Saving on Labor Cost as Basis for Redundancy

Redundancy generally transpires because of excess positions. It is worthy of note that what becomes redundant is the position and not the holder. Hence, if X is a cashier, she may be terminated not because she is redundant, but because her position as cashier is.

An interesting follow-up inquiry is if that is the case, it seems that saving on labor cost cannot be the basis for redundancy.

Adopting that line of inquiry in an actual case, redundancy was challenged on the ground that the true desire for the program is to save labor costs. The Court held that the law does not prevent employers from saving on labor costs.

The Court has recognized such right. The determination of the need for the phasing out of a department as a labor and cost saving device because it was no longer economical to retain said department is a management prerogative, with which the courts will not interfere.

The phasing out of a department and the consequent redundancy of the position held by the employee is a valid act of the company to save cost in its operations. The company may transfer the function of the

department to another.

So long as the undertaking to save on labor costs is not attended by malice, arbitrariness, or intent on the part of the employer to circumvent the law, courts should not interfere with such endeavor.

Indeed, the management of a company cannot be denied faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies. While there should be mutual consultation, eventually deference is to be made to what management decides.

The employer’s utilization of high technology equipment in its operation such as computers and digital switches necessarily resulted in the reduction of the demand for the services of a Switchman since computers and digital switches can aptly perform the function of several Switchmen. Indubitably, the position of Switchman has become redundant.

In one case, the company phased-out its security section and hired an independent security agency. It was a valid act constituting a legitimate business decision. Consequently, absent proof that management acted in a malicious or arbitrary manner, courts should not interfere with the exercise of judgment by the employer.

When the employer terminated its Water Pump Tenders because of engagement with independent contractors, the employer’s good faith in implementing a redundancy program is not necessarily put in doubt by the availment of the services of an independent contractor.

Learn how to Validly Terminate Employee in the Philippines with this Tutorial Video of Atty. Elvin

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