Philippines: Superfluity or Subterfuge: What is Adequate Proof of Redundancy under Philippine Law?

Authors: Atty. Rashel Ann C. Pomoy and Atty. Sofia Anazea A. David

The Philippine Labour Code codifies the principle of security of tenure and ensures that employees cannot be dismissed without just or authorised cause. Among the authorised causes, redundancy is one of the most utilised justifications for termination, granting employers the prerogative to reorganise their operations that promote greater efficiency, reduce overhead costs, and enhance prospects of economic gains.[1]

Redundancy arises as a response to a condition where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise,[2] as the employer has no legal obligation to keep more employees than are necessary for the operation of its business.[3]

Being rooted in the employer’s business judgement,[4] the determination of whether or not an employee’s services are still needed or sustainable properly belongs to the employer.[5] The wisdom, soundness, or characterisation of service as redundant is well-respected and is generally not subject to review by labour authorities nor the courts, that is, until there is a showing that the same was done in violation of law or attended with arbitrary and malicious action.[6]

Hence, once a claim for illegal dismissal has been filed, the burden of proof in redundancy rests on the employer.[7] In the context of labour disputes, the employer’s prerogative to implement a redundancy, no matter how well-intentioned, is bound by strict compliance with legal safeguards designed to ensure good faith, particularly through the requirement to provide sufficient proof that the redundancy is legitimate and not a pretext for unfair dismissal​​.

Consequently, the validity of a redundancy shifts from being a mere question of intent to a substantive evaluation of whether the evidence presented is sufficient enough to show good faith.

Specifically, the Department of Labour and Employment, through Department Order No. 147, series of 2015, has adopted several Supreme Court rulings in establishing the element of “adequate proof of redundancy” as part of the requirements for a valid redundancy:

“(b) Redundancy. — To be a valid ground for termination, the following must be present:

xxx

5. There must be an adequate proof of redundancy 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.”[8] (Emphasis supplied)

A recurring issue in redundancy cases, as suggested by the phrase “such as, but not limited to,” lies in the sufficiency and type of evidence presented. While the foregoing documents provide a clear narrative of why a specific role has become unnecessary, and remain to be ideal standard in proving a valid redundancy, a plain reading of the provision dictates that such cannot serve as the exclusive list of evidence in demonstrating that the redundancy was made in good faith.

Limiting adequate proof of redundancy to these traditional documents is neither practical nor reflective of the dynamic nature of business operations, as companies may overlook the need for comprehensive documentation, depending on their organisational culture, decision-making processes, or the urgency of the circumstances leading to redundancy. Start-ups and small businesses, in particular, may lack the formalised processes to produce feasibility studies or detailed restructuring plans, even when redundancy is necessary for their survival.

Additionally, a position may be rendered superfluous due to a number of factors, such as the over-hiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of service activity previously undertaken by the business.[9] These scenarios, while jurisprudentially acknowledged to be valid reasons for redundancy, are not easily captured through traditional forms of documentation, such as staffing patterns or feasibility studies.

As aptly held in 3M Philippines, Inc. vs. Yuseco, G.R. No. 248941, November 09, 2020, a redundancy program may be proved by evidence other than just a presentation of new staffing patterns or feasibility studies and proposals.

Thus, the question shifts to the kind of evidence that may be considered adequate proof of redundancy beyond the commonly cited examples, such as new staffing patterns, feasibility studies, job descriptions, and management-approved restructuring plans.

A. Affidavits

One clear instance is the Court’s nuanced approach towards the credibility of affidavits.

In American Power Conversion Corporation, et al. vs. Lim, G.R. No. 214291 (2018), the Supreme Court held that the affidavits and memoranda of the managers of respondent company on the alleged plans for restructuring, as well as the organisational chart presented, were merely self-serving, and thus, insufficient to prove redundancy.

The case of Panlilio vs. National Labour Relations Commission, et al., G.R. No. 117459 (1997), similarly held that the affidavits which the company submitted are “entitled to little weight, for it does [sic] not prove the superfluity of petitioner’s position, noting that these documents do not even present the necessary factors which would confirm that a position is indeed redundant, such as over hiring of workers, decreased volume of business or dropping of a product line or service activity.”

In contrast, the case of Andrada, et al. vs. National Labour Relations Commission, et al. G.R. No. 173231, (2007), citing Soriano, Jr. vs. National Labour Relations Commission, et al., G.R. No. 165594, (2007), has recognised that validity of affidavits executed by company officers has adequate proof of redundancy, finding that the “the company sufficiently established the fact of redundancy through affidavits executed by the officers of the respondent PLDT, explaining the reasons and necessities for the implementation of the redundancy program.”

Moreover, in 3M Philippines, Inc. vs. Yuseco, supra, heavy probative and evidentiary weight was given on the affidavit executed by the company’s Human Resources Manager, which discussed in detail the underlying rationale behind the company’s redundancy program and the reorganisation of its various business groups, particularly to maximise the capabilities and efficiency of the workforce and remove their overlapping of functions. Notably, the company provided other documentary evidence to corroborate the claim of redundancy, such as the letter informing the employee of his impending termination, the notice letters addressed to the employee and to the DOLE, and print-outs of text messages between the Human Resource Manager and the employee, which showed that the latter acknowledged his termination.

B. Organisational Charts and Tables

The Supreme Court has also taken varying stances on the use of organisational charts and tables, notwithstanding its mention of “new staffing pattern” as valid evidence for redundancy.

In McConnell Dowell Phils., Inc., et al. vs. Bernal, G.R. No. 224685 (2021), the Supreme Court held that the organisational charts showing exhibiting the remaining positions after the employee’s termination, were inadequate to justify the redundancy, viz:

“Neither do the Organisational Charts presented by MacDow prove that there was a valid redundancy program. Such organisational charts merely show which positions remained within MacDow after Bernal was terminated, without any explanation with regard to why the other positions were abolished.” (Emphasis supplied)

Similarly, in AMA Computer College, Inc. vs. Garcia, et al., G.R. No. 166703 (2008), the Supreme Court rejected the following evidence in proving a valid redundancy, to wit:

“In the case at bar, ACC attempted to establish its streamlining program by presenting its new table of organisation.  ACC also submitted a certification by its Human Resources Supervisor, Ma. Jazmin Reginaldo, that the functions and duties of many rank and file employees, including the positions of Garcia and Balla as Library Aide and Guidance Assistant, respectively, are now being performed by the supervisory employees. These, however, do not satisfy the requirement of substantial evidence that a reasonable mind might accept as adequate to support a conclusion. As they are, they are grossly inadequate and mainly self-serving.”

On the other hand, the Supreme Court in Culili vs. Eastern Telecommunications Philippines, Inc., et al., G.R. No. 165381 (2011), upheld the company’s use of organisational tables, to wit:

“The records show that ETPI had sufficiently established xxx the existence of redundancy in the position of a Senior Technician. xxx ETPI also submitted its old and new tables of organisation and sufficiently described how limited the functions of the abolished position of a Senior Technician were and how it decided on whom to absorb these functions.”

C. Proof of Business Losses and Financial Documents

Although financial statements and proof of business losses are not explicitly included in the commonly cited examples of adequate proof of redundancy, the Supreme Court appears to recognise their significance in substantiating the necessity for reorganisation.

In Manggagawa ng Komunikasyon sa Pilipinas vs. Philippine Long Distance Telephone Company Incorporated, G.R. No. 190389 (2017), the Supreme Court lent credence to the company’s data showing its decreasing volume of the received calls by the Operator Services Centre for the years 1996 to 2002, to demonstrate to implement the redundancy program.

Likewise, in Mejila vs. Wrigley Philippines, Inc., et al., G.R. No. 199469 (2019), the Supreme Court upheld the company’s reliance on business projections showing a positive correlation between increased production volume and decreased headcount, as well as specific cost savings, to justify its decision to outsource its clinic operations.

The Supreme Court in Culili vs. Eastern Telecommunications Philippines, Inc., supra,  also considered the company’s explanation of its failure to meet business targets, alongside the impact of the economic crisis, as sufficient to demonstrate the necessity of reducing its workforce and streamlining its organisation.

In Morales, et al. vs. Central Azucarera de la Carlota, Inc., G.R. No. 223611 (2022), the validated the company’s use of audited financial statements prepared by independent auditor Isla Lipana Co. from 2005 to 2007, reflecting its continued business losses and the volatile sugar market.

Nevertheless, the Supreme Court, in McConnell Dowell Phils., Inc., et al. vs. Bernal, supra, held that “while financial losses may be a reason to terminate employees, that alone cannot justify termination due to redundancy”, once again illustrating the need for corroborative evidence.

D. Miscellaneous Evidence

In redundancy cases, the Supreme Court has assessed a variety of documentary evidence, including notification letters, emails, internal documents, company resolutions, and contracts, among others. Such documents, while differing in form, are held to the same evidentiary standard, requiring them to provide concrete, specific, and corroborative proof to sufficiently justify the redundancy.

In NESIC Phils., Inc. vs. Crisologo, G.R. No. 201535 (2015), the Supreme Court ruled that the letters submitted by the employer to the DOLE and the employee, outlining claims of financial losses and restructuring, did not constitute substantial evidence. The Court found that these communications lacked concrete and corroborative proof to demonstrate the necessity for redundancy, such as specific data on financial performance or details on the organisational changes.

The same ruling was held in Caltex (Phils.), Inc. vs. National Labour Relations Commission, et al., G.R. No. 159641 (2007), where the company’s letter to DOLE contained general assertions about consolidation, abolition, and outsourcing of functions but lacked concrete proof of redundancy.

In General Milling Corporation vs. Viajar, G.R. No. 181738 (2013), the Supreme Court rejected a letter-memorandum submitted by the company, citing its failure to include a detailed evaluation of the existing positions and their impact on the organisation. The Court further noted that GMC did not provide tangible evidence to substantiate claims of a business slowdown or over-hiring, rendering the redundancy claim unsubstantiated.

In the case of Yulo vs. Concentrix Daksh Services Philippines, Inc., G.R. No. 235873 (2019), the Supreme Court deemed that the email presented by the company, which revealed the its plans to “right size the headcount of the account due to business exigencies/requirements,” failed to justify the redundancy. As basis, the Court noted that this internal document, prepared by the employer’s own business unit head, was self-serving and lacked sufficient corroborative data. In particular, the email merely referenced low call volume and a long-term forecast, but failed to provide supporting evidence, such as actual call volume data or the forecast itself. Without the email or credible evidence to substantiate its claims, the Supreme Court held that the employer could not demonstrate the good faith or legitimate business necessity required for a valid redundancy program.

The case of Andrada, et al. vs. National Labour Relations Commission, et al., G.R. No. 173231 (2007), involved the company’s reliance on a “status review,” which the Supreme Court held as inadequate:

“According to the CA, Legend proved the existence of redundancy when it submitted a status review of its project division where it reported that the 78-man personnel exceeded the needs of the company. The report further stated that there was duplication of functions and positions, or an over-supply of employees, especially among architects, engineers, draftsmen, and interior designers. We cannot agree with the conclusion of the CA. The pieces of evidence submitted by Legend are mere allegations and conclusions not supported by other evidence. Legend did not even bother to illustrate or explain in detail how and why it considered petitioners’ positions superfluous or unnecessary.”

Thus, while general assertions and self-serving documents have been consistently rejected by the Supreme Court, evidence which clearly outlines the rationale and necessity for redundancy has been deemed sufficient.

For instance, in Pantranco North Express Inc. vs. NLRC, G.R. No. 106516 (1999), the Supreme Court upheld the validity of the redundancy based on a certification from the Assistant Legal Manager which clarified that the company lawyer concurrently took on the role of Head of the Registration Section, the position previously held by the complainant-employee. Through such certification, the Court found that the functions of two separate positions were effectively merged as part of the company’s streamlining efforts to reduce costs.

Despite ruling that the termination in Ocean East Agency, et al. vs. Lopez, G.R. No. 194410, (2015) was illegal due to the lack of fair and reasonable criteria employed, the Supreme Court nevertheless found that the company was able to establish the fact of redundancy through its “Quality Procedures Manual” that the employee’s position as a Documentation Officer was superfluous because its duties and functions were similar to those of the Documentation Clerks in its operations department.

Lastly, in HCL Technologies Philippines, Inc. vs. Guarin, Jr., G.R. No. 246793 (2021), the Supreme Court validated the redundancy on the basis of employee’s contract of employment, which indicated how the employee was hired to handle a certain account. Consequently, the Court found that the subsequent termination of the account for which the employee was engaged effectively rendered his position redundant.

Conclusion

While there is no singular, definitive standard for what constitutes “adequate proof of redundancy,” it is precisely this flexibility which allows the labour tribunal and the courts to account for the unique circumstances of each case. Moreover, even without such uniform standard, the foregoing cases illustrate a general framework for understanding the conditions, which are necessary to justify redundancy.

Despite the concept of adequate proof of redundancy being tied to the oft-quoted examples of new staffing patterns, feasibility studies, job descriptions, and management-approved restructuring plans, the kind of evidence presented does not ultimately determine its sufficiency, revealing that its persuasive value lies in its substance, and not in its form.

Various forms of evidence, such as affidavits, certifications, financial statements, or even internal memoranda, have been affirmed to be adequate when they are detailed and corroborated by other evidence, and clearly indicative of the superfluity of the position in light of the actual needs of the business. Conversely, even the traditionally cited types of evidence, such as staffing patterns or feasibility studies, have been rejected when they are vague, unsupported, or self-serving.

In this regard, the threshold for adequate proof of redundancy lies in its very definition: it must reflect the factual reality of a condition where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.

As highlighted in jurisprudence, this condition can only be satisfied when the following elements are present:

1. The evidence must be substantial, providing a solid and credible basis to convince a reasonable mind that the position has become unnecessary in light of the enterprise’s business operations;
2. The evidence must demonstrate the logic behind the redundancy, establishing a causal connection between the superfluity of the position and the enterprise’s legitimate needs; and
3. The evidence must be corroborated by additional and independent proof that reinforces the claim for redundancy.

With these measures in place, employers are provided with a clear framework to substantiate their lawful exercise of their management prerogative, allowing them to effectively respond to shifting market demands and operational challenges, while ensuring their business judgement is protected from any unfounded claim of illegal termination. More importantly, the employees’ fundamental right to security of tenure is safeguarded against arbitrary dismissals disguised as redundancy.

[1] Smart Communications, Inc. vs. Astorga, G.R. No. 148132 (2008).

[2] Wiltshire File Co., Inc. vs. NLRC, G.R. No. 82249 (1991); DOLE Department Order No. 147, series of 2015, Section 4(q).

[3] Morales vs. Metropolitan Bank and Trust Company, G R No. 182475, (2012).

[4] San Miguel Corporation vs. Del Rosario, G.R. Nos. 168194 & 168603 (2005).

[5] Culili vs. Eastern Telecommunications Philippines, Inc., et al., G.R. No. 165381 (2011).

[6] Smart Communications, Inc. vs. Astorga, G.R. No. 148132 (2008).

[7] Coca-Cola Bottlers Phippines.lnc. vs. Del Villar, G.R. No. 163091 (2010).

[8] DOLE Department Order No. 147, series of 2015, Section 5.4(b)(5), citing General Milling Corporation vs. Violeta L. Viajar, G.R. No. 181738 (2013).

[9] AMA Computer College vs. Garda, G R No. 166703 (2008).