What is redundancy?
Redundancy is one of the authorized causes for the termination of employment provided for in Article 298 of the Labor Code. As an authorized cause, it is employer-initiated and may be invoked even without fault on the part of the employee.
Redundancy exists when the service capability of the workforce is in excess of what is reasonably needed to meet the demands of the enterprise.[1]
What is a redundant position or when is a position considered redundant?
In Ocean East Agency Corporation v. Lopez[2], the Supreme Court (SC) held that a redundant position is one rendered superfluous by any number of factors, such as over hiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company, or phasing out of a service activity previously undertaken by the business.
Under these factors, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business.
Even if a business is doing well, an employer can still validly dismiss an employee from the service due to redundancy if that employee's position has already become in excess of what the employer's enterprise requires.
What are the elements for the valid implementation of a redundancy program?
While a declaration of redundancy is ultimately a management decision in exercising its business judgment, and the employer is not obligated to keep in its payroll more employees than are needed for its day to-day operations, management must not violate the law nor declare redundancy without sufficient basis.[3]
In Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance Telephone Company Incorporated[4], the SC said that for the implementation of a redundancy program to be valid, the employer must comply with the following requisites:
(1) written notice served on both the employees and the Department of Labor and Employment (DOLE) at least one month prior to the intended date of retrenchment;
(2) 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;
(3) good faith in abolishing the redundant positions; and
(4) fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.
Is redundancy the same as retrenchment?
No, redundancy is not the same as retrenchment. Although both are authorized causes for termination of employment under Art. 298, they are distinct and separate grounds.
In Arabit v. Jardine Pacific Finance, Inc., [5] the SC reiterated that retrenchment and redundancy are two different concepts; they are not synonymous; thus, they should not be used interchangeably.
Retrenchment is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this Court.
On the other hand, redundancy does not need to be always triggered by a decline in the business. Even if a business is doing well, an employer can still validly dismiss an employee from the service due to redundancy if that employee’s position has already become in excess of what the employer’s enterprise requires.
How much is the separation pay for termination on the ground of redundancy?
An employee terminated due to redundancy shall be paid by the employer a separation pay equivalent to at least 1 month pay or at least 1 month pay for every year of service, whichever is higher, a fraction of 6 months service is considered as 1 whole year.[6]
See related post: "Due process in employee termination".
You may also refer to the government's official publication of the Labor Code of the Philippines.
[1] Ocean East Agency Corporation v. Lopez, G.R. No. 194410, October 14, 2015. [2] Id. [3] Manggagawa ng Komunikasyon sa Pilipinas v. Philippine Long Distance Telephone Company Incorporated, G.R. No. 190389, April 19, 2017. [4] Id. [5] G.R. No. 181719, April 21, 2014. [6] Sec. 5.5 - Payment of Separation Pay, DOLE Department Order No. 147-15, Series of 2015, Amending the Implementing Rules and Regulations of Book VI of the Labor Code, as amended.