Labor Review

Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

RETIREMENT

 Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.
 Retirement is the result of a bilateral act of the parties, a voluntary agreement between the
employer and the employee whereby the latter, after reaching a certain age, agrees to sever
his or her employment with the former.

THREE KINDS OF RETIREMENT SCHEMES

1. Mandated by law: Compulsory and contributory in character

2. CBA and other agreements: Agreement between the employer and the employees
3. Voluntarily given by the employer : expressly as in an announced company policy or impliedly
as in a failure to contest the employee's claim for retirement benefits. [Gerlach v. Reuters
Limited, PH, G.R. No. 148542 (2005)]

AGE OF RETIREMENT

In the absence of a retirement plan or agreement:

a. Compulsory retirement: 65 years old

b. Optional retirement: 60 years or more (but below 65) and having served the establishment
for at least 5 years.

ELIGIBILITY

All employees in the private sector, regardless of their position, designation, or status, and
irrespective of the method by which their wages are paid. -Sec. 1, IRR, RA 7641

EXCEPTIONS:

1. Employees covered by the Civil Service Law;

2. Employees in retail, service and agricultural establishments or operations regularly employing not
more than ten employees -Sec. 2, IRR, RA 7641

BENEFITS- RETIREMENT PAY

½ month salary for every year of service. This includes:

• Fifteen (15) days salary based on the latest salary rate

• Cash equivalent of five (5) days of service incentive leave

• One-twelfth (1/12) of the 13th month pay.

(1/12 x 365/12 = .083 x 30.41 = 2.52)

• All other benefits that the employer and employee may agree upon

BENEFITS- UNDER A CBA/APPLICABLE CONTRACT

The employee shall receive the retirement benefits granted therein; provided, however, that such
retirement benefits shall not be less than the retirement pay required under RA 7641, and provided
 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

further that if such retirement benefits under the agreement are less, the employer shall pay the
difference.

BENEFITS- Workers Paid by Results

Basis for computation of salary for 15 days Average Daily Salary (ADS): The ADS is derived by dividing
the total salary for the last 12 months reckoned from the date of retirement by the number of actual
working days in that particular period, provided that the determination of rates of payment by
results are in accordance with established regulations. -Sec. 5.3, IRR, RA 7641

BENEFITS- PART-TIME WORKERS

Part-time workers are also entitled to retirement pay of “one-half month salary” for every year of
service under RA 7641 after satisfying the following conditions precedent for optional retirement:

a. There’s no retirement plan between the employer and the employee; and

b. The employee should have reached the age of 60 years, and should have rendered at least
5years of service with the employer.

VOLUNTARY RESIGNATION

ARTICLE 300 [285]. Termination by employee. — (a) An employee may terminate without just cause
the employee-employer relationship by serving a written notice on the employer at least one (1)
month in advance. The employer upon whom no such notice was served may hold the employee
liable for damages. (b) An employee may put an end to the relationship without serving any notice
on the employer for any of the following just causes:

“1. Serious insult by the employer or his representative on the honor and person of the employee;

“2. Inhuman and unbearable treatment accorded the employee by the employer or his
representative;

“3. Commission of a crime or offense by the employer or his representative against the person of the
employee or any of the immediate members of his family; and

“4. Other causes analogous to any of the foregoing.”

REQUISITES OF RESIGNATION

1. written (not verbal or oral) notice of the termination (commonly known as resignation letter);
and

2. service of such notice to the employer at least one (1) month in advance.

EFFECTS AND CONSEQUENCES

• Terminates the employer-employee relationship

• No payment of separation pay unless such has been an established practice by the employer
or when a written agreement to such effect has been made between the employer and
employee

• Execution of quitclaim

•
 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

REMEDY

• Terminates the employer-employee relationship

• No payment of separation pay unless such has been an established practice by the employer
or when a written agreement to such effect has been made between the employer and
employee

TAX REPERCUSSIONS

• If the resignation before the end of the year

While you are employed, your withholding tax is based on the assumption that you are going to
be earning the same amount of money for the whole year. But when you resign before the end
of the year, your previous employer will compute your last pay as if that is your only income for
the entire year. This often results in a tax liability that is lower than the total amount of taxes
already withheld from you and will result in a tax refund added to your last pay.

INVOLUNTARY RESIGNATION

Article 282. Termination by employer. An employer may terminate an employment for any of the
following causes:

Serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or representative in connection with his work;

Gross and habitual neglect by the employee of his duties;

Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representatives; and

Other causes analogous to the foregoing.

SERIOUS MISCONDUCT

Improper or wrong conduct; the transgression of some established and definite rule of action, a
forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere
error in judgment. To be serious within the meaning and intendment of the law, the misconduct
must be of such grave and aggravated character and not merely trivial or unimportant

(Villamor Golf Club v. Pehid, 04 October 2005)

ELEMENTS OF SERIOUS MISCONDUCT

1. serious;

2. relate to the performance of the employee’s

duties;

3. employee has become unfit to continue working

for the employer (Phil. Aeolus v NLRC, 2000)

 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

Elements of Willful Disobedience

1. employee’s assailed conduct was willful or intentional, the willfulness being characterized by
wrongful and perverse attitude;

2. the order violated must have been reasonable, lawful, made known to the employee and
must pertain to the duties which he has been engaged to discharge

(Micro Sales Operation Network v. NLRC,11 October 2005)

Gross and Habitual Neglect

1. GROSS and HABITUAL must concur together.

2. Implies a want or absence of or failure to exercise slight care or diligence, or the entire
absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them.

3. Previous infractions by the employee should have been acted upon appropriately by the
employer before terminating the former.

Fraud or Willful Breach of Trust

• Can be committed only by confidential and managerial employees

confidential employees – charged with custody and protection of employer’s property like a
cashier (this is different from the “confidential employees” in labor relations)

• A criminal case need not be actually filed. Commission of acts constituting a crime is
sufficient.

Analogous Cases; Examples

• Violation of safety rules

• gross inefficiency

• wrongful acts of employee against the company

• violation of code of discipline

• failure to heed an order not to join an illegal picket

• immorality

• sexual harassment

Art. 283. Authorized Causes for Termination

Grounds:

1. Introduction of labor-saving devices

2. Redundancy

3. Retrenchment
 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

4. Closure of business as a result of grave financial loss

5. Closure not due to losses

Redundancy

• 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 has become superfluous as an outcome of a number of factors such as overhiring

of workers, decreased volume of business, dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise (thus it only requires
superfluity not duplication of work)

• The redundancy SHOULD NOT have been created by the EMPLOYER

Retrenchment

• Resorted primarily to avoid or minimize business losses.

Standards to Justify Retrenchment

1. The losses expected should be substantial and not merely de minimis in extent.

2. The substantial loss apprehended must be reasonably imminent

3. It be reasonably necessary and likely to effectively prevent the expected losses. The
employer should have taken other measures prior or parallel to retrenchment to forestall
losses.

4. The alleged losses if already realized, and the expected imminent losses must be proved by
sufficient and convincing evidence.

Closure Not Due to Losses

• In cases of closure not due to losses, it must NOT be in BAD FAITH.

• If the dismissal is based on a just cause under Article 282 but the employer failed to comply
with the notice requirement, the sanction to be imposed upon him should be tempered
because the dismissal process was, in effect, initiated by an act imputable to the employee.

• If the dismissal is based on an authorized cause under Article 283 but the employer failed to
comply with the notice requirement, the sanction should be stiffer because the dismissal
process was initiated by the employer’s exercise of his management prerogative

Constructive Dismissal

1. No formal dismissal

2. The employee is placed in a situation by the employer such that his continued employment
has become UNBEARABLE.
 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

Art. 284. Disease as ground for termination

Grounds:

• When his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees

• There is a certification by a competent public health authority that the disease is of such
nature or at such stage that it cannot be cured within a period of 6 months even with proper
medical treatment

• The requirement for a medical certificate cannot be dispensed with; otherwise, it would
sanction the unilateral and arbitrary determination by the employer of the gravity or extent
of the employee’s illness and thus defeat the public policy on the protection of labor

EFFECTS OF INVOLUNTARY RESIGNATION

• An employer who dismisses an employee

without just or authorized cause is liable for:

1. Reinstatement or separation pay if reinstatement is not possible; and

2. Full backwages.

 The following reliefs are cumulative and not

alternative:

1. Reinstatement

2. Options Given to Employers

a. Actually reinstate the dismissed employees or

b. Constructively reinstate them in the payroll.

3. Backwages

4. Damages and Attorney’s Fees

5. Separation Pay

REINSTATEMENT

 Reinstatement means restoration to a state or condition from which one had been removed
or separated. The person reinstated assumes the position he had occupied prior to his
dismissal.
 An action for reinstatement by reason of illegal dismissal is one based on an injury, which
may be brought within 4 years from the time of dismissal.
 Options Given to Employers:

a. Actually reinstate the dismissed employees or,

b. Constructively reinstate them in the payroll.

 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz

 Either way, this must be done immediately upon the filing of their appeal, without need of
any executory writ.

SEPARATION PAY IN LIEU OF REINSTATEMENT

Kinds of separation pay (SP)

1. SP as a statutory requirement for authorized causes

2. SP as financial assistance found in the next section

3. SP in lieu of reinstatement where reinstatement is not feasible; and

4. SP as a benefit in the CBA or company policy

Separation Pay and Reinstatement, Exclusive Remedies

The payment of separation pay and reinstatement are exclusive remedies. The payment of
separation pay replaces the legal consequences of reinstatement to an employee who was illegally
dismissed.
 Labor Review
Saturday 1:00pm-4:00pm
Reported by: Jevilyn Mary C. Ruiz