Reorganization as a cost-saving device is acknowledged by the courts in the Philippines. If you are an employer, you are not precluded from adopting a new policy conducive to a more economical and effective management, and the law does not require you to suffer financial losses before you can terminate the services of the employee on the ground of redundancy. If you are an employee, you should know your rights in the event of termination of your employment by reason of redundancy.

REQUISITES: 

For 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. (Section 5.4[b], DOLE D.O. No. 147-15, s. 2015)

It is prudent for the employer to undertake these steps in implementing a redundancy program:

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1. Inform employees of the current state of the business necessitating the reduction of workforce;

2. Present proof that a redundancy program is the appropriate measure in order to improve the company’s state of business operations (e.g. new staffing pattern, feasibility study or proposal on the viability of the newly created positions, job description, and management’s approval of the restructuring);

3. Issuing a Board Resolution approving and authorizing the implementation of a redundancy program;

4. Comply with procedural requirements by serving a written notice on the workers and the Regional Office of the Department of Labor and Employment (DOLE) having jurisdiction over the place of business at least thirty (30) days before the effectivity of the termination, specifying the ground/s for termination; and

5. Payment of separation pay.

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Statutory procedural process must strictly be followed as noncompliance may warrant the employer to pay indemnity in the form of nominal damages of Fifty Thousand Pesos (Php 50,000.00).

SEPARATION PAY: In case of termination due to the installation of labor-saving devices or 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. 

NOTE: A fraction of six (6) months service is considered as one (1) whole year (Section 5.5, DOLE D.O. No. 147-15, s. 2015)

Understanding authorized causes in the Labor Code is crucial for both employers and employees. There are safeguards in our Labor Code to ensure that terminations are conducted fairly and legally, protecting employees from unjust dismissal while allowing employers to manage their workforce effectively. 

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Disclaimer: This article is for informational purposes only and should not be considered legal advice. For specific guidance on labor law concerns in the Philippines, consult with a legal professional.

Padin & Partners Law Offices is a full-service law firm that caters to labor law concerns in Cebu City, Philippines. For consultations: book an appointment or reach us at  +63 (32) 316-1540 or +63 917 188 0361.

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