General Milling Corporation vs. Viajar

An employer invoking redundancy as an authorized cause of dismissal must substantiate the claim with substantial evidence — such as a new staffing pattern, feasibility studies, job descriptions, or management approval of a restructuring — and not merely declare the position redundant; the employer bears the burden of proving the validity of the dismissal, and failure to discharge that burden renders the dismissal illegal. The employer's business judgment in characterizing a position as redundant is not subject to discretionary review only where no violation of law and no arbitrary or malicious action is shown.

General Milling Corporation (GMC) is a domestic corporation with principal office in Makati City and a manufacturing plant in Lapu-Lapu City. Violeta L. Viajar had been employed by GMC since August 6, 1979, rising from Invoicing Clerk to Purchasing Staff, and was receiving a monthly salary of ₱19,651.41 at the time of her separation. The dispute is governed by Article 283 of the Labor Code, which authorizes redundancy as a ground for terminating employment provided the employer serves written notice on the worker and the Department of Labor and Employment at least one month before the intended date and pays separation pay equivalent to at least one month pay or one month pay for every year of service, whichever is higher.

General Milling Corporation, a domestic corporation with principal office in Makati City and a manufacturing plant in Lapu-Lapu City, employed Violeta L. Viajar on August 6, 1979 as an Invoicing Clerk. Through the years she held various positions in the company until she became Purchasing Staff, and at the time of her termination she was receiving a monthly salary of ₱19,651.41.

In October 2003, GMC terminated the services of thirteen employees for redundancy, including Viajar, allegedly as part of a gradual downsizing of its Vismin (Visayas-Mindanao) Operations in Cebu, where a sizeable number of positions had become redundant over a period of time. On October 30, 2003, Viajar received a Letter-Memorandum dated October 27, 2003 from GMC, through Human Resource Department Manager Johnny T. Almocera, informing her that her services were no longer needed effective November 30, 2003 because her position as Purchasing Staff at the Purchasing Group, Cebu Operations was deemed redundant. She immediately consulted her superior at the time, Thaddeus Oyas, who told her that he too was shocked upon learning about it.

When Viajar reported for work on October 31, 2003, almost a month before the effectivity of her severance from the company, the guard on duty barred her from entering GMC's premises. She was also denied access to her office computer and was restricted from punching her daily time record in the bundy clock. On November 7, 2003, Viajar was invited to the HRD Cebu Office where she was asked to sign certain documents, which turned out to be an "Application for Retirement and Benefits." She refused to sign and sought clarification, because she had not applied for retirement and instead asserted that her services were terminated for alleged redundancy. Almocera told her that her signature on the Application for Retirement and Benefits was needed to process her separation pay. Viajar also claimed that between July 4, 2003 and October 13, 2003, GMC hired fifteen new employees, which aroused her suspicion that her dismissal was not necessary.

For its part, GMC insisted that Viajar's dismissal was due to the redundancy of her position. It reasoned that it was forced to terminate her services because of the economic setbacks the company was suffering, which affected its profitability, and the continuing rise of its operating and interest expenditures; redundancy was part of its concrete and actual cost reduction measures. GMC presented the required "Establishment Termination Report," which it filed before the Department of Labor and Employment on October 28, 2003, involving thirteen of its employees including Viajar, and subsequently issued to her two checks amounting to ₱440,253.02 and ₱21,211.35 as separation pay. On December 2, 2003, Viajar filed a Complaint for Illegal Dismissal with damages against GMC, Almocera, and Purchasing Manager Joel Paulino before Regional Arbitration Branch No. VII, NLRC, Cebu City.

The Labor Arbiter found that Viajar had been properly notified on October 30, 2003 through the Letter-Memorandum dated October 27, 2003 signed by Almocera that her position as Purchasing Staff had been declared redundant, and that GMC had submitted the "Establishment Termination Report" to the DOLE on October 28, 2003; it further faulted Viajar for not questioning the company's action before the DOLE Regional Office. The NLRC affirmed these findings, holding that Viajar was aware of GMC's "reduction mode" as shown in the GMC Vismin Manpower Complement, which reflected a declining manpower profile from 795 employees in 2000 to 696 as of June 2005, with terminations for redundancy recorded in 2002, 2003, 2004, and 2005. The Court of Appeals, on the other hand, found the evidence insufficient to establish a valid redundancy.

• Finality of NLRC Factual Findings: GMC argued that the factual findings of the NLRC, affirming those of the Labor Arbiter, must be accorded respect and finality because they are supported by evidence on record, and that there was no reason for the Court of Appeals to disturb them.
• Compliance with Article 283: GMC maintained that both the Labor Arbiter and the NLRC found its evidence sufficient to terminate Viajar's employment on the ground of redundancy, and that the evidence showed it had complied with both the procedural and substantive requirements for a valid termination.
• Grave Abuse of Discretion: GMC contended that the Court of Appeals committed grave abuse of discretion in its Decision of September 21, 2007 and Resolution of January 30, 2008 because the same were contrary to the evidence on record.

• Finality of NLRC Factual Findings: Whether the Court of Appeals erred in disturbing the factual findings of the Labor Arbiter and the NLRC, which are generally accorded respect and finality as findings of a quasi-judicial agency with specialized jurisdiction.
• Substantial Evidence of Redundancy: Whether GMC presented substantial evidence to justify Viajar's termination on the ground of redundancy under Article 283 of the Labor Code.
• Propriety of Damages: Whether the award of moral and exemplary damages, as well as attorney's fees, was proper.

• Finality of NLRC Factual Findings: No. The general rule of respect and finality admits of exceptions, one of which is a variance between the factual findings of the quasi-judicial agency and those of the Court of Appeals, and another where the findings are not supported by substantial evidence or are manifestly erroneous.
• Substantial Evidence of Redundancy: No. The employer failed to present substantial proof of a good-faith redundancy program, having offered only a letter-memorandum, a DOLE report, separation-pay checks, and a belated list of terminated employees, while the employee showed that new hires were taken in during the same period.
• Propriety of Damages: Yes. Moral and exemplary damages lie where the dismissal was tainted by bad faith or was done in a manner oppressive to labor, as shown by GMC's acts of barring Viajar from the premises before the effectivity of her termination and compelling her to sign an "Application for Retirement and Benefits."

• Finality of NLRC Factual Findings: The rule is that factual findings of quasi-judicial agencies such as the NLRC are generally accorded not only respect but, at times, even finality because of the special knowledge and expertise gained by these agencies from handling matters falling under their specialized jurisdiction, and the Court is not a trier of facts and does not normally embark on the evaluation of evidence adduced during trial. This rule, however, allows for exceptions. One exception covers instances when the findings of fact of the trial court or of the quasi-judicial agencies concerned are conflicting or contradictory with those of the Court of Appeals; when there is a variance in the factual findings, it is incumbent upon the Court to re-examine the facts once again. Another exception arises when the said findings are not supported by substantial evidence or when, on the basis of the available facts, the inference or conclusion arrived at is manifestly erroneous. Factual findings of administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness. In this case, the Court agreed with the Court of Appeals that the conclusions arrived at by the Labor Arbiter and the NLRC were manifestly erroneous, thus warranting the re-examination of the facts.

• Substantial Evidence of Redundancy: Article 283 of the Labor Code authorizes redundancy as a cause for termination, and from that provision the Court derived four requisites for a valid implementation of a redundancy program: (a) the employer must serve a written notice to the affected employees and the DOLE at least one month before the intended date of retrenchment; (b) the employer must pay the employees separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; (c) the employer must abolish the redundant positions in good faith; and (d) the employer must set fair and reasonable criteria in ascertaining which positions are redundant and may be abolished. Relying on Smart Communications, Inc. vs. Astorga, which in turn quoted Wiltshire File Co., Inc. vs. National Labor Relations Commission, the Court explained that redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise, and that a position is redundant where it is superfluous, superfluity being the possible outcome of overhiring of workers, decreased volume of business, or the dropping of a particular product line or service activity. The characterization of an employee's services as superfluous is an exercise of business judgment not subject to discretionary review, provided no violation of law or arbitrary or malicious action is shown. That prerogative, however, is not absolute: a company cannot simply declare redundancy without basis, and to exhibit good faith and the existence of fair and reasonable criteria, a company claiming to be overmanned must produce adequate proof. Citing Caltex (Phils.), Inc. vs. NLRC, which in turn cited Asufrin, Jr. vs. San Miguel Corporation and Panlilio vs. National Labor Relations Commission, the Court reiterated that evidence must be presented to substantiate redundancy, such as the new staffing pattern, feasibility studies or proposals on the viability of newly created positions, job descriptions, and approval by management of the restructuring. Measured against these standards, GMC presented only the notification letter to Viajar, the "Establishment Termination Report" submitted to the DOLE, the two separation-pay checks, and a list of terminated employees as of June 6, 2006. The letter-memorandum contained only general allegations and did not convince the Court that the termination was warranted; there was no showing that GMC evaluated existing positions and their effect on the company, nor any tangible proof of business slowdown or overhiring. The "Establishment Termination Report" did not account for anything to justify declaring the positions redundant, and the list of terminated employees was taken almost three years after Viajar was dismissed and almost a year after the Labor Arbiter promulgated its decision. No new staffing pattern, feasibility study or proposal, viability study of newly created positions, job description, management approval of the restructuring, or audited financial documents such as balance sheets and annual income tax returns were offered. Against GMC's self-serving general claim of business reverses and the need to reduce its manpower complement, Viajar presented proof that the petitioner had been hiring new employees while firing the old ones, negating the claim of redundancy. Because the burden of proving that the dismissal was for a valid and authorized cause rests on the employer, GMC's failure to discharge that duty meant the dismissal was not justified and therefore illegal. The Court likewise could not overlook that Viajar was prohibited from entering the company premises even before the effectivity date of termination and was compelled to sign an "Application for Retirement and Benefits," acts that exhibited bad faith since she was still entitled to report for work until November 30, 2003, and since the demand contravened the stated ground of redundancy. Citing Quevedo vs. Benguet Electric Cooperative, Incorporated, the Court distinguished retirement from termination due to redundancy: retirement is contractual, based on a bilateral agreement of the employer and employee, while termination is statutory and governed by the Labor Code as to its grounds, benefits, and procedure; voluntary retirement cuts employment ties leaving no residual employer liability, whereas involuntary retirement amounts to a discharge rendering the employer liable for termination without cause, with the employee's intent as the focal point of analysis and the fairness of the process, payment of stipulated benefits, and absence of badges of intimidation or coercion as relevant parameters. The case being one of termination due to redundancy under Article 283 and not retirement under Article 287, GMC's demand that Viajar sign an "Application for Retirement and Benefits" was suspect.

• Propriety of Damages: The Court agreed with the Court of Appeals that the award of moral and exemplary damages was proper. Moral damages have been awarded in termination cases when bad faith, malice, or fraud attend the employee's dismissal, or where the act oppresses labor, or where it was done in a manner contrary to morals, good customs, or public policy. Quoting with favor the findings of the Court of Appeals, the Court noted that while good faith is presumed, the circumstances surrounding the dismissal negated its existence: immediately after receipt of her termination letter effective November 30, 2003, Viajar was no longer treated as an employee as early as October 31, 2003; she was barred from entering the company premises, deprived of access to her office computer, and excluded from the bundy clock; and she was made to sign documents, including an "Application for Retirement and Benefits," in the guise of payment of her separation pay. Her immediate superior's shock upon being confronted aggravated her confusion and suffering, and she learned that a number of new employees had been hired, several of them in her former department. Moral damages may be recovered where the dismissal was tainted by bad faith or fraud, or where it constituted an act oppressive to labor done in a manner contrary to morals, good customs, or public policy, while exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner.

• Requisites for a Valid Termination Due to Redundancy — Under Article 283 of the Labor Code, as construed by the Court, the employer must comply with four requisites: (a) service of a written notice on the affected employees and the DOLE at least one month before the intended date of retrenchment; (b) 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; (c) abolition of the redundant positions in good faith; and (d) adoption of fair and reasonable criteria in ascertaining which positions are redundant and may be abolished. In this case, the Court found that GMC failed to establish the third and fourth requisites, since it produced no evidence of a good-faith evaluation of positions or of fair and reasonable criteria for selecting the employees to be separated.

• Redundancy, Defined — 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 may result from overhiring of workers, decreased volume of business, or the dropping of a particular product line or service activity previously undertaken by the enterprise. The absence of another person holding the same position does not negate redundancy, since in any well-organized business enterprise it would be surprising to find duplication of work. The Court applied this definition to hold that GMC's general claim of redundancy, unaccompanied by proof of superfluity, could not justify the dismissal.

• Business Judgment in Declaring Redundancy Is Not Absolute — The characterization of an employee's services as superfluous or no longer necessary, and therefore properly terminable, is an exercise of business judgment on the part of the employer, the wisdom and soundness of which is not subject to discretionary review provided no violation of law or arbitrary or malicious action is shown. The prerogative is not unbridled: a company cannot simply declare redundancy without basis, and to exhibit good faith and fair and reasonable criteria, a company claiming to be overmanned must produce adequate proof, such as a new staffing pattern, feasibility studies or proposals on the viability of newly created positions, job descriptions, and management approval of the restructuring. GMC's failure to present any of these proofs defeated its invocation of the prerogative.

• Burden of Proof in Illegal Dismissal Cases — In termination cases, the burden of proving that the dismissal of the employee was for a valid and authorized cause rests on the employer; it is incumbent upon the employer to show by substantial evidence that the termination was validly made, and failure to discharge that duty means the dismissal is not justified and therefore illegal. The Court applied this rule against GMC, whose self-serving general claim of business reverses did not satisfy the substantial-evidence standard.

• Retirement Distinguished from Termination Due to Redundancy — Termination of employment and retirement from service are mutually exclusive modes of ending employment, with varying juridical bases and resulting benefits: retirement is contractual, based on the bilateral agreement of the employer and employee, while termination is statutory, governed by the Labor Code and related laws as to its grounds, benefits, and procedure. Voluntary retirement cuts employment ties leaving no residual employer liability, whereas involuntary retirement amounts to a discharge rendering the employer liable for termination without cause; the employee's intent is the focal point of analysis, and the fairness of the process governing the retirement decision, the payment of stipulated benefits, and the absence of badges of intimidation or coercion are relevant parameters. Because Viajar's case was one of termination due to redundancy under Article 283 and not retirement under Article 287, GMC's demand that she sign an "Application for Retirement and Benefits" was suspect and indicative of bad faith.

• Moral and Exemplary Damages in Illegal Dismissal — Moral damages may be recovered where the dismissal of the employee was tainted by bad faith, malice, or fraud, or where it constituted an act oppressive to labor and was done in a manner contrary to morals, good customs, or public policy; exemplary damages are recoverable only if the dismissal was done in a wanton, oppressive, or malevolent manner. The Court sustained both awards in light of GMC's acts of excluding Viajar from the premises before the effectivity of her termination, denying her access to her office computer and the bundy clock, and requiring her to sign an "Application for Retirement and Benefits" to process her separation pay.

• Exceptions to the Finality of Factual Findings of Quasi-Judicial Agencies — Although factual findings of quasi-judicial agencies such as the NLRC are generally accorded respect, and at times even finality, owing to their specialized knowledge and expertise, the rule admits of exceptions, including (i) when the findings of the trial court or quasi-judicial agency are conflicting or contradictory with those of the Court of Appeals, and (ii) when the findings are not supported by substantial evidence or the inference or conclusion arrived at is manifestly erroneous. Factual findings of administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness. The Court invoked both exceptions to justify re-examining the records and reversing the Labor Arbiter and the NLRC.

• "Indeed, in any well organized business enterprise, it would be surprising to find duplication of work and two (2) or more people doing the work of one person. We believe that redundancy, for purposes of the Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put, 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 overhiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise." — Quoted by the Court from Smart Communications, Inc. vs. Astorga, itself quoting Wiltshire File Co., Inc. vs. National Labor Relations Commission; this passage supplies the canonical definition of redundancy under the Labor Code and is the formulation against which the sufficiency of GMC's evidence was measured.

• "While it is true that the 'characterization of an employee's services as superfluous or no longer necessary and, therefore, properly terminable, is an exercise of business judgment on the part of the employer,' the exercise of such judgment, however, must not be in violation of the law, and must not be arbitrary or malicious. The Court has always stressed that a company cannot simply declare redundancy without basis. To exhibit its good faith and that there was a fair and reasonable criteria in ascertaining redundant positions, a company claiming to be over manned must produce adequate proof of the same." — This passage states the ratio decidendi on the limited scope of the employer's business judgment and the evidentiary burden that accompanies a redundancy program.

• "It must, however, be pointed out that in termination cases, like the one before us, the burden of proving that the dismissal of the employees was for a valid and authorized cause rests on the employer. It was incumbent upon the petitioner to show by substantial evidence that the termination of the employment of the respondent was validly made and failure to discharge that duty would mean that the dismissal is not justified and therefore illegal." — This is the controlling statement on the allocation of the burden of proof in illegal dismissal cases, and it is the ground on which the petition was ultimately denied.

• "Voluntary retirement cuts employment ties leaving no residual employer liability; involuntary retirement amounts to a discharge, rendering the employer liable for termination without cause. The employee's intent is the focal point of analysis. In determining such intent, the fairness of the process governing the retirement decision, the payment of stipulated benefits, and the absence of badges of intimidation or coercion are relevant parameters." — Quoted from Quevedo vs. Benguet Electric Cooperative, Incorporated, this passage furnishes the test for distinguishing voluntary from involuntary retirement and supports the Court's finding that GMC's demand for an "Application for Retirement and Benefits" was suspect.

• Smart Communications, Inc. vs. Astorga, G.R. No. 148132, January 28, 2008, 542 SCRA 434 — The principal controlling precedent on the nature of redundancy; the Court adopted its formulation, drawn from Wiltshire, that redundancy exists where the employee's services are in excess of what is reasonably demanded by the enterprise, and that the employer's characterization of a position as superfluous is an exercise of business judgment reviewable only for violation of law or arbitrary or malicious action.
• Wiltshire File Co., Inc. vs. National Labor Relations Commission — The leading case quoted within Smart Communications; it supplies the authoritative definition of redundancy and the explanation that the absence of another occupant of the same position does not negate redundancy.
• Caltex (Phils.), Inc. vs. NLRC, G.R. No. 159641, October 15, 2007, 536 SCRA 175 — Cited for the evidentiary standard in redundancy cases, including the requirement that the employer produce adequate proof such as a new staffing pattern, feasibility studies or proposals, job descriptions, and management approval of the restructuring.
• Asufrin, Jr. vs. San Miguel Corporation — Quoted within Caltex; stands for the rule that it is not enough for a company to merely declare that it has become overmanned, as it must produce adequate proof of redundancy.
• Panlilio vs. National Labor Relations Commission — Quoted within Caltex; enumerates the categories of evidence that may substantiate redundancy, including the new staffing pattern, feasibility studies or proposals on the viability of newly created positions, job descriptions, and management approval of the restructuring.
• Quevedo vs. Benguet Electric Cooperative, Incorporated, G.R. No. 168927, September 11, 2009, 599 SCRA 438 — Followed for the distinction between retirement and termination of employment, and for the parameters governing the determination of whether a retirement is voluntary or involuntary.
• Lopez Sugar Corp. vs. Franco, 497 Phil. 806 (2005) — Cited, together with Culili and Caltex, as authority for the four requisites of a valid redundancy program.
• Culili vs. Eastern Telecommunications Philippines, Inc., G.R. No. 165381, February 9, 2011, 642 SCRA 338 — Cited with Lopez Sugar and Caltex for the requisites of a valid implementation of a redundancy program.
• Asian Alcohol Corporation vs. NLRC, 364 Phil. 912 (1999) — Cited by the NLRC in affirming the validity of the dismissal and by the Court in connection with the evidentiary requirements for redundancy, including audited financial documents.
• Andrada vs. NLRC, G.R. No. 173231, December 28, 2007, 541 SCRA 538 — Cited for the evidentiary items — new staffing pattern, feasibility studies or proposals, viability of newly created positions, job description, and management approval of the restructuring — that would substantiate a redundancy claim.
• Columbus Philippines Bus Corp. vs. NLRC, 417 Phil. 81 (2001) — Cited for the rule that the burden of proving a valid and authorized cause of dismissal rests on the employer.
• San Miguel Properties Philippines, Inc. vs. Gucaban, G.R. No. 153982, July 18, 2011, 654 SCRA 18 — Cited for the award of moral damages in termination cases attended by bad faith, malice, or fraud, or where the act oppresses labor or is contrary to morals, good customs, or public policy.
• Eureka Personnel & Management Services, Inc. vs. Valencia, G.R. No. 159358, July 15, 2009, 593 SCRA 36 — Cited for the rule that factual findings of quasi-judicial agencies such as the NLRC are generally accorded respect, and at times even finality, because of their specialized knowledge and expertise.
• Janssen Pharmaceutica vs. Silayro, G.R. No. 172528, February 26, 2008, 546 SCRA 628 — Cited for the exception to the finality rule where the findings of fact of the trial court or quasi-judicial agency conflict with those of the Court of Appeals.
• Sunset View Condominium Corporation vs. NLRC, G.R. No. 87799, December 15, 1993, 228 SCRA 466 — Cited for the exception to the finality rule where the findings are not supported by substantial evidence or the inference arrived at is manifestly erroneous.
• Arc-Men Food Industries Corp. vs. NLRC, 436 Phil. 371 (2002) — Cited alongside Sunset View for the same exception to the finality of administrative factual findings.
• Fujitsu Computer Products Corp. of the Phils. vs. Court of Appeals, 494 Phil. 697 (2005) — Cited for the rule that factual findings of administrative agencies are not infallible and will be set aside when they fail the test of arbitrariness.
• Bernarte vs. Philippine Basketball Association (PBA), G.R. No. 192084, September 14, 2011, 657 SCRA 745 — Cited for the settled rule that the Supreme Court is not a trier of facts and does not normally embark on the evaluation of evidence adduced during trial.

• Article 283, Labor Code of the Philippines — Provides that the employer may terminate employment due to redundancy, among other authorized causes, by serving a written notice on the worker and the Ministry of Labor and Employment at least one month before the intended date thereof, and that the worker terminated due to redundancy is entitled to separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher. The Court derived from this provision the four requisites of a valid redundancy program and held that GMC failed to satisfy the requirement of good-faith abolition of positions supported by fair and reasonable criteria.
• Article 287, Labor Code of the Philippines — Governs retirement and gives the parties leeway to stipulate benefits above a statutory floor. The Court cited it to distinguish retirement from termination due to redundancy, holding that Viajar's case was one of termination under Article 283 and not retirement, thereby rendering suspect GMC's demand that she sign an "Application for Retirement and Benefits."
• Rule 45, Rules of Court — The procedural vehicle by which GMC elevated the case to the Supreme Court through a Petition for Review on Certiorari, asking that the Court of Appeals' Decision dated September 21, 2007 and Resolution dated January 30, 2008 be set aside and the NLRC Decision dated October 28, 2005 and Resolution dated January 31, 2006 be reinstated.

• Chief Justice Maria Lourdes P. A. Sereno (Chairperson)
• Associate Justice Teresita J. Leonardo-De Castro
• Associate Justice Lucas P. Bersamin
• Associate Justice Martin S. Villarama, Jr.