FASAP v. PAL 2008SCThese issues boil down to the question of whether PALs retrenchment scheme was justified.Under the Labor Code, retrenchment or reduction of employees is authorized under art 283To be valid:1)That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merelyde 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 to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;(3)That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half () month 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 the 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.[45]In view of the facts and the issues raised, the resolution of the instant petition hinges on a determination of the existence of thefirst,fourthand thefifthelements

FIRST ELEMENT: That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merelyde minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer.- The law speaks of serious business losses or financial reverses.- The fact that an employer may have sustained a net loss, such loss,per se, absent any other evidence on its impact on the business, nor on expected losses that would have been incurred had operations been continued, may not amount to serious business losses mentioned in the law.- The employer must also exhaust all other means to avoid further losses without retrenching its employees.[52]Retrenchment is a means of last resort;- Alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence.- In establishing a unilateral claim of actual or potential losses, financial statements audited by independent external auditors constitute the normal method of proof of profit and loss performance of a company.[5- The audited financial statements should be presented before the Labor Arbiter who is in the position to evaluate evidence.They may not be submitted belatedly with the Court of Appeals, because the admission of evidence is outside the sphere of the appellate courts certiorari jurisdiction.CASE AT BARIn the instant case, PAL failed to substantiate its claim of actual and imminent substantial losses which would justify the retrenchment of more than 1,400 of its cabin crew personnel.Although the Philippine economy was gravely affected by the Asian financial crisis, however, it cannot be assumed that it has likewise brought PAL to the brink of bankruptcy.Likewise, the fact that PAL underwent corporate rehabilitation does not automatically justify the retrenchment of its cabin crew personnel.Records show that PAL was not even aware of its actual financial position when it implemented its retrenchment program.It initially decided to cut its fleet size to only 14 (Plan 14) and based on said plan, it retrenched more than 1,400 of its cabin crew personnel.Later on, however, it abandoned its Plan 14 and decided to retain 22 units of aircraft (Plan 22).Unfortunately, it has retrenched more than what was necessary.

PAL decided to adopt Plan 14 onJune 12, 1998.Three days after, or on June 15, 1998, it sent notices of retrenchment to its cabin crew personnel to take effect on July 15, 1998.However, after allegedly realizing that it was going to retain 22 of its aircraft instead of 14, and after more than 1,400 of its cabin crew have been fired during the period from November 30, 1998 to December 15, 1998, it suddenly recalled to duty 202 of the retrenched cabin crew personnel.This only proves that PAL was not aware of the true state of its finances at the time it implemented the assailed massive retrenchment scheme.It embarked on the mass dismissal without first undertaking a well-considered study on the proposed retrenchment scheme.Likewise, PAL has not shown to the Courts satisfaction that the pilots strike had gravely affected its operations.It offered no proof to show the correlation between the pilots strike and its alleged financial difficulties.