Management prerogatives refer to special rights granted to business owners under Philippine law. The key management prerogatives include the rights to hire and dismiss employees, transfer employees within the business, promote and demote employees, discipline employees, lay down policies, establish working hours, and organize and reorganize the business. Business owners also have rights to a reasonable return on investment and business expansion/growth. These prerogatives are derived from the Philippine Constitution and Civil Code and help business owners effectively manage their operations.

1. MANAGEMENT
PREROGATIVES

2. Management prerogative
• Definition: 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.”

3. Based on what we was stated…
• 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.)

4. 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

5. 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)

6. 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.

7. The Right to DISMISS (continued)
• 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.

8. 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.

9. The Right to Transfer (continued)
• 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)

10. 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)

11. 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 instill disciplinein 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)

12. 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)

13. 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.