Redundancy is within the ambit of “management prerogative” to upgrade and enhance its computer system. The position of IT officer whose job is to maintain the computer system has become patently redundant upon the company’s engagement of the contract service with another company.

Thus, the Supreme Court held that:

Philippine National Bank vs. Jumelito T. Dalmacio/Jumelito T. Dalmacio Vs. Philippine National Bank and/or Ms. Cynthia Javier
G.R. No. 202308/G.R. No. 202357, July 5, 2017


The case stemmed from a complaint for illegal dismissal, under-payment of separation pay and retirement benefits, illegal deduction, nonpayment of provident fund with prayer for damages and attorney’s fees filed by Jumelito T. Dalmacio (Dalmacio) and Emma R. Martinez (Martinez) as a result of their separation from PNB way back September 15, 2005 due to PNB’s implementation of its program.

Dalmacio and Martinez were hired as utility worker and communication equipment operator, respectively, by the National Service Corporation, a subsidiary of PNB. Years later, Dalmacio became an Information Technology (IT) officer of PNB, while Martinez became a Junior IT Field Analyst.

Dalmacio claims that PNB’s redundancy program was not valid as it did not apply fair and reasonable criteria in concluding that Dalmacio’s position had become redundant.

LA Ruling:

The LA ruled that PNB complied with the law and jurisprudence in terminating the services of the complainants on the ground of redundancy.

It held that it is undisputed that the outsourcing of the service and maintenance of the Bank’s computer hardware and equipment to Technopaq, Inc. was devised and/or implemented after consultation with the affected employees in the presence of their union officers.

NLRC Ruling:

On appeal, the NLRC, affirmed the LA’s Decision, and ruled that there is no showing of bad faith on PNB’s part in undertaking the redundancy program. Dalmacio and Martinez’s Motion for Reconsideration having been denied by the NLRC, Dalmacio filed a Petition for Certiorari with the CA.

The NLRC held that PNB was able to show substantial proof that it underwent redundancy program and that complainants herein voluntarily accepted the Special Redundancy Package offered by the bank to its employees.

In fact, they were officially notified of the management’s decision to terminate their employment. Dalmacio and their union officers were even consulted of PNB’s decision to terminate its employees on the ground of redundancy.

CA Ruling:

The CA affirmed in part the Resolution of the NLRC, and ruled, among others, that, “principles of justice and fair play call for the modification of the separation package already received by Dalmacio.

The CA held that even after he ceased working with PNB, Dalmacio was not left jobless as he readily accepted a job offer with Technopaq who employed him for three years. Only after he ceased working with Technopaq that he conveniently filed a case for illegal dismissal against PNB claiming other monetary benefits allegedly due him and after receiving substantial amount of separation pay. Hence the CA suspected the intention of Dalmacio in filing the complaint for illegal dismissal.

Further, the CA held that the action of PNB is within the ambit of “management prerogative” to upgrade and enhance the computer system of the bank. Dalmacio, being an IT officer whose job is to maintain the computer system of PNB, his position has become patently redundant upon PNB’s engagement of the contract service with Technopaq.

The subtraction of the GSIS Gratuity Pay is inappropriate, therefore the same should be returned to Dalmacio.” Aggrieved, both Dalmacio and PNB appealed the Decision of the CA.


Whether or not PNB validly implemented its redundancy program;

Whether or not the CA correctly ordered PNB to return Dalmacio’s GSIS Gratuity Pay

SC Ruling:

The SC denied both petitions.

Learn how to Validly Dismiss Employees in a book Guide to Valid Dismissal of Employees

A position is redundant when it is superfluous, and superfluity of a position or positions could be the result of a number of factors, such as the over hiring of workers, a decrease in the volume of business or the dropping of a particular line or service previously manufactured or undertaken by the enterprise.

It has been ruled that an employer has no legal obligation to keep more employees than are necessary for the operation of its business. For the implementation of a redundancy program to be valid, however, 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 termination of employment; (2) payment of separation pay equivalent to at least one month pay for every year of service; (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, taking into consideration such factors as (a) preferred status; (b) efficiency; and ( c) seniority, among others.

PNB’s action is within the ambit of “management prerogative” to upgrade and enhance the computer system of the bank. Dalmacio, being an IT officer whose job is to maintain the computer system of PNB, his position has become patently redundant upon PNB’s engagement of the contract service with Technopaq.

Dalmacio was appositely informed of PNB’s move to contract the services of Technopaq and as a result thereof, there were positions that were declared redundant including that of Dalmacio. PNB conducted series of meetings with Dalmacio and other affected employees to purposely look for placement of the displaced employees to other positions suited for them.

Finding no other alternative, PNB was constrained to terminate Dalmacio who thereafter posed no objection thereto, consented to and willingly received the hefty separation pay given to him. Moreover, records have it that PNB faithfully complied with the legal procedures provided under Article 283 of the Labor Code as evidenced by the individual notices of termination served and received by the petitioner as well as the Establishment Termination Report filed by PNB with the Department of Labor

Likewise, records show that PNB complied with the procedural requirements. PNB served Dalmacio and Martinez Notices of Termination informing them that their termination due to redundancy shall be effective September 15, 2005. PNB also filed an Establishment Termination Report with the Regional Office of the DOLE, in order to report complainants’ termination.

Contrary to Dalmacio’s claim, the Deed of Quitclaim and Release he signed militates against his reinstatement. The SC held that generally, deeds of release, waiver or· quitclaims cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal since quitclaims are looked upon with disfavor and are frowned upon as contrary to public policy.

Where, however, the person making the waiver has done so voluntarily, with a full understanding thereof, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as being a valid and binding undertaking.

The requisites for a valid quitclaim are: ( 1) that there was no fraud or deceit on the part of any of the parties; (2) that the consideration for the quitclaim is credible and reasonable; and (3) that the contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law.

Not having sufficiently proved that he was forced to sign said Deed of Quitclaim and Release, Dalmacio cannot expediently argue that quitclaims are looked upon with disfavor and considered ineffective to bar claims for the full measure of a worker’s legal rights. Indeed, it cannot even be said that Dalmacio did not fully understand the consequences of signing the Deed of Quitclaim and Release. He is not an illiterate person who needs special protection. He held a responsible position at PNB as an IT officer. It is thus safe to say that he understood the contents of the Deed of Quitclaim and Release.

There is also no showing that the execution thereof was tainted with deceit or coercion. Although he claims that he was “forced to sign” the quitclaim, he nonetheless signed it. In doing so, Dalmacio was compelled by his own personal circumstances, not by an act attributable to PNB.

Dalmacio’s GSIS Gratuity Pay has been deducted from separation package. Clearly, Dalmacio is entitled to his GSIS Gratuity Pay. Contrary to PNB’s assertion, giving Dalmacio what is due him under the law is not unjust enrichment.

The inflexible rule is that social legislation must be liberally construed in favor of the beneficiaries. Retirement laws, in particular, are liberally construed in favor of the retiree because their objective is to provide for the retiree’s sustenance and, hopefully, even comfort, when he no longer has the capability to earn a livelihood.

The liberal approach aims to achieve the humanitarian purposes of the law in order that efficiency, security, and well-being of government employees may be enhanced. Indeed, retirement laws are liberally construed and administered in favor of the persons intended to be benefited, and all doubts are resolved in favor of the retiree to achieve their humanitarian purpose.

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