AUTHORIZED CAUSES

1. AUTOMATION/ ROBOTICS – Installation of labor-saving devices.

2. REDUNDANCY – exists where the services of an employee are excess of what is reasonably
demanded by the actual requirements of the enterprise.

SPI TECHNOLOGIES, INC. VS. MAPUA

DOCTRINE: In cases of redundancy, the management should adduce evidence and prove that a position
which was created in place of a previous one should pertain to functions which are dissimilar and
incongruous to the abolished office. Presentation of the new table of the organization and the certification
of the Human Resources Supervisor that the positions occupied by the retrenched employees are
redundant are inadequate as evidence to support the college’s redundancy program.

Facts: Mapua was hired by SPI. Nolan informed Mapua that she was aligning Mapua’s position to become
a subordinate of Raina due to her missing a work deadline. Mapua’s colleagues were demotivated because
she was taking things easy while they were working very hard. Mapua lost about 95% of her work projects
and job responsibilities.
Raina informed Mapua over the phone that her position was considered redundant and that she is
terminated from employment effective immediately. Mapua was notified that she should cease reporting
for work the next day. Her laptop computer and company mobile phone were taken right away and her
office phone ceased to function.

MAPUA’S TERMINATION IS ILLEGAL.

Requisites of a VALID REDUNDANCY:

(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.

ARABIT V. JARDINE PACIFIC FINANCE INC.

DOCTRINE: To dismiss the petitioners and hire new contractual employees as replacements
necessarily give rise to the sound conclusion that the petitioners’ services have not really become
in excess of what the employer’s business requires.

FACTS: Petitioners were former regular employees of respondent Jardine. The petitioners were
also officers and members of a legitimate labor union and the sole exclusive bargaining agent of
the employees of Jardine.

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy
program among its employees. The petitioners were among those affected by the redundancy
program. Jardine thereafter hired contractual employees to undertake the functions these
employees used to perform.

PETITIONER WAS ILLEGALLY DISMISSED.

This Court has already ruled before that retrenchment and redundancy are two different
concepts; they are not synonymous; thus, they should not be used interchangeably.

Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors,
such as over hiring of workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the employee’s and
without prejudice to the latter, resorted to by management during periods of business recession,
industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant for a new production program or the introduction
of new methods or more efficient machinery, or of automation. Simply put, it is an act of the
employer of dismissing employees because of losses in the operation of a business, lack of work,
and considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court.

CULILI V. EASTERN TELECOMMUNICATION PHILIPPINES

DOCTRINE: The following evidence may be proffered to substantiate redundancy:

1. the new staffing pattern

2. feasibility studies
3. proposal on the viability of the newly created positions
4. job description and the approval by the management of the restructuring.

FACTS: Culili was a Senior Technician in the Customer Premises Equipment Management Unit
of the Service Quality Department of Eastern Telecom (ETPI). Due to business troubles and
losses, ETPI was compelled to implement a Right-Sizing Program which consisted of two
phases: the first phase involved the reduction of ETPI’s workforce to only those employees that
were necessary and which ETPI could sustain; the second phase entailed a company-wide
reorganization which would result in the transfer, merger, absorption or abolition of certain
departments of ETPI. ETPI offered the Special Retirement Program and the corresponding
retirement package to the 102 employees who qualified for the program. Of all the employees
who qualified to avail of the program, only Culili rejected the offer. After the successful
implementation of the first phase of the Right-Sizing Program, ETPI proceeded with the second
phase which necessitated the abolition, transfer and merger of a number of ETPI’s departments.
The specialized functions of a Senior Technician unnecessary. As a result, Culili’s position was
abolished due to redundancy and his functions were absorbed by another employee.

CULILI WAS LEGALLY DISMISSED.

In the new table of organization that the management approved, one hundred twelve (112)
employees were redeployed and nine (9) positions were declared redundant.

There is redundancy when the service capability of the workforce is greater than what is
reasonably required to meet the demands of the business enterprise. A position becomes
redundant when it is rendered superfluous by any number of factors such as over-hiring of
workers, decrease in volume of business, or dropping a particular product line or service activity
previously manufactured or undertaken by the enterprise.

An employer cannot simply declare that it has become overmanned and dismiss its employees
without producing adequate proof to sustain its claim of redundancy. Among the requisites of a
valid redundancy program are: (1) the good faith of the employer in abolishing the redundant
position; and (2) fair and reasonable criteria in ascertaining what positions are to be declared
redundant, such as but not limited to: preferred status, efficiency, and seniority.

ASUFRIN V. SAN MIGUEL CORPORATION

FACTS:

3. RETRENCHMENT (DOWNSIZING) – Reduction of personnel usually due to poor financial

returns so as to cut down on costs of operations in terms of salaries and wages to prevent
bankruptcy of the company; Linked with losses, it is a cost-cutting measure made
immediately necessary by business reduction or reverses.
4. CLOSURE OR CESSATION OF OPERATION OF THE ESTABLISHMENT OR UNDERTAKING
5. DISEASE
6. OTHER AUTHORIZED CAUSES
SPI TECHNOLOGIES, INC. and LEA VILLANUEVA vs. VICTORIA K. MAPUA

G.R. No. 191154 April 7, 2014

REYES, J.:

AUTHORIZED CAUSE: Redundancy

DOCTRINE: In cases of redundancy, the management should adduce evidence and prove that
a position which was created in place of a previous one should pertain to functions which are
dissimilar and incongruous to the abolished office.

Presentation of the new table of the organization and the certification of the Human Resources
Supervisor that the positions occupied by the retrenched employees are redundant are
inadequate as evidence to support the college’s redundancy program.

FACTS: Mapua alleged that she was hired by SPI and was the Corporate Development’s
Research/Business Intelligence Unit Head and Manager of the company. Subsequently, the then
Vice President and Corporate Development Head, Maquera hired Nolan as Mapua’s supervisor.

Nolan informed Mapua that she was realigning Mapua’s position to become a subordinate of co-
manager Raina due to her missing a work deadline (despite Mapua’s report that her laptop
crashed and lost her files). Nolan also disclosed that Mapua’s colleagues were "demotivated"
because she was "taking things easy while they were working very hard," and that she was
"frequently absent, under timing, and coming in late every time Maquera goes on leave or on
vacation."

Mapua noticed that her colleagues began to ostracize and avoid her. Nolan and Raina started
giving out majority of her research work and other duties under Healthcare and Legal Division to
the rank-and-file staff. Mapua lost about 95% of her work projects and job responsibilities.

Mapua consulted these work problems with SPI’s Human Resource Director and asked if she
can be transferred to another department within SPI. Subsequently, Mapua was informed that
there is an intra-office opening and that she would schedule an exploratory interview for her.
However, due to postponements not made by Mapua, the interview did not materialize.

Then, Mapua allegedly saw the new table of organization of the Corporate Development Division
which would be renamed as the Marketing Division. The new structure showed that Mapua’s
level will be again downgraded because a new manager will be hired and positioned between
her rank and Raina’s.

On March 21, 2007, Raina informed Mapua over the phone that her position was considered
redundant and that she is terminated from employment effective immediately. Mapua was notified
that she should cease reporting for work the next day. Her laptop computer and company mobile
phone were taken right away and her office phone ceased to function.

Mapua filed a complaint for illegal dismissal, claiming reinstatement or if deemed impossible, for
separation pay.

LA’s Ruling: Mapua’s termination was illegal, the redundancy of Mapua’s position being in want
of factual basis.

NLRC’s Ruling: Mapua’s termination was legal.

CA’s Ruling: Mapua’s termination was illegal.

SPI’s Argument: An employer has the unbridled right to conduct its own business in order to
achieve the results it desires. To prove that Villanueva’s functions are redundant, SPI submitted
an Inter-Office Memorandum and affidavit executed by its Human Resources Director,
Villanueva.

Mapua’s Argument: Her position as Corporate Development Manager is not redundant. She cited
that SPI was in fact actively looking for her replacement after she was terminated. Furthermore,
SPI violated her right to procedural due process when her termination was made effective on the
same day she was notified of it.

ISSUE: Was Mapua’s termination legal?

HELD: NO, Mapua’s termination was illegal.

This Court in Asian Alcohol Corporation v. NLRC pronounced that 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.

Anent the first requirement which is written notice served on both the employee and the DOLE
at least one month prior to the intended date of termination, SPI had discharged the burden of
proving that it submitted a notice to the DOLE, stating therein the effective date of termination.

In AMA Computer College, Inc. v. Garcia, et al., the Court held that the presentation of the new
table of the organization and the certification of the Human Resources Supervisor that the
positions occupied by the retrenched employees are redundant are inadequate as evidence to
support the college’s redundancy program. The Court quotes the related portion of its ruling:

In the case at bar, ACC attempted to establish its streamlining program by

presenting its new table of organization. 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.
More compelling evidence would have been a comparison of the old and new
staffing patterns, a description of the abolished and newly created positions, and
proof of the set business targets and failure to attain the same which necessitated
the reorganization or streamlining.

Also connected with the evidence negating redundancy was SPI’s publication of job vacancies
after Mapua was terminated from employment. SPI maintained that the CA erred when it
considered Mapua’s self-serving affidavit as regards the Prime Manpower advertisement
because the allegations therein were based on Mapua’s unfounded suspicions. Also, the failure
of Mapua to present a sworn statement of Dimatulac renders the former’s statements hearsay.

Even if we disregard Mapua’s affidavit as regards the Prime Manpower advertisement, SPI
admitted that it caused the Inquirer advertisement for a Marketing Communications Manager
position. Mapua alleged that this advertisement belied the claim of SPI that her position is
redundant because the Corporate Development division was only renamed to Marketing division.

A change in the job title is not synonymous to a change in the functions. A position cannot be
abolished by a mere change of job title. In cases of redundancy, the management should adduce
evidence and prove that a position which was created in place of a previous one should pertain
to functions which are dissimilar and incongruous to the abolished office.

Thus, in Caltex (Phils.), Inc. (now Chevron Phils., Inc.) v. NLRC, the Court dismissed the
employer’s claim of redundancy because it was shown that after declaring the employee’s
position of Senior Accounting Analyst as redundant, the company opened other accounting
positions (Terminal Accountant and Internal Auditor) for hiring. There was no showing that the
private respondent therein could not perform the functions demanded of the vacant positions, to
which he could be transferred to instead of being dismissed.

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F.

PUNZALAN, FREDDIE M. MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB
FINANCE EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF FREE
WORKERS) vs. JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE)

G.R. No. 181719 April 21, 2014

BRION, J.:
AUTHORIZED CAUSE: Redundancy

DOCTRINE: To dismiss the petitioners and hire new contractual employees as replacements
necessarily give rise to the sound conclusion that the petitioners’ services have not really become
in excess of what the employer’s business requires.

FACTS: Petitioners were former regular employees of respondent Jardine. The petitioners were
also officers and members of a legitimate labor union and the sole exclusive bargaining agent of
the employees of Jardine.

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy
program among its employees. The petitioners were among those affected by the redundancy
program. Jardine thereafter hired contractual employees to undertake the functions these
employees used to perform.

Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both
parties eventually reached an amicable settlement. In the settlement, the petitioners accepted
their redundancy pay without prejudice to their right to question the legality of their dismissal with
the NLRC. Jardine paid the petitioners a separation package composed of their severance pay,
plus their grossed up transportation allowance.

The petitioners and the Union filed a complaint against Jardine with the NLRC for illegal
dismissal and ULP.

Jardine argued in its defense that the company had been incurring substantial business losses
from 1996 to 1998. Because of these serious business losses, Jardine asserted that it had to lay-
off some of its employees and reorganize its ranks to eliminate positions that were in excess of
what its business required. Jardine, however, admitted that it hired contractual employees to
replace petitioners in their previous posts. Jardine reasoned out that no bad faith took place since
the hiring of contractual employees was a valid exercise of its management prerogative. Jardine
argued that the distinction between redundancy and retrenchment is not material; an employer
resorts to retrenchment or redundancy for the same reason, namely the economics of business.
Since Jardine successfully established that it incurred serious business losses, then termination
of employment of the petitioners was valid for all intents and purposes.

LA’s Ruling: Petitioners were illegally dismissed. The hiring of contractual employees to replace
the petitioners directly contradicts the concept of redundancy which involves the trimming down
of the workforce because a task is being carried out by too many people.

NLRC’s Ruling: Petitioners were illegally dismissed.

CA’s Ruling: Petitioners were legally dismissed. The CA found that Jardine’s act of hiring
contractual employees in replacement of the petitioners does not run counter to the argument
that their positions are already superfluous. The hiring of contractual employees is a
management prerogative that Jardine has the right to exercise. In the absence of any showing
of malice or arbitrariness on the part of Jardine in implementing its redundancy program, the
courts must not interfere with the company’s exercise of a bona fide management decision.

ISSUE: Were petitioners legally dismissed?

HELD: NO, Petitioners were illegally dismissed.

Redundancy in contrast with retrenchment

We cannot accept Jardine’s shallow understanding of the concepts of redundancy and

retrenchment in determining the validity of the severance of an employer-employee relationship.
The fact that they are found together in just one provision does not necessarily give rise to the
conclusion that the difference between them is immaterial. This Court has already ruled before
that retrenchment and redundancy are two different concepts; they are not synonymous; thus,
they should not be used interchangeably.50 The clear distinction between these two concepts
was discussed in Andrada, et al., v. NLRC, citing the case of Sebuguero v. NLRC, where this
Court clarified:

Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors,
such as over hiring of workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the enterprise.

Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the employee’s and
without prejudice to the latter, resorted to by management during periods of business recession,
industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant for a new production program or the introduction
of new methods or more efficient machinery, or of automation. Simply put, it is an act of the
employer of dismissing employees because of losses in the operation of a business, lack of work,
and considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court.

These rulings appropriately clarify that redundancy does not need to be always triggered by a
decline in the business. Primarily, employers resort to redundancy when the functions of an
employee have already become superfluous or in excess of what the business requires. Thus,
even if a business is doing well, an employer can still validly dismiss an employee from the
service due to redundancy if that employee’s position has already become in excess of what the
employer’s enterprise requires.

From this perspective, it is illogical for Jardine to terminate the petitioners’ employment and
replace them with contractual employees. The replacement effectively belies Jardine’s claim that
the petitioners’ positions were abolished due to superfluity. Redundancy could have been
justified if the functions of the petitioners were transferred to other existing employees of the
company.

To dismiss the petitioners and hire new contractual employees as replacements necessarily give
rise to the sound conclusion that the petitioners’ services have not really become in excess of
what Jardine’s business requires. To replace the petitioners who were all regular employees with
contractual ones would amount to a violation of their right to security of tenure.

Guidelines in implementing redundancy

The Court, in Asian Alcohol Corp. v. NLRC, laid down guidelines for redundancy to be
characterized as validly undertaken by the employer. The Court ruled:

For the implementation of a redundancy program to be valid, the employer must comply with the
following requisites: (1) written notice served on both the employees and the Department of Labor
and Employment at least one month prior to the intended date of retrenchment; (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 positions; and (4) fair and
reasonable criteria in ascertaining what positions are to be declared redundant and accordingly
abolished.

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine
informed the Department of Labor and Employment of the petitioners’ separation from the service
due to redundancy on April 30, 1999, one month before their termination’s effectivity. Also, the
petitioners were given their individual separation packages, composed of their severance pay,
plus their grossed up transportation allowance.

Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines
are interrelated to ensure good faith in abolishing redundant positions; the employer must clearly
show that it used fair and reasonable criteria in ascertaining what positions are to be declared
redundant.

In this cited case, the employer took pains to discuss and elaborate on the reasons why the
position of the private respondent was the one chosen by the employer to be abolished.

Jardine never undertook what the employer in Asian Alcohol did. Jardine was never able to
explain in any of its pleadings why the petitioners’ positions were redundant. It never even
attempted to discuss the attendant facts and circumstances that led to the conclusion that the
petitioners’ positions had become superfluous and unnecessary to Jardine’s business
requirements. Thus, we can only speculate on what actually happened.

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian
Alcohol, we find that at two levels, Jardine failed to set the required fair and reasonable criteria
in the termination of the petitioners’ employment, leading to the conclusion that the termination
from the service was arbitrary and in bad faith.

NELSON A. CULILI v. EASTERN TELECOMMUNICATIONS PHILIPPINES, INC., SALVADOR

HIZON (President and Chief Executive Officer), EMILIANO JURADO (Chairman of the
Board), VIRGILIO GARCIA (Vice President) and STELLA GARCIA (Assistant Vice
President)

G.R. No. 165381 February 9, 2011

LEONARDO-DE CASTRO, J.:

AUTHORIZED CAUSE: Redundancy

DOCTRINE: The following evidence may be proffered to substantiate redundancy: 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.

FACTS: Culili was a Senior Technician in the Customer Premises Equipment Management Unit
of the Service Quality Department of Eastern Telecom (ETPI). Due to business troubles and
losses, ETPI was compelled to implement a Right-Sizing Program which consisted of two
phases: the first phase involved the reduction of ETPI’s workforce to only those employees that
were necessary and which ETPI could sustain; the second phase entailed a company-wide
reorganization which would result in the transfer, merger, absorption or abolition of certain
departments of ETPI. ETPI offered the Special Retirement Program and the corresponding
retirement package to the 102 employees who qualified for the program. Of all the employees
who qualified to avail of the program, only Culili rejected the offer. After the successful
implementation of the first phase of the Right-Sizing Program, ETPI proceeded with the second
phase which necessitated the abolition, transfer and merger of a number of ETPI’s departments.
The specialized functions of a Senior Technician unnecessary. As a result, Culili’s position was
abolished due to redundancy and his functions were absorbed by another employee. Later, he
was informed of his termination from employment through a letter which was similar to the memo
shown to Culili by the union president weeks before Culili was dismissed. The memo was
advising him of his dismissal effective due to the Right-Sizing Program ETPI was going to
implement to cut costs and avoid losses. Culili alleged that neither he nor the Department of
Labor and Employment (DOLE) were formally notified of his termination. Culili claimed that he
only found out about it after he was barred from entering ETPI’s premises by its armed security
personnel when he tried to report for work. Culili asserted that ETPI had contracted out the
services he used to perform to a labor- only contractor which not only proved that his functions
had not become unnecessary, but which also violated their CBA and the Labor Code. ETPI
denied singling Culili out for termination. ETPI averred that since Culili did not avail of the Special
Retirement Program and his position was subsequently declared redundant, it had no choice but
to terminate Culili.

LA: He rendered a decision finding, among others, ETPI guilty of illegal dismissal and unfair
labor practice, and ordering it to reinstate Culili with backwages and such other benefits due him,
and damages and attorney’s fees.

NLRC: Affirmed the LA’s decision but modified the amount when it failed to properly notify both
Culili and the DOLE of Culili’s termination.

CA: partially granted ETPI’s petition and deleted the award for damages. CA found that Culili’s
position was validly abolished due to redundancy

ISSUES:

Is Culili validly dismissed?

 Did ETPI fail to properly comply with the procedural due process requirement in
terminating Culili?

HELD:

Yes. There is redundancy when the service capability of the workforce is greater than what is
reasonably required to meet the demands of the business enterprise. A position becomes
redundant when it is rendered superfluous by any number of factors such as over-hiring of
workers, decrease in volume of business, or dropping a particular product line or service activity
previously manufactured or undertaken by the enterprise.

This Court has been consistent in holding that the determination of whether or not an employees
services are still needed or sustainable properly belongs to the employer. Provided there is no
violation of law or a showing that the employer was prompted by an arbitrary or malicious act,
the soundness or wisdom of this exercise of business judgment is not subject to the discretionary
review of the Labor Arbiter and the NLRC.

However, an employer cannot simply declare that it has become overmanned and dismiss its
employees without producing adequate proof to sustain its claim of redundancy. Among the
requisites of a valid redundancy program are: (1) the good faith of the employer in abolishing the
redundant position; and (2) fair and reasonable criteria in ascertaining what positions are to be
declared redundant, such as but not limited to: preferred status, efficiency, and seniority.

This Court also held that the following evidence may be proffered to substantiate redundancy:
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.

In the case at bar, ETPI was upfront with its employees about its plan to implement a Right-
Sizing Program. Even in the face of initial opposition from and rejection of the said program by
ETEU, ETPI patiently negotiated with ETEUs officers to make them understand ETPIs business
dilemma and its need to reduce its workforce and streamline its organization. This evidently rules
out bad faith on the part of ETPI.

In deciding which positions to retain and which to abolish, ETPI chose on the basis of efficiency,
economy, versatility and flexibility. It needed to reduce its workforce to a sustainable level while
maintaining functions necessary to keep it operating. The records show that ETPI had sufficiently
established not only its need to reduce its workforce and streamline its organization, but also the
existence of redundancy in the position of a Senior Technician. ETPI explained how it failed to
meet its business targets and the factors that caused this, and how this necessitated it to reduce
its workforce and streamline its organization. ETPI also submitted its old and new tables of
organization 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.

In the new table of organization that the management approved, one hundred twelve (112)
employees were redeployed and nine (9) positions were declared redundant. It is inconceivable
that ETPI would effect a company-wide reorganization of this scale for the mere purpose of
singling out Culili and terminating him. If Culilis position were indeed indispensable to ETPI, then
it would be absurd for ETPI, which was then trying to save its operations, to abolish that one
position which it needed the most. Contrary to Culilis assertions that ETPI could not do away with
his functions as long as it is in the telecommunications industry, ETPI did not abolish the functions
performed by Culili as a Senior Technician. What ETPI did was to abolish the position itself for
being too specialized and limited. The functions of that position were then added to another
employee whose functions were broad enough to absorb the tasks of a Senior Technician.

Yes. ETPI, in effecting Culili’s termination, simply asked one of its guards to serve the required
written notice on Culili. Culili, on one hand, claims in his petition that this was handed to him by
ETPI’s vice president, but previously testified before the Labor Arbiter that this was left on his
table. Regardless of how this notice was served on Culili, this Court believes that ETPI failed to
properly notify Culili about his termination. Aside from the manner the written notice was
served, a reading of that notice shows that ETPI failed to properly inform Culili of the grounds
for his termination. Since it has been established that Culili’s termination was due to an
authorized cause and cannot be considered unfair labor practice on the part of ETPI, his
dismissal is valid. However, in view of ETPI’s failure to comply with the notice
requirements under the Labor Code, Culili is entitled to nominal damages in addition to his
separation pay.

As for the award of moral and exemplary damages in illegal dismissal cases, moral damages are
awarded only where the dismissal was attended by bad faith or fraud, or constituted an act
oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.
Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or
malevolent manner to warrant an award for exemplary damages. It is our considered view that
Culili has failed to prove that his dismissal was orchestrated by the individual respondents herein
(ETPI officers) for the mere purpose of getting rid of him. In fact, most of them have not even
dealt with Culili personally. Moreover, it has been established that his termination was for an
authorized cause, and that there was no bad faith on the part of ETPI in implementing its Right-
Sizing Program, which involved abolishing certain positions and departments for redundancy. It
is not enough that ETPI failed to comply with the due process requirements to warrant an award
of damages, there being no showing that the company’s and its officers’ acts were attended with
bad faith or were done oppressively.

BONIFACIO ASUFRIN, JR. vs. SAN MIGUEL CORPORATION and the COURT OF
APPEALS

G.R. No. 156658 March 10, 2004

YNARES-SANTIAGO, J.:

AUTHORIZED CAUSE: Redundancy

DOCTRINE: It is not enough for a company to merely declare that it has become over manned. It must produce
adequate proof that such is the actual situation to justify the dismissal of the affected employees for redundancy.

FACTS: Coca Cola Plant, then a department of respondent San Miguel Beer Corporation (SMC),
hired petitioner as utility/miscellaneous worker in February 1972. On November 1, 1973, he
became a regular employee paid on daily basis as a Forklift Operator. On November 16, 1981,
he became a monthly paid employee promoted as Stock Clerk.
Sometime in 1984, the sales office and operations at the Sum-ag, Bacolod City Sales Office were
reorganized. Several positions were abolished including petitioner’s position as Stock Clerk. After
reviewing petitioner’s qualifications, he was designated warehouse checker at the Sum-ag Sales
Office.

On April 1, 1996, respondent SMC implemented a new marketing system known as the “pre-
selling scheme” at the Sum-ag Beer Sales Office. As a consequence, all positions of route sales
and warehouse personnel were declared redundant. Respondent notified the DOLE Director of
Region VI that 22 personnel of the Sales Department of the Negros Operations Center would be
retired effective March 31, 1995.

Respondent SMC thereafter wrote a letter to petitioner informing him that, owing to the
implementation of the “pre-selling operations” scheme, all positions of route and warehouse
personnel will be declared redundant and the Sum- ag Sales Office will be closed effective April
30, 1996. Thus, from April 1, 1996 to May 15, 1996, petitioner reported to respondent’s Personnel
Department at the Sta. Fe Brewery, pursuant to a previous directive.

Thereafter, the employees of Sum- ag sales force were informed that they can avail of
respondent’s early retirement package pursuant to the retrenchment program, while those who
will not avail of early retirement would be redeployed or absorbed at the Brewery or other sales
offices. Petitioner opted to remain and manifested to Acting Personnel Manager Salvador
Abadesco his willingness to be assigned to any job, considering that he had three children in
college.

Petitioner was surprised when he was informed by the Acting Personnel Manager that his name
was included in the list of employees who availed of the early retirement package. Petitioner’s
request that he be given an assignment in the company was ignored by the Acting Personnel
Manager. Petitioner thus filed a complaint for illegal dismissal.

ISSUE: Was the dismissal of petitioner based on a just and authorized cause.

HELD: NO. In the case at bar, petitioner was dismissed on the ground of redundancy, one of the
authorized causes for dismissal. The determination that employee’s services are no longer
necessary or sustainable and, therefore, properly terminable is an exercise of business judgment
of the employer. The wisdom or soundness of this judgment is not subject to discretionary review
of the Labor Arbiter and the NLRC, provided there is no violation of law and no showing that it
was prompted by an arbitrary or malicious act. In other words, it is not enough for a company to
merely declare that it has become over manned. It must produce adequate proof that such is the
actual situation to justify the dismissal of the affected employees for redundancy.

Persuasive as the explanation proffered by respondent may be to justify the dismissal of

petitioner, a number of disturbing circumstances, however, leave us unconvinced.

First, of the 23 SMC employees assigned at the Sum-ag Sales Office/Warehouse, 9 accepted
the offer of SMC to avail of the early retirement whose separation benefits was computed at
250% of their regular pay. The rest, including petitioner, did not accept the offer. Out of the
remaining 14, only petitioner clearly manifested, through several letters, his desire to be
redeployed to the Sta. Fe Brewery or any sales office – and for any position not necessarily
limited to that of a warehouse checker. In short, he was even willing to accept a demotion just to
OCEAN EAST AGENCY CORP VS LOPEZ

FACTS: On March 7, 1988, respondent Allan I. Lopez was employed as Documentation Officer assigned to
Ocean East's Operations Department. In a letter dated February 5, 2001, Ocean East served notice to Lopez
that effective thirty (30) days later, or on March 6, 2001, his services will be terminated on the ground of
redundancy, as his position as Documentation Officer is but a duplication of those occupied by its two (2)
other personnel who were also exercising similar duties and functions.

On February 7, 2001, Lopez received his separation pay and was issued a Certificate of Service.

On May 23, 2001, Lopez filed an Amended Complaint for illegal dismissal, damages and attorney's fees
against petitioners Ocean East, Carmen and Skinitis. Lopez alleged that Skinitis falsely accused him of
making money from the crew to be deployed abroad, maligned his physical handicap as a polio victim, and
ordered his removal from his job.

LA ruled in favor of Ocean East citing the employer's management prerogative to abolish a position which it
deems no longer necessary. NLRC affirmed LA, stating that there was no malice shown by Ocean East in the
exercise of its management prerogative. CA reversed NLRC. CA found that Ocean East failed to discharge
the burden of proving the validity of Lopez' dismissal due to redundancy.

There is nothing in the records that shows that indeed a study was conducted which led to the termination of
Lopez' services on the ground that his position has become redundant. Neither was there any proof that
Oceaneast had a concrete redundancy program. Moreover, Oceaneast committed a fatal error when it failed
to give written notice to the Department of Labor and Employment (DOLE) as required under Article 283 of
the Labor Code. Both the Labor Arbiter and the NLRC found the absence of written notice of termination to
the DOLE but opined that there was substantial compliance on the notice requirement as Lopez himself was
duly informed and consented to his termination by receiving his separation pay. But such lack of notice is
frowned upon by law.

Ocean East argued that there was no need to serve notice to DOLE since Lopez’ acceptance of separation pay
is deemed an acknowledgment by the employee of the valid cause of termination.

RULING: There was an illegal dismissal.

For the implementation of a redundancy program to be valid, the employer must comply with these
requisites: (1) written notice served on both the employee and the Department of Labor and Employment at
least one month prior to the intended date of retrenchment; (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 positions; and (4) fair and reasonable criteria in ascertaining what positions are
to be declared redundant and accordingly abolished.

The Court finds that petitioners failed to establish compliance with the first, third and fourth requisites for a
valid implementation of a redundancy program, thereby making Ocean East liable for illegal dismissal.

It is undisputed that Ocean East failed to comply with the first requisite of service of a written notice of
termination to the DOLE. CA is correct in pointing out that Lopez had no choice but to accept the separation
pay because he was a family man with five (5) children to support30 and Ocean East's letter clearly stated
that he was being terminated due to redundancy.31

Above all, there is no merit in petitioners' contention that notice to the DOLE may already be dispensed with
since there was no more useful purpose for it, and he was already adequately compensated as required by
law. Indeed, to dispense with such notice would not only disregard a clear labor law provision that affords
protection to an employee, but also defeats its very purpose which is to give the DOLE the opportunity to
ascertain the veracity of the alleged authorized cause of termination.

In this case, petitioners were able to establish through Ocean East's Quality Procedures Manual that Lopez'
position as a Documentation Officer was redundant because its duties and functions were similar to those of
the Documentation Clerks in its operations department. However, they failed to prove by substantial
evidence their observance of the fair and reasonable criteria of seniority and efficiency in ascertaining the
redundancy of the position of Documentation Officer, as well as good faith on their part in abolishing such
position. Petitioners were unable to justify why it was more efficient to terminate Lopez rather than its two
other Documentation Clerks, Reynolds and Hing. Also, while Reynolds was supposedly retained for being
more senior than Lopez, petitioners were silent on why they chose to retain Hing who was hired in 1996,
instead of Lopez who was hired about eight (8) years earlier in 1988.

RETRENCHMENT
G.R. No. 192488, April 19, 2016
BLUE EAGLE MANAGEMENT, INC., MA. AMELIA S. BONOAN, AND CARMELITA S. DELA
RAMA, Petitioners, v. JOCELYN L. NAVAL, Respondent.

The requirements for a valid retrenchment were laid down in Asian Alcohol Corporation v. National Labor
Relations Commission:

The requirements for valid retrenchment which must be proved by clear and convincing evidence are:
(1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good faith by the employer;
(2) that the employer served written notice both to the employees and to the Department of Labor and
Employment at least one month prior to the intended date of retrenchment;
(3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least
1/2 month pay for every year of service, whichever is higher;
(4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its
interest and not to defeat or circumvent the employees' right to security of tenure; and
(5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would
be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or
managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

Proof of financial losses becomes the determining factor in proving the legitimacy of retrenchment. In
establishing a unilateral claim of actual or potential losses, financial statements audited by independent
external auditors constitute the normal method of proof of profit and loss performance of a company. The
condition of business losses justifying retrenchment is normally shown by audited financial documents like
yearly balance sheets and profit and loss statements as well as annual income tax returns.