Wednesday, October 5, 2011


by Atty. Marlon J. Manuel
September 2, 2011


l      PAL plans to terminate more than 2,600 employees

l      70% of PALEA’s membership and the total number of rank-and-file employees

l      62% of the union leadership

l      35% of the total employee complement of PAL

l      The mass termination will affect three (3) departments (according to PAL – “non-core”)

l      AIRPORT SERVICES - passenger handling, ramp handling, station control, central baggage services, airport equipment maintenance, and cargo handling (about 2,000)

l      IN-FLIGHT CATERING - planning, preparation, production, servicing, and delivery of in-flight snacks, meals, and beverages for all PAL flights (about 400)

l      CALL CENTER OPERATIONS - reservations and bookings (about 300)

l      According to PAL’s plan, the services of the three (3) departments will be “spun-off/outsourced” to three (3) service providers
l      Sky Logistics for Airport Services
l      Sky Kitchen for In-flight Catering
l      SPI Global for Call Center Operations

l      The terminated employees will be “rehired” by the service providers

l      PAL earned a total comprehensive income of    US$ 72.5 MILLION (net income of US$65.5 Million plus other income) for the fiscal year which ended on March 31, 2011.

l      According to the company’s Financial Statement, this is “a significant turnaround from the previous fiscal year’s total comprehensive loss of US$ 14.4 million.” 

l      Converted to Philippine Pesos, PAL’s income amounted to MORE THAN PhP 3 BILLION  (computed at $1: PhP 42.50).


l      1998 - PALEA was constrained to enter into a suspension of its Collective Bargaining Agreement with PAL.
l      For TEN (10) long years, PALEA sacrificed its right to collective bargaining in order to help the nation’s flag carrier to recover while it went into rehabilitation.
l      2007 - PAL successfully exited rehabilitation.
l      2008 - The CBA Moratorium expired.
l      2009
l      period for negotiations for a new CBA between the parties, after the moratorium
l      PAL announced its intention to “spin-off/outsource” the three (3) departments.


l      Can PAL contract out the three (3) departments?

l      Is the mass termination of regular employees justified?

l      Is PAL guilty of unfair labor practices?

Can PAL contract out the three (3) departments?


l      The Collective Bargaining Agreement explicitly prohibits PAL from contracting out the functions and positions performed and held by regular employees.

l      The CBA states:
l      Section 4. The Company undertakes not to contract out existing positions, jobs, divisions, and departments presently occupied by present or future regular employees within the collective bargaining unit. xxx xxx


l      PAL is allowed to “spin-off” and the termination of employees is part of the “spin-off”.  

l      “Spin-off” is allowed under the 2nd paragraph of Section 4, Article XXIV of the CBA:
l      In case the Company deems it necessary to reorganize its corporate structure for the viability of its operations by forming joint ventures and spin-offs, the Company shall do so only after proper consultations with PALEA not less than forty-five (45) days before the implementation of said reorganization for the protection of the Union and those affected employees.

Office of the President:

l      PAL is justified in contracting out the three departments.

l      The proper application and interpretation of the various provisions in the CBA as well as in the Labor Code have been extensively elucidated by the Labor Secretary in her Order.  There is no reason to reverse the same.

Is the mass termination of regular employees justified?


l      PAL’s mass termination of more than 2,600 employees is neither necessitated nor justified by the company’s financial situation.

l      PAL is a profitable business enterprise as shown by PAL’s Financial Statements.

l      From the time that this dispute arose, PAL has been posting increased profitability that negates the doomsday scenario that it sought to depict when it embarked on the mass termination of its employees.

Can PAL contract out the three (3) departments?


l      Unless the spin-off is implemented, PAL will be forced to close down for lack of cash for operational purposes, which will bring incalculable losses not only to the employees, shareholders and creditors of PAL but also to the riding public and the national interest.
l      “PAL is in such a situation that constrains it to spin-off its non-core activities….”  
l      “it is justified in fact and in law in exercising a recognized management prerogative to reduce its workforce as a means to avert an imminent bankruptcy…” 
l      “the spin-off of non-core activities…had to be considered as part of the survival plan.”
l      “It was motivated by a pressing need to prevent further financial drain and thus, save PAL from eventual collapse.”
l      “the spin-off is necessary for to this very day, PAL’s economic downturn continues to threaten its survival.” 
l      “it is a desperate and unwanted course of action after substantial efforts exerted failed to alleviate its failing viability.” 
l      “Unless the spin-off is implemented at the soonest possible time, PAL will be forced to close down for lack of cash for operational purposes.”


l      The termination of the affected employees as a result of out-sourcing the services is in accordance with law.
l      What is involved in this case is retrenchment due to reorganization impelled by the need to “prevent continued heavy and substantial losses.” 
l      The outsourcing or contracting out of the business operations is a mere incident flowing from the valid and lawful decision to close the various departments of PAL “as a much needed cost cutting measure.”
l      The surge in fuel prices, the FAA downgrade, the global recession, the EU blacklist, and the airline industry condition, seriously affected the fiscal position of PAL.

Office of the President:

l      The consequent retrenchment of the regular employees and union members is valid.

l      PAL is encountering financial ordeals that justify the mass termination of the employees.

l      “We cannot close our eyes to the financial ordeals of the airline company laboriously presented and the global and national developments enveloping the airline industry.”

Is PAL guilty of unfair labor practices?


l      The mass termination of thousands of employees, at the start of collective bargaining negotiations, done in violation of the parties’ CBA, and which is not commensurate to the improving financial condition of PAL, is clear bad faith.

l      The scheme being implemented by PAL will eradicate union membership and exclude from the coverage of the bargaining unit the positions that are now being held by regular employees who are union members. These acts are deliberate interference with the employees’ rights to self-organization.

l      As shown by recent developments, the mass termination is aimed at defeating the negotiation of a new CBA. 


l      PAL is not guilty of unfair labor practice even if more than two thousand rank-and-file PAL employees, including PALEA members and officers, will be separated from service.

l      The spin-off and termination of union officers and members will not extinguish the union or even threaten its existence.

l      The company’s decisions and intentions are guided by good faith and a legitimate exercise of management prerogative to reduce its workforce as a means to avert an imminent bankruptcy.


l      PAL is not liable for unfair labor practice.

l      Surrounding global and national economic developments necessitated the adoption of measures to keep PAL afloat and competitive.  

l      The good faith of PAL negates any allegation that contracting out services was motivated by the intention to discourage, or to interfere with, the exercise of the right to self-organization.
l      OP

l      For pursuing a legitimate exercise of management prerogative, PAL is not liable for unfair labor practice.


l      After asking the workers to sacrifice for ten (10) years for the company and the country, PAL and the government will now sacrifice the workers themselves.

l      Under PAL’s plan, the company wants to continue to benefit from the loyal services of the workers, but without their job security, union, and CBA.

l      Despite PAL’s MORE THAN PhP 3 BILLION income for the previous year, PAL will terminate more than 2,600 regular employees.  What is PAL’s justification for the mass termination?  LOSSES

l      The Office of the Secretary of Labor and the Office of the President upheld PAL’s mass termination of more than 2,600 regular employees.  How did these two government offices that are supposed to protect the rights of Filipino workers justify PAL’s mass termination?  LOSSES

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