Redundancy Requires Good Faith in the Exercise of PrerogativeAtty Elvin
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.
For the implementation of a redundancy program to be valid, the employer must comply with the following requisites: (See page 172, Guide to Valid Dismissal of Employees, 2nd Edition)
- Written notice served on both the employees and the Department of Labor and Employment at least one month prior to the intended date of retrenchment;
- Payment of separation pay equivalent to at least one month pay for every year of service, whichever is higher;
- Good faith in abolishing the redundant positions; and
- Fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.
The determination that the employee’s services are no longer necessary or sustainable and, therefore, properly terminable for being redundant is an exercise of business judgment of the employer. The wisdom or soundness of this judgment is not subject to discretionary review of the Labor Arbiter and the NLRC, provided there is no violation of law and no showing that it was prompted by an arbitrary or malicious act. In other words, 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. (MA Computer College, Inc. vs. Garcia, G.R. No. 166703, April 14, 2008 citing Asufrin, Jr. vs. San Miguel Corporation, 469 Phil. 237, 245 (2004).)
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 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. The company 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.
However, in a case where the employer attempted to justify its purported redundancy program by claiming that it received an e-mail from its client abroad informing it of the latter’s plans to right size the headcount but such e-mail was never presented in the proceedings, there was no compliance with good faith requirement according to the SC. (Yulo vs. Concentrix Daksh Services Philippines, Inc., G.R. No. 235873, January 21, 2019; Read the Digest of Yulo vs. Concentrix here)
The internal one (1)-page document submitted by said employer hardly demonstrates its good faith. It lacks adequate data to justify a declaration of redundancy, but more so, because it is clearly self-serving since it was prepared by the employer’s own requestor/business unit head, and not by any employee/representative coming from the client itself.
Advertorial: Achieve Mastery in Labor Rules, Doctrines and Principles. Purchase a Discounted Offer of HR Bundle books by Atty. Villanueva
Notably, parallel to narrative of the current situation of the business unit stating what triggered the downsizing and the preferred outcome. The internal document merely stated that that the company needed to finish the seasonal ramp and would need to decrease the headcount due to low call volume based on the long term forecast by its client. 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 its client.