Hui vs. CGI UK. Ltd., Inc., et al.

An employer dismissing an employee for redundancy must prove the existence of redundancy and the use of fair and reasonable criteria in selecting employees for dismissal; a mere declaration of redundancy, unsupported by adequate evidence, renders the dismissal illegal. CGI's failure to prove that petitioner's services were superfluous or that fair criteria were used made her dismissal illegal, notwithstanding its business judgment.

CGI UK. LTD., Inc. is part of a global group of companies providing high-end business and IT consulting, systems integration, application development, and management to clients in different industries. Petitioner Kristine Angel Cabilin Hui was hired by CGI in 2007 as Staff Supply-Test Analyst and later promoted to Lead Software QA Engineer/Business Analyst. Under CGI's staffing model, Software Test Analysts rendered work only when their skills were required by client projects; those without projects were placed on bench, received full compensation without rendering work, and could either be assigned to a new project or placed on a redundancy list.

Petitioner Kristine Angel Cabilin Hui was hired by CGI UK. LTD., Inc. in 2007 as Staff Supply-Test Analyst and later promoted to Lead Software QA Engineer/Business Analyst. Since 2009, she attended seminars, trainings, and accomplished several projects in Scotland, London, and Belgium. She invested 10% of her salary in CGI's provident fund and 3% in company shares.

In May 2014, petitioner became the Lead Tester and worked with Esguerra for an Australian project. She was surprised and insulted when Esguerra suddenly placed her under a three-month Performance Improvement Plan where she could be terminated if she failed to improve. In January 2015, petitioner learned that she was removed from the Australian project and placed on bench, or among employees without a project, under a new Staff Manager, Joe Ledesma. In her 2014 Performance Review, Ledesma gave her a good evaluation due to excellent feedback, particularly the "exceed expectations" comment of CGI's Australian client.

Notwithstanding the good assessment, CGI terminated her on April 6, 2015 on the ground of redundancy using as criteria her alleged inefficiency. Petitioner asserted that CGI failed to establish redundancy in her employment. She contended that she was the only Software Test Analyst terminated for redundancy; there were job openings at CGI; she should have been given an option to work in a different department instead of being terminated for redundancy; CGI did not use fair and reasonable criteria in selecting employees to be terminated; she was the most valuable software test analyst in CGI based on her skills and qualifications; and she was the most senior and finest software test analyst in CGI.

CGI averred that it is part of a global group of companies providing high-end business and IT consulting, systems integration, application development, and management to various clients in different industries. According to CGI, it hired petitioner as a Software Test Analyst, and like other testers, she only rendered work when her skills were required by the projects given by clients. Because the demand for Software Test Analyst was not consistent, those without projects were placed on bench instead of being terminated. While on bench, an employee was not required to render any work and therefore generated no income for CGI, but received full compensation. Employees placed on bench could either be assigned to a new project or placed on a redundancy list and terminated. Petitioner was first placed on bench in 2012 for 153 days; later assigned to the Electrabel project for a year; and again placed on bench in 2014 for 111 days.

While petitioner was on bench for the second time, the New South Wales Electoral Commission of Australia engaged CGI Australia to enhance the software application of NSWEC in preparation for the 2015 State Government Election. CGI Australia sought CGI's collaboration. Petitioner, along with other Software Test Analysts, was taken from the bench to work on a separate module; she was assigned to the "PRRC LC" Module. On December 26, 2014, however, petitioner was delisted from the roll of employees called back to the NSWEC project and was again placed on bench starting December 27, 2014. CGI averred that petitioner was not replaced by another Software Test Analyst in the NSWEC project; instead, the number of assigned employees was reduced upon the client's request. As no assignment was available, petitioner was included in the redundancy program because she was the only tester on bench when the program was submitted to the Department of Labor and Employment, she was the only tester who underwent a Performance Improvement Plan because of her inefficiency, and she was particular in accepting assignments. On April 6, 2015, CGI served upon petitioner a Notice of Redundancy and paid her separation pay and the proceeds of her provident fund.

The lower tribunals found petitioner validly dismissed for redundancy. The LA held that CGI complied with the notice requirement and paid separation pay and found no legal basis to question the redundancy because petitioner was the only software test analyst on bench when the redundancy list was submitted to DOLE, the only Software Test Analyst who underwent a Performance Improvement Plan, and was particular in accepting assignments. The NLRC noted that the DOLE list contained 27 names and that petitioner had been on bench for an accumulated 374 days in her last two and a half years. The CA likewise found redundancy established by the undisputed fact that petitioner received remuneration while on bench without work for 153 days in 2012, 111 days in 2014, and 110 days in 2015 prior to termination, totaling about 374 days. The record also included a February 25, 2015 e-mail from the System Architect of the NSWEC PRCC Project, CGI's Australian client, stating that petitioner exceeded expectations, came to work early, often stayed late, completed assigned tasks with high quality, and was a valuable resource for future projects; and job vacancy notices for Software Test Analyst published at Njoyn.com, CGI's Career Posting Alert, before and after her termination, with "Job Application Acknowledgment" e-mails sent to petitioner after she applied.

• Absence of Redundancy: Petitioner argued that CGI failed to establish redundancy in her employment; she was the only Software Test Analyst terminated for redundancy, and there were job openings at CGI at the time of her termination.
• Option to Transfer and Fair Criteria: Petitioner maintained that she should have been given an option to work in a different department instead of being terminated, and that CGI did not use fair and reasonable criteria in selecting employees for redundancy.
• Value and Seniority: Petitioner claimed she was the most valuable software test analyst in CGI based on her skills and qualifications, and the most senior and finest software test analyst.
• Bad Faith and Security of Tenure: Petitioner imputed error on the CA for upholding the LA and NLRC, arguing that her dismissal was unnecessary and carried out in bad faith to defeat her security of tenure.
• Job Vacancies and Career Posting Alerts: On appeal to the NLRC and CA, petitioner pointed out that her position was not redundant because there were several job vacancies at the time of her termination, she continued to receive e-mails from CGI's Career Posting Alert after applying, and many testers were still working in CGI.

• Validity of Redundancy and Business Judgment: CGI averred that petitioner was validly dismissed for redundancy; it is part of a global group providing IT consulting and management services; testers rendered work only when required by client projects, and those without projects were placed on bench.
• Bench System and Compensation: CGI maintained that while on bench, employees did not render work and generated no income but received full compensation; they could be assigned to a new project or placed on a redundancy list and terminated. Petitioner was on bench in 2012 for 153 days, assigned to Electrabel for a year, and on bench in 2014 for 111 days.
• NSWEC Project and Delisting: CGI explained that petitioner was taken from the bench for the NSWEC project and assigned to the "PRRC LC" Module, but was delisted on December 26, 2014 and placed on bench starting December 27, 2014; she was not replaced, and the number of assigned employees was reduced upon the client's request.
• Selection for Redundancy: CGI asserted that petitioner was included in the redundancy program because she was the only tester on bench when the program was submitted to DOLE, the only tester who underwent a Performance Improvement Plan due to inefficiency, and was particular in accepting assignments.
• Compliance with Notice and Payment: CGI served a Notice of Redundancy on April 6, 2015 and paid petitioner's separation pay and provident fund proceeds.
• Inefficiency and Selectivity: In its Position Paper, CGI admitted including petitioner in the 2015 redundancy program as she was the only software test analyst on bench at that time; it placed her on bench due to alleged inefficiency on account of purported tardiness and being selective in accepting projects.

• Redundancy: Whether petitioner was validly dismissed on the ground of redundancy.
• Proof of Redundancy: Whether CGI proved the existence of redundancy to justify the termination of petitioner.
• Fair and Reasonable Criteria: Whether CGI used fair and reasonable criteria in selecting petitioner for redundancy.
• Illegal Dismissal and Monetary Awards: Whether petitioner is entitled to full backwages, separation pay in lieu of reinstatement, moral and exemplary damages, attorney's fees, and legal interest.
• Deduction of Separation Pay: Whether the separation pay petitioner received from CGI should be deducted from her monetary awards.

• Redundancy: No. The dismissal was illegal; CGI failed to prove that petitioner's services were superfluous or in excess of what was reasonably required.
• Proof of Redundancy: No. It was not enough for CGI to declare redundancy; it had to produce adequate proof such as new staffing pattern, feasibility studies, job descriptions, approved management restructuring, or audited financial documents, which it did not.
• Fair and Reasonable Criteria: No. Even assuming redundancy, CGI did not use fair and reasonable criteria; petitioner was the most tenured software test analyst, and there was no evidence of inefficiency, while the Australian client's feedback and CGI's job postings contradicted its claim.
• Illegal Dismissal and Monetary Awards: Yes. Petitioner is entitled to full backwages and other benefits from illegal termination until finality, separation pay in lieu of reinstatement, moral and exemplary damages of P100,000 each, attorney's fees of 10% of the total award, and 6% legal interest per annum from finality.
• Deduction of Separation Pay: Yes. The separation pay she received as part of the redundancy program must be deducted from her monetary awards to prevent unjust enrichment.

• Redundancy: Redundancy under Article 298 (formerly Article 283) of the Labor Code exists when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise; it may result from overhiring, decrease in business volume, or dropping of a particular line or service. Although determining whether services are no longer necessary is an exercise of business judgment, management must not violate the law nor declare redundancy without sufficient basis. CGI admitted that it included petitioner in the 2015 redundancy program because she was the only software test analyst on bench at that time and because of alleged inefficiency, tardiness, and selectivity in accepting projects. However, CGI did not adduce evidence of duplication in petitioner's services or that her services were in excess of what was reasonably required by the project. It did not submit any affidavit of its officers explaining the reasons and necessities for the redundancy program. It unceremoniously placed petitioner in the redundancy list without first demonstrating the superfluity of her position. The Court held that CGI should have initially established the existence of redundancy before determining an employee redundant on the criteria of inefficiency; absent proof of redundancy, there was no basis to declare petitioner redundant on the criteria of alleged inefficiency. Thus, the CA erred in upholding the LA and NLRC.

• Proof of Redundancy: In terminating employees due to redundancy, it is not enough for the employer to merely declare that a position had become redundant; it must produce adequate proof of such redundancy to justify dismissal. The employer must provide the labor tribunals and the Court with evidence to justify the necessity of reducing the number of software test analysts, such as new staffing pattern, feasibility studies or proposals, viability of newly created positions, job descriptions, approved management restructuring, audited financial documents like balance sheets, annual income tax returns, and others. CGI failed to present such evidence. Its bare allegations did not satisfy the burden.

• Fair and Reasonable Criteria: Jurisprudence requires the employer to prove good faith in abolishing redundant positions and the existence of fair and reasonable criteria in selecting employees for dismissal, such as less preferred status, efficiency, and seniority. Even assuming a necessity to reduce software test analysts, CGI did not employ fair and reasonable criteria. Petitioner was the most tenured software test analyst in CGI, and there was no evidence to support CGI's claim that she was inefficient. The Australian client's February 25, 2015 e-mail stated that petitioner exceeded expectations, came to work early, often stayed late, completed tasks with high quality, and was a valuable resource for future projects. Job vacancy notices for Software Test Analyst at Njoyn.com before and after her termination, and the "Job Application Acknowledgment" e-mails sent to petitioner, were inconsistent with the existence of redundancy. The Court thus disagreed with the CA's statement that there was scant evidence of posting opportunities in Njoyn. Absent any basis to declare petitioner's services redundant, her termination was illegal.

• Illegal Dismissal and Monetary Awards: The right to security of tenure under Section 3, Article XIII of the Constitution is guarded by Article 294 (formerly Article 279) of the Labor Code, which provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and other privileges, full backwages inclusive of allowances, and other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement. If reinstatement is no longer possible, backwages are computed from illegal termination up to finality of the decision. Separation pay may be awarded in lieu of reinstatement due to long passage of time, strained relations, antipathy, or when reinstatement is no longer feasible or in the best interests of the parties. Here, the Court deemed separation pay in lieu of reinstatement proper because of the passage of time from petitioner's 2015 termination and the strain in the relationship, shown by CGI's baseless charge of inefficiency and unjustified bench placement. When separation pay is ordered in lieu of reinstatement, the employment relationship is terminated only upon finality of the decision. Petitioner is entitled to separation pay and full backwages from the time CGI withheld compensation until finality. Moral damages are recoverable when dismissal is attended by bad faith, fraud, oppression, or is contrary to good morals, good customs, or public policy; exemplary damages are recoverable when dismissal is wanton, oppressive, or malevolent. CGI exercised its management prerogative in a repressive and despotic manner, so petitioner is entitled to moral and exemplary damages of P100,000 each. Attorney's fees of 10% of the total monetary award are proper under Article 2208 of the Civil Code because petitioner was compelled to litigate. Legal interest at 6% per annum is imposed from finality until full payment.

• Deduction of Separation Pay: Following the principle against unjust enrichment applicable in labor cases, petitioner must return the separation pay she received from CGI as part of the redundancy program by deducting that amount from her present monetary awards. The case is remanded to the Labor Arbiter for computation.

• Redundancy as an Authorized Cause for Termination — Under Article 298 (formerly Article 283) of the Labor Code, redundancy exists when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. It may arise from overhiring, a decrease in business volume, or the dropping of a particular line or service. The employer bears the burden of proving redundancy; a mere declaration is insufficient. In this case, CGI failed to prove that petitioner's services were superfluous or in excess of what was reasonably required.
• Employer's Burden of Proof in Redundancy — The employer must produce adequate proof of redundancy, such as new staffing pattern, feasibility studies or proposals, viability of newly created positions, job descriptions, approved management restructuring, audited financial documents like balance sheets, annual income tax returns, and others. CGI submitted none of these and did not even provide an affidavit of its officers explaining the redundancy program.
• Fair and Reasonable Criteria in Selecting Redundant Employees — Jurisprudence requires proof of good faith in abolishing redundant positions and the use of fair and reasonable criteria in selecting employees for dismissal, such as less preferred status, efficiency, and seniority. Even assuming redundancy, CGI did not use fair criteria; petitioner was the most tenured software test analyst, and the evidence contradicted CGI's claim of inefficiency.
• Security of Tenure and Remedies for Illegal Dismissal — Article 294 (formerly Article 279) of the Labor Code and Section 3, Article XIII of the Constitution guarantee security of tenure. An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges, full backwages inclusive of allowances, and other benefits or their monetary equivalent. If reinstatement is no longer possible, separation pay may be awarded in lieu, and backwages are computed from illegal termination up to finality of the decision.
• Separation Pay in Lieu of Reinstatement — Separation pay may be awarded in lieu of reinstatement due to long passage of time, strained relations, antipathy, or when reinstatement is no longer feasible or in the best interests of the parties. The employment relationship is terminated only upon finality of the decision ordering separation pay. Here, the Court awarded separation pay in lieu of reinstatement because of the passage of time since petitioner's 2015 termination and the strained relationship between the parties.
• Moral and Exemplary Damages in Illegal Dismissal — Moral damages are recoverable when the dismissal is attended by bad faith, fraud, oppression, or is contrary to good morals, good customs, or public policy. Exemplary damages are recoverable when the dismissal is wanton, oppressive, or malevolent. CGI's repressive and despotic exercise of its management prerogative entitled petitioner to P100,000.00 each as moral and exemplary damages.
• Attorney's Fees and Legal Interest — Under Article 2208 of the Civil Code, attorney's fees may be recovered when the defendant's act or omission compelled the plaintiff to litigate. The Court awarded attorney's fees equivalent to 10% of the total monetary award and imposed legal interest at 6% per annum from finality until full satisfaction.
• Unjust Enrichment — The principle against unjust enrichment applies in labor cases. Petitioner must return the separation pay she received from CGI as part of the redundancy program by deducting that amount from her monetary awards.

• "Redundancy is an authorized cause for termination of employment under Article 298 (formerly Article 283) of the Labor Code. It exists when 'the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.'" — This passage states the statutory definition of redundancy and anchors the Court's analysis of whether CGI had a valid authorized cause.
• "In terminating employees due to redundancy, it is not enough for the employer to merely declare that a position had become redundant. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees." — This is the ratio decidendi on the employer's evidentiary burden; it explains why CGI's bare declaration could not sustain the dismissal.
• "Thus, it is incumbent upon CGI to provide the labor tribunals and the Court with evidence to justify the necessity of reducing the number of its software test analysts such as new staffing pattern, feasibility studies or proposals, viability of newly created positions, job descriptions, approved management restructuring, audited financial documents like balance sheets, annual income tax returns, and others." — This passage enumerates the kind of proof required in redundancy cases and shows the specific evidentiary gap in CGI's case.
• "Definitely, the Court demands unquestionable proof from employers to establish their basis in terminating employees for their employment is the very source of their livelihood, which the Court must safeguard against fabricated causes to validate illegal dismissal cases." — This passage articulates the high standard of proof imposed on employers and the policy of protecting workers' security of tenure.

• Aboitiz Power Renewables, Inc. vs. Aboitiz Power Renewables, Inc., G.R. No. 237036, July 8, 2020 — Cited for the rule that only questions of law may be raised on appeal under Rule 45 because the Court is not a trier of facts, subject to exceptions.
• Soriano, Jr. vs. NLRC, 550 Phil. 111, 125 (2007) — Cited for the exception allowing factual review where the findings of the NLRC and the CA are capricious and arbitrary, and the CA's findings premised on absence of evidence are contradicted by the record.
• Coca-cola Femsa Philippines vs. Macapagal, G.R. No. 232669, July 29, 2019 — Cited for the requirement that fair and reasonable criteria in redundancy selection may include less preferred status, efficiency, and seniority.
• American Power Conversion Corporation, et al. vs. Lim, 823 Phil. 635, 657 (2018) — Cited for the rule that an employer must produce adequate proof of redundancy and cannot rely on a mere declaration.
• Abbott Laboratories (Phils.), Inc., et al. vs. Torralba, et al., 820 Phil. 196, 216-217 (2017), citing Session Delights Ice Cream and Fast Foods vs. Hon. CA (6th Div.), et al., 625 Phil. 612, 630 (2010) — Cited for the computation of backwages and separation pay in illegal dismissal cases.
• Symex Security Services, Inc., et al. vs. Rivera, et al., 820 Phil. 653, 672 (2017) — Cited for the award of separation pay in lieu of reinstatement due to strained relations and for moral and exemplary damages.
• Petron Corp. vs. Javier, G.R. No. 229777 (Notice), July 6, 2020, citing Consolidated Distillers of the Far East, Inc. vs. Zaragoza, 833 Phil. 888, 895 (2018), further citing Bani Rural Bank, Inc., et al. vs. De Guzman, et al., 721 Phil. 84, 103 (2013) — Cited for the rule that when separation pay is ordered in lieu of reinstatement, the employment relationship is terminated only upon finality of the decision.
• Bayview Management Consultants, Inc. vs. Pre, G.R. No. 220170, August 19, 2020, citing Symex Security Services, Inc., et al. vs. Rivera, et al., supra note 54 at 673-674 (2017) — Cited for the recoverability of moral and exemplary damages in illegal dismissal attended by bad faith or oppressive conduct.

• Article 298 (formerly Article 283), Labor Code — Defines redundancy as an authorized cause for termination; redundancy exists when the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. The Court applied it and found CGI failed to prove redundancy.
• Article 294 (formerly Article 279), Labor Code — Guarantees security of tenure and provides that an unjustly dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges, full backwages inclusive of allowances, and other benefits or their monetary equivalent. The Court applied it to award backwages and separation pay in lieu.
• Section 3, Article XIII, 1987 Constitution — Guarantees full protection to labor and security of tenure. The Court cited it as the constitutional basis for petitioner's security of tenure.
• Article 2208, Civil Code — Allows recovery of attorney's fees when the defendant's act or omission compelled the plaintiff to litigate. The Court awarded 10% of the total monetary award.
• Rule 45, Rules of Court — Limits appeals to questions of law, with exceptions. The Court cited it and then reviewed the facts because the lower findings were contradicted by evidence.

Justice Perlas-Bernabe (Chairperson), Justice Hernando, Justice Gaerlan, and Justice Dimaampao concurred.