What is the concept of redundancy?
Redundancy is one of the authorized causes for termination of employment under Article 283 of the Labor Code of the Philippines.
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business. Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February 7, 1991, 193 SCRA 665]
What are the requisites for the ground of redundancy?
Redundancy is one of the authorized causes for termination of employment under Article 283 of the Labor Code of the Philippines.
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.
Succinctly put, a position is redundant where it is superfluous, and superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business. Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February 7, 1991, 193 SCRA 665]
What are the requisites for the ground of redundancy?
For redundancy to be a valid ground to terminate
employment, the following requisites must be present:
1. Written
notice served on both the affected employees and the Department of
Labor and Employment at least one (1) month prior to the intended date of
termination;
2. Payment
of separation pay equivalent to at least one (1) month pay or
to at least one (1) month pay for every year of service, whichever is higher;
3. Good
faith in abolishing the redundant positions; and
4. Fair
and reasonable criteria in ascertaining what positions are to be
declared redundant and accordingly abolished [such as (a) less preferred status [e.g.temporary employee]; (b) efficiency; and (c) seniority].
Burden of proof in redundancy rests on the employer.
It is the burden of the employer to prove the factual and legal basis for the dismissal of its employees on the ground of redundancy.
It is the employer’s burden to show that redundancy exists. It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees (Asufrin vs. San Miguel Corporation, 2004).
Evidence must be presented to substantiate redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring (Panlilio vs. NLRC, 1997).
It is the employer’s burden to show that redundancy exists. It is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees (Asufrin vs. San Miguel Corporation, 2004).
Evidence must be presented to substantiate redundancy such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description and the approval by the management of the restructuring (Panlilio vs. NLRC, 1997).
Evidence of losses, not required.
Duplication of work, not necessary
Where two or more persons are performing the same work which may be effectively accomplished by only one, the employer may terminate the excess personnel and retain only one.
Redundancy in an employer’s personnel force, however, does not necessarily or even ordinarily refer to duplication of work. That no other person was holding the same position that private respondent held prior to the termination of his services, does not show that his position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work and two or more people doing the work of one person. (Wiltshire File Co., Inc. vs. NLRC, supra).
In redundancy, what is looked into is the position itself, the nature of the services performed by the employee and the necessity of such position. (Tierra International Construction Corp. vs. NLRC, 1992)
Redundancy in an employer’s personnel force, however, does not necessarily or even ordinarily refer to duplication of work. That no other person was holding the same position that private respondent held prior to the termination of his services, does not show that his position had not become redundant. Indeed, in any well-organized business enterprise, it would be surprising to find duplication of work and two or more people doing the work of one person. (Wiltshire File Co., Inc. vs. NLRC, supra).
In redundancy, what is looked into is the position itself, the nature of the services performed by the employee and the necessity of such position. (Tierra International Construction Corp. vs. NLRC, 1992)
Abolition of position or department.
The abolition of departments or positions in
the company is one of the recognized management prerogatives. In
the absence of proof that the act of the employer was ill-motivated, it is presumed
that it acted in good faith. (San
Miguel Corporation vs. NLRC, G. R. No. 99266, March 2, 1999).
In valid abolition of positions, the Supreme
Court cannot erase that initiative simply to protect the person holding the
position.
(Cosico, Jr. vs. NLRC, G. R. No. 118432,
May 23, 1997).
Reorganization
through redundancy, valid.
Reorganization as a cost-saving device
effected through redundancy is acknowledged as valid by jurisprudence. An
employer is not precluded from adopting a new policy conducive to a more
economical and effective management. (International
Harvester Macleod, Inc. vs. IAC, 149 SCRA 641 [1987]).
Contracting
out of abolished position to independent contractors held valid.
In Serrano vs. NLRC, [G. R. No. 117040,
January 27, 2000], the act of the employer of phasing-out its security
section and the hiring of an independent security agency to perform
its task constitutes a legitimate business decision. Consequently,
absent proof that management acted in a malicious or arbitrary manner, the
Supreme Court will not interfere with the exercise of judgment by an employer.
In Asian Alcohol
Corporation vs. NLRC, [G. R. No. 131108, March 25, 1999], the Supreme Court
upheld the termination of employment of water pump tenders and their
replacement by independent contractors. It ruled that an employer’s good faith
in implementing a redundancy program is not necessarily put in doubt by the
availment of the services of an independent contractor to replace the services
of the terminated employees to promote economy and efficiency.
In De
Ocampo vs. NLRC, [213 SCRA 652 (1992)], the Supreme Court upheld the
termination of employment of three mechanics in a transportation company and
their replacement by a company rendering maintenance and repair services.
Indeed, the management of a company cannot be
denied the faculty of promoting efficiency and attaining economy by a study of
what units are essential for its operation. To it belongs the ultimate
determination of whether services should be performed by its personnel or
contracted to outside agencies. While there should be mutual consultation,
eventually deference is to be made to what management decides. (Serrano vs. NLRC, supra).
Hiring of
casuals after redundancy, held valid.
Private respondent-employees in Dole Philippines, Inc. vs. NLRC, [G. R. No.
120009, September 13, 2001] submit that the subsequent hiring of casual
employees to replace the dismissed regular employees on the ground of
redundancy is an indication of bad faith. Petitioner company does not deny that
they hired casual employees after the implementation of the redundancy program.
Petitioner explains, however, that it has always hired casuals to augment the
company’s manpower requirements in accordance with the demands of the
industry. Petitioner further asserts that the number of casuals remained
relatively constant after the implementation of the redundancy program, as
shown by the graph appended as Annex “J” of its supplement to the motion for
reconsideration before the NLRC. The Court finds the foregoing explanation
sufficient to negate the allegations of bad faith by its former employees.
Elimination of undesirables, abusers and worst performers through redundancy, not an indication of bad faith.
In Dole Philippines, Inc. vs. NLRC, [G. R. No. 120009, Sept. 13, 2001], the private respondent-employees point to references in petitioner’s studies of the redundancy program to the elimination of “undesirables,” “abusers” and “worst performers” as another indicia of petitioner’s bad faith. The Supreme Court, however, ruled that it is not too keen on attaching such a sinister significance to these allusions. It may be argued that the elimination of the so-called “undesirables” was merely incidental to the redundancy program or that past transgressions could have been part of the criteria in determining who among the redundant employees is to be dismissed.
Characterization of service as redundant by employer, not subject to review; exception.
As a general rule, the characterization of the services of the employee who was terminated for redundancy is an exercise of business judgment of the employer. The wisdom or soundness of such characterization or decision is not subject to discretionary review by the Labor Arbiter or the NLRC and the Court of Appeals. The only exception is when there is a showing that the same was done in violation of law or attended with arbitrary and malicious action.
It is not enough, therefore, for a company to merely declare that it has become overmanned. It must produce adequate proof that such is the actual situation in order to justify the dismissal of the affected employees for redundancy.
In the 2001 case of Santos vs. CA, Pepsi-Cola Products Phils., Inc., [G. R. No. 141947, July 5, 2001], respondent Pepsi, based on the fact that its Metro Manila Sales Operations were not meeting its sales targets, and on the fact that new positions were subsequently created, wanted to restructure its organization in order to include more complex positions that would either absorb or render completely unnecessary the positions it had previously declared redundant. The soundness of this business judgment of Pepsi has been assailed by petitioners, arguing that it is more logical to implement new procedures in physical distribution, sales quotas, and other policies aimed at improving the performance of the division rather than to reduce the number of employees and create new positions. The Supreme Court, however, said that this argument cannot be accepted.
While it is true that management may not, under the guise of invoking its prerogative, ease out employees and defeat their constitutional right to security of tenure, the same must be respected if clearly undertaken in good faith and if no arbitrary or malicious action is shown.
Similarly, in Wiltshire File Co., Inc. vs. NLRC, [G.R. No. 82249, February 7, 1991, 193 SCRA 665], petitioner company effected some changes in its organization by abolishing the position of Sales Manager and simply adding the duties previously discharged by it to the duties of the General Manager to whom the Sales Manager used to report. In that case, it was held that the characterization of private respondent’s services as no longer necessary or sustainable and, therefore, properly terminable, was an exercise of business judgment on the part of petitioner company.
But the above rule was not applied in the 2001 case of University of the Immaculate Concepcion, vs. U.I.C. Teaching and Non-Teaching Personnel and Employees Union, [G. R. No. 144702, July 31, 2001]. Petitioners do not claim that the position of school electrician has become useless or redundant such that it had to be abolished. That there is need for an electrician is shown by the fact that his work is being performed by the student-scholar. There is no showing that there were two (2) positions for school electricians, and that in order to achieve a reduction in personnel, one position for electrician was abolished resulting in one position for school electrician and the consequent termination of the employment of the person occupying the position. Rather, the facts show that there was only one position for electrician which was occupied by respondent. When the time came that the student-trainee became capable of performing his functions, the latter’s employment was terminated and the student-trainee took the vacated position. Clearly there was here no abolition of position to achieve a reduction in the number of electricians employed by the UIC. In other words, the student-trainee merely replaced respondent as school electrician because petitioners found it to their advantage to let the work be done by the student for free.
Redundancy and retrenchment, distinguished.
Redundancy and retrenchment are not synonymous but distinct and separate grounds under Article 283.
“Redundancy” exists when the
services of an employee are in excess of what is required by an enterprise. “Retrenchment,” on the other hand, is one of the economic
grounds for dismissing employees and is resorted to primarily to avoid or
minimize business losses. “Redundancy Program,” while denominated as such, is
more precisely termed “retrenchment” if it was primarily intended to prevent
serious business losses. (Atlantic Gulf and Pacific Company of Manila, Inc. [AG
& P], vs. NLRC, G. R. No. 127516, May 28, 1999).
“Last In, First Out” [LIFO] rule.
In the case of Maya Farms Employees Organization vs. NLRC, [G. R. No. 106256, December
28, 1994], involving termination due to redundancy, one of the issues
raised was the validity of application of the “Last In, First Out [LIFO]” rule
embodied in the CBA which states:
“Section 2. LIFO RULE. - In all cases of
lay-off or retrenchment resulting in termination of employment in the line of
work, the Last-In-First-Out (LIFO) Rule must always be strictly observed.”
(Section 2, Article III, CBA).
In holding that the employer did not violate
said rule, the Supreme Court declared:
“It is not
disputed that the LIFO rule applies to termination of employment in the line of
work. Verily, what is contemplated in the LIFO rule is that when there are two
or more employees occupying the same position in the company affected by the
retrenchment program, the last one employed will necessarily be the first to
go.
“Moreover,
the reason why there was no violation of the LIFO rule was amply explained by
public respondent in this wise:
‘xxx. The
LIFO rule under the CBA is explicit. It is ordained that in cases of
retrenchment resulting in termination of employment in line of work, the
employee who was employed on the latest date must be the first one to go. The
provision speaks of termination in the line of work. This contemplates a
situation where employees occupying the same position in the company are to be
affected by the retrenchment program. Since there ought to be a reduction in
the number of personnel in such positions, the length of service of each
employee is the determining factor, such that the employee who has a longer
period of employment will be retained.’”
LIFO rule,
exception.
In the same case of Maya Farms [supra], the
petitioners contended that the LIFO rule was violated by management in the case
of two (2) employees, the Asst. Superintendent for packing and Asst.
Superintendent for meat processing, respectively. The union pointed out that
the employee who was retained by management was employed on a much later date
than the other employee, and both were Assistant Superintendents.
The Supreme Court affirmed the ruling of the
NLRC which declared that despite the LIFO rule, the nature of work and
experience were correctly taken into account by management, thus:
“We cannot
sustain the union’s argument. It is indeed true that Roberta Cabrera was
employed earlier (January 28, 1961) and [sic] Lydia Bandong (July 9, 1966).
However, it is maintained that in the meat processing department, there were 3
Asst. Superintendents assigned as head of the 3 sections thereat. The reason
advanced by the company in retaining Bandong was that as Asst. Superintendent
for meat processing, she could ‘already take care of the operations of the
other sections.’ The nature of work of each assistant superintendent as well as
experience were taken into account by management. Such criteria was not shown
to be whimsical nor capricious.” (Maya
Farms Employees Organization vs. NLRC, G. R. No. 106256, Dec. 28, 1994).
LIFO or
FILO rule, no basis in law.
No law mandates the so-called rule of “Last
in, First out” [LIFO] or “First in, Last out” [FILO]. And the
reason is simple enough. A host of relevant factors come into play in
determining cost efficient measures and in choosing the employees who will be
retained or separated to save the company from closing shop. In determining
these issues, management has to enjoy a pre-eminent role. (Asian Alcohol Corporation vs. NLRC, supra).
LIFO rule,
not controlling, as employer has prerogative to choose who to terminate.
In the 2000 case of De la Salle University vs. De la Salle University Employees
Association, [G. R. No. 109002, April 12, 2000], the union proposed the use
of the "last-in-first-out" method in case of lay-off, termination due
to retrenchment and transfer of employees. The union relied on social justice
and equity to support its proposition, and submitted that the University’s
prerogative to select and/or choose the employees it will hire is limited,
either by law or agreement, especially where the exercise of this prerogative
might result in the loss of employment. The union further insists that its
proposal is “…in keeping with the avowed State policy ‘(q) To ensure the
participation of workers in decision and policy-making processes affecting
their rights, duties and welfare’ (Art. 211, Labor Code, as amended).”
On the other hand, the University asserted
its management prerogative and countered that “[w]hile it is recognized that
this right of employees and workers to ‘participate in policy and
decision-making processes affecting their rights and benefits as may be
provided by law’ has been enshrined in the Constitution (Article III, [should
be Article XIII], Section 3, par. 2), said participation, however, does not
automatically entitle the union to dictate as to how an employer should choose
the employees to be affected by a retrenchment program. The employer still
retains the prerogative to determine the reasonable basis for selecting such
employees.”
The Supreme Court ruled as follows:
“We agree with the voluntary arbitrator that
as an exercise of management prerogative, the University has the right to adopt
valid and equitable grounds as basis for terminating or transferring employees.
As we ruled in the case of Autobus Workers' Union (AWU) and Ricardo Escanlar
vs. National Labor Relations Commission, [291 SCRA 219 (1998)], ‘[a] valid
exercise of management prerogative is one which, among others, covers: work
assignment, working methods, time, supervision of workers, transfer of
employees, work supervision, and the discipline, dismissal and recall of
workers. Except as provided for, or limited by special laws, an employer is
free to regulate, according to his own discretion and judgment, all aspects of
employment.’” (emphasis supplied)
Hobson’s
choice.
Hobson’s choice means no choice at all;
a choice between accepting what is offered or having nothing at all. It refers
to the practice of Tobias Hobson, an English stable-owner in the 17th century,
of offering only the horse nearest the stable door.
This principle was applied in the 2004 case of Asufrin, Jr. vs. San Miguel Corporation, [G. R. No. 156658, March 10, 2004], where the employees, even if given the option to retire, be retrenched or dismissed, were made to understand that they had no choice but to leave the company. More bluntly stated, they were forced to swallow the bitter pill of dismissal but afforded a chance to sweeten their separation from employment. They either had to voluntarily retire, be retrenched with benefits or be dismissed without receiving any benefit at all. All that the employees were offered was a choice on the means or method of terminating their services but never as to the status of their employment. In short, they were never asked if they wanted to work for petitioner-company.
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