Law on Redundancy


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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 overhiring 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 employee's 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 this Court. (G.R. No. 115394)

The installation of labor-saving devices contemplates the installation of machinery to effect economy and efficiency in its method of production. (G.R. No. 121314)
Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet the demands on the enterprise. A redundant position is one rendered superfluous by any number of factors, such as overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured by the company or phasing out of a service activity priorly undertaken by the business. Under these conditions, the employer has no legal obligation to keep in its payroll more employees than are necessary for the operation of its business. (G.R. No. 131108)

The general rule is that the characterization by an employer of an employee's services as no longer necessary or sustainable is an exercise of business judgment on the part of the employer. The wisdom or soundness of such characterization or decision is not, as a general rule, subject to discretionary review on the part of the Labor Arbiter, the NLRC and the CA. Such characterization may, however, be rejected if the same is found to be in violation of the law or is arbitrary or malicious. (G.R. No. 148195)

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