nature of a demandable obligation. Verily,
by virtue of its incorporation in the CBA, the
Christmas bonus due to respondent
Association has become more than just an act standards, employment agreements, and
of generosity on the part of the petitioner but a principles of equity.
contractual obligation it has undertaken.
(Lepanto Ceramics, Inc. v. Lepanto Ceramics
Employees Association, supra.) Key Principles Governing Change of
Working Hours

Company Practice
1. Reasonableness and Good faith - ERs
A bonus may be granted on equitable
must exercise the right to modify
consideration when the giving of such bonus
working hours in good faith and for
has been the company’s long and regular
valid business purposes. Changes
practice.
should not be arbitrary or intended to
To be considered a ‘regular practice,’ harass employees.
however, the giving of the bonus should have
been done over a long period of time, and 2. Notice Requirement - Proper notice
must be shown to have been consistent and must be given to employees regarding
deliberate. The test or rationale of this rule on any change in their working hours. The
long practice requires an indubitable showing period for notice may depend on
that the employer agreed to continue giving company policies, CBAs. or specific
the benefits knowing fully well that said labor agreements
employees are not covered by the law 3. Consent and Employment Contracts -
requiring payment thereof.” (Eastern For EEs covered by fixed-term
Telecommunications Philippines, Inc. v. contracts or explicit agreements on
Eastern Telecoms Employees Union, supra.) working hours, consent may be
required to alter the schedule.
Changes that violate contractual
NOTE: If a bonus is demandable, then it is stipulations may lead to claims of
subject to the rule on non-diminution of constructive dismissal.
benefits. The rule is settled that any benefit
and supplement being enjoyed by the 4. Compliance with Labor Standards
employees cannot be reduced, diminished,
discontinued or eliminated by the employer. 5. Prohibition against diminution of
The principle of non-diminution of benefits is benefits
founded on the constitutional mandate to
protect the rights of workers and to promote 6. Non-discriminatory
their welfare and to afford labor full protection.
BONA FIDE OCCUPATIONAL
QUALIFICATIONS

CHANGE OF WORKING HOURS

Employment in particular jobs may not be
limited to persons of a particular sex, religion,
Employers have the prerogative to change or national origin unless the employer can
working hours to address operational needs. show that sex, religion, or national origin is an
However, such changes musut adhere to labor actual qualification for performing the job. The
qualification is called a bona fide occupational 1) The employment qualification is reasonably
qualification (BFOQ). (Yrasuegi v. Philippine related to the essential operation of the job
Airlines, Inc., G.R. No. 168081, 17 October involved; and
2008)

2) That there is factual basis for believing that

TESTS all or substantially all persons meeting the
qualification would be unable to properly
perform the duties of the job.
1. Meiorin Test

In short, the test of reasonableness of the

British Columbia Public Service Employee company policy is used because it is parallel to
Commission (BSPSERC) v. The British BFOQ. BFOQ is valid “provided it reflects an
Columbia Government and Service inherent quality reasonably necessary for
Employee’s Union (BCGSEU), satisfactory job performance.”

Steps:

1. Rational Connection: The employer MARRIAGE BETWEEN EEs of

must show the standard is rationally COMPETITOR ERs
related to performing the job.
2. Good Faith: The employer must have In Duncan Association of Detailman-PTGWTO
adopted the standard honestly v. Glaxo Wellcome Philippines, Inc., the Court
did not hesitate to pass upon the validity of a
believing it was necessary for a
company policy which prohibits its employees
legitimate work purpose. from marrying employees of a rival company. It
3. Reasonable Necessity (Undue was held that the company policy is reasonable
Hardship): The employer must prove considering that its purpose is the protection of
the interests of the company against possible
they cannot accommodate the competitor infiltration on its trade secrets and
employee (or group) without facing procedures.
undue hardship, meaning it's
impossible to find an alternative POST-EMPLOYMENT RESTRICTIONS
solution.

Refers to limitations imposed on former

2. Reasonableness Test employees after exiting employment in relation
to their next work or business, as well as what
they can say about their previous work which
In Star Paper Corporation v. Simbol, this Court may be sensitive or confidential
held that in order to justify a BFOQ, the
employer must prove that:
Purpose of post-employment restrictions
1) To protect trade secrets; 3. Confidentiality or Non-Disclosure
Agreements (Unlimited Duration)

2) To protect confidential and sensitive

information; LIMITATIONS OF THE EXERCISE OF
MANAGEMENT PREROGATIVE

3) To prevent former employees from using

what they learned to directly compete with the Management prerogative is evidently quite a
previous employer; powerful right by the employer. As such,
jurisprudence has provided limitations for the
exercise of such right. These limitations temper
4) To prevent former employees from the exercise of such right and ensure that the
disparaging the previous employer and its rights of the employees are considered.
employees.

There are thus main limitations to management

Test For a post-employment restriction to be prerogative:
valid, it has to be reasonable. The following are
the factors to test reasonableness:
1) Good faith, and,

1) Whether the covenant protects a legitimate

business interest of the employer; 2) Employee rights.

2) Whether the covenant creates an undue A. Good Faith

burden on the employee;

First, management prerogative should be

3) whether the covenant is injurious to the exercised in good faith. While the employer has
public welfare; the right to regulate all aspects of employment,
it should be done in good faith. For example,
an employer is justified in dismissing an
4) Whether the time and territorial limitations employee who refuses to be transferred to a
contained in the covenant are reasonable; and different branch if such is a business necessity
(e.g. the employee’s skills and expertise is
needed in the other branch). The just cause
5) Whether the restraint is reasonable from the
termination would be based on willful
standpoint of public policy. (Rivera v. Solidbank
disobedience. Conversely, if there is no such
Corporation, G.R. No. 163269, 19 April 2006)
justification, an employer may be held liable for
illegal dismissal.
Types of post-employment restrictions

In a case, the dismissal of a utility man, who

1. Non-Compete Clauses was separated from service due to his refusal
2. Non-Solicitation Clauses to transfer, was held valid after it was
established that the company was acting in
good faith when it implemented a
reorganization plan to address financial
difficulties and after due process was observed.

B. EMPLOYEE RIGHTS

Second, management prerogative should be

exercised with due regard to the rights of labor.
Otherwise stated, the employer should ensure
that labor laws – which provides for the rights
of the employees – should be observed.

For instance, an employer cannot validly

terminate a rank-and-file employee who
refuses to render overtime work if there is no
ground for compulsory overtime work.
Unknown to many, DOLE rules prohibit
overtime work for rank-and-file as a general
rule; however, exceptions are allowed under
the rule on compulsory overtime work. Thus, a
rank-and-file employee has a right to refuse
overtime work where none of the grounds are
present. (See Last paragraph, Section 10, Rule
I, Book III, Omnibus Rules Implementing the
Labor Code)

Managerial prerogatives, however, are subject

to limitations provided by law, collective
bargaining agreements, and general principles
of fair play and justice. (Endico v. Quantum
Foods Distribution Center, G.R. No. 161615,
39 January 2009)

Otherwise stated, the employee’s bundle of

rights consists of those provided for by law,
contract, company policies, collective
bargaining agreement, other employment
agreements, and general principles of fair play
and justice.