The Supreme Court has ruled that employers cannot simply declare an employee redundant based on alleged inefficiency without first demonstrating the actual need to reduce the workforce. In Kristine Angel Cabilin Hui v. CGI UK. LTD., Inc., the Court emphasized that employers must provide concrete evidence of redundancy, such as new staffing patterns or financial documents, before using subjective criteria like inefficiency to justify termination. This decision protects employees from arbitrary dismissals disguised as redundancy measures, ensuring that employers adhere to fair and reasonable standards in workforce management.

From Valued Employee to Redundant: Did CGI Prove the Need for Layoff?

Kristine Angel Cabilin Hui was terminated from CGI UK. LTD., Inc. on the grounds of redundancy. CGI claimed that Hui, a Software Test Analyst, was inefficient and often on bench, meaning she was without a project for extended periods. Hui challenged her dismissal, arguing that CGI failed to prove that her position was truly redundant and that the company used unfair criteria to select her for termination. The Labor Arbiter (LA) and the National Labor Relations Commission (NLRC) initially sided with CGI, but the Court of Appeals (CA) affirmed these rulings. The Supreme Court, however, reversed the CA’s decision, finding that CGI had not adequately demonstrated the necessity of reducing its workforce and that the criteria used to select Hui for redundancy were not fair and reasonable.

The Supreme Court began its analysis by reaffirming that redundancy is a valid cause for termination under Article 298 of the Labor Code. The Court quoted the provision, noting that redundancy exists when “the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise.” However, the Court emphasized that declaring redundancy requires more than a mere assertion; it requires substantial proof. The Court referred to its prior rulings in Aboitiz Power Renewables, Inc. v. Aboitiz Power Renewables, Inc., stating that, “To ensure that the dismissal is not implemented arbitrarily, jurisprudence requires the employer to prove, among others, its good faith in abolishing the redundant positions as well as the existence of fair and reasonable criteria in the selection of employees who will be dismissed from employment due to redundancy. Such fair and reasonable criteria may include, but are not limited to: (a) less preferred status, i.e., temporary employee; (b) efficiency; and (c) seniority.”

Building on this principle, the Court criticized CGI’s failure to provide sufficient evidence of redundancy. CGI argued that Hui was placed on the redundancy program because she was the only software test analyst on bench, allegedly due to her inefficiency. However, CGI did not provide any evidence showing that there was a duplication in Hui’s services or that her services were in excess of what the project reasonably required. The Court noted the lack of documents such as new staffing patterns, feasibility studies, or audited financial statements to justify the reduction of software test analysts. Because CGI unceremoniously placed petitioner in the list of redundant employees without first demonstrating the superfluity of her position, the Court stated, “To the Court, CGI should have initially established the existence of redundancy before determining an employee redundant on the criteria of inefficiency. There being no proof of redundancy to justify the reduction of software test analysts in CGI, there is no basis to declare petitioner a redundant employee on the criteria of her alleged inefficiency.”

Moreover, the Supreme Court found that CGI did not employ fair and reasonable criteria in selecting Hui for redundancy, even if redundancy had been proven. The Court noted that Hui was the most tenured software test analyst at CGI, and there was no solid evidence to support CGI’s claim that she was inefficient. In fact, the System Architect of NSWEC PRCC Project, the Australian Client of CGI, sent an email to CGI Staff Manager Ledesma and Hui giving the latter excellent feedback on her work, stating as follows:

From: Bai Li
Sent Wednesday, February 25, 2015
To: Hui, Kristine Angel
Cc: Ledesma, Joe
Subject: RE: Collaboration

Hi Kristine,

I am more than happy to provide feedback to your work in 2014.

I worked with Kristine on NSWEC PRCC project in the second half of 2014.

During the project, Kristine

1. Documented system test spec and test cases for the PRCC functionalities;
2. provided valuable input and feedback for the functional specification, software development and testing;
3. helped team members to identify issues and problems;
4. communicated clearly and professionally with Australian team members and escalated issues that could potentially have impact the schedule;
5. came to work early and often stayed late to get assigned task complete with high quality;
6. adopted ethical behavior at work.

In my view, Kristine has exceeded expectations with regards to deliver high quality testing. We are happy with Kristine’s work and consider her as a valuable resource for future projects.

This positive feedback from a client directly contradicted CGI’s claims of inefficiency. Further undermining CGI’s argument was the fact that before and after Hui’s termination, there were several job vacancy notices for Software Test Analysts published on CGI’s career posting site. These job postings indicated that there was still a need for software test analysts within the company, contradicting the claim that Hui’s services were redundant.

Given these factors, the Supreme Court concluded that Hui’s termination was illegal. As an illegally dismissed employee, Hui was entitled to several monetary awards. The Court cited Article 294 of the Labor Code, which states that an employee unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges, as well as full backwages. However, considering the length of time that had passed since Hui’s termination and the strained relationship between her and CGI, the Court deemed reinstatement inappropriate. Instead, it awarded Hui separation pay in lieu of reinstatement, in addition to full backwages.

In addition to backwages and separation pay, the Court also awarded Hui moral and exemplary damages, finding that CGI had acted in bad faith by declaring her services redundant without sufficient justification. The Court explained that moral damages are recoverable when the dismissal is attended by bad faith or constitutes an act oppressive to labor, while exemplary damages are recoverable when the dismissal was done in a wanton, oppressive, or malevolent manner. Moreover, Hui was entitled to attorney’s fees, as she was compelled to litigate to protect her rights. The Court also noted that Hui should return the separation pay she received as part of the redundancy program to avoid unjust enrichment.

FAQs

What was the key issue in this case?	The key issue was whether CGI UK. LTD., Inc. validly dismissed Kristine Angel Cabilin Hui on the ground of redundancy. The Supreme Court focused on whether the company adequately proved the redundancy and used fair criteria in selecting Hui for termination.
What is redundancy in the context of labor law?	Redundancy is a valid cause for termination when an employee’s services are in excess of what is reasonably demanded by the employer’s actual requirements. The employer must prove this excess need with sufficient evidence, such as a decrease in business or a change in staffing patterns.
What evidence must an employer provide to prove redundancy?	An employer must provide concrete evidence such as new staffing patterns, feasibility studies, audited financial documents, or affidavits explaining the reasons for the redundancy program. Mere claims of inefficiency are not sufficient.
What are fair and reasonable criteria for selecting employees for redundancy?	Fair criteria include less preferred status (e.g., temporary employee), efficiency, and seniority. Employers must have a reasonable basis for evaluating these criteria and apply them consistently.
What are the remedies for illegal dismissal due to a false claim of redundancy?	An illegally dismissed employee is entitled to reinstatement without loss of seniority rights, full backwages, and other benefits. If reinstatement is not feasible, the employee may be awarded separation pay in lieu of reinstatement, as well as moral and exemplary damages.
Why did the Supreme Court award moral and exemplary damages in this case?	The Court awarded damages because CGI acted in bad faith by declaring Hui’s services redundant without sufficient justification and by baselessly charging her with inefficiency. This constituted an act oppressive to labor.
What is the significance of positive feedback from a client in a redundancy case?	Positive feedback from a client can undermine an employer’s claim that an employee was inefficient, as it provides evidence of the employee’s competence and value to the company. This was a factor in the Supreme Court’s decision in this case.
What is the effect of job vacancy postings on a redundancy claim?	The existence of job vacancy postings for similar positions can contradict an employer’s claim that an employee’s services were no longer needed. This suggests that there was no actual redundancy, undermining the employer’s justification for the termination.

This case underscores the importance of employers adhering to due process and providing substantial evidence when implementing redundancy programs. Employers must demonstrate a genuine need to reduce the workforce and use fair, objective criteria in selecting employees for termination. Failing to do so can result in significant legal repercussions.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Kristine Angel Cabilin Hui v. CGI UK. LTD., Inc., G.R. No. 247207, October 06, 2021