Other Special Benefit

Villuga vs. NLRC

225 SCRA 537 (1993)

Facts:

Petitioner Elias Villuga was employed as cutter in the Broad Street Tailoring owned by private
respondent Rodolfo Zapanta. He was paid a fixed monthly salary of P840.00 and a monthly
transportation allowance of P40.00. In addition, Villuga was assigned the chore of distributing work
to the shop's tailors or sewers when both the shop's manager and assistant manager would be absent.
The other petitioners were either ironers, repairmen and sewers. They were paid a fixed amount for
every item ironed, repaired or sewn, regardless of the time consumed in accomplishing the task.
Petitioners did not fill up any time record since they did not observe regular or fixed hours of work.
From February 17 to 22, 1978, Villuga failed to report for work allegedly due to illness. For not
properly notifying his employer, he was considered to have abandoned his work. Villuga claimed that
he was refused admittance when he reported for work after his absence, allegedly due to his active
participation in the union organized by private respondent's tailors. He further claimed that he was not
paid overtime pay, holiday pay, premium pay for work done on rest days and holidays, service
incentive leave pay and 13th month pay. Petitioners Abistado, Mendoza, Brizuela and Oro also
claimed that they were dismissed from their employment because they joined the Philippine Social
Security Labor Union (PSSLU). The other petitioners claimed that they stopped working because
private respondents gave them few pieces of work to do after learning of their membership with
PSSLU.

The Labor Arbiter rendered a decision ordering the dismissal of the complaint for unfair labor
practices, illegal dismissal and other money claims except petitioner Villuga's claim for 13th month
pay for the years 1976, 1977 and 1980. The NLRC affirmed the questioned decision.

Issue:

Whether an employer-employee relationship exists and whether such employment is managerial in

character or that of a rank and file employee are primordial considerations before extending labor
benefits.

Held:

Under Rule I, Section 2(c), Book III of the Implementing Rules of the Labor Code, to be a
member of a managerial staff, the following elements must concur or co-exist, to wit: (1) that his
primary duty consists of the performance of work directly related to management policies; (2) that he
customarily and regularly exercises discretion and independent judgment in the performance of his
functions; (3) that he regularly and directly assists in the management of the establishment; and (4)
that he does not devote twenty per cent of his time to work other than those described above.
CJC Trading vs. NLRC
246 SCRA 724 (1995)

Facts:

Private respondents Ricardo Ausan, Jr. and Ernesto Alanan were employed by petitioner since 1983
and 1978, respectively, as truck drivers and were paid on a "per trip or task basis." They filed separate
complaints against petitioner CJC Trading, Incorporated and/or Ms. Celia J. Carlos for illegal
dismissal and non-payment of premium pay for holiday and rest day, service incentive leave pay and
thirteenth month pay. The Labor Arbiter dismissed the complaints for lack of merit and holding that:
(1) respondent Ausan, Jr., after figuring in a non-work related accident which affected his right foot,
told petitioner that he no longer wanted to work because his injury might affect his driving; (2)
respondent Alanan voluntarily quit his job because of old age and weakness; and (3) private
respondents were not entitled to the labor standards benefits claimed by them because they were paid
on a "per trip or per task basis."On appeal, the NLRC affirmed in toto the decision of the Labor
Arbiter but awarded private respondents separation pay equivalent to one-half month salary for every
year of service.

Issue:

Whether or not private respondents are entitled to separation pay.

Held:

The award of separation pay is authorized in the situations dealt with in articles 283 and 284 of the
Labor Code, and as well as in cases where there is illegal dismissal and reinstatement is no longer
feasible under Section 4(b), Rule I, Book VI of the Implementing Rules and Regulations of the Labor
Code. By way of exception, this Court has allowed grants of separation pay to stand as "a measure of
social justice" where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character.

The instant case, however, does not fall under any of the above mentioned instances. There was no
dismissal of private respondents by petitioner here. Neither, upon the other hand, can this be
considered a case of abandonment. Rather, we have before us a case of voluntary resignation.

An employee who voluntarily resigns is not entitled to separation pay unless otherwise stipulated in
an employment contract or collective bargaining agreement, or sanctioned by established employer
practice or policy. The Labor Code is devoid of any provision which grants separation pay to
employees who voluntarily resign. Neither was there anything in the record that shows that, in the
instant case, there is a collective bargaining agreement or any other agreement or established
company policy concerning the payment of separation pay to employees who resign.

The pertinent law is Article 287 of the Labor Code, as amended by R.A. No. 7641.

In the instant case, the complaints of private respondents were still being resolved on the labor arbiter
level when R.A. No. 7641 took effect. However, it was quite clear, and both the Labor Arbiter and the
NLRC so held, that private respondents had ceased to be employees of petitioner, by reason of
voluntary resignation, before the statute went into effect. Moreover, it appears that private
respondents did not qualify for the benefits of R.A. No. 7641 under the terms of this law itself. The
Court notes that when private respondents filed their complaints more than one year after they had
been allegedly illegally dismissed, respondent Ausan, Jr. was 57 years old while respondent Alanan
was 60 years old. That would make Ausan, Jr. 55 years old and Alanan 58 years old at the time their
services with petitioner were ended by their resignation. Since the record does not show any
retirement plan or collective bargaining agreement providing for retirement benefits to petitioner's
employees, the applicable retirement benefits to petitioner's employees, the applicable retirement age
is the optional retirement age of 60 years according to Article 287, which would qualify the retiree to
retirement benefits equivalent to 1/2 month's salary for every year of service.

Unfortunately, at the time private respondent stopped working for petitioner, they had not yet reached
the age of sixty year. There is nothing to prevent petitioners from voluntarily giving private
respondents some financial assistance on an ex gratia basis.
Pantranco North Express vs. NLRC
259 NLRC 161 (1996)

Facts:

Private respondent was hired by petitioner in 1964 as a bus conductor. He eventually joined the
Pantranco Employees Association-PTGWO. He continued in petitioner's employ until August 12,
1989, when he was retired at the age of fifty-two (52) after having rendered twenty five years' service.
The basis of his retirement was the compulsory retirement provision of the collective bargaining
agreement between the petitioner and the aforenamed union. On February 1990, private respondent
filed a complaint for illegal dismissal against petitioner with NLRC. The complaint was consolidated
with two other cases of illegal dismissal having similar facts and issues, filed by other employees,
non-union members.
 
Labor Arbiter rendered his decision finding that the three complainants were illegally and unjustly
dismissed and order the respondent to reinstate them to their former or substantially equivalent
positions without loss of seniority rights with full back wages and other benefits. Petitioner appealed
to public respondent, which issued the questioned Resolution affirming the labor arbiter's decision in
toto.
 
The issue is whether the CBA stipulation on compulsory retirement after twenty-five years of service
is legal and enforceable.
 
Held:

The Court  rules that the CBA stipulation is legal and enforceable.
 
The bone of contention in this case is the provision on compulsory retirement after 25 years of
service.
 
Article XI, Section 1 (e) (5) of the May 2, 1989 Collective Bargaining Agreement 8 between
petitioner company and the union states:
 
Section 1.  The COMPANY shall formulate a retirement plan with the following main features:
 
 (e) The COMPANY agrees to grant the retirement benefits herein provided to regular employees
who may be separated from the COMPANY for any of the following reasons:
 
 (5) Upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to
the COMPANY, whichever comes first, and the employee shall be compulsory retired and paid the
retirement benefits herein provided."
 
The said Code provides:
 
Art. 287.    Retirement. — Any employee may be retired upon reaching the retirement age established
in the Collective Bargaining Agreement or other applicable employment contract. In case of
retirement, the employee shall be entitled to receive such retirement benefits as he may have earned
under existing laws and any collective bargaining or other agreement."
 
The Court agrees with petitioner and the Solicitor General. Art. 287 of the Labor Code as worded
permits employers and employees to fix the applicable retirement age at below 60 years. Moreover,
providing for early retirement does not constitute diminution of benefits. In almost all countries
today, early retirement, i.e., before age 60, is considered a reward for services rendered since it
enables an employee to reap the fruits of his labor — particularly retirement benefits, whether lump-
sum or otherwise — at an earlier age, when said employee, in presumably better physical and mental
condition, can enjoy them better and longer.
 
As a matter of fact, one of the advantages of early retirement is that the corresponding retirement
benefits, usually consisting of a substantial cash windfall, can early on be put to productive and
profitable uses by way of income-generating investments, thereby affording a more significant
measure of financial security and independence for the retiree who, up till then, had to contend with
life's vicissitudes within the parameters of his fortnightly or weekly wages. Thus we are now seeing
many CBAs with such early retirement provisions. And the same cannot be considered a diminution
of employment benefits.
 
Being a product of negotiation, the CBA between the petitioner and the union intended the provision
on compulsory retirement to be beneficial to the employees-union members, including herein private
respondent. When private respondent ratified the CBA with the union, he not only agreed to the CBA
but also agreed to conform to and abide by its provisions. Thus, it cannot be said that he was illegally
dismissed when the CBA provision on compulsory retirement was applied to his case.
 
Incidentally, we call attention to Republic Act No. 7641, known as "The Retirement Pay Law", which
went into effect on January 7, 1993. Although passed many years after the compulsory retirement of
herein private respondent, nevertheless, the said statute sheds light on the present discussion when it
amended
 
Art. 287 of the Labor Code, to make it read as follows:
 
ART. 287.  Retirement. — Any employee may be retired upon reaching the retirement age establish
in the collective bargaining agreement or other applicable employment contract.
 
In the absence of a retirement plan or agreement providing for retirement benefits of employees in the
establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-
five (65) years which is hereby declared the compulsory retirement age, who has served at least five
(5) years in the said establishment may retire . . ."
 
The aforequoted provision makes clear the intention and spirit of the law to give employers and
employees a free hand to determine and agree upon the terms and conditions of retirement. Providing
in a CBA for compulsory retirement of employees after twenty-five (25) years of service is legal and
enforceable so long as the parties agree to be governed by such CBA. The law presumes that
employees know what they want and what is good for them absent any showing that fraud or
intimidation was employed to secure their consent thereto.
R&E Transport vs. Latag
GR No. 155214, February 13, 2004

Facts:

Pedro Latag was a regular employee of La Mallorca Taxi for 14 years. When La Mallorca ceased
from business operations, Latag transferred to R & E Transport, Inc. Latag got sick in January 1995
and was forced to apply for partial disability with the SSS, which was granted. When he recovered, he
reported for work in September 1998 but was no longer allowed to continue working on account of
his old age. Latag asked for his retirement pay but was ignored. This prompted him to file a case for
payment of his retirement pay before the NLRC. Unfortunately, Latag died and his wife, Avelina
Latag, substituted him. Labor Arbiter rendered a decision in favor of Latag entitling him a sum of Php
277,500.00 by way of retirement pay.

Petitioners offered Latag Php 38,500.00 instead which she accepted. She was also asked to sign an
already prepared quitclaim and release and a joint motion to dismiss the case. Petitioners filed the
quitclaim and motion to dismiss but Labor arbiter’s decision stands and writ of execution was
prepared in due course.

Petitioners interposed an appeal before the NLRC but was dismissed for failure to post a cash or
surety bond, as mandated by law. Upon motion, NLRC reconsidered the appeal.
Respondent appealed to the CA, contending that an employer’s appeal of a decision involving
monetary awards may be perfected only upon the posting of an adequate cash or surety bond. CA
thus ruled that the labor arbiter’s had already become final and executory.

Issue:

How should the retirement pay of Latag be made?

Held:

In Article 287 of the Labor Code, as amended by Republic Act No. 7641, it provides:

Art. 287. Retirement: In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or
more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age,
who has served at least five (5) years in said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction
of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one half-month salary shall mean fifteen
(15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five
(5) days of service incentive leaves.

It is accepted that taxi drivers do not receive fixed wages, but retain only those sums in excess of the
“boundary” or fee they pay to the owners or operators of their vehicles. Thus, the basis for computing
their benefits should be the average daily income. In this case, the CA found that Pedro was earning
an averageof five hundred pesos (Php 500) per day. We thus compute his retirement pay as follows:
Php 500 x 15 days x 14 years of service equals Php 105,000.
Rufina Patis vs. Alusitain
GR No. 146202, July 14, 2004

Facts:

In March 1948, Alusitain was hired as a laborer at the Rufina Patis Factory owned and operated by
petitioner Lucas. After close to forty three years or on February 19, 1991, Alusitain admittedly
tendered his letter of resignation. On May 22, 1991, Alusitain executed a duly notarized affidavit of
separation from employment and submitted the same on even date to the Pensions Department of the
Social Security System (SSS).

On January 7, 1993, Republic Act No. 7641 (R.A. 7641), "AN ACT AMENDING ARTICLE 287 OF
PRESIDENTIAL DECREE NO. 442, AS AMENDED OTHERWISE KNOWN AS THE LABOR
CODE OF THE PHILIPPINES, BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED
PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIRMENT PLAN IN THE
ESTABLISHMENT," took effect.

Sometime in 1995, Alusitain, claiming that he retired from the company on January 31, 1995, having
reached the age of 65 and due to poor health, verbally demanded from petitioner Lucas for the
payment of his retirement benefits.

Petitioner Lucas, however, refused to pay the retirement benefits of Alusitain, prompting the latter to
make a written demand on September 20, 1995. Lucas, however, remained adamant in his refusal to
give in to Alusitain's demands. Having failed to arrive at an amicable settlement, Alusitain filed on
November 17, 1995 a complaint before the NLRC against petitioners Rufina Patis Factory and Lucas
for non-payment of retirement benefits.

Issue:

Whether or not respondent is entitled to the retirement benefits.

Held:

Negative

R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure
and as a curative statute that absent a retirement plan devised by, an agreement with, or a voluntary
grant from, an employer can respond, in part at least, to the financial well-being of workers during
their twilight years soon following their life of labor. There should be little doubt about the fact that
the law can apply to labor contracts still existing at the time the statute has taken effect, and that its
benefits can be reckoned not only from the date of the law's enactment but retroactively to the time
said employment contracts have started.

R.A. 7641 may be given retroactive effect where (1) the claimant for retirement benefits was still the
employee of the employer at the time the statute took effect; and (2) the claimant had complied with
the requirements for eligibility under the statute for such retirement benefits. It is thus clear that in
order for respondent to claim retirement benefits from petitioner Rufina Patis Factory, he has to prove
that he was its employee at the time R.A. 7641 took effect.
In the case at bar, it was incumbent on Alusitain to prove that he retired on January 31, 1995 and not
on February 20, 1991 as indicated on his letter of resignation. This, he failed to do.
Sta. Catalina College vs. NLRC
416 SCRA 243

Facts:

In 1955, Hilaria was hired as an elementary school teacher at the Sta. Catalina College (petitioner
school). In 1970, she applied for and was granted a one year leave of absence without pay on account
of the illness of her mother. After the expiration in 1971 of her leave of absence, she had not been
heard from by petitioner school. In the meantime, she was employed as a teacher at 2 different
schools during school year 1980-1981 and1981-1982. . Still the same year, Hilaria reached the
compulsory retirement age of 65. Retiring pursuant to Article 287 of the Labor Code, as amended by
Republic Act 7641, petitioner school pegged her retirement benefits computed on the basis of fifteen
years of service from 1982 to 1997. . From retirement benefits was deducted an amount representing
reimbursement of the employer’s contribution to her retirement benefits under the Private Education
Retirement Annuity Association (PERAA) which Hilaria had already received.  Deducted too was an
amount representing the gratuity pay which was given to her. Having failed to agree on how the
retirement benefits should be computed, Hilaria filed a complaint before the NLRC Regional
Arbitration against school for non-payment of retirement benefits. Labor Arbiter ruled in favor of the
school on the issue of respondent’s years of service. An appeal to NLRC revised the decision and
changed respondent’s years of service to 29 years and ruled that the gratuity pay shall not be deducted
from the retirement package. Appeal to CA by petitioners was dismissed holding that petitioners
failed to prove that Hilaria had abandoned her position in 1970, as petitioner school even gave her a
Plaque of Appreciation for thirty years of service “precisely because of her thirty year continuous
service,” and that petitioner school never sent notice to her dismissing her, hence, the employer-
employee relationship was not severed and, therefore, her services for petitioner school during the
period from 1955-1970 should be credited in the computation of her retirement benefits.

Issue:

Should the retirement benefits or respondent be counted as a “continuous years of service”

Held:

On the issue of respondent’s years of service, SC ruled that Hilaria cannot be credited for her
services in 1955-1970 in the determination of her retirement benefits.  For, after her one year leave of
absence expired in 1971 without her requesting for extension thereof as in fact she had not been heard
from until she resurfaced in 1982 when she reapplied with petitioner school, she abandoned her
teaching position as in fact she was employed elsewhere in the interim and effectively relinquished
the retirement benefits accumulated during the said period. On the issue of the gratuity pay, SC ruled
that gratuity pay earlier awarded to Hilaria should not be deducted from the retirement benefits due
her, the same is in order.  Gratuity pay is separate and distinct from retirement benefits. It is paid
purely out of generosity. Gratuity pay is paid to the beneficiary for the past services or favor rendered
purely out of the generosity of the giver or grantor.  Gratuity, therefore, is not intended to pay a
worker for actual services rendered or for actual performance.  It is a money benefit or bounty given
to the worker, the purpose of which is to reward employees who have rendered satisfactory service to
the company. Retirement benefits, on the other hand, are intended to help the employee enjoy the
remaining years of his life, releasing him from the burden of worrying for his financial support, and
are a form of reward for his loyalty to the employer.
Honda Phils. vs. Samahan ng mga Manggagawa sa Honda
GR No. 145561, June 15, 2005

Facts:

Petitioner Honda and respondent union Samahan ng Malayang Manggagawa sa Honda forged
Collective Bargaining Agreement which contained provisions on the 13th month pay, 14th month pay
wand financial assistance. The CBA is effective until year 2000.

In the latter part of 1998, the parties started negotations for their 4th and 5th years of their CBA.
Talks between the paries bogged down, respondent union filed a Notice of Strike and Honda
thereafter filed a Notice of Lockout. The DOLE Secretary ordered the parties to cease and desist from
committing acts that would aggravate the situation. Both parties complied accordingly.

On May 11, 1999, respondent then again filed a second Notice of Strike on the ground of unfair
labor practice alleging that Honda illegally contracted out work to the detriment of the workers.
Respondent union went on strike and picketed the premises of Honda on May 19, 1999. It was settled
referred to NLRC for compulsory arbitration.

On November 22, 1999, the management of Honda issued a memorandum announcing its new
computation of the 13th and 14th month pay to be granted to all its employees whereby the thirty-one
(31)-day long strike shall be considered unworked days for purposes of computing said benefits.

As per the company’s new formula, the amount equivalent to 1/12 of the employees’ basic salary
shall be deducted from these bonuses, with a commitment however that in the event that the strike is
declared legal, Honda shall pay the amount deducted.

Issue:

Whether or not the pro-rated computation of the 13 th month pay and the other bonuses in question
is valid and lawful.

Held:

Presidential Decree No. 851 (13th Month Pay Law) provided that the minimum 13 th month pay
required by law shall not be less than one-twelfth (1/12) of the total basic salary earned by an
employee within a calendar year. The revised guidelines also provided for a pro-ration of this benefit
only in cases of resignation or separation from work.  As the rules state, under these circumstances,
an employee is entitled to a pay in proportion to the length of time he worked during the year,
reckoned from the time he started working during the calendar year.

The Court agrees with the findings of the arbitrator the assailed CBA provisions are far from
being unequivocal. A cursory reading of the provisions will show that they did not state categorically
whether the computation of the 13th month pay, 14th month pay and the financial assistance would
be based on one full month’s basic salary of the employees, or pro-rated based on the compensation
actually received. Therefore it is just proper that the ambiguity shall be resolved in favor of labor as
mandated by Article 1702 of the Civil Code.

In the present case, there being no gap in the service of the workers during the calendar year in
question, the computation of the 13 th month pay should not be pro-rated but should be given in full
More importantly, it has not been refuted that Honda has not implemented any pro-rating of the 13 th
month pay before the instant case.  Honda did not adduce evidence to show that the 13 th month, 14th
month and financial assistance benefits were previously subject to deductions or pro-rating or that
these were dependent upon the company’s financial standing. The Company (Honda) explicitly
accepted that it was the strike held that prompted them to adopt a pro-rata computation. It has also
been known that full month payment of the 13 th month pay is the established practice at Honda which
can be considered as something that has ripened into a company practice.
Wherefore, petitioner Honda Philippines, Inc.’s (Honda) pro-rated payment of the 13 th and 14th month
pay and financial assistance to its employees was invalid.
Jaculbe vs. Siliman University
GR No. 156934, March 16, 2007

Facts

Sometime in 1958, petitioner began working for respondent’s university medical center as a nurse.

In a letter dated December 3, 1992, respondent, through its Human Resources Development
Office, informed petitioner that she was approaching her 35 th year of service with the university and
was due for automatic retirement on November 18, 1993, at which time she would be 57 years old.
This was pursuant to respondent’s retirement plan for its employees which provided that its members
could be automatically retired “upon reaching the age of 65 or after 35 years of uninterrupted service
to the university.” Respondent required certain documents in connection with petitioner’s impending
retirement.
 
A brief exchange of lettera between petitioner and respondent followed.  Petitioner emphatically
insisted that the compulsory retirement under the plan was tantamount to a dismissal and pleaded
with respondent to be allowed to work until the age of 60 because this was the minimum age at which
she could qualify for SSS pension. But respondent stood pat on its decision to retire her, citing
“company policy.”
 
On November 15, 1993, petitioner filed a complaint in the National Labor Relations Commission
(NLRC) for “termination of service with preliminary injunction and/or restraining order.” On
November 18, 1993, respondent compulsorily retired petitioner.

Issue

Whether or not respondent’s retirement plan imposing automatic retirement after 35 years of
service contravene the security of tenure clause in the Constitution and the Labor Code.

Whether or not respondent commit illegal dismissal by retiring petitioner solely by reason of the
retirement plan.

Held:

Retirement plans allowing employers to retire employees who are less than the compulsory
retirement age of 65 are not per se repugnant to the constitutional guaranty of security of tenure.
Article 287 of the Labor Code provides:
 
ART. 287. Retirement - Any employee may be retired upon reaching the retirement age
established in the collective bargaining agreement or other applicable employment contract. xxx
 
By its express language, the Labor Code permits employers and employees to fix the applicable
retirement age at below 60 years.
 
However, the plan runs afoul of the constitutional guaranty of security of tenure contained in
Article XIII, also known as the provision on Social Justice and Human Rights.

From the language of the foregoing retirement plan rules, the compulsory nature of both
membership in and contribution to the plan debunked the theory that petitioner’s “voluntary
contributions” were evidence of her willing participation therein. It was through no voluntary act of
her own that petitioner became a member of the plan. In fact, the only way she could have ceased to
be a member thereof was if she stopped working for respondent altogether. Furthermore, in the rule
on contributions, the repeated use of the word “shall” ineluctably pointed to the conclusion that
employees had no choice but to contribute to the plan (even when they were on leave).

Respondent’s retirement plan had been in effect for more than 30 years. What was not pointed
out, however, was that the retirement plan came into being in 1970 or 12 years after petitioner started
working for respondent. In short, it was not part of the terms of employment to which petitioner
agreed when she started working for respondent.  Neither did it become part of those terms shortly
thereafter.

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.

In this case, no agreement, collective or otherwise, justifies the latter’s imposition of the early
retirement age in its retirement plan, opting instead to harp on petitioner’s alleged “voluntary”
contributions to the plan, which was simply untrue. The truth was that petitioner had no choice but to
participate in the plan, given that the only way she could refrain from doing so was to resign or lose
her job. It is axiomatic that employer and employee do not stand on equal footing, a situation which
often causes an employee to act out of need instead of any genuine acquiescence to the employer.
This was clearly just such an instance.     
        
Not only was petitioner still a good eight years away from the compulsory retirement age but she
was also still fully capable of discharging her duties as shown by the fact that respondent’s board of
trustees seriously considered rehiring her after the effectivity of her “compulsory retirement.”
 
As already stated, an employer is free to impose a retirement age less than 65 for as long as it has
the employees’ consent. Stated conversely, employees are free to accept the employer’s offer to lower
the retirement age if they feel they can get a better deal with the retirement plan presented by the
employer. Thus, having terminated petitioner solely on the basis of a provision of a retirement plan
which was not freely assented to by her, respondent was guilty of illegal dismissal. 
Intercontinental Broadcoasting Corp. vs. Amarilla
GR No. 162775, October 27, 2006

Facts: 

On various dates, petitioner employed certain persons at its Cebu station. On March 1, 1986, the
government sequestered the station, including its properties, funds and other assets, and took over its
management and operations from its owner, Roberto Benedicto. However, in December 1986, the
government and Benedicto entered into a temporary agreement under which the latter would retain its
management and operation.  On November 3, 1990, the Presidential Commission on Good
Government (PCGG) and Benedicto executed a Compromise Agreement, where Benedicto
transferred and assigned all his rights, shares and interests in petitioner station to the government.
The PCGG submitted the Agreement to the Sandiganbayan in Civil Case No. 0034 entitled “Republic
of the Philippines v. Roberto S. Benedicto, et al.”
 
In the meantime, the four (4) employees retired from the company and received, on staggered
basis, their retirement benefits under the 1993 Collective Bargaining Agreement (CBA) between
petitioner and the bargaining unit of its employees.  

In the meantime, a P1,500.00 salary increase was given to all employees of the company, current
and retired, effective July 1994.  However, when the four retirees demanded theirs, petitioner refused
and instead informed them via a letter that their differentials would be used to offset the tax due on
their retirement benefits in accordance with the National Internal Revenue Code (NIRC). Amarilla
was informed that the P71,480.00 of the amount due to her would be used to offset her tax liability of
P340,641.42. Otadoy was also informed in a letter dated July 5, 1999, that his salary differential of
P170,250.61 would be used to pay his tax liability which amounted to P127,987.57. Since no tax
liability was withheld from his retirement benefits, he even owed the company P17,727.26 after the
offsetting. Quiñones was informed that he should have retired compulsorily in 1992 at age 55 as
provided in the CBA, and that since he was already 58 when he retired, he was no longer entitled to
receive salary increases from 1992 to 1995. Consequently, he was overpaid by P137,932.22 for the
“extension” of his employment from 1992 to 1995, which amount he was obliged to return to the
company.   In any event, his claim for salary differentials had expired pursuant to Article 291 of the
Labor Code of the Philippines. Lagahit’s claim for salary differential of P73,165.23 was rejected by
petitioner in a letter dated July 6, 1999, on the ground that he had a tax liability of P396,619.03; since
the amount would be used as partial payment for his tax liability, he still owed the company
P323,453.80.
 
The four (4) retirees filed separate complaints against IBC TV-13 Cebu and Station Manager
Louella F. Cabañero for unfair labor practice and non-payment of backwages before the NLRC,
Regional Arbitration Branch VII.
Arguments

Petitioner: 1) Under Section 21 of the NIRC,  the retirement benefits received by employees from
their employers constitute taxable income.  While retirement benefits are exempt from taxes under
Section 28(b) of said Code, the law requires that such benefits received should be in accord with a
reasonable retirement plan duly registered with the Bureau of Internal Revenue (BIR) after
compliance with the requirements therein enumerated.  Since its retirement plan in the 1993 CBA was
not approved by the BIR, complainants were liable for income tax on their retirement benefits.  It was
mandated to withhold the income tax due from the retirement benefits of said complainants.  It was
not estopped from correcting the mistakes of its former officers. Under the law, complainants are
obliged to return what had been mistakenly delivered to them.
 2) The retirement benefits received by the complainants were based on the CBA between it and
its bargaining units. Under Sections 72 and 73 of the NIRC, it is obliged to deduct and withhold taxes
determined in accordance with the rules and regulations to be prepared by the Secretary of Finance. 
It was its duty to withhold the taxes on complainants’ retirement benefits, otherwise, it would be held
civilly and criminally liable under Sections 251, 254 and 255 of the NIRC.

3) Respondents are liable for taxes on their retirement benefits because the retirement plan under
the CBA was not approved by the BIR.  It insisted that it failed to comply with the requisites of
Section 32 of the NIRC and Rule II, Section 6 of the Rules Implementing the New Retirement Law
which provides that retirement pay shall be tax exempt upon compliance with the requirements under
Section 2(b) of Revenue Regulation  No. 12-86 dated August 1, 1986.

Respondent: Their retirement benefits are exempt from income tax under Article 32 of the NIRC. 
Sections 28 and 72 of the NIRC, which petitioner relied upon in withholding their differentials, do not
apply to them since these provisions deal with the applicable income tax rates on foreign corporations
and suits to recover taxes based on false or fraudulent returns. They pointed out that, under Article
VIII of the CBA, only those employees who reached the age of 60 were considered retired, and those
under 60 had the option to retire, like Quiñones and Otadoy who retired at ages 58 and 51,
respectively. 

Issue
Whether or not the retirement benefits of respondents are part of their gross income.

Held

Affirmative

Under the CBA, it is not obliged to pay for the taxes on the respondents’ retirement benefits. We
have carefully reviewed the CBA and find no provision where petitioner obliged itself to pay the
taxes on the retirement benefits of its employees.
 
Also, under the NIRC, the retirement benefits of respondents are part of their gross income
subject to taxes. Section 28 (b) (7) (A) of the NIRC of 1986 provides:
 
Sec. 28.           Gross Income. –
 
xxxx
 
(b)        Exclusions from gross income. - The following items shall not be included in gross income
and shall be exempt from taxation under this Title:
 
xxxx
(7)        Retirement benefits, pensions, gratuities, etc. - (A) Retirement benefits received by officials
and employees of private firms whether individuals or corporate, in accordance with a reasonable
private benefit plan maintained by the employer: Provided, That the retiring official or employee has
been in the service of the same employer for at least ten (10) years and is not less than fifty years of
age at the time of his retirement: Provided, further, That the benefits granted under this subparagraph
shall be availed of by an official or employee only once. For purposes of this subsection, the term
"reasonable private benefit plan" means a pension, gratuity, stock bonus or profit-sharing plan
maintained by an employer for the benefit of some or all of his officials or employees, where
contributions are made by such employer for officials or employees, or both, for the purpose of
distributing to such officials and employees the earnings and principal of the fund thus accumulated,
and wherein it is provided in said plan that at no time shall any part of the corpus or income of the
fund be used for, or be diverted to, any purpose other than for the exclusive benefit of the said official
and employees.
 
 
Revenue Regulation No. 12-86, the implementing rules of the foregoing provisions, provides:
 
(b) Pensions, retirements and separation pay. – Pensions, retirement and separation pay constitute
compensation subject to withholding tax, except the following:
 
(1)        Retirement benefit received by official and employees of private firms under a reasonable
private benefit plan maintained by the employer, if the following requirements are met:
 
(i)          The retirement plan must be approved by the Bureau of Internal Revenue;
 
(ii)         The retiring official or employees must have been in the service of the same employer for at
least ten (10) years and is not less than fifty (50) years of age at the time of retirement; and
 
(iii)         The retiring official or employee shall not have previously availed of the privilege under the
retirement benefit plan of the same or another employer.
 
 
Thus, for the retirement benefits to be exempt from the withholding tax, the taxpayer is burdened
to prove the concurrence of the following elements: (1) a reasonable private benefit plan is
maintained by the employer; (2) the retiring official or employee has been in the service of the same
employer for at least 10 years; (3) the retiring official or employee is not less than 50 years of age at
the time of his retirement; and (4) the benefit had been availed of only once.

Under Section 80 of the NIRC, petitioner, as employer, was obliged to withhold the taxes on said
benefits and remit the same to the BIR.
 
Section 80. Liability for Tax. –
 
(A) Employer. – The employer shall be liable for the withholding and remittance of the correct
amount of tax required to be deducted and withheld under this Chapter. If the employer fails to
withhold and remit the correct amount of tax as required to be withheld under the provision of this
Chapter, such tax shall be collected from the employer together with the penalties or additions to the
tax otherwise applicable in respect to such failure to withhold and remit.

An agreement to pay the taxes on the retirement benefits as an incentive to prospective retirees
and for them to avail of the optional retirement scheme is not contrary to law or to public morals.
Petitioner had agreed to shoulder such taxes to entice them to voluntarily retire early, on its belief that
this would prove advantageous to it.  Respondents agreed and relied on the commitment of petitioner.
For petitioner to renege on its contract with respondents simply because its new management had
found the same disadvantageous would amount to a breach of contract.  There is even no evidence
that any “new management” was ever installed by petitioner after respondents’ retirement; nor is
there evidence that the Board of Directors of petitioner resolved to renege on its contract with
respondents and demand the reimbursement for the amounts remitted by it to the BIR.
 
 The well-entrenched rule is that estoppel may arise from a making of a promise if it was intended
that the promise should be relied upon and, in fact, was relied upon, and if a refusal to sanction the
perpetration of fraud would result to injustice. The mere omission by the promisor to do whatever he
promises to do is sufficient forbearance to give rise to a promissory estoppel.
Letran Calamba Faculty & Employees Association vs. NLRC et al
GR No 156225, January 29, 2008

Facts:

The Letran Calamba Faculty and Employees Association (petitioner) filed a complaintagainst
Colegio de San Juan de Letran, Calamba, Inc. (respondent) for collection of various monetary claims
due its members. The Labor Arbiter (LA) handling the consolidated cases, denied and dismissed the
respective complaints.

Issue:

WON the pay of the faculty members for teaching overloads should be included as basis in the
computation of their 13th month pay?

Held:

Teaching overload may not be considered part of basic salary.

Under the Rules and Regulations Implementing PD 851, the following compensations are deemed
not part of the basic salary: a) cost-of-living allowances granted pursuant to PD 525 and Letter of
Instruction No. 174; b) profit sharing payments; c) all allowances and monetary benefits which are
not considered or integrated as part of the regular basic salary of the employee at the time of the
promulgation of the Decree on Dec 16, 1975.

Under a later set of Supplementary Rules and Regulations Implementing PD 851 issued by the
then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part
of the basic salary and in the computation of the 13th-month pay.

The all-embracing phrase "earnings and other remunerations" which are deemed not part of the
basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium
for works performed on rest days and special holidays, pay for regular holidays and night
differentials. As such they are deemed not part of the basic salary and shall not be considered in the
computation of the 13th-month pay.

As provided for by Art 87 of the Labor Code, it is clear that overtime pay is an additional
compensation other than and added to the regular wage or basic salary, for reason of which such is
categorically excluded from the definition of basic salary under the Supplementary Rules and
Regulations Implementing PD 851.

In the same manner that payment for overtime work and work performed during special holidays
is considered as additional compensation apart and distinct from an employee's regular wage or basic
salary, an overload pay, owing to its very nature and definition, may not be considered as part of a
teacher's regular or basic salary, because it is being paid for additional work performed in excess of
the regular teaching load.
Reyes vs. NLRC et al
GR No 160233, August 8, 2007

Facts

Petitioner was employed as a salesman at private respondent’s Grocery Division in Davao City
on August 12, 1977.  He was eventually appointed as unit manager of Sales Department-South
Mindanao District, a position he held until his retirement on November 30, 1997.  Thereafter, he
received a letter regarding the computation of his separation pay.

Insisting that his retirement benefits and 13 th month pay must be based on the average monthly
salary of P42,766.19, which consists of P10,919.22 basic salary and P31,846.97 average monthly
commission, petitioner refused to accept the check issued by private respondent in the amount of
P200,322.21.  Instead, he filed a complaint before the arbitration branch of the NLRC for retirement
benefits, 13th month pay, tax refund, earned sick and vacation leaves, financial assistance, service
incentive leave pay, damages and attorney’s fees.

Issue

Whether or not commissions form part of the basic salary.

Held:

Negative.

The salesmen’s commissions, comprising a pre-determined percentage of the selling price of the
goods sold by each salesman, were properly included in the term basic salary for purposes of
computing the 13th month pay.  The salesmen’s commission are not overtime payments, nor profit-
sharing payments nor any other fringe benefit, but a portion of the salary structure which represents
an automatic increment to the monetary value initially assigned to each unit of work rendered by a
salesman.

Contrarily, in Boie-Takeda, the so-called commissions paid to or received by medical

representatives of Boie-Takeda Chemicals or by the rank and file employees of Philippine Fuji Xerox
Co., were excluded from the term basic salary because these were paid to the medical representatives
and rank-and-file employees as productivity bonuses, which are generally tied to the productivity, or
capacity for revenue production, of a corporation and such bonuses closely resemble profit-sharing
payments and have no clear direct or necessary relation to the amount of work actually done by each
individual employee. Further, commissions paid by the Boie-Takeda Company to its medical
representatives could not have been sales commissions in the same sense that Philippine Duplicators
paid the salesmen their sales commissions. Medical representatives are not salesmen; they do not
effect any sale of any article at all.
 
In fine, whether or not a commission forms part of the basic salary depends upon the
circumstances or conditions for its payment. Should petitioner’s commissions be considered in the
computation of his retirement benefits and 13th month pay? No, it should not.

Article 287 of the Labor Code, as amended by Republic Act No. 7641, otherwise known as The New
Retirement Law, provides xxx. Likewise, Section 5 of Rule II of the Rules Implementing the New
Retirement Law, provides xxx.

The article provides for two types of retirement: (a) compulsory and (b) optional.  The first takes
place at age 65, while the second is primarily determined by the collective bargaining agreement or
other employment contract or employer’s retirement plan.  In the absence of any provision on
optional retirement in a collective bargaining agreement, other employment contract, or employer’s
retirement plan, an employee may optionally retire upon reaching the age of 60 years or more, but not
beyond 65 years, provided he has served at least five years in the establishment concerned.
 
For the purpose of computing retirement pay, “one-half month salary” shall include all of the
following:
 
1) 15 days salary based on the latest salary rate;
2) cash equivalent of 5 days of service incentive leave (or vacation leave);
3) 1/12 of the 13th month pay;
4) other benefits as may be agreed upon by employer and employee for inclusion.
 
But, it shall not include the following:
 
1) cost of living allowance;
2) profit-sharing payments; and
3) other monetary benefits which are not considered as part of or integrated into the regular salary of
the employees
 

Petitioner filed for optional retirement upon reaching the age of 60.  However, the basis in
computing his retirement benefits is his latest salary rate of P10,919.22 as the commissions he
received are in the form of profit-sharing payments specifically excluded by the foregoing
rules. when these earnings and remuneration are closely akin to fringe benefits, overtime pay or
profit-sharing statements, they are properly excluded in computing retirement pay.  However, sales
commissions which are effectively an integral portion of the basic salary structure of an employee,
shall be included in determining the retirement pay.

At bar, petitioner Rogelio J. Reyes was receiving a monthly sum of P10,919.22 as salary
corresponding to his position as Unit Manager.  Thus, the “overriding commissions” paid to him by
Universal Robina Corp. could not have been ‘sales commissions’ in the same sense that Philippine
Duplicators paid its salesmen sales commissions.  Unit Managers are not salesmen; they do not effect
any sale of article at all.  Therefore, any commission which they receive is certainly not the basic
salary which measures the standard or amount of work of complainant as Unit Manager. 
Accordingly, the additional payments made to petitioner were not in fact sales commissions but rather
partook of the nature of profit-sharing business.  Certainly, from the foregoing, the doctrine in Boie-
Takeda Chemicals and Philippine Fuji Xerox Corporation, which pronounced that commissions are
additional pay that does not form part of the basic salary, applies to the present case.
 

Aside from the fact that as unit manager petitioner did not enter into actual sale transactions, but
merely supervised the salesmen under his control, the disputed commissions were not regularly
received by him.  Only when the salesmen were able to collect from the sale transactions can
petitioner receive the commissions.  Conversely, if no collections were made by the salesmen, then
petitioner would receive no commissions at all. In fine, the commissions which petitioner received
were not part of his salary structure but were profit-sharing payments and had no clear, direct or
necessary relation to the amount of work he actually performed.  The collection made by the
salesmen from the sale transactions was the profit of private respondent from which petitioner had a
share in the form of a commission. 

The criterion which would entitle him to a commission, but the actual sale transactions brought
about by the individual efforts of the salesmen.   
 

Insofar as what constitutes “basic salary,” the foregoing discussions equally apply to the
computation of petitioner’s 13th month pay.

Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is
used as the basis in the determination of his 13th-month pay.  Any compensations or remunerations
which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory
bonus.
 
Under the Rules and Regulations Implementing Presidential Decree 851, the following
compensations are deemed not part of the basic salary a) Cost-of-living allowances granted pursuant
to Presidential Decree 525 and Letter of Instruction No. 174; b)  Profit sharing payments; c)  All
allowances and monetary benefits which are not considered or integrated as part of the regular basic
salary of the employee at the time of the promulgation of the Decree on December 16, 1975.
Arco Metal Products Co Inc et al vs. Samahan ng Mga Manggagawa sa Arco Metal-NAFLU
GR No 170734, May 14, 2008

Facts:

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the
labor union of petitioner’s rank and file employees. Sometime in December 2003, petitioner paid the
13th month pay, bonus, and leave encashment of three union members in amounts proportional to the
service they actually rendered in a year, which is less than a full twelve (12) months. Respondent
protested the prorated scheme, claiming that on several occasions petitioner did not prorate the
payment of the same benefits to seven (7) employees who had not served for the full 12 months.
According to respondent, the prorated payment violates the rule against diminution of benefits under
Article 100 of the Labor Code. Thus, they filed a complaint before the National Conciliation and
Mediation Board (NCMB).

Issue:

WON the grant of 13th month pay, bonus, and leave encashment in full regardless of actual
service rendered constitutes voluntary employer practice

Held:

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished,
discontinued or eliminated by the employer.

The principle of non-diminution of benefits is founded on the Constitutional mandate to "protect

the rights of workers and promote their welfare and to afford labor full protection. Said mandate in
turn is the basis of Article 4 of the Labor Code which states that all doubts in the implementation and
interpretation of this Code, including its implementing rules and regulations shall be rendered in favor
of labor.

Thus in DavaoFruits Corporation v. Associated Labor Unions, et al.where an employer had

freely and continuously included in the computation of the 13 th month pay those items that were
expressly excluded by the law, we held that the act which was favorable to the employees though not
conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished,
discontinued or eliminated. In Sevilla Trading Company v. Semana, we ruled that the employer’s act
of including non-basic benefits in the computation of the 13 th month pay was a voluntary act and had
ripened into a company practice which cannot be peremptorily withdrawn.
In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely,
voluntarily and consistently granting full benefits to its employees regardless of the length of service
rendered. True, there were only a total of seven employees who benefited from such a practice, but it
was an established practice nonetheless. Jurisprudence has not laid down any rule specifying a
minimum number of years within which a company practice must be exercised in order to constitute
voluntary company practice.Thus, it can be six (6) years,three (3) years,or even as short as two (2)
years.Petitioner cannot shirk away from its responsibility by merely claiming that it was a mistake or
an error, supported only by an affidavit of its manufacturing group head.
Universal Robina Sugar Milling Corp. Caballeda
GR No. 156644, July 28, 2008

Facts:

Agripino Caballeda worked as welder for URSUMCO from March 1989 until June 23, 1997
while Alejandro Cadalin worked for URSUMCO as crane operation from 1976 up to June 15, 1997.
John Gokongwei, Jr. President of URSUMCO issued a memorandum establishing the company
policy on “Compulsory Retirement.” All employees corporate-wide who attain 60 years of age on or
before April 30, 1991 shall be considered retired on May 31, 1991. Subsequently, on December 9,
1992, Republic Act No. 7641 was enacted into law and it took effect on January 7, 1993, amending
Article 287 of the Labor Code.

Agripino and Alejandro having reached the age of 60, were allegedly forced to retire by
URSUMCO. They both accepted their retirement benefits. Later on, Agripino filed a complaint for
illegal dismissal because his compulsory retirement was in violation of the provisions of RA 7641
and, was in effect, a form of illegal dismissal.

Issues:

RA 7641 can be given retroactive effect; whether or not Agripino Caballeda and Alejandro
Cadalin voluntarily retired from the service.

Held:

The issue of retroactivity has long been settled in the case of Enriquez Security Services, Inc. vs.
Cabotaje.

This doctrine has been repeatedly upheld and clarified in several cases. Pursuant thereto, this
Court imposed two (2) essential requisites in order that R.A. 7641 may be given retroactive effect:
(1) the claimant for retirement benefits was still in the employ of the employer at the time the statute
took effect; and (2) the claimant had complied with the requirements for eligibility for such
retirement benefits under the statute.

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. The age of retirement is primarily determined by the existing agreement
between the employer and the employees. However, in the absence of such agreement, the retirement
age shall be fixed by law. Under Art. 287 of the Labor Code as amended, the legally mandated age
for compulsory retirement is 65 years, while the set minimum age for optional retirement is 60 years.

In this case, it may be stressed that the CBA does not per se specifically provide for the
compulsory retirement age nor does it provide for an optional retirement plan. It merely provides that
the retirement benefits accorded to an employee shall be in accordance with law. Thus, we must
apply Art. 287 of the Labor Code which provides for two types of retirement: (a) compulsory and (b)
optional. The first takes place at age 65, while the second is primarily determined by the collective
bargaining agreement or other employment contract or employer's retirement plan. In the absence of
any provision on optional retirement in a collective bargaining agreement, other employment
contract, or employer's retirement plan, an employee may optionally retire upon reaching the age of
60 years or more, but not beyond 65 years, provided he has served at least five years in the
establishment concerned. That prerogative is exclusively lodged in the employee.
 Indubitably, the voluntariness of the respondents' retirement is the meat of the instant
controversy. Generally, the law looks with disfavor on quitclaims and releases by employees who
have been inveigled or pressured into signing them by unscrupulous employers seeking to evade their
legal responsibilities and frustrate just claims of employees.They are frowned upon as contrary to
public policy. A quitclaim is ineffective in barring recovery of the full measure of a worker's rights,
and the acceptance of benefits therefrom does not amount to estoppel.

In exceptional cases, the Court has accepted the validity of quitclaims executed by employees if
the employer is able to prove the following requisites: (1) the employee executes a deed of quitclaim
voluntarily; (2) there is no fraud or deceit on the part of any of the parties; (3) the consideration of the
quitclaim is credible and reasonable; and (4) the contract is not contrary to law, public order, public
policy, morals or good customs or prejudicial to a third person with a right recognized by law. In this
case, petitioners failed to establish all the foregoing requisites.

To be precise, only Alejandro was able to claim a partial amount of his retirement benefit. Thus,
it is clear from the decisions of the LA, NLRC and CA that petitioners are still liable to pay Alejandro
the differential on his retirement benefits. On the other hand, Agripino was actually and totally
deprived of his retirement benefit. In Becton Dickinson Phils., Inc. v. National Labor Relations
Commission, we held:

There is no nexus between intelligence, or even the position which the employee held in the
company when it concerns the pressure which the employer may exert upon the free will of the
employee who is asked to sign a release and quitclaim. The employee is confronted with the same
dilemma of whether signing a release and quitclaim and accept what the company offers them, or
refusing to sign and walk out without receiving anything, may do succumb to the same pressure,
being very well aware that it is going to take quite a while before he can recover whatever he is
entitled to, because it is only after a protracted legal battle starting from the labor arbiter level, all the
way to this Court, can he receive anything at all. The Court understands that such a risk of not
receiving anything whatsoever, coupled with the probability of not immediately getting any gainful
employment or means of livelihood in the meantime, constitutes enough pressure upon anyone who is
asked to sign a release and quitclaim in exchange of some amount of money which may be way
below what he may be entitled to based on company practice and policy or by law.

Absent any convincing proof of voluntariness in the submission of the documentary requirements
and the execution of the quitclaim, we cannot simply assume that respondents were not subjected to
the very same pressure. Respondents vigorously pursued this case all the way up to the Supreme
Court. Without doubt, this is a manifestation that respondents had no intention of relinquishing their
employment, wholly incompatible to petitioners' assertion that respondents voluntarily retired.
Respondents did not voluntarily retire but were forced to retire, tantamount to illegal dismissal.
Cercado vs. Uniprom
GR No 188154, October 13, 2010

Facts:

Petitioner Lourdes A. Cercado (Cercado) started working for respondent UNIPROM, Inc.
(UNIPROM) on December 15, 1978 as a ticket seller assigned at Fiesta Carnival, Araneta Center,
Quezon City. Later on, she was promoted as cashier and then as clerk typist.

On April 1, 1980, UNIPROM instituted an Employees’ Non-Contributory Retirement Plan 4

which provides that any participant with twenty (20) years of service, regardless of age, may be
retired at his option or at the option of the company.

On January 1, 2001, UNIPROM amended the retirement plan in compliance with Republic Act
(R.A.) No. 7641.5 Under the revised retirement plan, 6 UNIPROM reserved the option to retire
employees who were qualified to retire under the program.

UNIPROM exercised its option under the retirement plan, and decided to retire Cercado effective
at the end of business hours on February 15, 2001. A check of even date in the amount of
P100,811.70, representing her retirement benefits under the regular retirement package, was issued to
her. Cercado refused to accept the check. And Cercado was no longer given any work. She then filed
a case against UNIPROM before the LA for illegal dismissal before the Labor Arbiter (LA), alleging,
among others, that UNIPROM did not have a bona fide retirement plan, and that even if there was,
she did not consent thereto.
 
Issue:
1)Whether or not UNIPROM has a bona fide retirement plan; and
2) whether petitioner was validly retired pursuant thereto.
 
Held:

Hence, consistent with the Court’s ruling in Jaculbe, having terminated petitioner merely on the
basis of a provision in the retirement plan which was not freely assented to by her, UNIPROM is
guilty of illegal dismissal. Petitioner is thus entitled to reinstatement without loss of seniority rights
and to full backwages computed from the time of her illegal dismissal in February 16, 2001 until the
actual date of her reinstatement. If reinstatement is no longer possible because the position that
petitioner held no longer exists, UNIPROM shall pay backwages as computed above, plus, in lieu of
reinstatement, separation pay equivalent to one-month pay for every year of service. This is consistent
with the preponderance of jurisprudence relative to the award of separation pay in case reinstatement
is no longer feasible