SC re-affirms right of employers to dismiss workers on redundancy

Published December 27, 2020, 11:24 AM

by Rey Panaligan 

The Supreme Court (SC) has re-affirmed its previous decisions which upheld the right of employers under the law to dismiss or retrench employees on the ground of redundancy.

(MANILA BULLETIN)

It said “… an employer has no legal obligation to keep more employees than are necessary for the operation of its business.”
 
It pointed out: “In fact, 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.”
 
The latest SC ruling on the redundancy issue was contained in the case that settled the legal controversy between 3M Philippines, Inc. and Lauro D. Yuseco, who before the termination of his employment on Jan. 1, 2016, was the country business leader of the firm’s industrial business group.
 
The SC decision was written by Associate Justice Amy C. Lazaro Javier and concurred in by Associate Justices Estela M. Perlas Bernabe, Alexander G. Gesmundo, Mario V. Lopez, and Ricardo R. Rosario of the court’s second division.
 
In its decision, the SC said that “redundancy is one of the authorized causes for the termination of employment provided for in Article 298 of the Labor Code, as amended.”
 
The SC, however, said: “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.”
 
In its decision, the SC said that 3M Philippines had complied with all the requirements of the law in terminating Yuseco’s employment due to redundancy.
 
The decision promulgated last November 9 but made public only last week reversed the Jan. 18, 2019 ruling of the Court of Appeals (CA) which declared Yuseco illegally dismissed.
 
Case records showed that 3M Philippines “is a subsidiary of 3M Company — an American multinational conglomerate corporation engaged in the manufacture and distribution of products such as adhesives, abrasives, laminates, passive fire protection, dental and medical products, electronic materials, car care products, and optical films, and operates in more than sixty-five (65) countries, including the Philippines.”
 
Yuseco started working with 3M Philippines in 1997. He was paid a monthly salary of P271,000.

On Nov. 25, 2015, he was summoned to a meeting with the firm’s managing director Anthony J. Bolzan and human resource manager Maria Theresa Chiongbian.

He was asked to avail himself of a separation package worth P5.25 million as he would be retrenched on Jan. 1, 2016. His counter offer as a separation package equivalent to his salary for 25 years.
 
He was informed that the company had to align its business model with some of the other 3M subsidiaries in Southeast Asian regions “to enhance its marketing and sales capabilities.”
 
One of the changes, he was told, was the merger of the industrial business group he headed with the safety and graphics business group headed by Tommee Lopez.  The merged group will be known as the industrial and safety market center.
 
On Dec. 1, 2015, Yuseco received a letter from the firm informing him that his position as country business leader would be considered redundant by Jan. 1, 2016.
 
Because of Lopez’s qualifications, experience, performance ratings in both areas, he was chosen to head the new group. 

Yuseco was offered P5.17 million in separation pay; P80,576.91 in retirement plan; P1.88 million as additional pay; two years extension of health coverage; and two years of life insurance coverage. The additional pay of P1.88 million was increased to P2.35 million to cover his tax liability.
 
Yuseco did not agree. He filed an illegal dismissal case with the National Labor Relations Commission (NLRC) of the Department of Labor and Employment.
 
On April 22, 2016, Labor Arbiter Pablo A. Gajardo, Jr.  ruled in favor of Yuseco with a ruling that 3M Philippines was guilty of illegal dismissal. Gajardo ordered the payment of back wages, separation pay, moral and exemplary damages, and attorney’s fees.
 
On appeal by 3M Philippines, the NLRC reversed the labor arbiter in its Oct. 21, 2016 ruling which stated that Yuseco’s separation was due to redundancy which was carried out after a serious study.
 
On Yuseco’s appeal, the CA reversed the NLRC and reinstated the labor’s arbiter’s ruling.  The appellate court also ordered Yuseco’s reinstatement “without loss of seniority rights and other privileges, with full backwages inclusive of allowances and other benefits, computed from the time he was dismissed on 1 January 2016 up to actual reinstatement.”
 
3M Philippines elevated the issue before the SC. Ruling in favor of 3M Philippines, the SC said:

“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.
 
“In sum, petitioner (3M Philippines) sufficiently proved by substantial evidence that redundancy truly existed and its adoption and implementation conformed with the requirements of the law.

“As the NLRC aptly ruled: Based on the record of this case, We find that the separation of complainant from employment was due to redundancy which was carried out after a serious study. It is difficult to convince Us that the redundancy was thought out on the spur of the moment or only during the meeting of November 25, 2015.  It would be foolhardy for the respondent company to have come out with a drastic change in its organization without regard to its viability and profitability, just to get rid of complainant.
 
“Precisely, in 2015, the company made a decision to enhance its marketing and sales capabilities, inspired by the business performance of some 3M subsidiaries in the South East Asian Region. The company focused more on the demands of the market.
 
“ACCORDINGLY, the petition is GRANTED. The Decision dated January 18, 2019 and Resolution dated August 14, 2019 of the Court of Appeals in CA-G.R. SP No. 149264 are REVERSED and SET ASIDE. The complaint of respondent Lauro D. Yuseco for illegal dismissal is DISMISSED.
“Petitioner 3M Philippines, Inc.  is ORDERED to PAY Lauro D. Yuseco his separation package in accordance with its Separation Benefit Computation…. SO ORDERED.”
                                                                                               

 
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