The establishment and implementation of criteria are important feature of redundancy to give respect to the employee’s constitutionally enshrined security of tenure.

In one case, the Supreme Court has refused to give credence to the redundancy invoked by the employer inasmuch as the company adopted no criterion in dismissing the employee.

Verily, the absence of criteria and the erroneous implementation of the criterion selected, both render invalid the redundancy because both have the ultimate effect of

In a case, studies for the redundancy program showed to eliminate the “undesirables,” “abusers,” and “worst performers.” It was challenged for being indicia of bad faith. The Supreme Court disagreed and did not put significance to the allusions. It may be argued that the elimination of the so-called “undesirables” was merely incidental to the redundancy program or that past transgressions could have been part of the criteria in determining who among the redundant employees is to be dismissed.

That no other person was holding the same position prior to the termination of one’s services, does not show that his position had not become redundant. Indeed, 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.

The fact that the employer hired contractual employees after implementing its redundancy program does not necessarily negate the existence of redundancy. Especially if there is showing that such hiring was intended solely for winding up operations using the old system.

The employer has the recognized right and prerogative to select the persons to be hired and to designate the work as well as the employee or employees to perform it.

This includes the right of the company to determine the employees to be retained or discharged and who among the applicants are qualified and competent for a vacant position. The rationale for this principle is that the employer is in the best position to ascertain what is proper for the advancement of its interest.

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In Wiltshire File Co., Inc. vs. NLRC, the position of Sales Manager was abolished on the ground of redundancy as the duties previously discharged by the Sales Manager simply added to the duties of the General Manager to whom the Sales Manager used to report. In adjudging said termination as legal, this Court said that redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.

The characterization of an employee’s services as no longer necessary or sustainable, and therefore, properly terminable, was an exercise of business judgment on the part of the employer. According to the Court, the wisdom or soundness of such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action is not shown.

In the case of International Macleod, Inc. v. Intermediate Appellate Court, the Supreme Court also

considered the position of Government Relations Officer to have become redundant in view of the appointment of the International Heavy Equipment Corporation as the company’s dealer with the government. It held therein that 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 services is a management prerogative and the courts will not interfere with the exercise thereof as long as no abuse of discretion or merely arbitrary or malicious action on the part of management is shown.

The Court also held in Bondoc v. People’s Bank and Trust Co., that the bank’s board of directors possessed the power to remove a department manager whose position depended on the retention of the trust and confidence of management and whether there was need for his services. Although some vindictive motivation might have impelled the abolition of his position, this Court expounded that it is undeniable that the bank’s board of directors possessed the power to remove him and to determine whether the interest of the bank justified the existence of his department.

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Article 298. 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 Ministry 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.

Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed

to meet the demands of the business enterprise. A position is redundant where it had become superfluous. Superfluity of a position or positions may be the outcome of a 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.

A valid redundancy program must comply with the following requisites: (a) written notice served on both the employees and the DOLE at least one (1) month prior to the intended date of termination of employment; (b) payment of separation pay equivalent to at least one (1) month pay for every year of service; (c) good faith in abolishing the redundant positions; and (d) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished, taking into consideration such factors as (i) preferred status; (ii) efficiency; and (iii) seniority, among others.

Reorganization as a cost-saving device is acknowledged by jurisprudence.

An employer is not precluded from adopting a new policy conducive to a more economical and effective  management, and the law does not require that the

employer should be suffering financial losses before he can terminate the services of the employee on the ground of redundancy. (DOLE Philippines, Inc. vs. NLRC, G.R. No. 120009, September 13, 2001.)

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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.

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