REDUNDANCY TO BE VALID MUST SHOW GOOD FAITH: MERE PRESENTATION OF SELF-SERVING INTERNAL DOCUMENT AND LACK OF CRITERIA DO NOT ESTABLISH GOOD FAITH

Redundancy exists when an employee’s position is superfluous, or an employee’s services are in excess of what would reasonably be demanded by the actual requirements of the enterprise.

Thus, the SC held as follows:

Yulo vs. Concentrix Daksh Services Philippines, Inc.
G.R. No. 235873, January 21, 2019

Redundancy; Criteria; Good faith; Separation pay

Facts:

Petition Enrique Marco G. Yulo (Yulo) was engaged by Respondent Concentrix Daksh Services Philippines, Inc. (Concentrix) as a Customer Care Specialist-Operations and was assigned to the account of Amazon.com, Inc.

On February 17, 2015, Yulo received a letter from Concentrix informing him that Amazori intended to “right size the headcount of the account due to business exigencies/requirements” and thus, he would be temporarily placed in the company’s redeployment pool effective February 20, 2015. This notwithstanding, Concentrix promised Yulo that it would endeavor to deploy him in other accounts based on his skill set, with a caveat, however, that should he fail to get into a new account by March 22, 2015, he would be served with a notice of redundancy.

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As it turned out, Yulo was not re-assigned to other accounts as of the said date, and consequently, was terminated on the ground of redundancy. This prompted him to file a complaint for constructive illegal dismissal, non-payment of salary/wages and 13th month pay, moral and exemplary damages, and attorney’s fees with prayer for backwages and other benefits, before the NLRC, docketed as NLRC Case No. 06-07585-15.

For its part, Concentrix contended that Yulo was legally terminated on the ground of redundancy, claiming compliance with the termination requirements provided in Article 283 of the Labor Code. It claimed to have notified Yulo of the implementation of the redundancy program on February 17, 2015 and subsequently submitted an establishment termination report on February 20, 2015 with the Department of Labor and Employment (DOLE), attaching thereto a list of affected employees. Further, it asserted that Yulo was among those selected to be redundated on March 22, 2015 due to his low performance and high negative response rate.

LA Ruling:

The LA found that Concentrix failed to comply with all the requisites for a valid redundancy program, which therefore rendered Yulo’s dismissal illegal.

Accordingly, the LA ordered Concentrix to reinstate Yulo to his former position without loss of seniority rights, and to pay him his backwages and proportionate 13th month pay, as well as moral and exemplary damages and attorney’s fees.

Aggrieved, Concentrix appealed to the NLRC.

NLRC Ruling:

The NLRC affirmed the LA’s conclusion that Concentrix was illegally dismissed.

The NLRC found that Yulo failed to: (a) pay Yulo’s separation pay; ( b) exhibit good faith in terminating Yulo’s employment; and (c) competently prove its criteria in ascertaining the redundant positions.

Dissatisfied, Concentrix moved for reconsideration but the same was denied. Hence, Concentrix elevated the matter to the CA via a petition for certiorari.

CA Ruling:

The CA granted Concentrix’s petition and set aside the ruling of the NLRC.

It ruled that Yulo’s dismissal was legal since Concentrix strictly complied with the procedural requirements in the implementation of a valid redundancy program, and that the same was implemented in good faith since Concentrix endeavored to fit Yulo to other positions but unfortunately failed to qualify for any other position in any other account.

In addition, the CA noted that based on the company’s records, Yulo’s performance was below par, his attendance record was low, and he even had a high negative response rate; thus, his dismissal was justified.

Yulo moved for reconsideration but the same was denied; hence, the petition before the SC.

Issue/s:

Whether or not the failure to present the plan of company’s account client to right size the headcount of the account due to business exigencies/requirements resulted in failure to prove good faith in redundancy

Whether or not the internal document which explained the Account client’s redundancy plans sufficiently proved good faith in redundancy

Whether or not screenshot of employees’ performance ratings substantially prove use of criteria in implementing redundancy

SC Ruling:

The SC found the petition meritorious.

Essentially, redundancy exists when an employee’s position is superfluous, or an employee’s services are in excess of what would reasonably be demanded by the actual requirements of the enterprise. Redundancy could be the result of a number of factors, such as the overhiring 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.

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In this relation, jurisprudence explains that the characterization of an employee’s services as redundant, and therefore, properly terminable, is an exercise of management prerogative, considering that an employer has no legal obligation to keep more employees than are necessary for the operation of its business.

Nevertheless, case law qualifies that the exercise of such prerogative “must not be in violation of the law, and must not be arbitrary or malicious.” Thus, following Article 298 of the Labor Code as above cited, the law requires the employer to prove, inter alia, its good faith in abolishing the redundant positions, and further, the existence of fair and reasonable criteria in ascertaining what positions are to be declared redundant and accordingly abolished.

To exhibit its good faith and that there was a fair and reasonable criteria in ascertaining redundant positions, a company claiming to be over manned must produce adequate proof of the same. The company 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.

The presence of criteria discussed in Golden Thread Knitting Industries, Inc. v. NLRC shows good faith on its part and is· evidence that the implementation of redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its employees. The SC held that Concentrix was not able to present adequate proof to show that it exhibited good faith, as well as employed fair and reasonable criteria in terminating Yulo’s employment based on redundancy.

Particularly, Concentrix attempted to justify its purported redundancy program by claiming that it received an e-mail from Amazon informing it of the latter’s plans to “right size the headcount of the account due to business exigencies/requirements.” However, such e-mail -much less, any sufficient corroborative evidence tending to substantiate its contents -was never presented in the proceedings a quo. At most, Concentrix submitted, in its motion for reconsideration before the NLRC, an internal document, which supposedly explained Amazon’s redundancy plans.

However, the SC found that this one (1)-page document hardly demonstrates Concentrix’s good faith only because it lacks adequate data to justify a declaration of redundancy, but more so, because it is clearly self-serving since it was prepared by one Vivek Tiku, the requestor/business unit head of Concentrix, and not by any employee/representative coming from Amazon itself. Notably, parallel to the entry “Narrative of the current situation of the business unit, what triggered the downsizing, and what is the preferred outcome,” the requestor merely stated that “[w]e have just finished our seasonal ramp and would need to decrease our headcount due to low call volume based on the long term forecast by the client (Dec-Feb EOM LTF).” However, outside of this general conclusion, no evidence was presented to substantiate the alleged low call volume and the forecast from which it is based on so as to truly exhibit the business exigency of downsizing the business unit assigned to Amazon.

Aside from the lack of evidence to show Concentrix’s good faith, Concentrix likewise failed to prove that it employed fair and reasonable criteria in its redundancy program. Concentrix merely presented a screenshot of a table with names of the employees it sought to redundate based on their alleged poor performance ratings. Indeed, while “efficiency” may be a proper standard to determine who should be terminated pursuant to a program of redundancy, said document does not convincingly show that fair and reasonable criteria was indeed employed by Concentrix.

All that the screenshot contains is a list of employees with their concomitant performance ratings. As the LA pointed out, though Concentrix incorporated in their Reply a screenshot of what appears to be a table containing the names of purported employees including their respective performance ratings, the SC did not admit this at its face value in the absence of proof that would substantiate the same.

The presence of these criteria is evidence that the implementation of redundancy was painstakingly done by the employer in order to properly justify the termination from the service of its employees. The aforesaid screenshot barely shows Concentrix’s actual compliance with this standard.

Finally, while Concentrix had duly notified Yulo that it was terminating him on the ground of redundancy, records are bereft of any showing that he was paid his separation pay, which is also a requisite to properly terminate an employee based on this ground. As Article 298 states, “in case of termination due to redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher.”