REDUNDANCY IS VALID WHERE GOOD FAITH IS DULY ESTABLISHED AS EVIDENCED BY THE ACCEPTANCE OF THE DECISION OF EMPLOYER AND WITH EMPLOYEE NEGOTIATING FOR SEPARATION PAY PACKAGE

Redundancy exists when the service of an employee is in excess of what is reasonably demanded by the actual requirements of the business. A redundant position is one rendered superfluous by any number of factors, such as over-hiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of a service activity formerly undertaken by the enterprise.

Thus, the SC held in the following case:

Que vs. Asia Brewery, Inc.
G.R. No. 202388, April 10, 2019

Redundancy; Acceptance of the reason behind redundancy affirms the wisdom and good faith behind the decision; Constructive Dismissal; Constructive dismissal does not arise where the employee was informed of the planned implementation of a redundancy program and he accepted the decision and negotiated for a separation package

Facts:

Petitioner Elpidio T. Que (Que) had been the Regional Sales Manager (RSM) of private respondent Asia Brewery Inc. (Asia Brewery) for eight (8) years and stationed in Northern Luzon covering the areas of Ilocos Sur, Ilocos Norte, Abra, Cagayan, Kalinga Apayao, Isabela, Nueva Vizcaya, lfugao and Quirino Province.

Previously, there were twelve (12) sales offices comprising the North Central Luzon Region (NCLR) which were situated in San Leonardo, Tarlac, Sta. Maria, San Fernando, Olongapo, Bataan, La Union, Baguio, Vigan, Dagupan, Cauayan and Tuguegarao. However, in February of 2004, the management of private respondent split the said region into two to spur a better growth rate in its income and to give a more direct and focused handling of the areas covered by these sales offices. The first part is composed of the sales offices at San Leonardo, Tarlac, Sta. Maria, San Fernando, Olongapo, Bataan, La Union, Baguio and Dagupan. The second part, over which the Que was made RSM, consisted of the sales offices in Vigan, Tuguegarao and Cauayan.

One year and three months after the split of the NCLR, Raymundo T. Gatmaitan, the vice president for sales of Asia Brewery made an evaluation of the experimental split of the NCLR and recommended the reversion to the old set up of putting the NCLR under one RSM. He opined that the decision did not achieve any gain. He further recommended that since the re-merger would result to redundancy in the office of a Regional Sales Manager the office of the Que should be abolished on the ground of redundancy.

Que claims that he was found to be ineffectual. He was allegedly pressured to submit his resignation letter to which he responded that he was not retiring or resigning. He claims that the package offered him was too low and that he deserves a higher package. He was also asked to surrender the company vehicle that he was then using. He was also informed that there was already a replacement for him in Vigan sales office. When he went there he was prevented by the guard from entering. He was also informed that he was not allowed to enter the Cauayan sales office. When he gassed-up the fleet card he was using was refused by Petron Gas Station since it was already a “terminated card.” He received an email informing him that he was no longer the Regional Sales Manager for Northern Luzon as the same had already been merged with the sales office under Jimmy Uy.

On the part of Asia Brewery, it alleged that Que was verbally informed of the move to consolidate the North and Central Luzon areas under one Regional Sales Manager which would result in the abolition of his position once the reorganization is implemented. He was shown an initial computation of his separation pay in the amount of Php536,000.00. He started to negotiate for a higher separation pay. First, he asked that the amount shown to him as his separation pay be rounded off to Php600,000.00 and in addition thereto, the ownership of the service vehicle be transferred to him to complete his separation pay package. In his meeting with Asia Brewery’s COO, Michael Tan, he verbally informed the latter that he decided to voluntarily tender his resignation and started discussing with him the matter of his separation pay and the possibility of getting distributorship agreement with the company for its products in Vigan City.

Allegedly, Que assured Michael G. Tan that the resignation letter would be handed to him as soon as he has bade farewell to the people from the sales offices in Vigan, Tuguegarao and Cauayan. Thereafter, Michael Tan, received a letter from Que confirming the verbal information of the said corporate decision and that he was looking forward to the separation pay he is entitled to receive from the company. Through the said letter, Que also sought the help of Mr. Tan in realizing his dream of getting reconnected with the Lucio Tan Group of Companies through the grant of exclusive distributorship of Virgin Drinks and likewise mentioned therein about his meeting with the three Marketing Territory Managers or “MTM’s” in Laoag informing them that he would be parting with them soon.

Que once again met Asia Brewery’s key officers. He was shown an increased amount of separation pay in line with his plea for the rounding off of the first computation showed to him. However, instead of being pleased, Que showed displeasure and further negotiated for higher separation pay in the amount of Php888,888.00 in addition to the service vehicle he had earlier asked. Thus, no agreement was reached. Thereafter, he was instructed to turn over the key to his service vehicle, but he refused retorting that he had his gun and gold inside the vehicle and threatening to make a scene. Further, in another meeting at the Manila Peninsula Hotel, he presented a much higher separation package in the staggering amount of Php8,876,189.70 which was flatly rejected by Asia Brewery for want of any legal or factual basis.

LA Ruling:

The Labor Arbiter (LA) ruled that Que was constructively dismissed.

For the LA, from the date that Que was informed of his impending dismissal, he could no longer work with ease as he was constantly prodded to submit his resignation letter. The LA believed Que’s narration of facts and ruled that he was irregularly prevented from reporting to work when the security guards refused to let him enter the sales offices, in addition to the cancellation of his fleet card for his gas expenses.

The LA also ruled that Asia Brewery failed to prove its claim of redundancy as no financial statement from an independent auditor was submitted. Both parties appealed to the NLRC. Que claimed he is entitled to higher monetary awards while Asia Brewery claimed that Que was not illegally dismissed.

NLRC Ruling:

The NLRC reversed the LA and found that instead of being pressured to relinquish his employment, Que actually negotiated for a suitable separation package after he was informed that he was being retrenched because his position had become redundant.

The NLRC gave weight to a letter of Que which showed that he was not against the plan to ease him out from being RSM of North Luzon or the re-merging of such area with the Central Luzon sales office under one RSM. In the same letter, Que did not show any animosity or bitterness, or any pressure in the submission of a resignation letter.

CA Ruling:

The CA affirmed the NLRC Decision.

The CA ruled that the NLRC did not commit grave abuse of discretion when it ruled that the letter of Que showed that he was not coerced and that it belied any claim of animosity when he was informed that his position had become redundant. The CA also ruled that the NLRC was correct in ruling that Asia Brewery complied with the formal and substantial requirements for termination of employment due to redundancy.

Aggrieved, Que filed the petition before the Supreme Court.

Issue/s:

Whether or not there was valid redundancy in this case when the company terminated one of the two regional sale managers as it decided to revert to its original setup of having only one office in one region from an experimental setup of having two

Whether or not there was constructive dismissal when the employee was informed of the planned implementation of a redundancy program, even accepted the decision and negotiated for a separation package that would be more than what the law required

SC Ruling:

The SC denied the petition.

The SC held that Article 298 of the Labor Code states that an employer may terminate the employment of any employee on the ground of redundancy. As defined, redundancy exists when the service of an employee is in excess of what is reasonably demanded by the actual requirements of the business. A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of a service activity formerly undertaken by the enterprise.

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In Lowe, Inc. vs. Court of Appeals, the Court laid down the requirements for the valid implementation of a redundancy program. 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 SC likewise ruled that the determination of the continuing necessity of a particular officer or position in a business corporation is a management prerogative, and the courts will not interfere unless arbitrary or malicious action on the part of management is shown. Citing Lowe, the SC held that it is also within the exclusive prerogative of management to determine the qualification and fitness of an employee for hiring and firing, promotion or reassignment. Indeed, an employer has no legal obligation to keep more employees than are necessary for the operation of its business. In determining who among the employees should be retained or separated, the Court explained in Lowe that preferred status, efficiency, and seniority are among the accepted criteria in implementing a redundancy program.

Here, Que’s only argument against the implementation of the redundancy program was that there was no supporting documents that the business was performing poorly. This is, however, belied by the findings of facts of the NLRC and the CA. Asia Brewery based its decision to terminate Que’s employment on an Evaluation Report, which showed the need to revert to the original set-up of having one RSM for Northern Luzon.

The SC in making its ruling relied upon the NLRC’s findings which gave weight to the Evaluation Report. In this report, it was duly established that after more than a year of the experimental organizational set up of splitting the North Central Luzon Region (NCLR) into two regions, the Central Luzon Region or CLR and the North Luzon Region or NLR, no gain was achieved by Asia Brewery. Asia Brewery did not accomplish anything in terms of accelerating development and improving the sales performance of the subject areas especially those under the North Luzon Region (NLR).

Having Que as RSM of the NLR, with only three sales offices to man, did not provide the expected outcome. Performance of the NLR under him even had nothing to be proud of Sales dropped. The quality of accounts receivables deteriorated. Unpaid and outstanding accounts posted huge figures. Maintaining the two (2) RSMs has proven ineffective especially in terms of boosting sales in the region, particularly the NLR under Que. Moreover, the set up only served to increase the company’s operation expenses. At this time when sales is not doing well, the company can ill afford to incur unnecessary costs.

Necessarily, it was duly established that the position of one of the two RSMs will become an excess of what is reasonably required by the company. Hence, the employment of the excess RSM has to be terminated on the ground of redundancy, subject to the payment of separation pay as mandated by law. Asia Brewery decided to retain Uy as RSM for (to be revived) NCLR and separate Que on the ground of redundancy. Asia Brewery established that in the short time that Mr. Uy took over the CLR, he has proven to be very professional, qualified and competent to perform the duties and responsibilities of an RSM, as partly evidenced by the good sales performance of his region. On the other hand, Que failed miserably to meet the sales expectations of Management, aside from other matters which proved his inefficiency and ineffectiveness as RSM.

Asia Brewery complied with the written notice requirement, the payment of separation pay, good faith in abolishing Que’s position, and the use of fair and reasonable criteria in choosing Que as the one whose employment will be terminated.

Que was informed of the planned implementation of a redundancy program, he accepted the decision and negotiated for a separation package that would be more than what the law required. When the parties failed to agree on the separation package primarily because of the demands of Que, Asia Brewery had no choice but to implement the redundancy program. Que failed to prove the work environment became hostile thus making it unbearable for him to remain an employee of Asia Brewery.

Que’s claim that he was pressured to resign was belied by his May 18, 2005 letter. It would seem that Que had initially accepted this but had hoped to get a separation package that was higher than what the law provided. And when he failed to get his demands, his attitude turned sour and he refused to communicate with the head office. What Que claims as pressures to make him resign were actually a result of his disobedience to orders for him to report to work at the head office. He even insisted on visiting the sales offices where he used his connections in order to force the sales offices to give him access to the premises. Any embarrassment he might have experienced was not because Asia Brewery acted maliciously and arbitrarily in terminating his employment but because he failed in getting what he wanted. Absent proof of malicious and arbitrary conduct of Asia Brewery, there can be no basis for a finding that Que was constructively dismissed.