REDUNDANCY CRITERIA SHOULD NOT BE LIMITED TO STATUS, EFFICIENCY, OR PROFICIENCY; EMPLOYER MAY RESORT TO USING OTHER INDICATORS IN DETERMINING WHO WILL REMAIN WITH THE COMPANY UPON DOWNSIZING ITS PAYROLL

Redundancy criteria in ascertaining what positions are to be declared redundant must be determined for validity of redundancy. While this is a management prerogative, in this case, the employer failed to satisfy the evidentiary requirement to prove that employees’ positions should be redundated.

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Hence, the SC held in the October 11, 2017 case as follows:

Abbott Laboratories (Philippines), Inc. vs. Manuel F. Torralba, et al.
G.R. No. 229746, October 11, 2017

Facts:

Respondent Roselle P. Almazar (Almazar) was employed by Abbott as the National Sales Manager of its PediaSure Division, while Almazar, et al. Redel Ulysses M. Navarro (Navarro) and Manuel F. Torralba (Torralba) were Regional Sales Managers of the same department.

Abbott decided to integrate into one sales unit its PediaSure Division and its Medical Nutrition Division, both under the Specialty Nutrition Group. The decision was made after a study, entitled “Specialty Nutrition Group Sales Force Restructure Philippines,” (Study) revealed that both departments have similar business models and sales execution methods. As a result of the merger, Almazar, et al.’spositions were declared redundant.

Abbott informed both the Department of Labor and Employment (DOLE) and Almazar, et al. of the latter’s termination due to redundancy. Thereafter, the company offered Almazar, et al. the District Sales Manager positions, with a lower job rate and with duties and responsibilities different from that of a National or Regional Sales Manager.

Almazar, et al. rejected the offer and signed their respective Deeds of Waiver, Release, and Quitclaim (Deeds) after receiving their separation pay and last pay.

Almazar, et al. filed a complaint for illegal dismissal on the ground that Abbott allegedly did not observe the criteria of preference of status, efficiency, and seniority in determining who among its redundant employees are to be retained. They also filed a claim for underpayment of separation pay and discrimination because other former employees who were terminated due to redundancy allegedly received 250% of their monthly salaries per year of service as separation pay, while they only received 150% thereof. Likewise included in the complaint was a claim for moral and exemplary damages and attorney’s fees.

Abbott maintained that Almazar, et al. were terminated for authorized cause; that Almazar, et al.’s functions as sales managers were redundant because they were already being performed by the Medical Nutrition Division; that Almazar, et al.’sseparation pays were equivalent to one-and-a-half month pay for every year of service plus three (3) months gratuity, which is more than what the Labor Code requires; that in addition to their separation pays, Almazar, et al. were able to acquire their service vehicles at a big discount; and that Almazar, et al. voluntarily signed the Deeds.

LA Ruling:

Labor Arbiter Madjayran H. Ajan rendered a Decision holding that Almazar, et al. were illegally dismissed and directed Abott Laboratories to reinstate them and pay backwages, moral and exemplary damages, and attorney’s fees.

According to the Labor Arbiter, Abbott failed to overcome the burden of proving that the adoption and implementation of the redundancy program was not in violation of law, and that it was not attended by malice or arbitrariness. The Labor Arbiter found wanting the evidence presented to establish that Abbott followed the required preference criteria of status, efficiency, and proficiency in determining who among the employees are going to be retained.

There being no job evaluation conducted to gauge how the allegedly redundant employees would fare against the criteria, the Labor Arbiter deemed that Almazar, et al. were arbitrarily and illegally dismissed. Moreover, the Labor Arbiter ruled that the execution of the Deeds did not bar Almazar, et al. from contesting the validity of their termination.

Aggrieved, Abbott appealed the Labor Arbiter’s Decision to the National Labor Relations Commission (NLRC). Simultaneously therewith, and in compliance with the Labor Arbiter’s order of reinstatement, Abbot Laboratories, et al. furnished Almazar, et al. with Return to Work Notices directing them to personally appear for work.

In the same month, Almazar, et al. discussed with Abbot Laboratories, et al. the terms of the employment that the former would be returning to. However, Almazar, et al.   rejected the offer of reinstatement on the ground that the proposed positions were not equivalent to the ones they were previously occupying. It also appears that the offer was preconditioned on the Almazar, et al.’s returning the amounts they previously received when they executed the Deeds.

NLRC Ruling:

The NLRC promulgated its Decision reversing the Labor Arbiter’s findings.

The NLRC was in agreement with the Labor Arbiter that Abbott failed to prove that Almazar, et al.’s positions were superfluous or unnecessary. However, the NLRC nevertheless ruled that the Deeds precluded them from claiming that they were illegally dismissed.

It then affirmed its Decision through its Resolution denying Abbot Laboratories, et al.’s motion for reconsideration therefrom. Thus, Almazar, et al. elevated the case to the CA on certiorari.

CA Ruling:

The appellate court rendered the assailed Decision reinstating, with modification, the ruling of the Labor Arbiter.

In justifying its ruling, the CA noted first that the Labor Arbiter and the NLRC are in concurrence that there was no valid redundancy program because Abbott failed to prove one of its requisites -that it used a fair and reasonable criteria in the selection of the employees who will be dismissed.

Thus, as the ground for termination of employment was illegal, the Deeds signed by Almazar, et al. could not also be valid, vitiated as they were by either mistake or fraud. With the annulment of the Deeds, Almazar, et al. are then entitled to reinstatement, so the CA held.

Abbot Laboratories, et al. timely moved for reconsideration, assailing the consistent findings that the records are bereft of any evidence to prove that Abbott adopted a fair and reasonable criteria in the implementation of the redundancy program. They argued, on the main, that the criteria to be used in determining who among the employees are to be retained is part of management prerogative, and that they are not constrained to resolve the issue on retention based solely on its employees’ status, efficiency, and proficiency.

A second set of Return to Work Notices, was also furnished by Abbot Laboratories, et al. to Almazar, et al., appointing them to positions equivalent to their old ones and allowing them to maintain their ranks in the company and receive the same salaries and benefits that they were previously receiving.

In the letter addressed to Torralba, petitioner stated that his “district assignment shall be determined on the basis of a territory deliberation to be conducted by management, following the product refresher modules and evaluation that [Torralba] will undergo until June 30, 2016.

The improved offers, however, were also flatly refused by Torralba, Navarro, and Almazar. Almazar, et al. deemed the offer of reinstatement to be violative of the ruling of the Labor Arbiter, as upheld by the CA. They averred that the District Sales Manager positions are not equivalent to their former ones and, hence, could not be considered as a   valid offer of reinstatement. Payroll reinstatement should have then been carried out.

Petitioner, for its part, advised Almazar, et al. that they can no longer be reinstated to their original posts since those were already abolished effective March 22, 2013. The company admitted that the Regional Sales Manager positions no longer exist, which is why it offered Almazar, et al. the posts of District Sales Manager in lieu thereof. Petitioner added that Almazar, et al. would have realized that they are equivalents had they pen1sed the onboarding plan that it prepared upon their return to work. And anent Almazar, et al.’s claim of payroll reinstatement, petitioner claimed that, although the award of reinstatement is self-executory, the option to exercise actual reinstatement or payroll reinstatement belongs to the employer.

On account of Abbot Laboratories, et al.’s earnest efforts to reinstate Almazar, et al. to their former positions, albeit futile, they filed a Manifestation with Motion praying that Almazar, et al.’s entitlement to backwages be tolled up until the date of Almazar, et al.’s refusal.

The CA resolved the pending incidents denying the motion for reconsideration. As to the Manifestation with Motion filed by private Almazar, et al., the same was granted by the CA.

Accordingly, the award of backwages of Torralba and Navarro was computed from 22 March 2013 to 12 July 2016, while the backwages of Almazar was computed from 22 March 2013 to 18 July 2016.

Hence, the petition before the SC.

Issue/s:

Whether or not in declaring employees redundant the employer is limited to using the criteria of status, efficiency, and proficiency.

Whether or not Abbott’s justification of the terminations based on the 2013 Study recommending the restructuring of the Sales Force of the Specialty Nutrition Group under which the PediaSure and Medical Nutrition Divisions used to belong discharge the burden to prove validity of dismissal.

Whether or not the offer to hire the affected employees to positions under the newly created department is inconsistent with the termination on the ground of redundancy.

Whether or not the Waiver and Quitclaim when the dismissal is illegal is also illegal

Whether or not the fact that employees are educated and occupied supervisory position did not make them less susceptible to financial offers.

Whether or not the offer of reinstatement to employees constituted as waiver of the right to be reinstated

Whether or not the amount of separation pay received should be considered as partial satisfaction of the award for backwages and should be credited

SC Ruling:

The SC denied the petition.

The burden of proving that the dismissal of the employees was for a valid and authorized cause rests on the employer. It is incumbent upon the Abbot Laboratories, et al. to show by substantial evidence that the terminations of the employment of the Almazar, et al. were validly made. Failure to discharge this duty would mean that the dismissal is illegal.

Redundancy is a recognized authorized cause for validly terminating employment. Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirement of the enterprise.

For a valid implementation of a redundancy program, the employer must comply with the following requisites:

(1) written notice served on both the employee and the DOLE at least one month prior to the intended date of termination;

(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 position; and

( 4) fair and reasonable criteria in ascertaining what positions are to be declared redundant.

The burden is on the employer to prove by substantial evidence the factual and legal basis for the dismissal of its employees on the ground of redundancy. Substantial evidence, in tum, is defined as that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion.

However, Abbot Laboratories, et al. are correct in pointing out that the list of indices in Golden Thread (preference criteria of status, efficiency, and proficiency) is not exhaustive.

It was then erroneous for the courts a quo to have harped on the three indices as the basis for ruling that petitioner failed to comply with the fourth requirement. An integral portion of management prerogative is the adoption of the criteria against which the employees will be measured for purposes of implementing a redundancy program. Abbott may then resort to using other indicators in determining who will remain with the company upon downsizing its payroll.

However, the data presented in the Study, by itself, does not satisfy the evidentiary requirement to prove that Almazar, et al.’s positions should be redundated. The graphical presentations in the Study “are mere allegations and conclusions not supported by other evidence” that do not explain in detail why it considered Almazar, et al.’s positions superfluous or unnecessary.

While there may be basis for integrating the PediaSure Division and Medical Nutrition Division into one unit as demonstrated in the Study, there is no sufficient basis offered for retaining all the employees in one unit while dismissing those from the other. It may be that there are similarities in the functions and responsibilities attached to the positions in both divisions that resulted in superfluity, but determining who will occupy the newly-merged position is a different matter altogether. This required, on the part of the employer, an evaluation of not just the performance of the divisions, but of the individual employees who may be affected by the redundancy program.

Evidence that this job appraisal was actually conducted is severely wanting in the records of this case. Rather, Abbott relied on general averments about logic and reason to justify its choice of division to retain. Absent substantial evidence tending to prove that the employees that would have been affected by the merger of the two departments were measured against specific criteria, the termination of the redundated employees cannot be sustained.

On the contrary, such terminations are products of caprice and whimsy, and do not constitute a valid exercise of management prerogative beyond the Court’s power of review.

The employer’s subsequent act of hiring additional employees is inconsistent with the termination on the ground of redundancy. The SC held that in the notice furnished by Abbott to the DOLE, the company declared that the reason for the redundancy program, affecting four (4) of its employees, is to reduce the company’s manpower by eliminating positions that were allegedly superfluous.

However, according to SC this proffered justification is readily contradicted by the fact that the affected employees were offered newly-created District Sales Manager positions that were entitled to lower pay and benefits. To Our mind, the redundancy program is then a mere subterfuge to circumvent Almazar, et al.’s right to security of tenure.

Consequently, the Deeds signed by the Almazar, et al. could not therefore be deemed valid, premised as they were on an invalid termination. The case of Philippine Carpet Manufacturing Corporation vs. Tagyamon (Philippine Carpet) listed three specific instances wherein a waiver cannot estop a terminated employee from questioning the validity of his or her dismissal, to wit:

(1) the employer used fraud or deceit in obtaining the waivers;

(2) the consideration the employer paid is incredible and unreasonable; or

(3) the terms of the waiver are contrary to law, public order, public policy, morals, or good customs or prejudicial to a third person with a right recognized by law.

As the ground for termination of employment was illegal, the quitclaims are deemed illegal as the employees’ consent had been vitiated by mistake or fraud.

That the Almazar, et al. are educated individuals who were occupying supervisory positions is immaterial. The Court has allowed supervisory employees to seek payment of benefits and a manager to sue for illegal dismissal even though, for a consideration, they executed deeds of quitclaims releasing their employers from liability. Such circumstance does not make them any less susceptible to financial offers, faced as they were with the prospect of unemployment. Economic necessity constrained them to accept Abbot Laboratories, et al.’s monetary offer and sign the deeds of release, waiver and quitclaim.

Almazar, et al.’s rejection of Abbott’s offer of reinstatement cannot be treated as a waiver of the right to be so reinstated nor as opting to receive separation pay in lieu thereof, simply because the positions offered to them are different from those they previously occupied. It is, therefore, not the “actual reinstatement” contemplated under the Labor Code.

A perusal of the second set of Return to Work Orders addressed to the Almazar, et al. readily evinces that, although the Almazar, et al. would be receiving the same compensations as before, they would be performing functions different from their prior posts.

The SC ruled likewise that the amounts received as separation pay should be considered as partial satisfaction of the award for backwages, and should consequently be credited therefrom.