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41. Andrada, et. al. v.

NLRC  Retrenchment, on the other hand, is used interchangeably
G.R. No. 17321, December 28, 2007, Joben Odulio with the term "lay-off." It is the termination of employment
Authorized Causes initiated by the employer through no fault of the employee's
and without prejudice to the latter, resorted to by
Doctrine: management during periods of business recession, etc.
Simply put, it is an act of the employer of dismissing
 Requirements to justify retrenchment to prevent abuse
employees because of losses in the operation of a business,
by employers: lack of work, and considerable reduction on the volume of his
(1) it is undertaken to prevent losses, which are not merely business, a right consistently recognized and affirmed by this
de minimis, but substantial, serious, actual, and real, or if Court.
only expected, are reasonably imminent as perceived
 It is however not enough for a company to merely declare
objectively and in good faith by the employer;
that positions have become redundant. It must produce
(2) the employer serves written notice both to the
adequate proof of such redundancy to justify the dismissal of
employees and the DOLE at least 1 month prior to the
the affected employees.
intended date of retrenchment; and
(3) the employer pays the retrenched employees separation
pay equivalent to 1 month pay or at least 1/2 month pay ER: Andrada, et. al. were dismissed by their employer,
for every year of service, whichever is higher. Legend, citing retrenchment. They said that they were
(4) The Court later added the requirements that the being retrench in a last-in-first-out basis on account of
employer must use fair and reasonable criteria in shelving of a condotel project, completion of a casino,
ascertaining who would be dismissed and retained subcontracting a work to a third party, the completion of a
among the employees and that the retrenchment must hotel and a casino, abolition of a department. The LA said
be undertaken in good faith. there was an illegal dismissal as Legend failed to justify the
Except for the written notice to the affected employees and retrenchment of its personnel; the documents failed to
the DOLE, non-compliance with any of these requirements show that Legend was suffering from actual losses or that
render[s] the retrenchment illegal. there was redundancy. The CA held that the retrenched
 Retrenchment and redundancy are two different employees were validly dismissed from employment due to
concepts: redundancy and not retrenchment. The CA ratiocinated that
 Redundancy exists where the services of an employee are in Legend had validly terminated the employment of its
excess of what is reasonably demanded by the actual employees since it had proven that complainants' positions
requirements of the enterprise. A position is redundant were superfluous and that there was an oversupply of
where it is superfluous, and superfluity of a position or
employees; more than what its projects needed. It agreed
positions may be the outcome of a number of factors, such as
over hiring of workers, decreased volume of business, or with NLRC that it was a different person who was
dropping of a particular product line or service activity recruiting for new personnel. [SEE REQUISITES FOR
previously manufactured or undertaken by the enterprise. RETRENCHMENT] In this case, Legend failed to show its

was in need of petitioners were validly dismissed. on February 6. 1998. Legend sent a notice to the DOLE of its Pampanga. Legend complied with the notice requirements and the payment of separation benefits to the retrenched employees. and/or their options. on the strength retrenchment as the reason for their termination. Legend informed the we also rule that Legend failed to establish by the same retrenched employees of their permanent retrenchment quantum of proof the fact of redundancy. Resorts and Casino. complainants alleged that they Development Division. 14 of the 34 retrenched employees filed before the Regional Arbitration Branch of the NLRC in On January 6. Petitioners. separation pay. hence. draftsmen. Legend informed the 34 employees of retrenchment program nor did it submit audited financial the retrenchment through a notice with the aforesaid statements regarding its alleged financial losses.month pay. abolition of a and said that complainants voluntarily signed quitclaims so department. intention to retrench and terminate the employment of 34 employees. 1995 up to 1997 and worked as architects. after giving conducted in a last-in-first-out (LIFO) basis. meal allowance. completion Legend. completion of a hotel and a casino. the prerogative when it terminated the retrenched employees. ex-gratia. pro-rated 13th. a complaint for illegal dismissal. 1998. The SC also disagreed the CA’s pronouncement that that Legend International Resorts. Legend paid the retrenched petitioners' termination from employment was illegal. and surveyors in the Subic Legend Legend. on the other hand. that they were already barred from suing Legend.] The basis for retrenchment was not established by substantial evidence. Inc. The retrenchment would be were illegally dismissed because Legend. signed quitclaims but reserved their right to sue operators. invoked management of a casino. A month later. in turn. employees their salaries up to February 6. petitioners REDUNDANCY & RETRENCHMENT. Division. The LA declared there was illegal dismissal and ordered the reinstatement of the complainants. Curiously. the Labor and Employment its failure to establish the basis made the retrenchment Center of the Subic Bay Metropolitan Authority advertised illegal. Inc. employees for positions similar to those vacated by but for redundancy. were hired on various dates from unused vacation leave credits. et. which included the petitioners in the Project Before the Labor Arbiter. on the same day. 1998. al. subcontracting a work to a third party. Though reasons. such as shelving of a condotel project.financial condition prior to and at the time it enforced its The following day. [SEE DIFFERENTIATION BET. and tax refund. engineers. created of the updated status report of the Project Development new positions similar to those they had just vacated. Facts: Andrada. . Afterwards. (Legend) Project Development Division on various projects. not for retrenchment.

who asked for Subic Bay Metropolitan Authority's help in recruiting personnel for Retrenchment is an exercise of management's prerogative Gaehin International Inc. to protect labor. The NLRC also retrenchment or redundancy are subject to strict gave credence to Legend's claim that it was Yap Yuen requirements under Article 283. and that there was redundancy service. Under the Labor Code. actual. with NLRC that it was a different person who was (2) the employer serves written notice both to the recruiting for new personnel. It agreed by the employer. more than what its projects needed. Khong. was there a valid retrenchment or was suffering from actual losses or that there was did Legend prove the existence of redundancy in its Project redundancy. MR was denied. employees and the DOLE at least 1 month prior to . serious. employees since it had proven that complainants' positions and real. which are not Legend had validly terminated the employment of its merely de minimis. The LA said there was bad faith when Legend Development Division? advertised openings for positions similar to those occupied by the retrenched employees at the same time the Held: This was an illegal dismissal. and not Legend. who then reversed absolute. The CA ratiocinated that (1) it is undertaken to prevent losses. retrenchment and the LA. It said that Legend was able to prove that it was redundancy are authorized causes for separation from suffering from actual losses. but substantial. either minimize or prevent losses. NO VALID RETRENCHMENT A company's exercise of its management prerogatives is not Legend filed an appeal with the NLRC. with the 30-day notice requirements to the DOLE and to the retrenched employees. or when the company is The NLRC observed that Gaehin was an entity distinct and about to close or cease operations for causes not due to separate from Legend. are reasonably were superfluous and that there was an oversupply of imminent as perceived objectively and in good faith employees. the documents failed to show that Legend dismissed? Corollarily. In Ariola v. to the construction of the Grand Legenda Hotel and Casino. dismissals due to in the work of the retrenched employees. or if only expected. it was held that the retrenched employees employers: were validly dismissed from employment due to redundancy and not retrenchment. summarized the requirements to justify retrenchment to prevent abuse by Before the CA. it awarded damages. How ever. Legend fully and properly complied business losses. As such.The LA stated that Legend failed to justify the retrenchment Issue: Whether or not the complainants were illegally of its personnel. (Gaehin) as the sub-contractor for to terminate the employment of its employees en masse. retrenchment program was being implemented. Philex Mining Corporation.

program nor did it submit audited financial statements It is however not enough for a company to merely declare regarding its alleged financial losses. Though Legend that positions have become redundant. or dropping of a particular product separation pay equivalent to 1 month pay or at line or service activity previously manufactured or least 1/2 month pay for every year of service. they are not synonymous and therefore should not be used interchangeably. work. hence. such as over hiring of workers. non-compliance with any of these requirements because of losses in the operation of a business." It is the employer must use fair and reasonable criteria in termination of employment initiated by the employer ascertaining who would be dismissed and retained through no fault of the employee's and without among the employees and that the retrenchment prejudice to the latter. it Except for the written notice to the affected employees and is an act of the employer of dismissing employees the DOLE. lack of render[s] the retrenchment illegal. during periods of business recession. employment was illegal. redundancy. on the other hand. and considerable reduction on the volume of his In this case. is used (4) The Court later added the requirements that the interchangeably with the term "lay-off. NLRC:  Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. whichever is higher. Simply put. and superfluity of a position or positions may be the outcome of a number . It must produce complied with the notice requirements and the payment of adequate proof of such redundancy to justify the dismissal separation benefits to the retrenched employees. etc. its failure to of the affected employees. establish the basis made the retrenchment illegal. undertaken by the enterprise. petitioners' termination from but for redundancy.  Retrenchment. we also rule that Legend failed to The SC also disagreed the CA’s pronouncement that establish by the same quantum of proof the fact of petitioners were validly dismissed. This Court explained in detail the difference between the two concepts in Sebuguero v. Retrenchment and redundancy are two different concepts. the intended date of retrenchment. and of factors. A position is redundant where it is superfluous. not for retrenchment. decreased (3) the employer pays the retrenched employees volume of business. Legend failed to show its financial condition business. a right consistently recognized and affirmed prior to and at the time it enforced its retrenchment by this Court. The basis for retrenchment was not established by NO VALID REDUNDANCY substantial evidence. resorted to by management must be undertaken in good faith.