THE ELEMENTS OF A VALID REDUNDANCY AS AN AUTHORIZE CAUSE TO TERMINATE EMPLOYMENT
One of the authorize causes to terminate an employment under Article 283 of the Labor Code is redundancy. In the case of Aboitiz Power Renewables, Inc.-Tiwi Consolidated Union, et al. vs. Aboitiz Power Renewables, Inc., et al., G.R. 237036 (08 July 2020), the Supreme Court restates that redundancy exists when “ the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.” The Court also held that such can be due to “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 Aboitiz Power Renewables, Inc.-Tiwi Consolidated Union, et al. vs. Aboitiz Power Renewables, Inc., et al., supra, Aboitiz Power Renewables, Inc. (the “Company”) is engaged in the operation of Tiwi Geothermal Powerplant in Tiwi, Albay. On 16 September 2013, the Company, through its Assistant Vice President for Legal and Commercial Services, Atty. John Martin Yasay, announced in a town hall meeting that the Company will implement a redundancy program that would result in the removal of around twenty percent (20%) of its current employees. Atty. Yasay explained that the reason of the redundancy is the declining steam production and the adoption of the Oracle Enterprise Business Suit which streamlined its supply and financial system. Thereafter, the Company started to individually talk to the affected employees and handed to them two Manager’s Checks representing the redundancy package and one-time financial assistance.
Aggrieved, the petitioners-employees filed cases for illegal dismissal, and unfair labor practice primarily. The petitioners-employees alleged that: (1) the Company failed to comply with the notice requirement for redundancy; (2) the Notice of Redundancy given to them and the notice to the Department of Labor and Employment (DOLE) contained self-serving allegations without any evidence that justified the redundancy program; 3) the Company has not showed that it was overmanned and failed to show proof on the decline on steam production that justified the redundancy program; and (4) the Company failed to show the criteria used to determine which employees will be removed due to redundancy in their positions. Finally, the petitioners-employees argued that their dismissal amounted to unfair labor practice as it is tantamount to union-busting since their unions were allegedly duringa negotiation with the Company.
In sustaining the position of the Company, the Supreme Court held that while the determination of whether the employees’ services are no longer necessary or sustainable, and therefore, properly terminable for redundancy, is an exercise of business judgment, the management must neither violate the law nor declare redundancy without sufficient basis. The Court held that redundancy must be based on a fair and reasonable criterion, which includes but not limited to: (a) less preferred status, i.e., temporary employee; (b) efficiency; and (c) seniority.
In Aboitiz Power Renewables, Inc.-Tiwi Consolidated Union, et al. vs. Aboitiz Power Renewables, Inc., et al., supra, the Supreme Court held that the Company met the requisites for a valid redundancy: (1) written notice to the affected employees and DOLE one (1) month prior to the intended date of dismissal; (2) payment of separation package and one-time-financial assistance of Php400,000.00 each; (3) fair and reasonable criteria in ascertaining what positions are to be declared redundant and be abolished; and (4) good faith in abolishing the redundant positions.
The most crucial and important requisites in redundancy program are the last two elements. The Company must be able to show basis and good faith in choosing what positions to be declared as redundant. In this case, what the Company did was to come-up with a Study, the “Right-Sizing Program”, which showed the implementation guidelines and criteria used in determining redundant positions. Hence, as a matter of prudence, for employers to avoid being accused of bad faith and arbitrarily declaring positions as redundant or targeting undesirable employees in the guise of redundancy, commissioning a study from an independent or third-party consultant may provide legal cover to management.