When there is redundancy? What are the requisites for redundancy to be an authorized way for dismissal?

Main Issue: Legality of Dismissal

Culili asserted that he was illegally dismissed because there was no valid cause to terminate his employment.  He claimed that ETPI failed to prove that his position had become redundant and that ETPI was indeed incurring losses.  Culili further alleged that his functions as a Senior Technician could not be considered a superfluity because his tasks were crucial and critical to ETPI’s business.

Under our laws, an employee may be terminated for reasons involving measures taken by the employer due to business necessities.  Article 283 of the Labor Code provides:

Art. 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 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 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.

There is redundancy when the service capability of the workforce is greater than what is reasonably required to meet the demands of the business enterprise.  A position becomes redundant when it is rendered superfluous by any number of factors such as over-hiring of workers, decrease in volume of business, or dropping a particular product line or service activity previously manufactured or undertaken by the enterprise.[36]

This Court has been consistent in holding that the determination of whether or not an employee’s services are still needed or sustainable properly belongs to the employer.  Provided there is no violation of law or a showing that the employer was prompted by an arbitrary or malicious act, the soundness or wisdom of this exercise of business judgment is not subject to the discretionary review of the Labor Arbiter and the NLRC.[37]

          However, an employer cannot simply declare that it has become overmanned and dismiss its employees without producing adequate proof to sustain its claim of redundancy.[38]  Among the requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared redundant,[39] such as but not limited to: preferred status, efficiency, and seniority.[40]

          This Court also held that the following evidence may be proffered to substantiate redundancy: 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.[41]

In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-Sizing Program.  Even in the face of initial opposition from and rejection of the said program by ETEU, ETPI patiently negotiated with ETEU’s officers to make them understand ETPI’s business dilemma and its need to reduce its workforce and streamline its organization.  This evidently rules out bad faith on the part of ETPI.

In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency, economy, versatility and flexibility.  It needed to reduce its workforce to a sustainable level while maintaining functions necessary to keep it operating.  The records show that ETPI had sufficiently established not only its need to reduce its workforce and streamline its organization, but also the existence of redundancy in the position of a Senior Technician.  ETPI explained how it failed to meet its business targets and the factors that caused this, and how this necessitated it to reduce its workforce and streamline its organization.  ETPI also submitted its old and new tables of organization and sufficiently described how limited the functions of the abolished position of a Senior Technician were and how it decided on whom to absorb these functions.

In his affidavit dated April 10, 2000,[42] Mr. Arnel D. Reyel, the Head of both the Business Services Department and the Finance Department of ETPI, described how ETPI went about in reorganizing its departments.  Mr. Reyel said that in the course of ETPI’s reorganization, new departments were created, some were transferred, and two were abolished.  Among the departments abolished was the Service Quality Department.  Mr. Reyel said that ETPI felt that the functions of the Service Quality Department, which catered to both corporate and small and medium-sized clients, overlapped and were too large for a single department, thus, the functions of this department were split and simplified into two smaller but more focused and efficient departments.  In arriving at the decision to abolish the position of Senior Technician, Mr. Reyel explained:

11.3. Thus, in accordance with the reorganization of the different departments of ETPI, the Service Quality Department was abolished and its functions were absorbed by the Business and Consumer Accounts Department and the Corporate and Major Accounts Department.

      11.4. With the abolition and resulting simplification of the Service Quality Department, one of the units thereunder, the Customer Premises Equipment Maintenance (“CPEM”) unit was transferred to the Business and Consumer Accounts Department.  Since the Business and Consumer Accounts Department had to remain economical and focused yet versatile enough to meet all the needs of its small and medium sized clients, it was decided that, in the judgment of ETPI management, the specialized functions of a Senior Technician in the CPEM unit whose sole function was essentially the repair and servicing of ETPI’s telecommunications equipment was no longer needed since the Business and Consumer [Accounts] Department had to remain economical and focused yet versatile enough to meet all the multifarious needs of its small and medium sized clients.

      11.5. The business reason for the abolition of the position of Senior Technician was because in ETPI’s judgment, what was needed in the Business and Consumer Accounts Department was a versatile, yet economical position with functions which were not limited to the mere repair and servicing of telecommunications equipment.  It was determined that what was called for was a position that could also perform varying functions such as the actual installation of telecommunications products for medium and small scale clients, handle telecommunications equipment inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of reports on the daily and monthly activation of telecommunications equipment by these small and medium scale clients.

      11.6. Thus, for the foregoing reasons, ETPI decided that the position of Senior Technician was to be abolished due to redundancy.  The functions of a Senior Technician was to be abolished due to redundancy.  The functions of a Senior Technician would then be absorbed by an employee assigned to the Business and Consumer Accounts Department who was already performing the functions of actual installation of telecommunications products in the field and handling telecommunications equipment inventory monitoring, evaluation of telecommunications equipment purchased and the preparation of reports on the daily and monthly activation of telecommunications equipment.  This employee would then simply add to his many other functions the duty of repairing and servicing telecommunications equipment which had been previously performed by a Senior Technician.[43]

In the new table of organization that the management approved, one hundred twelve (112) employees were redeployed and nine (9) positions were declared redundant.[44]  It is inconceivable that ETPI would effect a company-wide reorganization of this scale for the mere purpose of singling out Culili and terminating him.  If Culili’s position were indeed indispensable to ETPI, then it would be absurd for ETPI, which was then trying to save its operations, to abolish that one position which it needed the most.  Contrary to Culili’s assertions that ETPI could not do away with his functions as long as it is in the telecommunications industry, ETPI did not abolish the functions performed by Culili as a Senior Technician.  What ETPI did was to abolish the position itself for being too specialized and limited.  The functions of that position were then added to another employee whose functions were broad enough to absorb the tasks of a Senior Technician.

Culili maintains that ETPI had already decided to dismiss him even before the second phase of the Right-Sizing Program was implemented as evidenced by the December 7, 1998 letter.

The December 7, 1998 termination letter signed by ETPI’s AVP Stella Garcia hardly suffices to prove bad faith on the part of the company.  The fact remains that the said letter was never officially transmitted and Culili was not terminated at the end of the first phase of ETPI’s Right-Sizing Program.  ETPI had given an adequate explanation for the existence of the letter and considering that it had been transparent with its employees, through their union ETEU, so much so that ETPI even gave ETEU this unofficial letter, there is no reason to speculate and attach malice to such act.   That Culili would be subsequently terminated during the second phase of the Right-Sizing Program is not evidence of undue discrimination or “singling out” since not only Culili’s position, but his entire unit was abolished and absorbed by another department.

 http://sc.judiciary.gov.ph/jurisprudence/2011/february2011/165381.htm     

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About Erineus

Born on December 28, 1965, Surallah, South Cotabato, Southern Mindanao, Philippines.
This entry was posted in Labor Law, Termination and tagged . Bookmark the permalink.

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