Menardo and his co-employees worked for Coca-Cola for many years as route salesmen, drivers, helpers, and sales personnel. They were part of Coca-Cola’s traditional distribution system, which delivered products directly to retailers.
After recording negative operating income, Coca-Cola reviewed its distribution channels and concluded that its traditional sales and delivery system was significantly more expensive than alternative distribution models using Market Execution Partners (MEPs). As a result, the company adopted a new Route-to-Market strategy, phased out its conventional route sales system, closed certain distribution facilities, and declared hundreds of employees redundant. The affected workers received separation packages substantially higher than those required by law and signed quitclaims upon receipt of their benefits.
The employees challenged their dismissal. They argued that the redundancy program was merely a scheme to circumvent their right to security of tenure. According to them, Coca-Cola failed to present studies justifying the redundancy, failed to use fair criteria in selecting employees for termination, and merely transferred their functions to another company known as The Red System Company (TRCI), where some of them allegedly continued performing substantially the same work.
The Labor Arbiter agreed with the employees and declared the dismissals illegal. The Court of Appeals likewise ruled in their favor, holding that Coca-Cola failed to prove the validity of its redundancy program because it did not present sufficient evidence of the studies that supposedly justified the reorganization and failed to explain how the affected employees were selected for termination.
Was Coca-Cola’s redundancy program valid?
Yes.
For a redundancy program to be valid, the employer must show: (1) compliance with notice requirements; (2) payment of the proper separation pay; (3) good faith in abolishing the positions; and (4) fair and reasonable criteria in determining which positions would be declared redundant.
In this case, the Supreme Court held that Coca-Cola validly implemented its redundancy program. The Court noted that it had already upheld the same Route-to-Market restructuring program in several previous cases involving similarly situated employees. The evidence showed that Coca-Cola conducted a review of its distribution system, determined that the traditional route sales and mini-bodega schemes generated significantly higher costs, and concluded that greater efficiency could be achieved through the use of Market Execution Partners. As a consequence of that business decision, certain positions became unnecessary and were abolished.
The Court further found that Coca-Cola acted in good faith. Hundreds of affected employees were redeployed to other positions within the company. Those who could not be redeployed were given notice, separation pay exceeding statutory requirements, and other benefits. The fact that the company attempted to absorb as many employees as possible into alternative positions demonstrated good faith rather than an intent to circumvent labor laws.
All these circumstances showed that the redundancy program was undertaken as a legitimate business measure designed to improve efficiency and competitiveness, and not as a device to defeat the employees’ right to security of tenure.
Coca-Cola Europacific Aboitiz Philippines, Inc. v. Osongco et al. G.R. Nos. 238975-76. Uploaded to SC Website May 14, 2026.