Management prerogative is simply the power of an employer to do what it sees fit in conducting its business, and it includes the right to transfer an employee.
Outsourcing, or more more commonly known or tagged as Contractualization in the Philippines, is an arrangement where a client company outsources parts of its business operations to a contractor who performs those parts of the business. This would include hiring, managing, and firing the employees assigned to do the work on the client's worksite. There's no employer-employee relationship between the worker assigned and the client company. In the Philippines, the more common parts of the business that are contracted out are security, housekeeping, and maintenance work.
Why am I putting Management Prerogative and Contractualization together, you might ask. The answer is, these contracting "agencies" are notorious for either doing the bare minimum in providing compensation and benefits (to bid as the cheapest contract price) or outright violating labor standards or labor relations regulations. Transferring employees for shallow reasons is sadly quite common, especially since there is a wide pool of workers ready to take their positions, often entry-level ones.
While the Labor Code, which was enacted almost half a century ago, has provided needed protection to workers against injustices caused by employers, it also provides enough leeway for businesses to have as much say as possible in terms of hiring, managing, and firing employees.
Employers have the right to transfer an employee if it suits their business need, but what exactly are the limits to this prerogative? And when does an employee transfer cross the line between being reasonable to being a complete mockery? Let's take a look at the case of Philippine Industrial Security Agency (PISA) Corp. v. Aguinaldo.
PISA Corp. v. Aguinaldo
PISA Corp. was a security which conducted the security operations for a commercial bank in the Philippines, Far East Bank and Trust Company. Percival Aguinaldo worked as a security guard as PISA Corp's employee, assigned at the Far East Bank Santiago City branch. He was promoted as Branch Head Guard after rendering service for five years, and he had been with the company for ten years when one November workday PISA Corp's roving officer caught him not wearing headgear, resulting in disciplinary action being taken against him.
This disciplinary action came in the form of a memo informing him that he had been relieved of his duties.
Aguinaldo explained that he wasn't wearing his headgear, his perch cap, that day because it was raining and his head was still wet after he had to answer to an emergency call from their armor crew due to mechanical trouble on the armored car. Additionally, the bank's Branch Manager supported Aguinaldo, saying, "Mr. Aguinaldo has been with the branch for ten years, he is a person of good moral character and has performed his job above our expectations."
The Branch Manager asked PISA Corp. to retain Mr. Aguinaldo.
You might think that PISA Corp. would heed the recommendation of their client and did as they were told, but no. What they instead did was transfer Mr. Aguinaldo to a different Far East Bank branch, one in Malabon City. And this was a branch that wasn't exactly near. It was over 200 miles from his current branch of assignment!
PISA Corp. did provide some form of reassurance to their employee who had been working for them for a decade. They said that a new Santiago City Far East Bank branch was opening soon, and that he would be transferred back there once it opened.
It seemed like a fair promise, and better than firing him, right? Not exactly. There wasn't even a date or duration to which his transfer to the Malabon branch which was over 200 miles away, would last. And so, Aguinaldo sued PISA Corp for illegal dismissal, alleging that his transfer to the Malabon branch amounted to constructive dismissal.
Does Getting Transferred Amount to Dismissal?
Again, let me reiterate that management prerogative includes the right to transfer an employee as seen fit. But is the right to transfer an employee absolute? When does getting transferred amount to getting fired?
The Court said:
"A transfer amounts to constructive dismissal when the transfer is unreasonable, unlikely, inconvenient, impossible or prejudicial to the employee, as in this case. It is defined as an involuntary resignation resorted to when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee."
An employer's power to transfer an employee has its limits. When Aguinaldo was shipped to a place of assignment that was 200 miles away from his current place of assignment, for the mere fact that he was caught by an inspector for not wearing his perch cap, the exercise of management prerogative amounted to constructive dismissal.
"Petitioner's (PISA Corp's) act manifests insensibility to the welfare of respondent and his family. Obviously, his transfer to Malabon City will be prejudicial to them economically and emotionally. Indeed, petitioner's action is in defiance of basic due process and fair play in employment relations," the Court said.
Burden of Proof in Constructive Dismissal Cases
And it isn't up to Aguinaldo, the aggrieved worker, to prove that he was constructively dismissed. It's the employer's burden to prove that it did not constructively dismiss the employee.
The Court said:
"In constructive dismissal, the employer has the burden of proving that the transfer and demotion of an employee are for just and valid grounds, such as genuine business necessity. The employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of salary and other benefits. Should the employer fail to overcome this burden of proof, the employee's transfer shall be tantamount to unlawful constructive dismissal."
PISA Corp. failed to overcome the burden of proof. They also disregarded the business adage that 'the customer or client is always right.' The bank wanted to retain this trusted guy whom they've had for ten years, and the contractor disrespected that request.
Reasonable Limitations of Management Prerogative
As widely encompassing as management prerogative is as a doctrine that it allows companies to do some monumental things such as mass layoffs, reorganizing, 'streamlining', etc., it's good to know that there are reasonable limits to this power.
The Supreme Court concluded their decision by quoting their ruling in the case of Blue Dairy Corporation v. NLRC:
"The management prerogative to transfer personnel must not be exercised with grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker."
In an age where companies will take whatever means necessary to 'optimize' their business operations, 'streamline', or whatever fancy name there is to getting rid of workers just so they can make their quarterly numbers look good, just know that their powers are not absolute. And you, as an honest salaryman, have the law's protection.