Good Faith of the Employer is Required in Redundancy Program
Under Article 298 (formerly 283) of the Labor Code, redundancy is recognized as an authorized cause for dismissal, viz.:
Article 298 [283]. Closure of Establishment and Reduction of Personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year. (Emphasis supplied)
Essentially, redundancy exists when an employee’s position is superfluous, or an employee’s services are in excess of what would reasonably be demanded by the actual requirements of the enterprise.
Redundancy could be the result of a number of factors, such as the overhiring of workers, a decrease in the volume of business, or the dropping of a particular line or service previously manufactured or undertaken by the enterprise.
In this relation, jurisprudence explains that the characterization of an employee’s services as redundant, and therefore, properly terminable, is an exercise of management prerogative, considering that an employer has no legal obligation to keep more employees than are necessary for the operation of its business.
Nevertheless, case law qualifies that the exercise of such prerogative “must not be in violation of the law, and must not be arbitrary or malicious.” Thus, following Article 298 of the Labor Code as above cited, the law requires the employer to prove, inter alia, its good faith in abolishing the redundant positions, and further, the existence of fair and reasonable criteria in ascertaining what positions are to be
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declared redundant and accordingly abolished.
To exhibit its good faith and that there was a fair and reasonable criteria in ascertaining redundant positions, a company claiming to be over manned must produce adequate proof of the same. [Yulo vs. Concentrix Daksh Services Philippines, Inc., January 21, 2019, G.R. No. 235873]
Thus, in the Yulo case, the Court has ruled that it is not enough for a company to merely declare that it has become overmanned. Rather, it must produce adequate proof of such redundancy to justify the dismissal of the affected employees, 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.
Meanwhile, in Golden Thread Knitting Industries, Inc. v. NLRC, the Court explained that fair and reasonable criteria may include but are not limited to the following: “(a) less preferred status (e.g., temporary employee); (b) efficiency; and (c) seniority. The presence of these criteria used by the employer shows good faith on its part and is evidence that the implementation of redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its employees.”
In the Yulo case, the Court upholds the findings of the labor tribunals that the employer was not able to present adequate proof to show that it exhibited good faith, as well as employed fair and reasonable criteria in terminating petitioner’s employment based on redundancy.
Particularly, the employer attempted to justify its purported redundancy program by claiming that on December 18, 2014, it received an e-mail from Amazon informing it of the latter’s plans to “right size the headcount of the account due to business exigencies/requirements.”
However, such e-mail -much less, any sufficient corroborative evidence tending to substantiate its contents – was never presented in the proceedings a quo. At most, respondent submitted, in its motion 
for reconsideration before the NLRC, an internal document, which supposedly explained Amazon’s redundancy plans.
However, the Court finds that this one (1)-page document hardly demonstrates respondent’s good faith not only because it lacks adequate data to justify a declaration of redundancy, but more so, because it is clearly self-serving since it was prepared by one Vivek Tiku, the requestor/business unit head of respondent, and not by any employee/representative coming from Amazon itself.
Notably, parallel to the entry “Narrative of the current situation of the business unit, what triggered the downsizing[,] and what is the preferred outcome,” the requestor merely stated that “[w]e have just finished our seasonal ramp and would need to decrease our headcount due to low call volume based on the long term forecast by the client (Dec-Feb EOM LTF).” However, outside of this general conclusion, no evidence was presented to substantiate the alleged low call volume and the forecast from which it is based on so as to truly exhibit the business exigency of downsizing the business unit assigned to Amazon.
Aside from the lack of evidence to show employer’s good faith, it likewise failed to prove that it employed fair and reasonable criteria in its redundancy program. It merely presented a screenshot of a table with names of the employees it sought to redundate based on their alleged poor performance ratings.
Indeed, while “efficiency” may be a proper standard to determine who should be terminated pursuant to a program of redundancy, said document does not convincingly show that fair and reasonable criteria was indeed employed by respondent. To reiterate, all that the screenshot contains is a list of employees with their concomitant performance ratings. As the LA pointed out, “[t]hough [respondent] incorporated in their Reply a screenshot of what appears to be a table containing the names of purported employees including their respective performance ratings, this Office cannot admit this at its face value in the absence of proof that would substantiate the same.”
The presence of these criteria is evidence that the implementation of redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its employees. The aforesaid screenshot barely shows respondent’s actual compliance with this standard.
Finally, it may not be amiss to point out that while the employer had duly notified the employee that it was terminating him on the ground of redundancy, records are bereft of any showing that he was paid his separation pay, which is also a requisite to properly terminate an employee based on this ground. As Article 298 states, “[i]n case of termination due to xxx redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.”
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