The Supreme Court (SC) reminded employers that once their job offers are accepted by the workers, an employer-employee relationship is established and employers cannot just terminate the workers on mere claim of redundancy.

The SC said that redundancy is an authorized ground for dismissal of an employee under the labor Code in the exercise of business judgment.

However, the SC – citing its previous decisions – said that in declaring work redundancy, employers must not violate the law or act arbitrarily.

“It is not enough for a company to merely declare redundancy; it must produce adequate proof of such redundancy to justify the dismissal of the affected employees, such as but not limited to the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions, job description, and the approval by the management of the restructuring,” it pointed out.

With its ruling, the SC – in a decision written by Associate Justice Alfredo Benjamin S. Caquioa – found that Alltech Biotechnology (Alltech) illegally dismissed Paolo Landayan Aragones for failing to prove there was redundancy in the company.

Alltech’s website states that it is engaged in “operations in animal feed, meat, brewing, and distilling; and develops agricultural products for use in both livestock and crop farming, as well as products for the food industry.”

Case records showed that on April 1, 2016, Aragones was offered by Alltech the post of swine technical manager-Pacific (STMP). On April 18, 2016, Aragones signed the letter offer with specification that his job with Alltech will start on July 1, 2016. He then resigned from his job in preparation for his work at Alltech.

However, Alltech implemented a global restructuring and as a result, the post of STMP became redundant.

Alltech informed Aragones of the redundancy of the post in a letter dated June 10, 2016. It offered him P140,000 representing a month’s salary as gesture of goodwill. He did not accept the offer and filed a case against Alltech.

The labor arbiter ruled that Aragones was illegally dismissed as it pointed out that an employer-employee relationship was established when he accepted the firm’s job offer. It directed Alltech to pay Aragones P600,250 in full backwages; P50,000 as nominal damages; and 10 percent attorney’s fees.

On appeal, however, the National Labor Relations Commission (NLRC) ruled in favor of Alltech as it ruled that there was no employer-employee relationship between Aragones and the firm.

The NLRC also ruled that while Aragones accepted the offer letter, it came with a clear provision that his employment would only commence on July 1, 2016.

Thus, the NLRC said that without a definitive employment contract duly signed by the parties, there could be no employment relationship to speak of.

Undaunted, Aragones elevated his case to the Court of Appeals (CA) in a petition dated Aug. 29, 2017.

But the CA dismissed his petition for lack of merit as it ruled that Aragones was not illegally dismissed because he was not an employee of Alltech in the first place.

The appellate court said that since the position of STMP was abolished due to redundancy before Aragones' intended start date of July 1, 2016, no employer-employee relationship was established.

Aragones elevated his case before the SC. He told the SC that his acceptance of the letter offer on April 18, 2016 established an employment relationship between him and Alltech.

He said that the July 1, 2016 commencement date of his employment is not a condition but a term that did not suspend the existence of an employer-employee relationship. Also, he said the requirement to sign an employment contract on his first day was a mere formality which does not negate the fact that an employment contract was perfected earlier.

Alltech, on the other hand, told the SC that the perfection of the employment contract should be distinguished from the commencement of the employment relationship.

It said there was yet no employer-employee relationship between the parties when it withdrew the job offer because the offer letter expressly states that Aragones' employment shall commence on July 1, 2016, and he was still required to execute an employment contract on his first day of work.

In resolving the petition, the SC said that “the determination of whether Aragones was illegally dismissed hinges on whether Alltech validly implemented its redundancy program.”

In many cases, the SC said it found that the affidavits executed by the employer's officers sufficient to prove a valid redundancy program.

The SC also said:

“Here, Alltech's claim of redundancy is supported solely by the Affidavit dated Sept. 26, 2016 executed by respondent Matthew Smith, the vice president-Asia Pacific and director of Alltech New Zealand.

“The uncorroborated Smith affidavit merely stated that Alltech's Head Office conducted a review of its affiliates' business operations and determined that it had to shift their technical and marketing support focus from a regional to local coverage to better respond to the needs of their customers.

“The Smith affidavit is vague and general. It failed to demonstrate how the alleged restructuring program led to the abolition of specific positions, specifically how it affected particular positions or why these positions were identified for abolition.

“Thus, the Smith affidavit alone is not sufficient to prove the existence of redundancy in this case.

“Hence, Aragones is deemed illegally dismissed. Consequently, he is entitled to reinstatement and backwages. However, considering that Aragones no longer asks to be reinstated, the award of separation pay in lieu of reinstatement equivalent to one month salary for every year of service is proper.

“Accordingly, the Petition for Review on Certiorari dated June 10, 2020 is granted. The Decision dated April 25, 2019 and Resolution dated Jan. 28, 2020 of the Court of Appeals, Manila, Tenth Division, in CA-G.R. SP No. 152338 are annulled and set aside….

“Respondent Alltech Biotechnology Corporation is found liable for the illegal dismissal of petitioner Paolo Landayan Aragones, and is hereby ordered to pay Aragones: (a) backwages computed from July 1, 2016 until finality of the Decision; (b) separation pay equivalent to one month salary, for every year of service, starting from July 1, 2016 until the finality of this Decision; and (c) attorney's fees equivalent to ten percent (10%) of the total monetary award.

“The total judgment award shall also earn legal interest of 6% per annum, computed from the finality of the Decision until full payment.

“The Labor Arbiter is directed to compute the monetary awards in accordance with this Decision. So ordered.”