Redundancy – An Authorized Cause for Separation
Redundancy is a case of superfluity in positions.
When two or more positions are performing similar activities, and producing the same results, the other positions may be redundant and thus not needed in the organization.
Redundancy is properly defined as follows:
Redundancy exists where the services of an employee are in excess of what would reasonably be demanded by the actual requirements of the enterprise. 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 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. An employer has no legal obligation to keep on the payroll employees more than the number needed for the operation of the business. (Edge Apparel, Inc. v. Antipuesto, G.R. No. 121314, 12 February 1998)
Thus, redundancy is a right granted to the employer to restructure a bloated organization into a lean company.
SUBSTANTIVE DUE PROCESS
In compliance with Due Process, the first aspect of due process is on: substantive due process. It is divided into two: just causes and authorized causes.
For our purposes, we will focus on authorized causes as that is where redundancy is categorized.
Rule I-A of DOLE D.O. 147-15 provides for the standards which have to be complied in order to be valid:
5.4. Standard on Authorized Causes. An employer may terminate an employee for any of the following grounds:
x x x
(b) Redundancy. – To be a valid ground for termination, the following must be present:
1. There must be superfluous positions or services of employees;
2. The positions or services are in excess of what is reasonably demanded by the actual requirements of the enterprise to operate in an economical and efficient manner;
3. There must be good faith in abolishing redundant positions;
4. There must be fair and reasonable criteria in selecting the employees to be terminated; and
5. There must be an adequate proof of redundancy 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.
x x x
In cases of installation of labor-saving devices, redundancy and retrenchment, the “Last-In, First-Out Rule” shall apply except when an employee volunteers to be separated from employment.
The above standards are the requirements to properly implement an authorized cause separation via redundancy.
PROCEDURAL DUE PROCESS
The second aspect of due process is on: procedural due process.
Rule I-A of DOLE D.O. 147-15 provides for the procedure to be complied:
5.3. Termination of Employment Based on Authorized Causes. As defined in Articles 298 and 299 of the Labor Code, as amended, the requirements of due process shall be deemed complied with upon service of a written notice to the employee and the appropriate Regional Office of the Department of Labor and Employment (DOLE) at least thirty days [sic] (30) before the effectivity of the termination, specifying the ground or grounds for termination.
Otherwise stated, to properly implement redundancy the following steps have to be followed:
Step 1: 30-Day Notice to the Employee
Step 2: 30-Day Notice to DOLE
Step 3: Separation Pay
The following explains each step.
Step 1: 30-Day Notice to the Employee. – The employee should be provided with a notice regarding his beings separated from employment due to an authorized cause – at least 30 days before the last day of employment.
The current regulation requires that that the notice specify two things: (a) effective date of termination, and (b) the ground/s for the termination.
In practice, it is recommended that a brief description or information regarding the circumstances for the authorized cause be provided to give the concerned employee an idea as to what happened. Further, whenever practicable, the amount of the separation pay should be indicated to communicate well to the employee that the amount will be paid accordingly in compliance with Labor Law.
The purpose of this 30-day notice is to give the employee ample opportunity to prepare. Within this period, the employee may already start considering what he will be doing after the last day – whether to rest for a while, find next gainful employment, do business, study for the time being, attend seminars, or perform any other similar activity.
Step 2: 30-Day Notice to DOLE. – The employer is required to advise DOLE of the separation due to an authorized cause. The current form being used is RKS Form 5 which asks for the relevant information regarding the separation.
The purpose of requiring this 30-day notice to DOLE is so that the regulator will have the opportunity to confirm or verify the existence of the authorized cause. In practice, the DOLE may call for a conference to hear both sides, the employer and the employee. Depending on circumstances, a DOLE personnel may conduct a visit on the establishment to verify the existence of the authorized cause. Whenever everything is good, the DOLE personnel will see to it that the separation pay is paid to the employee.
Step 3: Separation Pay. – Since a separation by authorized cause is not due to a violation by an employee, and in most cases the ground is due to business reasons, the Labor Code requires the employer to pay the employee separation pay. The amount varies depending on the ground.
Rule I-A of DOLE D.O. 147-15 provides for the formula for the separation pay:
5.5. Payment of Separation Pay. Separation pay shall be paid by the employer to an employee terminated due to installation of labor-saving devices, redundancy, retrenchment, closure or cessation of operations not due to serious business losses or financial reverses, and disease.
x x x
An employee terminated due to installation of labor-saving devices or redundancy shall be paid by the employer a separation pay equivalent to at least one (1) month pay or at least one (1) month pay for every year of service, whichever is higher, a fraction of six (6) months service is considered as one (1) whole year.
In redundancy, separation pay is thus: 1 month pay – or – at least 1 month pay for every year of service. If there is a fraction of 6 months, it shall be counted as 1 year.
Whenever practicable, it is recommended that the separation pay be paid together with the Final Pay – after the employee is cleared of all accountabilities.
A business can be difficult to manage. It has a constant overhead, such as payroll, rent, taxes, mandatories, and similar thereto. Conversely, it may not always make a sale or profit in every transaction. Accordingly, the Labor Code itself recognizes the employer’s management prerogative to reduce its workforce via authorized causes. The main requirement is that the employer should pay separation pay to the employee to help in the transitioning.
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