The Supreme Court (SC) has upheld the validity of the redundancy program implemented by Coca-Cola Beverages Philippines in 2008, affirming the dismissal of 610 employees, ending a 17-year labor dispute over the company’s restructuring efforts.
In a 42-page decision written by Associate Justice Maria Filomena Singh, the SC’s Third Division ruled that the beverage giant’s decision to phase out an entire department and streamline operations to improve cost-efficiency and competitiveness was a legitimate exercise of management prerogative.
The case stemmed from Coca-Cola’s review of its distribution system in 2008 after recording negative operating income.
The company found that its Market Execution Partners under the Route-to-Market scheme and Key Accounts operations were more cost-efficient than its Conventional Routing Scheme (CRS).
As a result, it adopted a Revised Route to Market strategy that discontinued the CRS and led to the closure of mini-warehouses nationwide, displacing route salesmen, drivers, and helpers.
While affected employees were assessed for possible redeployment, 610 workers, including lead complainant Menardo Osongco Jr., were eventually declared redundant after failing to meet the company’s standards for reassignment.
The employees received separation notices and separation packages that were nearly twice the amount required by law.
They also signed quitclaims and releases, but later filed complaints for illegal dismissal, arguing that the redundancy program was implemented in bad faith and that their functions were merely transferred to The Red System Company Inc.
A labor arbiter initially ruled in favor of the workers, finding procedural lapses in the implementation of the redundancy program. However, the ruling was reversed by the National Labor Relations Commission (NLRC), which found that Coca-Cola had sufficiently justified the reorganization.
The Court of Appeals later sided with the employees, holding that the company failed to prove that the restructuring resulted from a comprehensive review of its operations.
Reversing the appellate court, the SC said an employer’s decision to abolish an entire department falls within its protected right to manage its business.
The high court stressed that the usual requirement of applying fair and reasonable criteria, such as efficiency, seniority, and loyalty, in selecting employees for termination does not apply when an entire department or line of service is completely eliminated.