5th Feb 2015

Dismissal of workers due to redundancy is a management prerogative governed by the Article 283 of the Labor Code. This is one of the authorized causes which an employer, in good faith, may utilize as a measure of efficiency in the company, or to prevent company losses. The pertinent portions of the law provide:

Article 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 operations 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 Department 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 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 closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least 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 as one (1) whole year.

The term “redundancy” is a technical labor term which has been the subject of many interesting cases that have found their way to the Supreme Court. In several of these cases, the Supreme Court has defined redundancy, for purposes of the Labor Code, as a condition which 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.

In another case, the Supreme Court stated that redundancy in an employer’s personnel force necessarily or even ordinarily refers 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. The Supreme Court observed that in any well-organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. (Dole Philippines, Inc. v. NLRC, 417 Phil. 428 [2001])

In such cases, the Supreme Court held that 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. v. NLRC, 193 SCRA 672)

However, employer must show adequate and convincing proof that the intended reduction of workforce or the abolishment of positions were unnecessary. In other words, it is not enough for a company to merely declare that it has become overmanned. It must produce adequate proof that such is the actual situation to justify the dismissal of the affected employees for redundancy.

In accordance with Article 283 of the Labor Code, Paragraph D, Section 2, Rule, Book VI, Omnibus Rules Implementing the Labor Code, provides:

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due process shall be deemed complied with upon the service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment at least thirty days before [effectivity] of the termination, specifically the ground or grounds for termination.

Therefore, for the implementation of a redundancy program to be valid, the employer must comply with the following procedural requisites: (1) written notice served on the employees and (2) the Department of Labor and Employment at least thirty (30) days prior to the intended date of redundancy. Specifically, the purpose of such previous notice to DOLE must be to enable it to ascertain the verity of the cause for termination of employment.

It must be stressed, however, that if the employee consented to or voluntarily applied for retrenchment with the employer due to redundancy, the required previous notice to the DOLE is not necessary as the employee thereby acknowledged the existence of a valid cause for termination of his employment.

The violation of statutory procedural due process on written notice by the employer would warrant the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. In the case of JAKA Food Processing Corp. v. Pacot, et al., G.R. No. 151378. March 28, 2005, the indemnity awarded by the Supreme Court to each of the complainant was P 50,000.00 as nominal damages.

Finally, the more important aspect in the termination of employment is the payment employee’s 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.

This is how to implement a redundancy program in the work place.

Nicolas & De Vega Law Offices is a full service law firm in the Philippines. You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines. You may also call us at +632 4706126, +632 4706130, or e-mail us at info@ndvlaw.com.

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