7. SHS Perforated Materials Inc.
v Diaz
G.R. No. 185814
October 13, 2010
By:
Topic: Management Prerogative
Petitioners: SHS Perforated Materials Inc.
Respondents: Manuel Diaz
Ponente: J. Mendoza
Doctrine: Management prerogative refers “to the right of an employer
to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of work.”
Although management prerogative refers to “the right to regulate all
aspects of employment,” it cannot be understood to include the right
to temporarily withhold salary/wages without the consent of the
employee
Facts:
SHS is a start-up corporation organized and existing under the
Philippines and registered with the PEZA. Petitioner Hartmannshenn,
a German national, is its president, in which capacity he determines
the administration and direction of the day-to-day business affairs of
SHS. Petitioner Schumacher, also a German national, is the treasurer
and one of the board directors. As such, he is authorized to pay all
bills, payrolls, and other just debts of SHS of whatever nature upon
maturity. Schumacher is also the EVP of the European Chamber of
Commerce of the Philippines (ECCP) which is a separate entity from
SHS. Both entities have an arrangement where ECCP handles the
payroll requirements of SHS to simplify business operations and
minimize operational expenses. Thus, the wages of SHS employees
are paid out by ECCP, through its Accounting Services Department
headed by Taguiang.
Respondent Diaz was hired by petitioner SHS as Manager for
Business Development on probationary status from July 18, 2005 to
January 18, 2006, with a monthly salary of P100,000.00. He was
tasked
to perform sales/marketing functions, represent the company in its
events, perform all functions, duties and responsibilities to be
assigned by the employer in due course, among others. In addition to
the above-mentioned responsibilities, respondent was also instructed
by Hartmannshenn to report to the SHS office and plant at least two
(2) days every work week to observe technical processes
involved in the manufacturing of perforated materials, and to learn
about the products of the company, which respondent was hired to
market and sell.
During respondentʼs employment, Hartmannshenn was often abroad
and, because of business exigencies, his instructions to respondent
were either sent by electronic mail or relayed through telephone or
mobile phone. When he would be in the Philippines, he and the
respondent held meetings. As to respondentʼs work, there was no
close supervision by him. However, during meetings with the
respondent, Hartmannshenn expressed his dissatisfaction over
respondentʼs poor performance. Respondent allegedly failed to make
any concrete business proposal or implement any specific measure to
improve the productivity of the SHS office. In addition, respondent was
said not to have returned Hartmannshenn's calls and e-mails, to which
Diaz denied.
Hartmannshenn instructed Taguiang not to release respondentʼs
salary. Later that afternoon, respondent called and inquired about his
salary. Taguiang informed him that it was being withheld and that he
had to immediately communicate with Hartmannshenn. The next day,
respondent served on SHS a demand letter and a resignation letter,
citing illegal and unfair labor practices.

Issues:
1. (Main issue) • WON the temporary withholding of
respondentʼs salary/wages by petitioners was a valid
exercise of management prerogative (No)
Ruling:
MAIN ISSUE- NO. Management prerogative refers “to the right of an
employer to regulate all aspects of employment, such as the freedom
to prescribe work assignments, working methods, processes to be
followed, regulation regarding transfer of employees, supervision of
their work, lay-off and discipline, and dismissal and recall of work.”
Although management prerogative refers to “the right to regulate all
aspects of employment,” it cannot be understood to include the right
to temporarily withhold salary/wages without the consent of the
employee
To sanction such an interpretation would be contrary to Article 116 of
the Labor Code.
Any withholding of an employeeʼs wages by an employer may only be
allowed in the form of wage deductions under the circumstances
provided in Article 113 of the Labor Code, as set forth below:
ART. 113. Wage Deduction. – No employer, in his own behalf or in
behalf of any person, shall make
any deduction from the wages of his employees, except:
(a) In cases where the worker is insured with his consent by the
employer, and the deduction is to
recompense the employer for the amount paid by him as premium on
the insurance;
(b) For union dues, in cases where the right of the worker or his union
to check-off has been
recognized by the employer or authorized in writing by the individual
worker concerned; and
(c) In cases where the employer is authorized by law or regulations
issued by the Secretary of
Labor.
As correctly pointed out by the LA, “absent a showing that the
withholding of complainantʼs wages
falls under the exceptions provided in Article 113, the withholding
thereof is thus unlawful.”
The Court finds petitionersʼ evidence insufficient to prove that
respondent did not work from November 16 to November 30, 2005.
As can be gleaned from respondentʼs Contract of Probationary
Employment and the exchanges of electronic mail messages between
Hartmannshenn and respondent, the latterʼs duties as manager for
business development entailed cultivating business ties, connections,
and clients in order to make sales. Such duties called for meetings
with prospective clients outside the office rather than reporting for work
on a regular schedule. In other words, the nature of respondentʼs job
did not allow close supervision and monitoring by petitioners. Neither
was there any prescribed daily monitoring procedure established by
petitioners to ensure that respondent
was doing his job. Therefore, granting that respondent failed to answer
Hartmannshennʼs mobile calls and to reply to two electronic mail
messages and given the fact that he admittedly failed to report to work
at the SHS plant twice each week during the subject period, such
cannot be taken to signify that he did not work from November 16 to
November 30, 2005.