Retrenchment & Redundancy NOT Synonymous
Retrenchment and redundancy are two different concepts; they are not synonymous and therefore should not be used interchangeably. The Supreme Court explained in detail the difference between the two concepts in Sebuguero v. NLRC:
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 of a position or positions may be the outcome of a number of factors, such as over hiring of workers, decreased volume of business, or dropping of a particular product line or service activity previously manufactured or undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the term lay-off. It is the termination of employment initiated by the employer through no fault of the employees and without prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation. Simply put, it is an act of the employer of dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by the Supreme Court.
Thus, simply put, redundancy exists when the number of employees is in excess of what is reasonably necessary to operate the business. The declaration of redundant positions is a management prerogative. The determination that the employees services are no longer necessary or sustainable and therefore properly terminable is an exercise of business judgment by the employer. The wisdom or soundness of this judgment is not subject to the discretionary review of the Labor Arbiter and NLRC.
It is however not enough for a company to merely declare that positions have become redundant. It must produce adequate proof of such redundancy to justify the dismissal of the affected employees. In Panlilio v. NLRC, the Supreme Court said that the following evidence may be proffered to substantiate redundancy: 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. In another case, it was held that the company sufficiently established the fact of redundancy through affidavits executed by the officers of the respondent PLDT, explaining the reasons and necessities for the implementation of the redundancy program. (G.R. No. 173231; December 28, 2007)