Paulino Ungos III

Lawyer | Law Professor | Author

Tag: redundancy

  • A Prejudicial Transfer

    The employer, a business process outsourcing (BPO) company, hired Mario as one of its technical support representatives and assigned him to handle a client account.

    On October 30, 2009, the employer informed Mario that he would be transferred to a different client account upon successfully passing the training, assessment and examination and that his refusal to take the examinations would result in the termination of his services on the ground of redundancy.

    Mario refused to undergo training and take the examinations under the belief that he was entitled to security of tenure.

    Thereafter, Mario received a memorandum informing him that those who declined to comply with the transfer directive were no longer required to log in their system since their respective team leaders will take care of their attendance instead until the redundancy offer is finalized.

    On November 17, 2009, Mario received a notice dated November 16, 2009 informing him of his dismissal due to redundancy effective December 16, 2009.

    Through his counsel, Mario sent a demand letter to his employer asserting that no redundancy in the company occurred considering that it was continuously hiring other technical support representatives. Mario further asserted that as a regular employee, he should no longer be required to take another examination to prove his qualifications.

    On January 7, 2010, Mario filed a complaint for illegal dismissal against the employer before the arbitration branch of the National Labor Relations Commission in Bacolod City.

    The employer argued that the decrease in volume of calls for the account to which Mario was originally assigned led to an excess number of technical support representatives working on the same. It stated that instead of immediately dismissing its employees, it offered to transfer Mario and other technical support representatives to another account, using the following criteria:

    • first call resolution scores for the last three preceding months; and
    • existence of remediation cases.

    The employer pointed out that using the foregoing criteria, Mario was one of the “bottom performers.” It then explained that transferring the said employees to another client account was without any demotion in rank or diminution in pay as long as they successfully passed the standard product training and assessment. It added that undergoing training and assessment were necessary due to the differences between the two client accounts. It posited that it was forced to dismiss Mario on the ground of redundancy since he refused to transfer and go through the training and examination. Finally, it claimed it sent a notice of termination to the Department of Labor and Employment (DOLE).

    The Office of the Labor and the National Labor Relations Commission ruled that the dismissal of Mario from employment on the ground of redundancy was valid.

    The Court of Appeals ruled that Mario was illegally dismissed from employment in view of the employer’s failure to show that his position was redundant.

    The employer went to the Supreme Court.

    Was Mario validly dismissed on the ground of redundancy?

    The Supreme Court ruled in the negative.

    The Court stated that in termination cases, the employer bears the burden of proving that the employee’s dismissal was for a valid and authorized cause. Consequently, an employer’s failure to prove that the dismissal was valid renders the dismissal illegal.

    Here, the Court ruled that Mario was illegally dismissed from employment since the employer’s evidence was found to be insufficient to support a claim of valid redundancy.

    The Court reiterated established principles by stating that redundancy exists when an employee’s services are in excess of what is reasonably demanded by the actual requirements of the business. To successfully invoke a valid dismissal due to redundancy, there must be:

    • a written notice served on both the employees and the DOLE at least one month prior to the intended date of termination of employment;
    • payment of separation pay equivalent to at least one month pay for every year of service;
    • good faith in abolishing the redundant positions; and
    • fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.

    Moreover, the company must provide substantial proof that the services of the employees are in excess of what is required of the company.

    The Court noted the employer’s assertion that its business was slowing down and that it would require fewer representatives beginning November 2009. The Court also looked into the following documents submitted by the employer to support its claim of redundancy:

    • Affidavit of the human capital delivery site manager;
    • Mario’s Employment Contract;
    • FCR scores of the technical support representatives considered to be bottom performers;
    • FAQs for Transition Plans;
    • Attendance sheet for meeting with representatives dated October 30, 2009;
    • Transfer Agreement;
    • Recruitment Flowchart;
    • Comparison of the duties of representatives assigned to the different clients;
    • Notice of Termination addressed to Mario; and
    • Termination Report to DOLE.

    However, the Court was not convinced of the alleged decline in the employer’s business and the expected decrease in volume of calls. This was because other than the bare assertions of the human capital delivery site manager, the Court found no other evidence proving the business slow down or the alleged low volume of calls. According to the Court, the affidavit of the human capital delivery site manager did not substantiate the claim of slow down or decreased call volume and is mainly self-serving. The Court explained that the employer should have presented any document proving the decline in volume of calls for the past months, or affidavits of client officers who determined that business was slowing down and the basis thereof. Although other documents were submitted, the Court found that these hardly proved the fact of redundancy.

    The Court was also not convinced of the employer’s claim of good faith when Mario was offered a transfer. Under jurisprudence, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits. Failure of the employer to overcome this burden of proof, the employee’s demotion shall no doubt be tantamount to unlawful constructive dismissal.

    In the present case, the Transfer Agreement was found to be prejudicial to him. According to the Court, by requiring Mario to pass additional trainings and examination as a condition to retain his employment under the pain of dismissal, the employer disregarded his right to security of tenure. For the Court, the employer’s failure to prove redundancy, coupled with the imposition of a prejudicial condition to retain employment, rendered the offer of transfer invalid.

    Having been illegally dismissed from employment, Mario was awarded separation pay and backwages.

    Further reading:

    • Teletech Customer Care Management Philippines, Inc. v. Gerona, Jr., G.R. No. 219166, November 10, 2021.

  • His Position Became Unnecessary upon Shipment Completion

    On November 1, 2009, the employer hired Manuel as a technical consultant. Under the agreement, Manuel was tasked to:

    • Prepare reports;
    • Be the intermediary of certain teams;
    • Attend coordination meetings;
    • Evaluate billings; and
    • Conduct Site visits.

    Through a letter dated June 27, 2013, the employer informed Manuel of the termination of his employment due to the cessation of delivery operations and diminution of activities. Aggrieved by the actions of his employer, Manuel filed a complaint for illegal dismissal against it.

    The employer contended that it had sufficiently established redundancy of Manuel’s position. It presented certain documents to prove that there was a significant diminution in the volume of materials business and that the completion of shipment had rendered his position irrelevant. The employer further argued that it did not dismiss Manuel in bad faith, contending that it complied with labor law requirements in terminating his employment. The employer pointed out that he was given a notice of termination with computation of his separation pay, and that the Department of Labor and Employment was also notified.

    Was Manuel validly dismissed from employment on the ground of redundancy?

    The Supreme Court ruled that Manuel was not validly dismissed on said ground.

    The Court stated that redundancy is recognized as one of the authorized causes for dismissing an employee under the Labor Code of the Philippines. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. 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. The employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.

    The Court further stated that for the implementation of a redundancy program to be valid, the employer must comply with the following requisites:

    • 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 or at least one month pay for every year of service, whichever is higher;
    • good faith in abolishing the redundant positions in that the employer must provide substantial proof that the services of the employees are in excess of what it requires; and
    • fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.

    In the present case, the Court acknowledged that the employer complied with the first and second requisites. It was able to notify Manuel and the Department of Labor and Employment at least a month before the planned redundancy. Manuel also received a computation of his separation pay corresponding to at least one month pay for every year of service with additional payment for economic assistance.

    However, the Court found that the employer failed to establish compliance with the third and fourth requisites.

    The Court discovered that the employer’s only basis for declaring petitioner’s position redundant was that his function, which was to monitor the delivery of supplies, became unnecessary upon completion of shipment.

    However, the Court discovered that Manuel’s employment agreement reveals the contrary as there was no mention of monitoring shipment as part of his tasks. The Court said that if his work pertains mainly to the delivery of supplies, it should have been specifically stated in his job description. Thus, the Court found no basis for the employer to consider Manuel’s position irrelevant when shipment had been completed.

    The Court also found that the employer failed to show that they used fair and reasonable criteria in determining what positions should be declared redundant.

    The Court explained that fair and reasonable criteria may take into account the preferred status, efficiency, and seniority of employees to be dismissed due to redundancy.

    However, the Court found that the employer never showed that it used any of these in choosing Manuel as among the employees affected by redundancy.

    The Court accordingly declared Manuel to have been illegally dismissed from employment.

    Further reading:

    • Acosta v. Matiere SAS, G.R. No. 232870, June 3, 2019.

  • Employment Status the Day Before the Occurrence of the Strike or Lockout

    The employer here found a need to improve its selling and distribution system if it wanted to remain viable and competitive in the business. Thus, it decided to implement a new cost-effective and simplified scheme of selling and distributing its products, that, in turn, led to a separation of twenty seven (27) rank-and-file, regular employees and union members on the ground of redundancy.

    The employer claimed that prior to the termination of employment, it had made a careful study of how to be more cost effective in operations and competitive in the business. It recognized in the process that its multi-layered selling and distribution system had to be simplified. Thus, it determined that the phasing out of said system was necessary which, however, resulted in the termination of employment of certain employees as their positions have become redundant.

    On May 29, 2009, the employer issued notices of termination to twenty seven (27) rank-and-file, regular employees and members of the union on the ground of redundancy due to the ceding out of its selling and distribution systems to the Market Execution Partners. The termination of their employment was made effective on June 30, 2009, but the union members were no longer required to report for work as they were put on leave of absence with pay until the effectivity date of termination. The union members were also granted individual separation packages, which many of them accepted, but under protest.

    The union asserted that the new selling and distribution system adopted and implemented by the employer would result in the diminution of the union membership amounting to union busting and to a violation of the Collective Bargaining Agreement provision against contracting out of services or outsourcing of regular positions. Thus, they filed a Notice of Strike with the National Conciliation and Mediation Board on June 3, 2009 on the ground of unfair labor practice, among others. On June 11, 2009, the union conducted a strike vote where a majority decided on conducting a strike.

    On June 23, 2009, the Secretary of the Department of Labor and Employment assumed jurisdiction over the labor dispute by certifying for compulsory arbitration to the National Labor Relations Commission the issues raised in the notice of strike. The Secretary also enjoined the parties from committing any act that may further exacerbate the situation.

    At this point, the union asserted that the employer should have enjoined the termination of employment which took effect on July 1, 2009. On the other hand, the employer contended that termination of employment was a certainty, from the time it issued the notices of termination and that the status quo prior to the issuance of the assumption order included the impending termination of the employment of the 27 employees.

    On March 16, 2010, the National Labor Relations Commission ruled that the employer implemented a valid redundancy program and that it did not commit unfair labor practice. The Commission further found no violation in the dismissal of the employees from employment because their respective notices of dismissal were received prior to the assumption order of the Secretary of the Department of Labor and Employment. The Commission found that the employer did not commit an act that exacerbated the dispute.

    The Court of Appeals affirmed the Decision of the National Labor Relations Commission.

    The Supreme Court, in turn, affirmed the validity of the employer’s redundancy program.

    One issue that reached the Supreme Court was whether the employer’s implementation of the redundancy program was an unfair labor practice.

    The other issue resolved by the Court was whether the employer should have enjoined the effectivity of the termination of the employment of the 27 affected union members when the Secretary of the Department of Labor and Employment assumed jurisdiction over their labor dispute.

    The Court reiterated prevailing jurisprudence in that unfair labor practice refers to acts that violate the workers’ right to organize. The Court stated that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers’ right to self-organization. Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize. To prove the existence of unfair labor practice, substantial evidence has to be presented.

    In the present case, the Court found that the union failed to substantiate its charge of unfair labor practice against the employer. According to the Court, the consequent termination of employment due to redundancy is not per se an act of unfair labor practice amounting to union busting. For while the number of union membership was diminished due to the termination of the employment of union members, it cannot safely be said that the employer acted in bad faith in terminating their services because the termination was not without a valid reason. There was no showing that the redundancy program was motivated by ill will, bad faith or malice, or that it was conceived for the purpose of interfering with the employees’ right to self-organize.

    The findings of the National Labor Relations Commission and the Court of Appeals on said issue were affirmed.

    However, the Court found that the employer violated the return-to-work order in that the status quo was not maintained after the Secretary of the Department of Labor and Employment had assumed jurisdiction over the dispute on June 23, 2009.

    In this regard, the Court relied on Article 278 [Formerly 263] (g) of the Labor Code of the Philippnines, which provides the conditions for, and the effects of, the assumption of jurisdiction by the Secretary of the Departent of Labor and Employment over a dispute.

    The Court explained that the powers given to the Secretary of the Department of Labor and Employment under Article 278 [Formerly 263] (g) is an exercise of police power with the aim of promoting public good. In fact, the scope of the powers is limited to an industry indispensable to the national interest as determined by the Secretary of the Department of Labor and Employment. Industries that are indispensable to the national interest are those essential industries such as the generation or distribution of energy, or those undertaken by banks, hospitals, and export-oriented industries. And following Article 263 (g), the effects of the assumption of jurisdiction are the following:

    • the enjoining of an impending strike or lockout or its lifting, and
    • an order for the workers to return to work immediately and for the employer to readmit all workers under the same terms and conditions prevailing before the strike or lockout, or the return-to-work order.

    The Court added that when the Secretary of the Department of Labor and Employment exercises these powers, he is granted “great breadth of discretion” in order to find a solution to a labor dispute. The most obvious of these powers is the automatic enjoining of an impending strike or lockout or the lifting thereof if one has already taken place. Assumption of jurisdiction over a labor dispute, or as in this case the certification of the same to the National Labor Relations Commission for compulsory arbitration, always co-exists with an order for workers to return to work immediately and for employers to readmit all workers under the same terms and conditions prevailing before the strike or lockout.

    The Court then highlighted the significance of the return-to-work order, which is interlocutory, and is merely meant to maintain the status quo while the main issue is being threshed out in the proper forum. The Court stressed that the status quo is simply the status of the employment of the employees the day before the occurrence of the strike or lockout.

    According to the Court, from the date the Secretary of the Department of Labor and Employment assumes jurisdiction over a dispute until its resolution, the parties have the obligation to maintain the status quo while the main issue is being threshed out in the proper forum — which could be with Secretary of the Department of Labor and Employment or with the National Labor Relations Commission. This is to avoid any disruption to the economy and to the industry of the employer — as this is the potential effect of a strike or lockout in an industry indispensable to the national interest — while the Secretary of the Department of Labor and Employment or the National Labor Relations Commission is resolving the dispute.

    In the present case, the Court found that since the union voted for the conduct of a strike on June 11, 2009, when the Secretary of the Department of Labor and Employment issued the return-to-work order dated June 23, 2009, this meant that the status quo was the employment status of the employees on June 10, 2009. This status quo should have been maintained until the National Labor Relations Commission resolved the dispute in its Resolution dated March 16, 2010. For the Court, the said Resolution then took the place of the return-to-work order of the Secretary of the Department of Labor and Employment and the employer no longer had the duty to maintain the status quo after March 16, 2010.

    The Court accordingly awarded to the employees backwages and other benefits from July 1, 2009 until March 16, 2010, with a recomputation of their separation pay taking into consideration the termination of their employment beginning March 16, 2010.

    Further reading:

    • San Fernando Coca-Cola Rank-and-File Union v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 200499, October 4, 2017.