MANAGEMENTPREROGATIVES

Management prerogative:
-An exclusive and special right, power or privilege granted to business owners.
-Property right attributed to the owner of a business establishment

Par.4, Sec. 3, ART. XIII, Philippine Constitution: “The state shall regulate the relations
between workers and employers, recognizing the x x x right of enterprises to reasonable
returns of investments, and to expansion & growth.”

ART. 428 of the Civil Code: • “The owner has the right to enjoy and dispose of a thing,
without other limitations than those established by law.”

The owner of a business establishment has, among others, the right to control or direct
its business, the right to its fruits and the right to dispose the same, subject to the
regulations of the police power of the state.

Example.
When an owner of a business enterprise, after operating a profitable business for
several years and decides to close the same for he is already tired of doing business and
wants to travel abroad for vacation, absolutely, he CAN CLOSE the business. However,
he is obliged to pay separation pay to workers as mandated by law. (Art. 283, Labor
Code.)

Most common Management Prerogatives

The Right to Hire
The Right to Dismiss (Fire/Terminate)
The Right to Transfer
The Right to Promote and Demote
The Right to Discipline
The Right to Lay Down Policies
The Right to Establish Working Hours
The right to Organize and Reorganize
The Right to Reasonable return on investment;
The Right to Expansion and Growth

The Right to HIRE

The company has the exclusive right to purchase labor from any person whom it chooses.
Thus, the transferee in good faith of a business establishment has no obligation to absorb
employees of the transferor and to continue on employing them. (MDII Employees
Association vs Presidential Assistant on Legal Affairs, 79 SCRA 40)

There is no law which requires the purchaser to absorb the employees of the selling
corporation. As there is no such law, the most that the purchasing company may do, for
purposes of public policy and social justice, is to give preference to the qualified separated
employees of the selling company, who in their judgment are necessary in the continued
operation of the business establishment. (San Felipe Neri School of Mandaluyong vs
NLRC, et al., GR NO. 78350, 9/11/91)

The Right to DISMISS

The company has the right to dismiss employees in accordance with the causes and
procedures established by law. This particular right must be exercised with CAUTION and
without abuse of discretion because termination affects the right of the worker to Security
of Tenure.

Art. 279 – in cases of Regular Employment, termination on the grounds of just and
authorized causes, subject to the requirements of due process.

End of contract? Completion of contract/phase?

No prior notice is required.
Termination of probationary employment?
Notice served on employee within a reasonable time

Any decision of termination shall be without prejudice to the right of the worker to contest
the same by filing a complaint with the RAB of the NLRC.

Validity of 30 day preventive suspensions.

The Right to Transfer

The company has the right to transfer an employee from one office to another within the
business establishment provided that there is no demotion in rank, salary, benefits and
other privileges.

This is a privilege inherent in the employer’s right to control and conduct its business
enterprise and conduct of its business operations to achieve its purpose. It cannot be
denied to the employer.

IT is the employer’s prerogative, based on its assessment on the following employee

attributes:
Qualifications
Aptitudes
Competence

An employee’s security of tenure does not give him such a vested right in his position as
would deprive the company of its prerogative to change his assignment or transfer him
where he will be most useful

When the EE’s transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and
it does not involve a demotion in rank or diminution in salaries, benefits and privileges,
the employee may not complain that it amounts to constructive dismissal. (PT&T vs
NLRC, GR NO. 76645, July 23, 1991; Allied Bank vs CA, GR No. 144412, 11/18/03)
The Right to PROMOTE and DEMOTE
The company has the right to promote employees

Promotion: scalar ascent of an employee to another position higher in rank or salary. The
right to promote carries with it the right to demote.

There is no law that compels an employee to accept a promotion, as a promotion is in the

nature of a gift or reward, which a person has a right to refuse. He who uses his won right,
injures no one. (Milares vs Subido, 20 SCRA 954; PT&T Corp. vs NLRC, Gr No. 152057,
9/29/03)

The Right to DISCIPLINE

The right of the employer to subject his employees to disciplinary measures and the need
for discipline have been judicially noticed.

Success in industries and public services is the foundation in which just wages may be
paid. There can be no success without efficiency. There can be no efficiency without
discipline. Thus, when they violate the rules of discipline, employees and laborers
jeopardize the interest not only of the employer but also of their own. In violating the rules
of discipline, they aim at killing the hen that lays golden eggs. Laborers who trample down
the rules set for an efficient service are, in effect, parties to a conspiracy against not only
to capital but also to labor.

The employer has the right to instil discipline in his employees and to impose reasonable
penalties on erring employees pursuant to company rules and regulations. (SMC vs
NLRC, GR No. 87277, May 12, 1989)

IF the undesirable one remains in service, it will demoralize the other employees
(Shoemart vs NLRC Gr No. 74229, 8/11/1989)

The Right to Lay Down Policies, Establish Working Hours, and to Organize and
Reorganize
In general terms, an employer is free to regulate, according to his own discretion and
judgment, all aspects of employment, including work assignments, working methods,
time, place and the manner or work, tools to be used, processes to be followed,
supervision of workers and working regulations. (SMC Sales vs Ople, GR No. 53515,Feb.
8, 1989)

The Right to Reasonable Return of Investment and the Right to Expansion and
Growth
Every business enterprise endeavours to increase its profit and in the process it may
adopt or devise means designed towards expansion and growth.