Legal Implications of Redundancy and Mass Hiring in the Philippines

Query: Is it legal for a company to declare redundancy while continuing to hire for the same job positions?

In the Philippines, the issue of redundancy and its legality under labor law is governed by the Labor Code and relevant jurisprudence. Redundancy is one of the authorized causes for terminating employment, but it must be executed with strict adherence to the law to avoid legal pitfalls.

Understanding Redundancy

Redundancy occurs when the services of an employee are in excess of what is required by the enterprise. This could be due to various reasons such as reorganization, cost-cutting measures, or a decline in business activities. According to Article 298 (formerly Article 283) of the Labor Code of the Philippines, redundancy is a legitimate ground for termination of employment. However, it must meet certain criteria:

1. Good Faith: The redundancy must be implemented in good faith. It should not be a mere subterfuge for terminating employees to replace them with new hires at lower wages.
2. Fair and Reasonable Criteria: The selection of employees to be made redundant should be based on fair and reasonable criteria. This ensures that the process is transparent and justifiable.
3. Separation Pay: Employees terminated due to redundancy are entitled to a separation pay equivalent to at least one month's pay or one month pay for every year of service, whichever is higher.
4. Notice Requirements: The employer must serve a written notice to the affected employees and the Department of Labor and Employment (DOLE) at least one month prior to the intended date of termination.

Legal Issues with Mass Hiring for the Same Positions

The legality of declaring redundancy while continuing to hire for the same job positions can be highly contentious and may be construed as bad faith or an attempt to circumvent labor laws. Here are key points to consider:

1. Bad Faith: If an employer declares redundancy but continues to hire new employees for the same or similar positions, this could be seen as an indication of bad faith. The employer must prove that the redundancy is genuine and not a means to replace higher-paid employees with lower-paid ones.
2. DOLE Investigation: The DOLE has the authority to investigate such matters. If employees file a complaint, DOLE can examine the redundancy program's legitimacy and whether it complies with the legal standards.
3. Legal Precedents: Courts have ruled against employers who misuse redundancy to unjustly terminate employees. Jurisprudence emphasizes that redundancy should not be a tool for discrimination or unfair labor practices.

Practical Steps for Employers

To ensure that redundancy is legally compliant, employers should:

• Conduct a Thorough Review: Before declaring redundancy, conduct a thorough review to determine the necessity of the action.
• Document Everything: Maintain clear documentation of the redundancy process, including the criteria used for selecting redundant employees.
• Consult with Legal Experts: Engage with legal experts to ensure compliance with all legal requirements and to mitigate risks of potential lawsuits.

Rights of Employees

Employees who believe they have been unjustly terminated due to redundancy can:

• File a Complaint: Lodge a complaint with the DOLE or pursue a case in the National Labor Relations Commission (NLRC).
• Seek Legal Counsel: Obtain legal counsel to explore options for redress and compensation.

In conclusion, while redundancy is a legally recognized reason for termination, it must be implemented with strict adherence to legal requirements. Employers must act in good faith and avoid any actions that may suggest an abuse of the redundancy process.