G.R. No.
L-24774 August 21, 1968
RAUL CIPRIANO, plaintiff-appellant,
vs.
SAN MIGUEL CORPORATION, defendant-appellee.
Tolentino, Garcia and D. R. Cruz for plaintiff-appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant-appellee.
CONCEPCION, C.J.:
Direct appeal, on questions purely of law, from a decision of the Court of First
Instance of Manila, dismissing plaintiff's complaint, without costs.
The pertinent facts have been stipulated. Plaintiff, Raul Cipriano, was first
employed, on September 1, 1953, as an apprentice salesman of San Miguel
Corporation, with a monthly salary of P215. On March 1, 1954, he became a
regular salesman, with a monthly salary of P240. Owing to regular promotions
given from time to time to defendant's employees, plaintiff's salary was
subsequently increased until it reached, on January 1, 1963, to P290 a month.
From the date last mentioned to April 17, 1964, he, moreover, got an average
commission of P367.11 a month.
On April 21, 1964, plaintiff received a notice to the effect that, the medical
department having certified that he could no longer continue performing his
functions as a salesman, the defendant was constrained to retire him at the
close of business on April 17, 1964. Plaintiff was then, as he had been for
sometime prior thereto, a member in good standing of San Miguel Brewery
Sales Force Union, which had with the defendant, an agreement, dated February
20, 1963, establishing a "Health, Welfare and Retirement Plan," which was in
force. Section 2 of Article VIII of said plan, 1 provided for retirement benefits at
the rate of "one (1) month's guaranteed basic compensation for each year of
service." Pursuant to this provision, plaintiff got the total sum of P2,292.28,
computed on the basis of the compensation for one (1) month for each year of
service rendered to the defendant. Subsequently, however, plaintiff demanded
payment of the separation pay prescribed in the Termination Pay Law 2 and,
upon failure of the defendant to heed the demand, or on December 1964, he
filed this action to recover said pay, as well as moral damages, exemplary
damages and attorney's fees.
After appropriate proceedings, the lower court rendered the appealed decision
dismissing plaintiff's complaint, upon the ground that the retirement benefits,
received by plaintiff under the aforementioned "Health, Welfare and Retirement
Plan", are in lieu of the termination pay provided by law, contrary to plaintiff's
claim to the effect that this pay is not excluded by said benefits.
Plaintiff's contention is manifestly devoid of merit. His right to the benefits of
the aforementioned plan came into existence by virtue of the agreement
between the defendant and the labor union, of which plaintiff is a member.
Admittedly, said right is subject to the limitations prescribed in the agreement,
Article X of which reads:.1äwphï1.ñët
Regular employees who are separated from the service of the
company for any reason other than misconduct or voluntary
resignation shall be entitled to either 100% of the benefits provided in
Section 2, Article VIII hereof, regardless of their length of service in
the company or to the severance pay provided by law, which ever is the
greater amount.
Pursuant thereto, plaintiff was entitled to "either" the amount prescribed in the
plan "or" the "severance pay provided by law, whichever is the greater amount."
In other words, he had a right to one of the two benefits, not to both, at the same
time. The exclusion of one by the other is clearly deducible, not only from the
terms "either" and "or" used in the agreement, but, also, by the qualifying
phrase "whichever is the greater amount." Indeed, "whichever is the greater
amount" would be immaterial, if the retiring employee were entitled to both.
Needless to say, the benefits under said plan — compensation for one (1) month
for each year of service — is bigger than the termination pay provided by law,
which is limited to one-half of the monthly compensation for every year of
service.3
WHEREFORE, the decision appealed from is hereby affirmed, with costs against
plaintiff-appellant. It is so ordered.
1

G.R. No. 75347 December 11, 1987
FORD PHILIPPINES SALARIED EMPLOYEES ASSOCIATION; ENSITE LIMITED
SALARIED EMPLOYEES UNION; FORD PHILIPPINES WORKERS UNION;
FORD ENSITE WORKERS UNION; and FORD PHILIPPINES PARTS DEPOT
WORKERS UNION, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION (En Banc) LABOR ARBITER
VIRGINIA G. SON, FORD PHILIPPINES, INC. ENSITE LTD. (Phil. Branch-Ford
Stamping Plant), JOHN SAGOVAC (President and Managing Director),
ARMANDO DAVID (Finance Director), and BANK OF THE PHILIPPINE
ISLANDS, respondents.
No. 75628 December 11, 1987
FORD PHILIPPINES, INC., ENSITE LTD. (Phil. Branch) and RICARDO J.
ROMULO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, FORD PHILIPPINES SALARIED
EMPLOYEES ASSOCIATION, ENSITE Ltd. SALARIED EMPLOYEES UNION,
FORD PHILIPPINES WORKERS UNION, INC., FORD PHILIPPINES PARTS
DEPOT WORKERS UNION and ENSITE LTD. WORKERS UNION, respondents.
PADILLA, J.:
These two (2) cases are considered jointly because they involve related issues.
In G.R. No. 75347, the petition for certiorari seeks to set aside the Resolution of
the NLRC en banc, dated 19 June 1986, in NLRC Case No. 11-4073-84, together
with NLRC Resolutions, dated 28 January 1986, and 4 December 1985, and the
Decision of Labor Arbiter Virginia Son, dated 25 June 1985, insofar as said
Resolutions and Decision upheld the validity of the deduction of
P13,000,000.00 from the Retirement Fund, for payment of separation benefits
to the Ford and Ensite Unions, for the benefit of their members.
On the other hand, in G.R. No. 75628, the petition for certiorari, with a prayer
for issuance of restraining order and preliminary injunction, seeks to set aside
2
the Resolutions dated 20 May 1986 and 19 June 1986, issued by the NLRC en
banc also in NLRC Case No. 11-4073-84, insofar as said Resolutions authorized
the issuance of a writ of execution in favor of the Ford and Ensite Unions,
against their respective employer-companies, for the amount of
P10,117,016.20.
The facts are as follows:
In 1971 and 1978, Ford Philippines, Inc. (Ford, for short) and Ensite Ltd. [Phil.
Branch] Ensite for short), established their respective Employees' Retirement
Plans (Plans or Plan, for short), 1 exclusively funded from the companies' own
contributions, and for which, the Bank of the Philippine Islands (BPI) was
appointed as irrevocable trustee. 2 Both Plans contain an "integration
provision," which authorizes the companies to integrate the employees'
retirement, death and disability benefits under the Plans, with and in lieu of
statutory benefits under the provisions on termination pay and retirement
benefits in the Labor Code as wen as other similar laws, and analogous benefits
granted under present or future collective bargaining agreements and other
employees' benefit plans. The "integration provision" is found in Article XI I 1,
Section 5 of the two (2) Plans, to wit:
To the fullest extent, the retirement, death, and disability
benefits accorded participants under the terms of this Plan shall be deemed
integrated with and in lieu of, statutory benefits in the New Labor Code, as well
as other similar laws, as now or hereafter amended, analogous benefits granted
under present or future Collective Bargaining Agreements, and other employee
benefit plans providing analogous benefits which may be imposed by future
legislations. In the event private benefits due under the plan are less than those
due and demandable under the provisions of the termination pay law and/or
present or future Collective Bargaining Agreement and/or future plans of
similar nature imposed by law, the company shall respond for the difference.
(Retirement/Pension Plan as amended, August 1, 1983)
Since the establishment and effectivity of the Retirement Plans, the employees'
termination, retirement and other analogous benefits have been paid out of the
Retirement Fund, pursuant to the "integration provision." 3
In 1984, Ford and Ensite ceased operations in the Philippines, resulting in the
termination of all their employees. The employees were correspondingly paid
their full separation benefits totalling about P50,000,000.00 or an average of
around P45,454.00 for each employee. Of the P50,000,000.00, an estimated
amount of P37,000,000.00 was drawn from the companies' operating funds and
the sum of about P13,000,000.00 was deducted from and paid out of the
accumulated P25,000,000.00 (more or less) Retirement Fund. After the amount
of P13,000,000.00 was withdrawn from the Retirement Fund, there remained a
balance of around P10,000,000.00, which under the Plan should be distributed
among all the employees. 4
However, before the actual distribution of the Fund residue, the different labor
unions, Ford Salaried Union, Ford Workers Union and Ensite Salaried Union,
filed a complaint dated 19 November 1984 before the Ministry of Labor and
Employment (now Department of Labor and Employment, National Capital
Region), assailing the validity of the deduction of P13,000.000.00 from the
Retirement Fund, which were used for separation benefits. 5
For their part, Ford and Ensite maintained that the deduction of the
P13,000,000.00 from the Retirement Fund is in accord with the "integration
provision" of the Plans as well as the various CBAs entered into between
management and the different unions involved.
After due hearing, Labor Arbiter Virginia Son rendered a Decision dated 25 June
1985: 6 1) upholding the validity of the deduction of P13,000,000.00 from the
Retirement Fund; 2) ordering Ford and Ensite to distribute among the unions
their respective shares in the remaining assets of the Fund, including
investments in real estate and stocks, after liquidation of the Fund, ten percent
(10%) of which shag be paid to the unions' counsel as attorney's fees.
On 8 July 1985, the unions appealed to the NLRC from the abovecited decision
of the Labor Arbiter, insofar as it sustained the validity of the deduction by the
companies from the Retirement Fund of said P13,000,000.00 for employees'
separation benefits. But, pending the appeal, the unions filed with the Labor
Arbiter on 20 August 1985 a "Motion for Clarification." The unions informed the
Labor Arbiter that there is reportedly a Fund residue of P8,300,000.00 (later
clarified 'by the companies to be P10,117,016.20) which, according to the
unions, may be distributed, even pending their appeal before the NLRC, as said
appeal allegedly involved only the deduction of P13,000,000.00. In the same
Motion, the unions prayed for the issuance of an order directing the immediate
distribution of the P8,300,000.00 Pl0,l17,016.20) among an the employees. 7
Without acting on the Motion, Labor Arbiter Son called both parties to a series
of conferences. During one such conference, Labor Arbiter Son proposed the
immediate distribution of the Fund residue by the companies, preferably before
Christmas of 1985, provided the unions would agree to withdraw their appeal
then pending before the NLRC in the matter of the amount deducted from the
3
Fund. Ford and Ensite agreed to the proposal. However, the unions reserved
their final decision on whether or not to agree with the proposal until they had
an exact quantification by the companies of the Fund residue. Hence, Ford and
Ensite, through counsel, disclosed that the Fund residue is actually
P10,117,016.20, not P8,300,000.00. 8
But, eventually, the unions rejected the Labor Arbiter's proposal, for they
believed that they would lose out if they were to abandon their appeal. On 15
November 1985, the unions filed a motion for execution, relative to the Fund
residue, before the NLRC [Second Division). 9 However, the companies opposed
said motion for execution on the ground that "to establish the remaining
balances in the retirement funds, so that they could be ripe for liquidation,
there must be a final resolution as to what are the exact amounts thereof; that
execution was not possible at that point in time because the Labor Unions'
appeal had prevented the final determination of the amount involved." 10
On 4 December 1985, NLRC (Second Division) promulgated a Resolution
affirming the decision of Labor Arbiter Son "with modification." The dispositive
portion of said Resolution reads:
WHEREFORE, the appealed decision is, as it is hereby, modified. Consequently,
respondents are hereby ordered to pay in full the retirement pay, the amount to
be taken from the retirement plan, to those complainants who are entitled to
retirement pay and to shoulder whatever balances to be paid according to the
Retirement plan (Art. XVII, Sec. 5).
In all other aspects, the decision is hereby affirmed.
SO ORDERED. 11
Affirmed were the right of the companies to deduct separation benefits from
the Retirement Fund pursuant to the "integration provision," and the order to
distribute the Fund residue among the employees after liquidation of the Fund.
But, as to the modifying portion of the aforequoted dispositive portion of the
Resolution, it seemed both superfluous and confusing, considering that the
employees' separation benefits (inadvertently referred to by NLRC as
"retirement benefits") were already long fully paid. 12
Because of the superfluous modifying portion of the Resolution, the unions filed
a Motion for Clarification and/or Reconsideration on 9 December 1985. They
particularly inquired as to what portion of the Decision of the Labor Arbiter was
modified, and why retirement benefits were being ordered to be paid, and
asking for reconsideration of the Resolution sustaining the companies' right to
pay the employees' separation benefits from the Retirement Fund. 13
The Motion for Clarification and/or Reconsideration was elevated by the
Second Division to the NLRC en banc, which in turn issued a Resolution dated 4
February 1986, denying the motion for lack of merit, and at the same time
stating that the Decision of the Second Division of the Commission (NLRC) in its
entirety clearly orders the respondents (companies) to pay the complainants
the remaining amount of the retirement fund, after deducting the separation
pay as provided for in the integration provision. 14
On 13 February 1986, the unions filed a Second (Urgent) Motion for
Reconsideration with a prayer for oral argument, which prayer for oral
argument was granted. Oral arguments were held on 6 March 1986 before the
NLRC en banc. During the oral arguments, the unions called the attention of the
NLRC regarding their then pending motion for execution earlier filed on 15
November 1985, for the distribution of the Fund residue. 15
On 20 May 1986, NLRC en banc issued a Resolution granting the unions' Motion
for Execution with specific order for Ford and Ensite to set aside 10% of the
Fund residue as attorney's fees for the unions' counsel.
The dispositive portion of the Resolution states: 16
Wherefore, the complainants' motion for issuance of a writ of execution is
hereby granted.
Accordingly, let a writ of execution be issued for P10,117,016.20, ten percent
(10%) of which is to set (sic) aside by the respondent company for the
complainant's counsel as attorney's fees in accordance with the Decision of
Labor Arbiter Virginia G. Son dated 25 June 1985.
On 5 June 1986, Ford and Ensite filed a motion for reconsideration of the
foregoing resolution. On 19 June 1986, the NLRC en banc issued another
Resolution 17 denying the companies' Motion for Reconsideration relative to
the execution over the Fund residue, and at the same time dismissing the
unions' Urgent Motion for Reconsideration concerning the deduction from the
Fund of the separation benefits of the employees.
4
Hence, these two (2) petitions, separately filed by Ford Philippines Salaried
Employees Association et al. (G.R. No. 75347) and Ford Philippines and Ensite
Ltd. (G.R. No. 75628).
The issue in G.R. No. 75347 is whether or not the companies' action in charging
the Retirement Fund for payment of the employees' separation benefits is valid,
while the issue in G.R. No. 75628 is whether or not the issuance of a writ of
execution against the companies, for the distribution of the Fund residue of
P10,117,016.20 to the employees is legal.
The unions contend that the "integration provision" in the Retirement Plan
authorizing Ford and Ensite to integrate the retirement, death and disability
benefits under the Plan with and in lieu of statutory benefits under the
provisions on termination pay and retirement benefits in the Labor Code, is
applicable only in cases of death, disability or retirement, but not to termination
of employment due to closure of business.
Article XIII, Section 5 of the Retirement Plan, otherwise known as the
integration provision is again hereunder quoted:
xxx xxx xxx
Section 5. To the fullest extent the retirement, death and disability benefits
accorded participants under the terms of this Plan shall be deemed integrated
with and in lieu of, statutory benefits under the provisions on termination pay
and retirement benefits in the New Labor Code, as well as other similar laws, as
now or hereafter amended, analogous benefits granted under present or future
Collective Bargaining-Agreements, and other employee benefit plans providing
analogous benefits which may be imposed by future legislations. In the event
private benefits due under the Plan are less than those due and demandable
under the provisions of the termination pay law and/or present or future
Collective Bargaining Agreement and/or future benefit plans of similar nature
imposed by law, the Company shall respond for the difference. 18 (Annex A)
A careful perusal of the foregoing provision shows that the retirement, death
and disability benefits paid under the Plan are deemed integrated with and in
lieu of termination benefits required to be paid under the Labor Code, which in
turn includes instances where the employees are terminated due to closure of
business.
The pertinent provision of the Labor Code is found in Article 283 which reads:
Art. 283. Closure of establishment and reduction of personnel ... in cases of
closures or cessation of operations of establishment or undertaking not due to
serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every
year of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
Consequently, the deduction of P13,000,000.00 from the Retirement Fund,
utilized for the payment of separation benefits is well in accord with the
"integration provision," and, as such, cannot be seriously assailed.
Likewise, the fact that the "integration provision" was incorporated in the
respective CBAs of the companies and the unions, is a clear manifestation that
the same was acceptable to, and accepted by the employees, and that they
recognized the right of the companies to charge the Retirement Fund for
payment of separation benefits. The pertinent provisions of the different
Collective Bargaining Agreements CBAs entered into between management and
the various unions provide the following: 19
FORD SALARIED UNION CBA
ENSITE SALARIED UNION CBA —
Section 4(3). Retirement and Ternination. — The severance and/or retirement
benefits stipulated in the preceding three sections include and are in lieu of any
severance or termination pay provided by law. The Company may pay the
foregoing retirement or severance benefits from a fund established for that
purpose.
FORD WORKERS' UNION CBA
FORD DEPOT UNION CBA
ENSITE WORKERS'UNION CBA —
Section 4. (15.05). The severance or disability benefits
stipulated in the preceding section include and are in lieu of
any severance or termination pay provided by law.
The fact that, since the establishment and effectivity of the Retirement Plans, it
had been the policy and practice of the companies to charge termination,
5
retirement and analogous benefits for separated employees to the Retirement
Fund, 20 without a single complaint or dissent on the part of the unions or any
employee, for that matter, is a manifestation on the part of the unions that
separation benefits (not necessarily retirement benefits) are covered by the
"integration provision" of the Retirement Plans and are chargeable to and
deductible from the Retirement Fund.
The purpose of the Plans or Fund, as provided in Article 1, Section 2 of the
Retirement Plans, is "to assist the employees financially in providing for their
retirement years." 21 This purpose, however, is subject to the terms and
conditions set forth in the Plan. And one such condition is the integration of
separation benefits with and in lieu of the retirement, death, and disability
benefits under the Plan. Such being the case, and considering that the
Retirement Plan should be interpreted in its entirety so as to give meaning to an
the provisions therein, the phrase retirement years should not be literally
construed as referring only to cases of employees' retirement from the
companies, but should be broadly interpreted as inclusive of all other instances
of employees' separation from the companies, such as, by reason of death,
disability or closure of business.
Furthermore, the companies cannot be charged with "diversion of funds" for
deducting the separation benefits from the Retirement Fund, because payment
of separation benefits is among the liabilities contemplated in Section 3, Article
1 of the Plan, which reads:
xxx xxx xxx
Section 3. Exclusive Benefit of the Employees
xxx xxx xxx
Under no circumstances, prior to the satisfaction of all liabilities with respect to
the participants and their beneficiaries under the plan, shall any income or
corpus of the Trust Fund or any Funds contributed to the Trust Fund by the
Company be diverted to or used for purposes other than for the exclusive
benefit of the Plan participants and their beneficiaries. (emphasis supplied)
It cannot also be said that, by deducting the separation benefits from the
Retirement Fund, the companies are paying the employees who have earned
vested rights under the plan, with separation benefits out of their own money,
and that in effect, a "recovery" is made by the companies of their contribution
to the Plan.
The Retirement Fund was fully and solely funded by Ford and Ensite, that is,
without contributions from any of their employees. And the "vested right" of
the employees in the Plan simply means that they are entitled to the Fund even
in cases of their voluntary resignation from the companies. But, as it happened,
the companies closed down, thereby pre-empting any voluntary resignation on
the part of the employees. Still, the employees are paid full separation benefits.
Based on the foregoing, the NLRC and the Labor Arbiter were justified in
sustaining the companies' action in charging the Retirement Fund for payment
of the employees' separation benefits occasioned by the companies' closure of
business in the Philippines.
With regard to the issue in G.R. No. 75628, Ford and Ensite allege that the
Resolution of 20 May 1986 granting the unions' Motion for Execution relative to
the non-controverted amount of P10,117,016.20 is void, having been allegedly
issued after the NLRC had lost jurisdiction over the case. The companies
contend that the NLRC Resolution dated 4 February 1986 denying the unions'
first motion for reconsideration, is a final resolution of all the issues in the case,
so that when the unions filed their second urgent motion for reconsideration,
dated 13 February 1986, the NLRC could not and should not have legally
entertained the same, because under the Interim Guidelines of the Rules of
Court, second motions for reconsideration of final orders or judgments are not
allowed.
The contention of the companies is without merit, because the Fund residue of
P10,117,016.20 was never the subject of any motion for reconsideration, much
less a second motion for reconsideration on the part of the unions. Instead, said
amount had been the subject only of the Urgent Manifestation and Motion for
Writ of Execution, and the Urgent Motion for Resolution of Motion for Writ of
Execution, respectively filed by the unions on 15 November and 9 December
1985, both before the NLRC. In any event, the filing of a second motion for
reconsideration is not barred under the Labor Code or the NLRC Rules.
Administrative and quasi-judicial bodies, like the NLRC, are not bound by the
technical rules of procedure in the adjudication of cases filed before them. 22
Ford and Ensite admit that the Retirement Fund indeed has a balance of
10,117,016.20. Likewise, they recognize the right of the employees to receive
their respective shares in the Fund residue, pursuant to Article XI, Section 3 of
the Retirement Plan, to wit:
Section 3. In the event of termination of the Plan, no future obligation shall be
payable under the Fund. The Trustee shall pay all debts or claims then
6
outstanding against the trust. Thereafter, the Trustee shall distribute the
property held in the Fund to the pensioners, participants and their beneficiaries
on the basis of the mortality and other present value tables approved by the
company. 23
The companies' alternative excuse that it is "actuarially impossible" for them to
compute the individual shares of the employees in the Fund residue, is likewise
untenable. This is because the residue amounting to P10,117,016.20 is
obviously Identifiable up to the last centavo. Not only that. The companies have
in their possession all the necessary documents upon which the computations
can be based, to wit: list of all the entitled employees; their respective service
records; and books of accounts in the possession of the trustee bank (BPI).
Moreover, in one of their conciliation conferences in 1985, before Labor Arbiter
Son, the companies agreed to the distribution of the Fund residue if only the
unions would withdraw their appeal. The fact that the companies agreed to
such a proposal (which however was eventually rejected by the unions as they
would allegedly lose out if their appeal were abandoned), is also an indication
that the computations of the employees' individual shares in the Fund residue
were already prepared and ready at that time, or that at least the companies
were then prepared and willing to immediately make the desired computations
on the basis of the pertinent documents in their possession.
With regard to the automatic deduction by the companies of 10% of the Fund
residue for attorney's fees of the unions' counsel, based on the Decision of
Labor Arbiter Son, we find no rule of law or tenet of judicial ethics violated
thereby. Considering that the workplaces of the employees have been closed
simultaneously with the companies' closure of business, it would be almost
impossible for the unions' counsel to be able to personally collect attorney's
fees from his clients who are presently spread out here and abroad.
Being the custodian of the Fund residue duly belonging to the employees, and
from which Fund, the attorney's fees of unions' counsel are to be paid, the
companies are in a proper position to effect the automatic deduction of the
attomey's fees of the unions' counsel. By doing so, the companies wig not be
acting as agents of the unions, but merely complying with a legal order of the
labor court.
The questioned motion for execution should, however, include only the
individual shares of the members of the unions which are party litigants in
these cases, and should not include the shares of employees who are non- union
members, such as the managerial, supervisory and other non-rank- and-file
employees. The 10% attorney's fees of the unions counsel should also be
charged exclusively against the individual shares of the union members in the
Fund residue.
With regard to the motion for supplemental relief of the unions counsel, dated
23 March 1987, praying that Ford Philippines, Inc. should be ordered to pay the
former the amount of ten percent (10%) of P5,700,000.00 (corresponding to
the employee's share in the selling price of the real estate of Ford Philippines
Inc. located in Sucat Road) which were allegedly distributed to the employees
without the knowledge of the unions' counsel, 24 the same is denied for being
unsubstantiated.
WHEREFORE, the petition in G.R. No. 75347 is DENIED. The Resolutions of the
NLRC en banc, dated 19 June 1986 in NLRC Case No. 11-4073-84, together with
NLRC Resolutions, dated 28 January 1986, and 4 December 1985, insofar as
they sustain the companies' right and action of deducting the amount of
P13,000,000.00 from the Retirement Fund as separation benefits for the
employees, are AFFIRMED.
In G.R. No. 75628, the temporary restraining order dated 25 August 1986 is
LIFTED. The Resolutions of the NLRC dated 20 May 1986 and 19 June 1986,
insofar as they authorize the issuance of a writ of execution in favor of the
unions, are AFFIRMED, as above qualified, with the modification that the writ of
execution issued as to the union members' shares in the amount of
P10,117,016.20, shall include the corresponding interests earned from 30
September 1985, up to the actual payment of such award.
SO ORDERED
7
G.R. No. 80502 May 7, 1990
ENRIQUE RAZON, JR. and METROPORT SERVICES, INC., petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and NICOLAS S. GARZOTA,
respondents.
Nicanor B. Jimeno for petitioners.
Apolo P. Geminde for private respondent.
FERNAN, C.J.:
In this petition for certiorari, petitioners Enrique Razon, Jr. and Metroport
Services, Inc. seek to set aside the resolution dated August 28, 1987 of the
National Labor Relations Commission affirming the decision of the Labor
Arbiter which ordered petitioners to pay private respondent Nicolas S. Garzota
his retirement pay, loyalty bonus and cash conversion of accrued vacation leave
in the total amount of P131,400.00.
Since 1966, private respondent had been employed by petitioner company then
known as E. Razon, Inc. Sometime in 1979, Alfredo Romualdez, the youngest
brother of the then First Lady, Imelda R. Marcos, acquired control of E. Razon,
Inc. and renamed it Metroport Services, Inc. 1
On February 26, 1986, after the February Revolution, petitioners regained
control of the company. 2
On February 28, 1986, because of failing health and having qualified for
compulsory retirement at age 65, private respondent, then the company's chief
accountant, submitted a letter request for retirement. Petitioners withheld
action on said request pending completion of the audit of company books
undertaken by the accounting firm of Sycip, Gorres and Velayo. 3
In the course of such audit, petitioners discovered that the following books of
account allegedly in the custody of private respondent as chief accountant were
missing: [a] general ledgers for the years l981 and l983; [b] cash disbursement
books for 1981 to 1983; [c] cash receipt books for 1981 to 1983; [d] bills
register for 1981 to 1983; [e] cash vouchers for 1981 to 1984; [f] journal
vouchers for 1981 to 1984; and [g] sales register for 1983 to 1984. 4
As a consequence thereof, petitioner Enrique Razon, Jr. issued on March 19,
1986 a memorandum terminating the services of private respondent on the
ground of loss of trust and confidence.
Meanwhile, the Philippine Ports Authority awarded the management and
operation of the arrastre services at the South Harbor to a new company, the
Marina Port Services, Inc., which hired private respondent. The latter has since
been connected with said firm.
Acting on private respondent's complaint for illegal dismissal and unpaid
retirement benefits, the Labor Arbiter on January 30, 1987, rendered the
following decision:
WHEREFORE, premises considered, respondent Metro Port Services, Inc. or
Enrique Razon, Jr., in case of the company's failure to pay, is hereby ordered to
pay complainant Nicolas S. Gartoza the foIlowing amounts:
P 60,000.00 — for retirement pay
P 60,000.00—for loyalty bonus
P 11,400.00 —cash conversion of accrued vacation leave, or a
total of P 131,400.00. 5
On appeal, the National Labor Relations Commissions sustained the Labor
Arbiter in its resolution of August 28, 1987. 6 Hence, the instant petition.
Petitioners contend that the NLRC gravely abused its discretion when it
sustained the grant of retirement benefits to private respondent and held
Enrique Razon, Jr. solidarily liable with Metroport Services, Inc. for the payment
thereof.
It is the perception of petitioners that management is vested with discretion to
approve or disapprove an employee's claim for retirement benefits. They
anchor this view of Article II (B) of the Retirement Plan which states that "(a)ny
official and employee who is 65 years old, and upon discretion of management,
8
shall be qualified or subject to compulsory retirement from the company with
benefits as provided in this plan." Thus, when petitioners discovered the loss of
vital books of account while in private respondent's custody and found him
"guilty of breach of trust as chief accountant", they claim to have a valid ground
to terminate private respondent's services and as a consequence to deny his
claim for retirement pay. 7
It must be stressed that the words "upon the discretion of management" are not
synonymous with absolute or unlimited discretion. In other words,
management discretion may not be exercised arbitrarily or capriciously
especially with regards to the implementation of the retirement plan. We
believe that upon acceptance of employment, a contractual relationship was
established giving private respondent an enforceable vested interest in the
retirement fund. Verily, the retirement scheme became an integral part of his
employment package and the benefits to be derived therefrom constituted as it
were a continuing consideration for services rendered, as well as an effective
inducement for remaining with the firm. 8
Having rendered twenty years of service with Metroport Services, Inc., it can be
said that private respondent has already acquired a vested right to the
retirement fund, a right which can only be withheld upon a clear showing of
good and compelling reasons.
In the case at bar, petitioners' rejection of the subject claim cannot be justifiably
sustained. The reported loss of confidence was due to the disappearance of
certain books of account which petitioners directly attributed to private
respondent. Petitioners were convinced that simply because private respondent
could not produce the needed books on demand, he was no longer worthy of
their trust and confidence. They abruptly dismissed him without giving him a
chance to explain his side. In short, there was not the slightest pretense at fair
play. Had petitioners been less hasty and conducted an investigation, they
would have found out that on November 30, 1982, a fire gutted the western
portion of petitioners' warehouse in front of Pier 5, destroying records, books,
vouchers and general ledgers. The circumstances surrounding the fire were
duly investigated and reported to the Commissioner of Internal Revenue. But
whatever documents might have been salvaged from that conflagration were
subsequently lost during the flood on July 25, 1985. 9
Thus, the resulting dismissal of private respondent was in itself marked by
arbitrariness and lack of due process. Petitioners cannot now be allowed to use
that as their legal excuse for denying the employee's legitimate claim for
retirement pay.
In further support of their refusal to give private respondent his retirement
benefits, petitioners argued that the discharged employee impliedly withdrew
his intention to retire when he joined Marina Port Services, Inc. 10
The fact that private respondent sought employment elsewhere should not
hinder him from claiming his retirement benefits. It is an inexorable fact that at
65 years, he reached the mandatory age for retirement and, therefore, qualified
to retire. We have here an ironic situation where instead of enjoying the fruits of
his retirement, private respondent was forced to seek reemployment for his
survival. Surely, private respondent does not deserve such a pathetic end to his
long and faithful service with petitioners.
As to the issue of whether petitioner Enrique Razon, Jr. in his capacity as
president and majority stockholder should be held solidarily liable with co-
petitioner Metroport Services, Inc. for the payment of the disputed retirement
claim, we rule in the affirmative.
Under Sec. 31 of the Corporation Code, "directors or trustees who willfully and
knowingly vote for or assent to patently unlawful acts of the corporation or who
are guilty of gross negligence or bad faith in directing the affairs of the
corporation . . . shall be liable jointly and severally for all damages resulting
therefrom suffered by the corporation, its stockholders or members or other
persons." The manner of dismissal of private respondent by petitioner Enrique
Razon, Jr. smacks of high-handedness, caprice and arbitrariness. No regard was
given to private respondent's long and faithful service to the corporation, nor
opportunity afforded him to explain the loss imputed to him through a
properly-conducted investigation. The willingness and alacrity on the part of
petitioner Enrique Razon, Jr. to terminate the services of private respondent
without taking into consideration private respondent's service to the company
and without affording him his right to due process, to our mind, suffice to taint
the act complained of with bad faith.
WHEREFORE, the assailed resolution of the National Labor Relations
Commission dated August 20, 1987 is hereby AFFIRMED in toto. Costs against
petitioners.
SO ORDERED.
9
G.R. No. 87653 February 11, 1992
CONRADO M. AQUINO, NAPOLEON B. AROMIN, ROBERTO A. GASPAN and
NICARDO P. BLANQUISCO, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION AND OTIS ELEVATOR
COMPANY, respondents.
Alejandro P. Ruiz, Jr. for petitioners.
Abad, Leano & Associates for private respondent.
CRUZ, J.:
The petitioners' services were terminated on the ground of retrenchment, and
they received separation pay double that required by the Labor Code.
Thereafter, they demanded retirement benefits, invoking the Retirement Plan of
the respondent company which they said was contractual rather than statutory.
The question eventually submitted to the labor authorities was, having received
the separation pay, were the petitioners still entitled to the retirement benefits?
The Labor Arbiter said they were, but the NLRC reversed him. The issue is now
before us for final resolution.
The petitioners were employees of private respondent Otis Elevator Company
when they were informed of the termination of their employment in line with
the need of the company "to streamline its operations, consolidate certain
functions, reduce its manpower and cut non-essential spending." The separate
letters addressed to the petitioners advised them that —
In lieu of notice, you shall be paid one month's equivalent salary, plus your
regular allowances, counted from such date, and you shall be covered with the
normal benefits for that period. You shall also be paid your earned and/or
unused sick leave and vacation leave, including your pro-rata 13th month pay.
And for every year of service with the Company, you shall be paid one month's
basic salary or your retirement benefits, if applicable to you, whichever is
higher. 1
Accordingly, petitioners were paid their separation pay, computed as follows:
Basic monthly Years in Separation redundancy in 1983 and 1982, respectively, and were both given separation pay
salary service Pay and retirement benefits.

Conrado M. Aquino P 4,300 22 P 94,600 For its part, the respondent company argued that separation pay and
Napoleon B. Aromin 10,350 22 227,700 retirement benefits were mutually exclusive; hence, the petitioners could no
Roberto A. Gaspan 3,800 19 72,200 longer claim the latter after having received the former.
Nicardo P. Blanquisco 8,800 13 110,500
The Labor Arbiter ruled in favor of the petitioners mainly on the ground that
The separation pay was based on Section 4, Article VII of the Collective the company was estopped from withholding retirement benefits from them
Bargaining Agreement between the company and its employees providing thus: after having granted similar benefits to the employees earlier mentioned. He
held that a different treatment of the petitioners would constitute
All employees in the bargaining unit separated without cause shall be granted discrimination because "benefits accorded to other employees must likewise be
separation pay of not less than one (1) month's latest basic rate for every year extended to the rest who are similarly situated." 2
of service subject to the existing provisions of the Retirement Plan.
In reversing the appealed decision, the NLRC declared that the case cited by the
In justifying their subsequent demand for retirement benefits before the Labor petitioners was exceptional and could not be considered a precedent. Moreover
Arbiter, the petitioners invoked Section 1, Article XIV, of the CBA in relation to —
Section 5.2, Article V, of the company's Retirement Plan, which provides:
The CBA provision is very clear that while the employees separated without
The COMPANY shall maintain the present group retirement plan which is cause are entitled to a separation pay of not less than one (1) month's latest
attached hereto as Annex "A" and made an integral part of this contract. (Sec. 1, basic rate for every year of service, this is made merely subject to and not in
Art. XIV). addition to the existing provisions of Section 5.2 of the Article V of the
Retirement Plan. In other words, no logical inference can be made that the
benefits under Section 5.2 of Article V of the Retirement in addition to the one
xxx xxx xxx (1) month's latest basic rate for every year of service. (sic) Therefore, the offer
of appellant perfectly fits well within the contemplation of the parties as
5.2. A Participant who is terminated from employment and who has rendered at envisaged in the aforementioned provisions of the CBA and the Retirement
least ten (10) years of service shall be entitled to receive in lump sum all or a Plan. 3
portion of his accrued benefit credits as of his date of termination, in
accordance with the following schedule: It is important at the outset to note the distinction between separation pay and
retirement benefits.
Years of Service Vested Percentage
Upon Termination of Benefit Credits Separation pay is required in the cases enumerated in Articles 283 and 284 of
the Labor Code, which include retrenchment, and is computed at at least one
Less than 10 years NIL month salary or at the rate of one-half month salary for every year of service,
10 to less than 15 50% whichever is higher. We have held that it is a statutory right designed to provide
15 to less than 20 75% the employee with the wherewithal during the period that he is looking for
20 years and over 100% another employment. 4

They also cited the case of their co-employees Cleodeveo Soriano, Jr. and Retirement benefits, where not mandated by law, may be granted by agreement
Patriciano Destajo, Jr., whose services were terminated on the ground of of the employees and their employer or as a voluntary act on the part of the
employer. Retirement benefits are intended to help the employee enjoy the

10
remaining years of his life, lessening the burden of worrying for his financial
support, and are a form of reward for his loyalty and service to the employer. 5
It is on the basis of these distinctions that the petitioners claim to be entitled
not only to the separation pay they have already received but also to the
retirement benefits provided for in the Retirement Plan of the respondent
company.
In rejecting this contention, the private respondent insists that the retirement
benefits are subject to the provisions of the Retirement Plan under Section 4 of
the CBA. Moreover, under the Omnibus Implementing Rules of the Labor Code,
retired employees whose services are terminated shall receive the
corresponding retirement benefits or separation pay, whichever is higher. 6
This clearly indicates that one benefit should exclude the other.
The petitioners are covered by the Retirement Plan because they have
contributed to the retirement fund, have been separated by reason of the
retrenchment, and have served the company for more than the prescribed
minimum period of ten years.
In Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 7 Justice Martin started
his ponencia thus: "The issue in this petition is whether an employee who has
already received his separation pay can still recover retirement benefits from
his employer." Resolving the question affirmatively, the Court declared in part:
But petitioner contends that private respondent can only avail himself of either
separation pay or retirement benefits but not both, citing in support thereof,
the ruling of this Court in the case of Cipriano vs. San Miguel Corporation, 24
SCRA 703. The foregoing ruling cannot be made to apply to the present suit
because in said case it is so expressly provided in the Labor Agreement that:
Regular employees who are separated from the service of the company for any
reason other than misconduct or voluntary resignation shall be entitled to
either 100% of the benefits provided in Section 2, Article VIII hereof regardless
of their length of service in the company or to the severance pay provided by
law, whichever is the greater amount.
Thus, in said case the employee was entitled to either the amount prescribed in
the plan or the severance pay provided by law whichever is the greater amount.
In the present case, there is nothing in the labor agreement entered into by the
petitioner with Batangas Transportation Employees Association of which
private respondent is a member barring the latter from recovering whatever
11
benefits he is entitled to under the law in addition to the gratuity benefits under
the labor agreement between him and his employer. Neither is there any
provision in the Termination Pay Law (Republic Act No. 1052, as amended by
Republic Act No. 1787) that an employee who receives big termination pay upon
separation from the service without cause is precluded from recovering any other
benefits agreed upon by him and his employer. In the absence of any such
prohibition, both in the aforesaid Labor Agreement and the Termination Pay
Law the private respondent has the right to recover from the petitioner whatever
benefits he is entitled to under the Termination Pay Law in addition to the other
benefits conferred upon him by the aforesaid labor agreement. *
The same issue was squarely raised in University of the East v. Minister of Labor,
8 where the award of both separation pay and retirement benefits to the
employees was assailed by the employer on the ground that "there could only
be one mode of termination of employment with respect to one and the same
employee." Through Justice Gutierrez, the Court reaffirmed the above-quoted
ruling in the BLTB case and held as follows:
Therefore, if there is no provision contained in the collective bargaining
agreement to the effect that benefits received under the Termination Pay Law
shall preclude the employee from receiving other benefits from the agreement,
then said employee is entitled to the benefits embodied in the agreement in
addition to whatever benefits are mandated by statute. In the case at bar, there
is no such provision. We cannot presume that it forms an implicit part of either
the CBA or the law. Separation pay arising from a forced termination of
employment and benefits given as a contractual right due to many years of
faithful service are not necessarily antagonistic to each other, especially where
there are strong equitable considerations as in this case. **
We have carefully examined the record, and particularly the Collective
Bargaining Agreement and the Retirement Plan, and have found no specific
prohibition against the payment of both benefits to the employee.
Maintaining that the above cases have no application to the case at bar, the
company calls attention to Book VI, Section 14, Rule 1, of the Omnibus Rules
Implementing the Labor Code, which provides as follows:
(a) An employee who is retired pursuant to a bonafide retirement plan or in
accordance with the applicable individual or collective agreement or
established employer policy shall be entitled to all the retirement benefits
provided therein or to termination pay equivalent to at least one-half month
salary for every year of service, whichever is higher, a fraction of at least six (6)
months being considered as one whole year.
However, it overlooks sub-section (c) of the same Section 14, which clearly
provides that:
(c) This Section shall apply where the employee retires at the
age of sixty (60) years or more.
The private respondent has not shown that the petitioners were sixty years or
older at the time of their separation and therefore covered by the said section.
Having itself invoked that provision, the company had the obligation to prove
that the petitioners came under its terms.
The private respondent's argument that the petitioners did not retire but were
terminated in employment is, in our view, plain nitpicking. It cannot be
seriously contended that if an employee dies before he can retire (at a time
when he is already eligible for retirement), his beneficiaries are entitled to the
retirement pay he would have himself earned. The effective cause of separation
is death, for which his heirs are entitled to death benefits, but they are also paid
retirement benefits as a consequence of such death.
This is not to say that one whose services are terminated not only because he
has retired but for another cause resulting in retirement is always entitled to
both separation pay and retirement benefits. It should be obvious that if, say, an
employee is dismissed for dishonesty, he is not entitled to separation pay or, for
that matter, even retirement benefits. But in the case before us, the petitioners
have not been separated for cause, in the sense that they have committed an
offense warranting their removal. They were separated for reasons not
imputable to them, as the letter above quoted categorically declared:
Finally, we want to assure you that your retrenchment is through no fault of
your own but mainly due to prevention of further losses. In behalf of the
Company, we express our sincere appreciation for your services and loyalty and
wish you every success in your future undertakings. 9
In arriving at our conclusion, we are guided by the principle that any doubt
concerning the rights of labor should be resolved in its favor, pursuant to the
social justice policy. The Court feels that if the private respondent really
intended to make the separation pay and the retirement benefits mutually
exclusive, it should have sought inclusion of the corresponding provision in the
12
Retirement Plan and the Collective Bargaining Agreement so as to remove all
possible ambiguity regarding this matter.
We may presume that the counsel of the respondent company was aware of the
prevailing doctrine embodied in the cases earlier cited. Knowing this, he should
have made it a point to categorically provide in the Retirement Plan and the
CBA that an employee who had received separation pay would no longer be
entitled to retirement benefits. Or to put it more plainly, collection of retirement
benefits was prohibited if the employee had already received separation pay.
The private respondent argues that it had paid the petitioners more than what
the law requires by giving them separation pay at the rate of one month instead
of one-half month for every year of service. The suggestion is that the company
had been more than liberal and that to require it to pay the retirement benefits
as well would be a strain on its benevolence.
The petitioners are not pleading for generosity but demanding their rights.
These rights are embodied in the Collective Bargaining Agreement, which was
the result of negotiations between the company and the employees.
Bargaining is a process where the parties discuss their demands and counter-
demands and, after haggling, agree on what is essentially a compromise
reflecting the concessions mutually given by the parties to arrive at a common
understanding. The resultant contract provides for demandable rights, not
withdrawable doles. When the employer signs a collective bargaining
agreement, it recognizes the rights of the workers and does not merely concede
certain privileges to them out of the goodness of its heart.
The private respondent asserts in its statement of facts that it gave the
petitioners a choice between accepting the separation pay and the retirement
benefits and they opted for the former. This is not borne by the record. In its
letter advising the petitioners of the termination of their services, the company
merely informed them that they would be given separation pay or retirement
benefits, whichever was higher. The petitioners received the separation pay
because they felt they were entitled thereto but they did not thereby waive their
rights to the retirement benefits.
We realize that the retirement benefits of the petitioners come up to a
substantial figure, considering their respective lengths of service with the
company. These benefits, added to the separation pay they have already
received, make up a tidy sum indeed. The point, however, is that the petitioners
are entitled to this amount under the provisions of the CBA and the Retirement
Plan freely entered into by the parties. These instruments are binding G.R. Nos. 143136-37 July 11, 2002
agreements, not being contrary to law, morals, good customs, public order or
public policy, and must therefore be upheld. SAN MIGUEL CORPORATION, petitioner,
vs.
WHEREFORE, the petition is GRANTED. The decision of the respondent ALFREDO B. LAO, respondent.
National Labor Relations Board is REVERSED and a new judgment is hereby
rendered directing the payment of retirement benefits to the petitioners in VITUG, J.:
accordance with the Retirement Plan of the respondent company and its
Collective Bargaining Agreement with its employees.
Petitioner assails in the instant petition, the decision and the resolution, dated
31 January 2000 and the 14 April 2000, respectively, of the Court of Appeals,
SO ORDERED. affirming the judgment of the National Labor Relations Commission ("NLRC")
which has awarded retirements benefits to respondent under "the company’s
retirement plan if any or, if none, separation pay at the rate of one half (1/2)
month salary for every year of service."

The factual antecedents were synthesized by the Court of Appeals in its

decision.

"As borne out by the records, the following facts given credence by the labor
arbiter reveal that Alfredo B. Lao had worked as Materials Planner for San
Miguel Corporation, Inc. (SMC for brevity) whose responsibility includes
procurement of cullets ("bubog"), raw materials used by the company for its
glass plant. On December 10, 1995, Rogerio Ibanes, Security Detachment
Commander of the Sentinel Watchman and Protective Agency, received
information that some deliveries of cullets were being misdeclared. Acting on
this tip, Mr. Ibanes conducted surveillance work on deliveries of cullets made by
Four Sisters, the Company’s biggest supplier of cullets. Mr. Ibanes and Larry
Ventura, a store staff of the company, personally witnessed the attempt by the
employees of Four Sisters to divert three (3) truck loads of unwashed cullets
earlier delivered to the company but were backloaded and brought to Marilao,
Bulacan for washing purposes.

"On January 19, 1996, Mr. Ibanes recounted that at about 9:30 o’clock in the
evening, three (3) trucks owned by Four Sisters and loaded with cullets, arrived
at the SMC’s Manila Glass Plant in Binondo, Manila. Covered by corresponding
delivery receipts, these cullets after being weighed were sent off to Marilao,
Bulacan for washing purposes. However, these cullets were brought to Cabuyao,
Laguna which prodded Mr. Ibanes to report the matter to the Cabuyao Police
who immediately apprehended the delivery truck drivers as they neared the
plant of Asia Brewery located in that area. While the drivers were undergoing
investigation at the Cabuyao Police Station, Alfredo B. Lao and Henry Ordinanza,
owner of Four Sisters Bottle dealer arrived. Upon their arrival, Alfredo Lao

13
confronted Ibanes and asked him what made him apprehend the cullets
belonging to Mr. Ordinanza. Ibanes immediately answered that the cullet
delivery is slated at Marilao, Bulacan for washing purposes but to his surprise, it
went to Cabuyao, Laguna.
"Upon intercession of Alfredo Lao, the three trucks and its drivers and
crew were released from the police custody the next day.
"In the administrative investigation that ensued, SMC required Alfredo
B. Lao to submit a written explanation why he interceded for the release of the
drivers, helpers and the three (3) truck loads of unwashed cullets from police
custody.
"Finding unsatisfactory the explanation given by Lao, he was
terminated (sic) by SMC on May 15, 1996, for violation of the rule prohibiting
‘removal of any company property without proper authorization.’" 1
Aggrieved, respondent Alfredo B. Lao filed a complaint for illegal dismissal. In
the proceedings below, Lao admitted that he did intercede for the release of the
cullets to Mr. Henry Ordinanza but, he said, only after having been assured by
the latter that he (Ordinanza) would personally take the matter up with
petitioner San Miguel Corporation (SMC) the next business day. Lao claimed
that the company did not incur any loss because of his action considering that
the cullets did not as yet belong to SMC and the supplier of the cullets still
retained control and possession of the items. SMC belittled the contention and
argued that when Lao made strong representations, under cloak of authority, to
the Cabuyao Police that the cullets belonged to Ordinanza and were intended
for delivery to a rival firm, he committed an act of disloyalty and willful breach
of trust.
The labor arbiter dismissed the complaint for illegal dismissal and ruled that
Lao deviated from his responsibility to ensure adequate inventory and supply of
cullets to the glass plant of SMC. The labor arbiter concluded that the act of Lao
in causing the delivery of the cullets into the hands of a competitor was an act of
disloyalty that justified the termination of his employment. On appeal to it, the
NLRC, in its resolution of 05 June 1998, affirmed the decision of the labor
arbiter but, taking into account his track record of twenty-seven (27) years of
employment and the fact that it was the first time that he had committed an act
adverse to SMC, the commission ordered the latter to pay Lao his retirement
benefits under its retirement plan if any, or, if none, to pay him separation pay at
the rate of one-half (1/2) month salary for every year of service. Dissatisfied,
SMC appealed the decision to the Court of Appeals. The appellate court, in its
14
now assailed decision and resolution, dismissed the petition and affirmed the
ruling of the NLRC.
The Court of Appeals debunked SMC’s argument that the directive to pay
respondent retirement benefits could not be legally carried out because of the
provision in the retirement plan prohibiting the award of retirement benefits to
any member dismissed for cause attributable to his own fault, negligence,
misconduct or fraud. Relying on the case of Razon, Jr. vs. NLRC,2 the appellate
court held that management discretion with regard to the implementation of
the retirement plan could not be exercised arbitrarily or capriciously on the
premise that, upon acceptance of employment, a contractual relationship was
established that gave employees an enforceable vested interest in the
retirement fund.
In its petition, SMC argues that the offense committed by Lao constitutes
serious misconduct and an act of betrayal against his employer, and he does not
deserve to be rewarded with an immense and sizable financial benefit after his
culpability has been established in two decisions of competent labor tribunals.
If it were to be held otherwise, even in the name of compassion, it would be,
SMC submits, to send a wrong signal that one can unjustly derive benefit at the
expense of another in the name of social justice. In his comment, Lao has
stressed that the Court of Appeals did not commit serious error by ordering
payment of retirement benefits in his favor on the basis of social and
compassionate justice as so ruled in a number of cases.
The central issue before the Court thus focuses on the propriety of the award of
either retirement benefits or separation pay to Alfredo B. Lao.
To begin with, the award of separation pay is authorized in the situations dealt
with in Article 2833 and Article 2844 of the Labor Code and in cases where there
is illegal dismissal but reinstatement would no longer be feasible under Section
4(b), Rule I, Book VI, of the Implementing Rules and Regulations of the Labor
Code.5 When an employee is dismissed for any of the just causes enumerated in
Article 282 of the Labor Code, the rule is that he would not be entitled to the
payment of separation pay. Article 282 of the Labor Code reads:
"Art. 282. Termination by employer - An employer may terminate an
employment for any of the following causes:
"a. Serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or representative in connection with his work;
 "b. Gross and habitual neglect by the employee of his duties;
"c. Fraud or willful breach by the employee of the trust reposed in
him by his employer or duly authorized representative;
"d. 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 representative; and
"e. Other causes analogous to the foregoing."
Section 7, Rule I, Book VI, of the Omnibus Rules Implementing the Labor Code,
similarly provides:
"Sec. 7- Termination of employment by employer. - The just causes for
terminating the services of an employee shall be those provided in Article 282
of the Code. The separation from work of an employee for a just cause does not
entitle him to the termination pay provided in the Code, without prejudice,
however, to whatever rights, benefits and privileges he may have under the
applicable individual or collective bargaining agreement with the employer or
voluntary employer policy or practice."
Exceptionally, however, separation pay is granted to stand as a "measure of
social justice" even when the employee is validly dismissed for cause so long as
it is not for serious misconduct or those other causes that reflect on his moral
character.
In Soco vs. Mercantile Corporation of Davao, 6 separation pay was granted to an
employee who had been dismissed for using the company vehicle for a private
purpose. In Tanala vs. National Labor Relations Commission 7 the payment of
separation pay to an employee who had been dismissed for quarreling with a
fellow worker outside the company premises was sustained. Likewise, in
Filipro, Inc. vs. NLRC,8 an award of separation pay was decreed in favor of an
employee who had been validly dismissed for preferring certain dealers in
violation of company policy. The Court, however, disallowed the grant of
separation pay to employees dismissed for serious misconduct or for some
other causes reflecting on his moral character. 9 In the case of Philippine Long
Distance Telephone Co. (PLDT) vs. NLRC and Abucay, 10 the Court clarified a
perceived incongruence in its several pronouncements by stating thusly:
15
"We hold that henceforth separation pay shall be allowed as a
measure of social justice only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those
reflecting on his moral character. Where the reason for the valid dismissal is,
for example, habitual intoxication or an offense involving moral turpitude, like
theft or illicit sexual relations with a fellow worker, the employer may not be
required to give the dismissed employee separation pay, or financial assistance,
or whatever other name it is called, on the ground of social justice.
"x x x xxx xxx
"The policy of social justice is not intended to countenance
wrongdoing simply because it is committed by the underprivileged. At best
it may mitigate the penalty but it certainly will not condone the offense." 11
The dictum was followed in Philippine National Construction Corporation vs.
NLRC,12 where the Court deleted an award of separation pay to an employee
who had been found guilty of dishonesty for having stolen company property.
Cosmopolitan Funeral Homes, Inc., vs. Maalat13 disallowed the grant of
separation pay to an employee who was dismissed for dishonesty for an
understatement of reported contract price against the actual contract price
charged to and paid by the customers and for misappropriation of funds or
collections. A similar holding was reached in Zenco Sales, Inc., vs. NLRC,14 where
the dismissed employee was found guilty of gross misconduct for having used
his employer’s property, equipment and personnel in his personal business. The
Court reversed the decision of the NLRC in San Miguel Corporation vs. NLRC,15
granting an employee, dismissed for dishonesty, the privilege to retire from the
company with a right to avail himself of 100% of the benefits the company had
offered to retiring employees. Quite recently, in Edge Apparel, inc. vs. NLRC, 16 the
Court, categorizing the two causes for the dismissal of an employee - "just
causes" under Article 282 of the Labor Code and "authorized causes" under
Article 283 and 284 of the same code -reiterated that an employee whose
employment was terminated for a just cause would not be so entitled as a
matter of right to the payment of separation benefits.
While it would be compassionate to give separation pay to a salesman if he
were dismissed for his inability to fill his quota, surely, however, he does not
deserve such generosity if his offense is the misappropriation of the receipts of
his sales.17 Where the cause for the termination of employment cannot be
considered as one of mere inefficiency or incompetence but an act that
constitutes an utter disregard for the interest of the employer or a palpable
breach of trust reposed in him, the grant by the Court of separation benefits is
hardly justifiable.
In the case at bar, respondent is found by the labor arbiter and the NLRC to have
been properly dismissed for his willful breach of trust and confidence. These
findings, which have been affirmed by the Court of Appeals, cannot simply be
ignored; indeed, such findings possess a degree of conclusiveness on, or at the
very least must be accorded respect by, this Court. 18
Unfortunately for respondent, neither can he claim benefits due from the
employer under the company’s retirement plan which concededly prohibits the
award of retirement benefits to an employee dismissed for a just cause, a
proscription that binds the parties to it. The appellate court’s reliance on Razon,
Jr. vs. NLRC19 is misplaced. In Razon, the employer’s refusal to give the employee
his retirement benefits is based on the provision of the retirement plan giving
management wide discretion to grant or not to grant retirement benefits, a
prerogative that obviously cannot be exercised arbitrarily or whimsically.
The Court, nevertheless, understands and shares the plight of respondent who
has spent the best years of his useful life with petitioner. The Court
commiserates with him but it can do no more than to appeal to an act of
compassion by SMC and to ask it to see its way clear to affording some form of
financial assistance to respondent who has served it for almost three decades
with no previous blemished record.
WHEREFORE, the petition is GRANTED, and the assailed decision and
resolution of the Court of Appeals insofar as it decrees the payment of
retirement benefits or separation pay to respondent Lao, affirming that of the
National Labor Relations Commission, is hereby REVERSED and SET ASIDE. It
is hoped, however, that petitioner will heed the Court’s call for compassion. No
costs.
SO ORDERED.
16
G.R. No. 155214 February 13, 2004
R & E TRANSPORT, INC., and HONORIO ENRIQUEZ, petitioners,
vs.
AVELINA P. LATAG, representing her deceased husband,
PEDRO M. LATAG, respondents.
DECISION
PANGANIBAN, J.:
Factual issues may be reviewed by the Court of Appeals (CA) when the findings
of fact of the National Labor Relations Commission (NLRC) conflict with those
of the labor arbiter. By the same token, this Court may review factual
conclusions of the CA when they are contrary to those of the NLRC or of the
labor arbiter.
The Case
Before us is a Petition for Review 1 under Rule 45 of the Rules of Court, seeking
to nullify the June 3, 2002 Decision2 and the August 28, 2002 Resolution 3 of the
Court of Appeals in CA-GR SP No. 67998. The appellate court disposed as
follows:
"WHEREFORE, premises considered, the petition is hereby GRANTED. The
assailed Order of public respondent NLRC is SET ASIDE. The March 14, 2001 4
[D]ecision of the Labor Arbiter a quo is REINSTATED." 5
The challenged Resolution denied petitioners’ Motion for Reconsideration.
The Factual Antecedents
The antecedents of the case are narrated by the CA as follows:
"Pedro Latag was a regular employee x x x of La Mallorca Taxi since March 1,
1961. When La Mallorca ceased from business operations, [Latag] x x x
transferred to [petitioner] R & E Transport, Inc. x x x. He was receiving an
average daily salary of five hundred pesos (₱500.00) as a taxi driver.
"[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 thus asked Felix Fabros, the administrative officer of [petitioners], for his
retirement pay pursuant to Republic Act 7641 but he was ignored. Thus, on
December 21, 1998, [Latag] filed a case for payment of his retirement pay
before the NLRC.
"Latag however died on April 30, 1999. Subsequently, his wife, Avelina Latag,
substituted him. On January 10, 2000, the Labor Arbiter rendered a decision in
favor of [Latag], the dispositive portion of which reads:
‘WHEREFORE, judgment is hereby rendered ordering x x x LA MALLORCA TAXI,
R & E TRANSPORT, INC. and their owner/chief executive officer HONORIO
ENRIQUEZ to jointly and severally pay MRS. AVELINA P. LATAG the sum of
₱277,500.00 by way of retirement pay for her deceased husband, PEDRO M.
LATAG.
‘SO ORDERED.’
"On January 21, 2000, [Respondent Avelina Latag,] with her then counsel[,] was
invited to the office of [petitioners’] counsel and was offered the amount of
₱38,500.00[,] which she accepted. [Respondent] was also asked to sign an
already prepared quitclaim and release and a joint motion to dismiss the case.
"After a day or two, [respondent] received a copy of the January 10, 2000
[D]ecision of the Labor Arbiter.
"On January 24, 2000, [petitioners] filed the quitclaim and motion to dismiss.
Thereafter, on May 23, 2000, the Labor Arbiter issued an order, the relevant
portion of which states:
‘WHEREFORE, the decision stands and the Labor Arbitration Associate of this
Office is directed to prepare the Writ of Execution in due course.
‘SO ORDERED.’
17
"On January 21, 2000, [petitioners] interposed an appeal before the NLRC. On
March 14, 2001, the latter handed down a [D]ecision[,] the decretal portion of
which provides:
‘WHEREFORE, in view of the foregoing, respondents’ Appeal is hereby
DISMISSED for failure to post a cash or surety bond, as mandated by law.
‘SO ORDERED.’
"On April 10, 2001, [petitioners] filed a motion for reconsideration of the above
resolution. On September 28, 2001, the NLRC came out with the assailed
[D]ecision, which gave due course to the motion for reconsideration." 6
(Citations omitted)
Respondent appealed to the CA, contending that under Article 223 of the Labor
Code and Section 3, Rule VI of the New Rules of Procedure of the NLRC, an
employer’s appeal of a decision involving monetary awards may be perfected
only upon the posting of an adequate cash or surety bond.
Ruling of the Court of Appeals
The CA held that the labor arbiter’s May 23, 2000 Order had referred to the
earlier January 10, 2000 Decision awarding respondent ₱277,500 as retirement
benefit.
According to the appellate court, because petitioners’ appeal before the NLRC
was not accompanied by an appropriate cash or surety bond, such appeal was
not perfected. The CA thus ruled that the labor arbiter’s January 10, 2000
Decision and May 23, 2000 Order had already become final and executory.
Hence, this Petition.7
Issues
Petitioners submit the following issues for our consideration:
"I
Whether or not the Court should respect the findings of fact [of] the NLRC as
against [those] of the labor arbiter.
"II
Whether or not, in rendering judgment in favor of petitioners, the NLRC
committed grave abuse of discretion.
"III
Whether or not private respondent violated the rule on forum-shopping.
"IV
Whether or not the appeal of petitioners from the Order of the labor arbiter to
the NLRC involves [a] monetary award."8
In short, petitioners raise these issues: (1) whether the CA acted properly when
it overturned the NLRC’s factual findings; (2) whether the rule on forum
shopping was violated; and (3) whether the labor arbiter’s Order of May 23,
2000 involved a monetary award.
The Court’s Ruling
The Petition is partly meritorious.
First Issue:
Factual Findings of the NLRC
Petitioners maintain that the CA erred in disregarding the factual findings of the
NLRC and in deciding to affirm those of the labor arbiter. Allegedly, the NLRC
findings were based on substantial evidence, while those of the labor arbiter
were groundless. Petitioners add that the appellate court should have refrained
from tackling issues of fact and, instead, limited itself to those of jurisdiction or
grave abuse of discretion on the part of the NLRC.
The power of the CA to review NLRC decisions via a Rule 65 petition is now a
settled issue. As early as St. Martin Funeral Homes v. NLRC, 9 we have
definitively ruled that the proper remedy to ask for the review of a decision of
the NLRC is a special civil action for certiorari under Rule 65 of the Rules of
Court,10 and that such petition should be filed with the CA in strict observance
of the doctrine on the hierarchy of courts. 11 Moreover, it has already been
18
explained that under Section 9 of Batas Pambansa (BP) 129, as amended by
Republic Act 7902,12 the CA -- pursuant to the exercise of its original jurisdiction
over petitions for certiorari -- was specifically given the power to pass upon the
evidence, if and when necessary, to resolve factual issues. 13
Likewise settled is the rule that when supported by substantial evidence, 14
factual findings made by quasi-judicial and administrative bodies are accorded
great respect and even finality by the courts. These findings are not infallible,
though; when there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the courts. 15
Hence, when factual findings of the NLRC are contrary to those of the labor
arbiter, the evidentiary facts may be reviewed by the appellate court. 16 Such is
the situation in the present case; thus, the doors to a review are open. 17
The very same reason that behooved the CA to review the factual findings of the
NLRC impels this Court to take its own look at the findings of fact. Normally, the
Supreme Court is not a trier of facts. 18 However, since the findings of fact in the
present case are conflicting,19 it waded through the records to find out if there
was enough basis for the appellate court’s reversal of the NLRC Decision.
Number of Creditable Years of Service for Retirement Benefits
Petitioners do not dispute the fact that the late Pedro M. Latag is entitled to
retirement benefits. Rather, the bone of contention is the number of years that
he should be credited with in computing those benefits. On the one hand, we
have the findings of the labor arbiter, 20 which the CA affirmed. According to
those findings, the 23 years of employment of Pedro with La Mallorca Taxi must
be added to his 14 years with R & E Transport, Inc., for a total of 37 years. On
the other, we also have the findings of the NLRC 21 that Pedro must be credited
only with his service to R & E Transport, Inc., because the evidence shows that
the aforementioned companies are two different entities.
After a careful and painstaking review of the evidence on record, we support
the NLRC’s findings. The labor arbiter’s conclusion -- that La Mallorca Taxi and
R & E Transport, Inc., are one and the same entity -- is negated by the
documentary evidence presented by petitioners. Their evidence 22 sufficiently
shows the following facts: 1) R & E Transport, Inc., was established only in
1978; 2) Honorio Enriquez, its president, was not a stockholder of La Mallorca
Taxi; and 3) none of the stockholders of the latter company hold stocks in the
former. In the face of such evidence, which the NLRC appreciated in its Decision,
it seems that mere surmises and self-serving assertions of Respondent Avelina
Latag formed the bases for the labor arbiter’s conclusions as follows:
"While [Pedro M. Latag] claims that he worked as taxi driver since March 1961
since the days of the La Mallorca Taxi, which was later renamed R & E
Transport, Inc., [petitioners] limit the employment period to 14 years.
"Resolving this matter, we note [respondent’s] ID (Annex "A", [Latag] position
paper), which appears to bear the signature of Miguel Enriquez on the front
portion and the date February 27, 1961 when [x x x Latag] started with the
company. We also note an SSS document (Annex ‘C’) which shows that the date
of initial coverage of Pedro Latag, with SSS No. 03-0772155, is February 1961.
"Viewed against [petitioners’] non-disclaimer [sic] that La Mallorca preceded R
& E Taxi, Inc.[;] x x x that both entities were/are owned by the Enriquez family,
with [petitioner] Honorio [Enriquez] as the latter’s President[; and] x x x that La
Mallorca was a different entity (page 2, [petitioners’] position paper), we are of
the conclusion that [Latag’s] stint with the Enriquez family dated back since
February 1961 and thus, he should be entitled to retirement benefits for 37
years, as of the date of the filing of this case on December 12, 1998." 23
Furthermore, basic is the rule that the corporate veil may be pierced only if it
becomes a shield for fraud, illegality or inequity committed against a third
person.24 We have thus cautioned against the inordinate application of this
doctrine. In Philippine National Bank v. Andrada Electric & Engineering
Company,25 we said:
"x x x [A]ny application of the doctrine of piercing the corporate veil should be
done with caution. A court should be mindful of the milieu where it is to be
applied. It must be certain that the corporate fiction was misused to such an
extent that injustice, fraud, or crime was committed against another, in
disregard of its rights. The wrongdoing must be clearly and convincingly
established; it cannot be presumed. Otherwise, an injustice that was never
unintended may result from an erroneous application.
xxx xxx xxx
"The question of whether a corporation is a mere alter ego is one of fact.
Piercing the veil of corporate fiction may be allowed only if the following
elements concur: (1) control -- not mere stock control, but complete
domination -- not only of finances, but of policy and business practice in respect
to the transaction attacked, must have been such that the corporate entity as to
this transaction had at the time no separate mind, will or existence of its own;
(2) such control must have been used by the defendant to commit a fraud or a
wrong to perpetuate the violation of a statutory or other positive legal duty, or a
19
dishonest and an unjust act in contravention of plaintiff’s legal right; and (3)
the said control and breach of duty must have proximately caused the injury or
unjust loss complained of."26
Respondent has not shown by competent evidence that one taxi company had
stock control and complete domination over the other or vice versa. In fact, no
evidence was presented to show the alleged renaming of "La Mallorca Taxi" to
"R & E Transport, Inc." The seven-year gap between the time the former closed
shop and the date when the latter came into being also casts doubt on any
alleged intention of petitioners to commit a wrong or to violate a statutory duty.
This lacuna in the evidence compels us to reverse the Decision of the CA
affirming the labor arbiter’s finding of fact that the basis for computing Pedro’s
retirement pay should be 37 years, instead of only 14 years.
Validity of the Quitclaim and Waiver
As to the Quitclaim and Waiver signed by Respondent Avelina Latag, the
appellate court committed no error when it ruled that the document was
invalid and could not bar her from demanding the benefits legally due her
husband. This is not to say that all quitclaims are invalid per se. Courts,
however, are wary of schemes that frustrate workers’ rights and benefits, and
look with disfavor upon quitclaims and waivers that bargain these away.
Courts have stepped in to annul questionable transactions, especially where
there is clear proof that a waiver, for instance, was wangled from an
unsuspecting or a gullible person; or where the agreement or settlement was
"unconscionable on its face." 27 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.28 Moreover, a quitclaim in which the consideration
is "scandalously low and inequitable" cannot be an obstacle to the pursuit of a
worker’s legitimate claim.29
Undisputably, Pedro M. Latag was credited with 14 years of service with R & E
Transport, Inc. Article 287 of the Labor Code, as amended by Republic Act No.
7641,30 provides:
"Art. 287. Retirement. - x x x
"x x x x x x x x x
"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.
x x x x x x x x x" (Italics supplied)
The rules implementing the New Retirement Law similarly provide the above-
mentioned formula for computing the one-half month salary. 31 Since Pedro was
paid according to the "boundary" system, he is not entitled to the 13th month 32
and the service incentive pay;33 hence, his retirement pay should be computed
on the sole basis of his salary.
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.34 Thus, the basis for computing their benefits should be the
average daily income. In this case, the CA found that Pedro was earning an
average of five hundred pesos (₱500) per day. We thus compute his retirement
pay as follows: ₱500 x 15 days x 14 years of service equals ₱105,000. Compared
with this amount, the ₱38,850 he received, which represented just over one
third of what was legally due him, was unconscionable.
Second Issue:
Was There Forum Shopping?
Also assailed are the twin appeals that two different lawyers filed for
respondent before the CA. Petitioners argue that instead of accepting her
explanation, the appellate court should have dismissed the appeals outright for
violating the rule on forum shopping.
Forum shopping is the institution of two or more actions or proceedings
grounded on the same cause, on the supposition that one or the other court
20
would render a favorable disposition.35 Such act is present when there is an
identity of parties, rights or causes of action, and reliefs sought in two or more
pending cases.36 It is usually resorted to by a party against whom an adverse
judgment or order has been issued in one forum, in an attempt to seek and
possibly to get a favorable opinion in another forum, other than by an appeal or
a special civil action for certiorari. 37
We find, as the CA38 did, that respondent has adequately explained why she had
filed two appeals before the appellate court. In the August 5, 2002 Affidavit 39
that she attached as Annex "A" to her Compliance to Show Cause Order with
Comment on petitioners’ Motion for Reconsideration, 40 she averred that she had
sought the services of another counsel to file her Petition for certiorari before
the CA. She did so after her original counsel had asked for an extension of time
to file the Petition because of time constraints and a tremendous workload, only
to discover later that the original counsel had filed a similar Petition.
We cannot fault respondent for her tenacity. Besides, to disallow her appeal
would not be in keeping with the policy of labor laws 41 to shun highly technical
procedural laws in the higher interest of justice.
Third Issue:
Monetary Award
Petitioners’ contention is that the labor arbiter’s January 10, 2000 Decision was
supplanted by the Compromise Agreement that had preceded the former’s
official release42 to, and receipt43 by, the parties. It appears from the records that
they had entered into an Amicable Settlement on January 21, 2000; that based
on that settlement, respondent filed a Motion to Dismiss on January 24, 2000,
before the labor arbiter who officially released on the same day his Decision
dated January 10, 2000; that upon receipt of a copy thereof, respondent filed a
Manifestation and Motion to Set Aside the Motion to Dismiss; and that the labor
arbiter subsequently calendared the case for conference, held hearings thereon,
and required the parties to exchange positions -- by way of comments, replies
and rejoinders -- after which he handed down his May 23, 2000 Order.
Under the circumstances, the case was in effect reopened by the proceedings
held after respondent had filed her Manifestation and Motion to Set Aside the
Motion to Dismiss. This ruling is in accordance with the fourth paragraph of
Section 2, Rule V of the New Rules of Procedure of the NLRC, 44 which therefore
correctly held as follows:
"x x x Thus, the further hearings conducted thereafter, to determine the validity especially because of serious errors in the factual conclusions of the labor
of complainant’s manifestation and motion are but mute confirmation that arbiter as to the award of retirement benefits.
indeed the 10 January 2000 decision in this case has not as yet attained finality.
Finally, the appealed order of 23 May 2000 itself declaring [that] ‘the decision WHEREFORE, this Petition is partly GRANTED. The Decision of the Court of
stands and the Labor Arbitration Associate of this office is directed to prepare Appeals is MODIFIED by crediting Pedro M. Latag with 14 years of service.
the Writ of Execution in due course,’ obviously, is a conclusion that the decision Consequently, he is entitled to retirement pay, which is hereby computed at
in this case has been supplanted and rendered functus officio by the herein ₱105,000 less the ₱38,850 which has already been received by respondent, plus
parties’ acts. Thus, when the Labor Arbiter a quo found in his appealed order six (6) percent interest thereon from December 21, 1998 until its full payment.
that the amount of ₱38,850.00 is ‘unconscionable viewed against the amount No costs.
awarded in the decision,’ the same became appealable independently of the 10
January 2000 decision, which has not attained finality, in the first place." 45
SO ORDERED.
We cannot concur, however, in petitioners’ other contention that the May 23,
2000 Order did not involve a monetary award. If the amicable settlement
between the parties had rendered the January 10, 2000 Decision functus oficio,
then it follows that the monetary award stated therein was reinstated -- by
reference -- by the aforementioned Order. The appeal from the latter should
perforce have followed the procedural requirements under Article 223 of the
Labor Code.

As amended, this provision explicitly provides that an appeal from the labor
arbiter’s decision, award or order must be made within ten (10) calendar days
from receipt of a copy thereof by the party intending to appeal it; and, if the
judgment involves a monetary award, an appeal by the employer may be
perfected only upon the posting of a cash or surety bond. Such cash or bond
must have been issued by a reputable bonding company duly accredited by the
NLRC in the amount equivalent to the monetary award stated in the judgment.
Sections 1, 3 and 6 of Rule VI of the New Rules of Procedure of the NLRC
implement this Article.

Indeed, this Court has repeatedly ruled that the perfection of an appeal in the
manner and within the period prescribed by law is not only mandatory but
jurisdictional, and the failure to perfect an appeal has the effect of rendering the
judgment final and executory. 46 Nonetheless, procedural lapses may be
disregarded because of fundamental considerations of substantial justice; 47 or
because of the special circumstances of the case combined with its legal merits
or the amount and the issue involved.48

The requirement to post a bond to perfect an appeal has also been relaxed in
cases when the amount of the award has not been included in the decision of G.R. No. 151021 May 4, 2006
the labor arbiter.49 Besides, substantial justice will be better served in the
present case by allowing petitioners’ appeal to be threshed out on the merits, 50

21
CAINTA CATHOLIC SCHOOL and MSGR. MARIANO T. BALBAGO, Petitioners,
vs.
CAINTA CATHOLIC SCHOOL EMPLOYEES UNION (CCSEU), Respondent.
DECISION
TINGA, J.:
The main issue for resolution hinges on the validity of a stipulation in a
Collective Bargaining Agreement (CBA) that allows management to retire an
employee in its employ for a predetermined lengthy period but who has not yet
reached the minimum compulsory retirement age provided in the Labor Code.
Jurisprudence has answered the question in the affirmative a number of times
and our duty calls for the application of the principle of stare decisis. As a
consequence, we grant the petition and reverse the Court of Appeals.
Before us is a petition for review on certiorari under Rule 45 of the Rules of
Court, assailing the Decision1 dated 20 August 2001 of the Court of Appeals in
CA-G.R. SP No. 50851, which reversed the Resolutions dated 31 January 1997, 2
and 30 April 19973 of the National Labor Relations Commission (NLRC), Third
Division in NLRC NCR CC No. L-000028-93 (NLRC RAB-IV-7-6827-94-R), as well
as the Resolution4 dated 6 December 2001.
The antecedent facts follow:
On 6 March 1986, a Collective Bargaining Agreement (CBA) was entered into
between Cainta Catholic School (School) and the Cainta Catholic School
Employees Union (Union) effective 1 January 1986 to 31 May 1989. This CBA
provided, among others, that:
ARTICLE IX
DURATION OF AGREEMENT
This Collective Bargaining Agreement shall become effective and binding upon
the parties from January 1, 1986 up to May 31, 1989. At least sixty (60) days
before the expiration of this Agreement, the parties hereto shall submit written
proposals which shall be made the basis of negotiations for the execution of a
new agreement.
22
If no new agreement is reached by the parties at the expiration of this
agreement, all the provisions of this Agreement shall remain full force and in
effect, up to the time a new Agreement shall be executed. 5
Msgr. Mariano Balbago (Balbago) was appointed School Director in April 1987.
From this time, the Union became inactive.
It was only in 10 September 1993 that the Union held an election of officers,
with Mrs. Rosalina Llagas (Llagas) being elected as President; Paz Javier
(Javier), Vice-President; Fe Villegas (Villegas), Treasurer; and Maria Luisa
Santos (Santos), Secretary. Llagas was then the Dean of the Student Affairs
while Villegas and Santos were Year-Level Chairmen. The other elected officers
were Rizalina Fernandez, Ester Amigo, secretaries; Nena Marvilla, treasurer;
Gilda Galange and Jimmy del Rosario, auditors; Filomeno Dacanay and Adelina
Andres, P.R.O.s; and Danilo Amigo and Arturo Guevarra, business managers. 6
On 15 October 1993, the School retired Llagas and Javier, who had rendered
more than twenty (20) years of continuous service, pursuant to Section 2,
Article X of the CBA, to wit:
An employee may be retired, either upon application by the employee himself
or by the decision of the Director of the School, upon reaching the age of sixty
(60) or after having rendered at
least twenty (20) years of service to the School the last three (3) years of which
must be continuous.7
Three (3) days later, the Union filed a notice of strike with the National
Conciliation and Mediation Board (NCMB) docketed as NCMB-RB-12-NS-10-
124-93.
On 8 November 1993, the Union struck and picketed the School’s entrances.
On 11 November 1993, then Secretary of Labor Ma. Nieves R. Confesor issued
an Order certifying the labor dispute to the National Labor Relations
Commission (NLRC). The dispositive portion reads:
"WHEREFORE, PREMISES CONSIDERED, this Office hereby certifies the labor
dispute at the Cainta Catholic School to the National Labor Relations
Commission for compulsory arbitration, pursuant to Article 263(g) of the Labor
Code as amended."
"Accordingly, all striking teachers and employees are directed to return to work
within 24 hours from receipt of this Order and the School Administrator to
accept all returning employees under the same terms and conditions prevailing
prior to the strike."
"Furthermore, the effects of the termination of Ms. Rosalinda Llagas and Paz A.
Javier are hereby suspended. In line with this Order, the School Administration
is ordered to reinstate them to their former positions without loss of seniority
rights and privileges pending determination of the validity of their dismissal."
"Both parties are further directed to cease and desist from committing any acts
that might aggravate the situation."
"SO ORDERED."8
On 20 December 1993, the School filed a petition directly with the NLRC to
declare the strike illegal.
On 27 July 1994, the Union filed a complaint 9 for unfair labor practice before
the NLRC docketed as NLRC Case No. RAB-IV-7-6827-94-R, entitled, "Cainta
Catholic School Employees Union v. Cainta Catholic School, et. al.," before
Arbitration Branch IV. Upon motion, then Labor Arbiter Oswald Lorenzo
ordered the consolidation of this unfair labor practice case with the above-
certified case.
On 31 January 1997, the NLRC rendered a Resolution favoring the School.
Three (3) issues were passed upon by the NLRC, namely: (1) whether the
retirement of Llagas and Javier is legal; (2) whether the School is guilty of unfair
labor practice; and (3) whether the strike is legal.
The NLRC ruled that the retirement of Llagas and Javier is legal as the School
was merely exercising an option given to it under the CBA. 10 The NLRC
dismissed the unfair labor practice charge against the School for insufficiency of
evidence. Furthermore, it was found that the strike declared by the Union from
8 to 12 November 1993 is illegal, thereby declaring all union officers to have
lost their employment status.11
The Union moved for reconsideration but it was denied in a Resolution dated
30 April 1997.
23
Hence, on 9 July 1997, the Union filed a petition for certiorari before this Court
docketed as G.R. No. 129548. The Court issued a temporary restraining order
(TRO) against the enforcement of the subject resolutions effective as of 23 July
1997. The School, however, filed a motion for clarification considering that it
had already enforced the 31 January 1997 NLRC Resolution.
On 28 July 1997, ten (10) regular teachers, who were declared to have lost their
employment status under the aforesaid NLRC Resolution reported back to work
but the School refused to accept them by reason of its pending motion for
clarification. This prompted the Union to file a petition for contempt against
Balbago and his agents before this Court, docketed as G.R. No. 130004, which
was later on consolidated with G.R. No. 129548.
Pursuant to the ruling of this Court in St. Martin Funeral Homes v. NLRC, 12 the
case was referred to the Court of Appeals and re-docketed as CA-G.R. SP No.
50851.
On 20 August 2001, the Court of Appeals rendered a decision giving due course
and granting the petition to annul and set aside the 31 January 1997 and 30
April 1997 Resolutions of the NLRC; while dismissing the petition for contempt
for lack of merit. The decretal portion of the decision reads:
WHEREFORE, premises considered, the petition to annul and set aside the 31
January 1997 and the 30 April 1997 resolutions of the National Labor Relations
Commission is GRANTED. Judgment is hereby RENDERED directing private
respondents: 1) to REINSTATE the terminated union officers, except Rosalinda
Llagas, Paz Javier, Gilda Galange and Ester Amigo, to their former positions
without loss of seniority rights and other privileges with full backwages,
inclusive of allowances and other benefits or their monetary equivalent from 9
June 1997 up to the time of their actual reinstatement; 2) to pay Rosalinda
Llagas: a) separation pay equivalent to one (1) month pay for every year of
service, in lieu of reinstatement, with full backwages, inclusive of allowances
and other benefits or their monetary equivalent from 9 June 1997 up to the
time of the finality of this decision; b) moral and exemplary damages in the
amount of ten thousand pesos (P10,000.00) and five thousand (P5,000.00),
respectively; 3) to pay Paz Javier, or her heirs: a) unpaid salaries, inclusive of
allowances and other benefits, including death benefits, or their monetary
equivalent from the time her compensation was withheld from her up to the
time of her death; b) separation pay equivalent to one (1) month’s salary for
every year of service; and c) moral and exemplary damages in the amount of ten
thousand pesos (P10,000.00) and five thousand pesos (P5,000.00), respectively.
Private respondents are also ordered to pay petitioner union attorney’s fees
equivalent to five percent (5%) of the total judgment award.
The petition for contempt, however, is DISMISSED for lack of merit.
No pronouncement as to costs.
SO ORDERED. 13
In reversing the decision of the NLRC, the Court of Appeals construed the
retirement of Llagas and Javier as an act amounting to unfair labor practice
when viewed against the backdrop of the relevant circumstances obtaining in
the case. The appellate court pointed out, thus:
The two happened to be the most vocal, dynamic and influential of all union
officers and members and they held considerable suasion over the other
employees. Rosalinda Llagas objected to the signing of the prepared form
distributed by the school, as a consequence of which, no one accomplished the
form, and opposed the formation of the high school faculty club as the teachers
already had sufficient representation through the union. Paz Javier, on the other
hand, demanded that she be given the floor during the faculty club
organizational meeting and went on to win the presidency of the faculty club,
conclusively showing that she enjoyed the support of the high school teachers.
They were therefore a new and different breed of union leaders – assertive,
militant and independent – the exact opposite of former union president Victor
Javier who seemed to be passive, cooperative and pacific. The school saw the
two as threats which it could not control, and faced with a very uncomfortable
situation of having to contend with an aggressive union which just dominated
the high school faculty club (except for Joel Javeniar, all of the faculty club’s
officers were union members; Rollo, p. 418), the school decided to "nip in the
bud" the reactivated union by retiring its most prominent leaders.
xxxx
It is not difficult to see the anti-union bias of the school. One of the first acts of
private respondent Msgr. Balbago immediately after his assumption of office as
school director was to ask for a moratorium on all union activities. With the
union in inactive status, the school felt secure and comfortable but when the
union reactivated, the school became apprehensive and reacted by retiring the
union’s two topmost officers by invoking the provisions of the CBA. When the
union furnished the school, through counsel, a copy of a proposed CBA on 3
24
November 1993, the school in a cavalier fashion ignored it on the pretext that
the union no longer enjoyed the majority status among the employees x x x 14
The appellate court concluded that the retirement of the two (2) union officers
was clearly to bust the reactivated union.
Having established that the School committed unfair labor practice, the Court of
Appeals declared that the "no-strike, no-lockout clause" in the CBA was not
violated when the union members staged a strike from 8 to 12 November
1993.15 It further held that minor disorders or isolated incidents of perceived
coercion attending the strike do not categorize it as illegal:
We studied carefully the available records and found that the existence of force
during the strike was certainly not pervasive and widespread, or consistently
and deliberately resorted to as a matter of policy, so as to stamp the strike with
illegality, or to cause the loss of employment of the guilty party x x x 16
The motion for reconsideration subsequently filed by the School was denied in
a Resolution dated 6 December 2001, save in case of some union officers where
the appellate court modified its ruling granting them separation pay instead of
reinstatement because of their retirement or death. 17
Thereafter, petitioners filed this petition for review on certiorari raising three
main issues, summarized as: (1) whether the School’s decision to retire Llagas
and Javier constitutes unfair labor practice; (2) whether the strike was legal;
and (3) whether some union officers ordered dismissed are entitled to
backwages.18
The School avers that the retirement of Llagas and Javier was clearly in
accordance with a specific right granted under the CBA. The School justifies its
actions by invoking our rulings in Pantranco North Express, Inc. v. NLRC 19 and
Bulletin Publishing Corporation v. Sanchez 20 that no unfair labor practice is
committed by management if the retirement was made in accord with
management prerogative or in case of voluntary retirement, upon approval of
management.
The Union, relying on the findings made by the Court of Appeals, 21 argues that
the retirement of the two union officers is a mere subterfuge to bust the union. 22
The NLRC, however, gave another justification to sustain the validity of the two
union officers’ forcible retirement, viz:
The retirement of Rosalinda Llagas has become inevitable because, being a
managerial employee by reason of her position as Dean of Student Affairs, she
accepted the Union presidency. She lost the trust and confidence on her by the
SCHOOL as she occupied a managerial position as Dean of Student Affairs. . .
Being also the union president, she has allowed her loyalties to be divided
between the administration and the union.
As to Paz Javier, her retirement was decided upon after an evaluation shows
that she was not performing well as her students were complaining about her
brusque attitude and bad language, aside from being habitually absent and late.
23
At the outset, only questions of law are entertained by this Court through a
petition for review on certiorari. There are, however, well-recognized
exceptions such as in this case when the factual findings of the NLRC and the
Court of Appeals are contradictory.24 A re-evaluation of the records of this case
is necessary for its proper resolution.
The key issue remains whether the forced retirement of Llagas and Javier was a
valid exercise of management prerogative. Undoubtedly, the retirement of the
two (2) union officers triggered the declaration of strike by the Union, and the
ruling on whether the strike was legal is highly dependent on whether the
retirement was valid.
We are impelled to reverse the Court of Appeals and affirm the validity of the
termination of employment of Llagas and Javier, arising as it did from a
management prerogative granted by the mutually-negotiated CBA between the
School and the Union.
Pursuant to the existing CBA, 25 the School has the option to retire an employee
upon reaching the age limit of sixty (60) or after having rendered at least
twenty (20) years of service to the School, the last three (3) years of which must
be continuous. Retirement is a different specie of termination of employment
from dismissal for just or authorized causes under Articles 282 and 283 of the
Labor Code. While in all three cases, the employee to be terminated may be
unwilling to part from service, there are eminently higher standards to be met
by the employer validly exercising the prerogative to dismiss for just or
authorized causes. In those two instances, it is indispensable that the employer
establish the existence of just or authorized causes for dismissal as spelled out
in the Labor Code. Retirement, on the other hand, is the result of a bilateral act
of the parties, a voluntary agreement between the employer and the employee
25
whereby the latter after reaching a certain age agrees and/or consents to sever
his employment with the former.26
Article 287 of the Labor Code, as amended, governs retirement of employees,
stating:
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 agreement and other agreements: Provided, however, That an
employee’s retirement benefits under any collective bargaining agreement and
other agreements shall not be less than those provided herein.
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 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.
The CBA in the case at bar established 60 as the compulsory retirement age.
However, it is not alleged that either Javier or Llagas had reached the
compulsory retirement age of 60 years, but instead that they had rendered at
least 20 years of service in the School, the last three (3) years continuous.
Clearly, the CBA provision allows the employee to be retired by the School even
before reaching the age of 60, provided that he/she had rendered 20 years of
service. Would such a stipulation be valid? Jurisprudence affirms the position of
the School.
Pantranco North Express, Inc. v. NLRC, cited by petitioners, finds direct
application in this case. The CBA involved in Pantranco allowed the employee to
be compulsorily retired upon reaching the age of 60 "or upon completing [25]
years of service to [Pantranco]." On the basis of the CBA, private respondent
was compulsorily retired by Pantranco at the age of 52, after 25 years of
service. Interpreting Article 287, the Court ruled that the Labor Code permitted
employers and employees to fix the applicable retirement age at below 60 years
of age. Moreover, the Court also held that there was no illegal dismissal since it
was the CBA itself that incorporated the agreement reached between the
employer and the bargaining agent with respect to the terms and conditions of
employment; hence, when the private respondent ratified the CBA with his
union, he concurrently agreed to conform to and abide by its provisions. Thus,
the Court asserted, "[p]roviding 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." 27
A similar set of facts informed our decision in Progressive Development
Corporation v. NLRC.28 The CBA therein stipulated that an employee "with [20]
years of service, regardless of age, may be retired at his option or at the option
of the company." The stipulation was used by management to compulsorily
retire two employees with more than 20 years of service, at the ages of 45 and
38. The Court affirmed the validity of the stipulation on retirement as
consistent with Article 287 of the Labor Code.
Philippine Airlines, Inc. v. Airline Pilots Association of the Phils. 29 further
bolsters the School’s position. At contention therein was a provision of the PAL-
ALPAP Retirement Plan, the Plan having subsequently been misquoted in the
CBA mutually negotiated by the parties. The Plan authorized PAL to exercise the
option of retirement over pilots who had chosen not to retire after completing
20 years of service or logging over 20,000 hours for PAL. After PAL exercised
such option over a pilot, ALPAP charged PAL with illegal dismissal and union-
busting. While the Secretary of Labor upheld the unilateral retirement, it
nonetheless ruled that PAL should first consult with the pilot to be retired
before it could exercise such option. The Court struck down that proviso, ruling
that "the requirement to consult the pilots prior to their retirement defeats the
exercise by management of its option to retire the said employees, [giving] the
pilot concerned an undue prerogative to assail the decision of management."
By their acceptance of the CBA, the Union and its members are obliged to abide
by the commitments and limitations they had agreed to cede to management.
The questioned retirement provisions cannot be deemed as an imposition
foisted on the Union, which very well had the right to have refused to agree to
allowing management to retire retire employees with at least 20 years of
service.
It should not be taken to mean that retirement provisions agreed upon in the
CBA are absolutely beyond the ambit of judicial review and nullification. A CBA,
as a labor contract, is not merely contractual in nature but impressed with
public interest. If the retirement provisions in the CBA run contrary to law,
public morals, or public policy, such provisions may very well be voided.
Certainly, a CBA provision or employment contract that would allow
26
management to subvert security of tenure and allow it to unilaterally "retire"
employees after one month of service cannot be upheld. Neither will the Court
sustain a retirement clause that entitles the retiring employee to benefits less
than what is guaranteed under Article 287 of the Labor Code, pursuant to the
provision’s express proviso thereto in the provision.
Yet the CBA in the case at bar contains no such infirmities which must be
stricken down. There is no essential difference between the CBA provision in
this case and those we affirmed in Pantranco and Progressive. Twenty years is a
more than ideal length of service an employee can render to one employer.
Under ordinary contemplation, a CBA provision entitling an employee to retire
after 20 years of service and accordingly collect retirement benefits is "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." 30
We affirm the continued validity of Pantranco and its kindred cases, and thus
reiterate that under Article 287 of the Labor Code, a CBA may validly accord
management the prerogative to optionally retire an employee under the terms
and conditions mutually agreed upon by management and the bargaining
union, even if such agreement allows for retirement at an age lower than the
optional retirement age or the compulsory retirement age. The Court of Appeals
gravely erred in refusing to consider this case from the perspective of
Pantranco, or from the settled doctrine enunciated therein.
What the Court of Appeals did instead was to favorably consider the claim of the
Union that the real purpose behind the retirement of Llagas and Javier was to
"bust" the union, they being its president and vice-president, respectively. To
that end, the appellate court favorably adopted the citation by the Union of the
American
case of NLRB v. Ace Comb, Co., 31 which in turn was taken from a popular local
labor law textbook. The citation stated that "[f]or the purpose of determining
whether or not a discharge is discriminatory, it is necessary that the underlying
reason for the discharge be established. The fact that a lawful cause for
discharge is available is not a defense where the employee is actually
discharged because of his union activities." 32
Reliance on NLRB v. Ace Comb, Co. was grossly inapropos. The case did not
involve an employee sought to be retired, but one who cited for termination
from employment for cause, particularly for violating Section 8(a)(3) of the
National Labor Relations Act, or for insubordination. Moreover, the United
States Court of Appeals Eighth Circuit, which decided the case, ultimately
concluded that "here the evidence abounds that there was a justifiable cause for
[the employee’s] discharge," 33 his union activities notwithstanding. Certainly,
the Union and the Court of Appeals would have been better off citing a case
wherein the decision actually concluded that the employee was invalidly
dismissed for union activities despite the ostensible existence of a valid cause
for termination.
Nonetheless, the premise warrants considering whether management may be
precluded from retiring an employee whom it is entitled to retire upon a
determination that the true cause for compulsory retirement is the employee’s
union activities.
The law and this Court frowns upon unfair labor practices by management,
including so-called union-busting. Such illegal practices will not be sustained by
the Court, even if guised under ostensibly legal premises. But with respect to an
active unionized employee who claims having lost his/her job for union
activities, there are different considerations presented if the termination is
justified under just or authorized cause under the Labor Code; and if separation
from service is effected through the exercise of a duly accorded management
prerogative to retire an employee. There is perhaps a greater imperative to
recognize the management prerogative on retirement than the prerogative to
dismiss employees for just or authorized causes. For one, there is a greater
subjectivity, not to mention factual dispute, attached to the concepts of just or
authorized cause than retirement which normally contemplates merely the
attainment of a certain age or a certain number of years in the service. It would
be easier for management desirous to eliminate pesky union members to abuse
the prerogative of termination for such purpose since the determination of just
or authorized cause is rarely a simplistic question, but involves facts highly
prone to dispute and subjective interpretation.
On the other hand, the exercise by management of its retirement prerogative is
less susceptible to dubitability as to the question whether an employee could be
validly retired. The only factual matter to consider then is whether the
employee concerned had attained the requisite age or number of years in
service pursuant to the CBA or employment agreement, or if none, pursuant to
Article 287 of the Labor Code. In fact, the question of the amount of retirement
benefits is more likely to be questioned than the retirement itself. Evidently, it
more clearly emerges in the case of retirement that management would anyway
have the right to retire an employee, no matter the degree of involvement of
said employee in union activities.
27
There is another point that militates against the Union. A ruling in its favor is
tantamount to a concession that a validly drawn management prerogative to
retire its employees can be judicially interfered on a showing that the employee
in question is highly valuable to the union. Such a rule would be a source of
mischief, even if narrowly carved out by the Court, for it would imply that an
active union member or officer may be, by reason of his/her importance to the
union, somehow exempted from the normal standards of retirement applicable
to the other, perhaps less vital members of the union. Indeed, our law’s
protection of the right to organize labor does not translate into perpetual job
security for union leaders by reason of their leadership role alone. Should we
entertain such a notion, the detriment is ultimately to the union itself,
promoting as it would a stagnating entrenched leadership.
We can thus can comfortably uphold the principle, as reiterated in Philippine
Airlines,34 that the exercise by the employer of a valid and duly established
prerogative to retire an employee does not constitute unfair labor practice.
There are other arguments raised by petitioners. We need to discuss them only
in brief, as they are no longer central to the resolution of this case.
The School insisted that Llagas and Javier were actually managerial employees,
and it was illegal for the Union to have called a strike on behalf of two
employees who were not legally qualified to be members of the Union in the
first place.35 The Union, on the other hand, maintains that they are rank-and-file
employees.
Article 212(m) of the Labor Code defines a managerial employee as "one who is
vested with powers or prerogatives to lay down and execute management
policies and/or to hire, transfer, suspend, lay-off, recall, discharge, assign or
discipline employees, or to effectively recommend such managerial actions."
The functions of the Dean of Student Affairs, as occupied by Llagas, are
enumerated in the Faculty Manual. The salient portions are hereby enumerated:
a. Manages the High School Department with the Registrar and Guidance
Counselors (acting as a COLLEGIAL BODY) in the absence of the Director or
Principal.
b. Enforces the school rules and regulations governing students to maintain
discipline.
xxxx
 g. Plans with the Guidance Counselors student leadership training programs to
encourage dynamic and responsible leadership among the students and
submits the same for the approval of the Principal/Director.
xxxx
i. Studies proposals on extra-curricular or co-curricular activities and projects
proposed by teachers and students and recommends to the Principal/Director
the necessary approval.
j. Implements and supervises activities and projects approved by the
Principal/Director so that the activities and projects follow faithfully the
conditions set forth by the Principal/Director in the approval.
k. Assists in the planning, supervising and evaluating of programs of co-
curricular activities in line with the philosophy and objectives of the School for
the total development of the students.
l. Recommends to the Principal policies and rules to serve as guides to
effective implementation of the student activity program. 36
xxxx
It is fairly obvious from a perusal of the list that the Dean of Student Affairs
exercises managerial functions, thereby classifying Llagas as a managerial
employee.
Javier was occupying the position of Subject Area Coordinator. Her duties and
responsibilities include:
1. Recommends to the principal’s consideration the appointment of faculty
members in the department, their promotion, discipline and even termination;
2. Recommends advisory responsibilities of faculty members;
3. Recommends to the principal curricular changes, purchase the books and
periodicals, supplies and equipment for the growth of the school;
4. Recommends his/her colleagues and serves as channel between teachers in
the department the principal and/or director. 37
Supervisory employees, as defined in Article 212(m) are those who, in the
interest of the employer, effectively recommend such managerial actions if the
exercise of such authority is not merely routinary or clerical in nature but
requires the use of independent judgment.
28
In the same vein, a reading of the above functions leads us to conclude that
Javier was a supervisory employee. Verily, Javier made recommendations as to
what actions to take in hiring, termination, disciplinary actions, and
management policies, among others.
We can concede, as the Court of Appeals noted, that such job descriptions or
appellations are meaningless should it be established that the actual duties
performed by the employees concerned are neither managerial nor supervisory
in nature. Yet on this point, we defer to the factual finding of the NLRC, the
proximate trier of facts, that Llagas and Javier were indeed managerial and
supervisory employees, respectively.1avvphil.net
Having established that Llagas is a managerial employee, she is proscribed from
joining a labor union,38 more so being elected as union officer. In the case of
Javier, a supervisory employee, she may join a labor union composed only of
supervisory employees.39 Finding both union officers to be employees not
belonging to the rank-and-file, their membership in the Union has become
questionable, rendering the Union inutile to represent their cause.
Since the strike has been declared as illegal based on the foregoing discussion,
we need not dwell on its legality with respect to the means employed by the
Union.
Finally, there is neither legal nor factual justification in awarding backwages to
some union officers who have lost their employment status, in light of our
finding that the strike is illegal. The ruling of the NLRC is thus upheld on this
point. We are also satisfied with the disposition of the NLRC that mandates that
Llagas and Javier (or her heirs) receive their retirement benefits.
WHEREFORE, the petition is GRANTED. The Resolution dated 31 January 1997
of the National Labor Relations Commission in NLRC NCR CC No. L-000028-93
is REINSTATED.
SO ORDERED.
G.R. No. 156934 March 16, 2007
ALPHA C. JACULBE, Petitioner,
vs.
SILLIMAN UNIVERSITY,Respondent.
DECISION
CORONA, J.:
Petitioner comes to us via this petition for review on certiorari 1 to challenge a
decision2 of the Court of Appeals (CA) and the resolution 3 affirming it.
Sometime in 1958, petitioner began working for respondent’s university
medical center as a nurse.4
In a letter dated December 3, 1992, 5 respondent, through its Human Resources
Development Office, informed petitioner that she was approaching her 35th
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." 6 Respondent required
certain documents in connection with petitioner’s impending retirement.
A brief exchange of letters7 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 SSS8 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."9 On November 18, 1993, respondent
compulsorily retired petitioner.
After the parties submitted their position papers, the labor arbiter rendered a
decision finding respondent guilty of illegal dismissal and ordered that
petitioner be reinstated and paid full backwages. 10 On appeal, however, the
NLRC reversed the labor arbiter’s decision and dismissed the complaint for lack
of merit.11 The NLRC likewise denied petitioner’s motion for reconsideration. 12
In the assailed decision and resolution, the CA affirmed the NLRC.
29
Hence, this petition.
The issues for our consideration are:
1) did respondent’s retirement plan imposing automatic retirement
after 35 years of service contravene the security of tenure clause in
the 1987 Constitution and the Labor Code?
2) did respondent commit illegal dismissal by retiring petitioner
solely by reason of such provision in its retirement plan?
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.13
However, after reviewing the assailed decision together with the rules and
regulations of respondent’s retirement plan, we find that 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.
The CA, in ruling against petitioner, premised its decision to uphold the
retirement plan on her voluntary participation therein:
The petitioner in this case may, however, argue that the Pantranco case is not
applicable in the case at bar as the controversy in the said case involves a
compulsory retirement on the basis of the length of service rendered by the
employee as agreed in an existing CBA, whereas in the present case, the private
respondent compulsorily retired the petitioner not based on a CBA but on the
retirement scheme provided for in the private respondent’s retirement plan.
Nonetheless, this argument must fail. The contract fixing for retirement age as
allowed under Article 287 of the Labor Code does not exclusively refer to CBA
which provides for an agreed retirement age. The said provision explicitly
allows, as well, other applicable employment contract to fix retirement age.
The records disclose that the private respondent’s Retirement Plan has been in
effect for more than 30 years. The said plan is deemed integrated into the
employment contract between private respondent and its employees as
evidenced by the latter’s voluntary contribution through monthly salary
deductions. Previous retirees have already enjoyed the benefits of the
retirement plan, and ever since the said plan was effected, no questions or
disagreement have been raised, until the same was made to apply to the
petitioner. xxx14 (emphasis ours)
The problem with this line of reasoning is that a perusal of the rules and
regulations of the plan shows that participation therein was not voluntary at all.
Rule III of the plan, on membership, stated:
SECTION 1 – MEMBERSHIP
All full-time Filipino employees of the University will automatically become
members of the Plan, provided, however, that those who have retired from the
University, even if rehired, are no longer eligible for membership in the Plan. A
member who continues to serve the University cannot withdraw from the
Plan.
xxx xxx xxx
SECTION 2 – EFFECTIVITY OF MEMBERSHIP
Membership in the Plan starts on the day a person is hired on a full-time basis
by the University.
SECTION 3 – TERMINATION OF MEMBERSHIP
Termination of membership in the Plan shall be upon the death of the
member, resignation or termination of employee’s contract by the
University, or retirement from the University.15 (emphasis ours).
Rule IV, on contributions, stated:
The Plan is contributory. The University shall set aside an amount equivalent to
3½% of the basic salaries of the faculty and staff. To this shall be added a 5%
deduction from the basic salaries of the faculty and staff.
30
A member on leave with the University approval shall continue paying, based
on his pay while on leave, his leave without pay should pay his contributions to
the Plan. However, a member, who has been on leave without pay should pay his
contributions based on his salary plus the University’s contributions while on
leave or the full amount within one month immediately after the date of his
reinstatement. Provided[,] further that if a member has no sufficient source of
income while on leave may pay within six months after his reinstatement. 16
From the language of the foregoing retirement plan rules, the compulsory
nature of both membership in and contribution to the plan debunked the CA’s
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).
According to the assailed decision, respondent’s retirement plan "ha(d) been in
effect for more than 30 years." 17 What was not pointed out, however, was that
the retirement plan came into being in 1970 18 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, as the
CA would have us believe.
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. 19 In
Pantranco North Express, Inc. v. NLRC,20 to which both the CA and respondent
refer, the imposition of a retirement age below the compulsory age of 65 was
deemed acceptable because this was part of the CBA between the employer and
the employees. The consent of the employees, as represented by their
bargaining unit, to be retired even before the statutory retirement age of 65 was
laid out clearly in black and white and was therefore in accord with Article 287.
In this case, neither the CA nor the respondent cited any agreement, collective
or otherwise, to justify 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, 21 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." 22
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.
At this point, reinstatement is out of the question.1awphi1.nét Petitioner is now
71 years old and therefore well over the statutory compulsory retirement age.
For this reason, we grant her separation pay in lieu of reinstatement. It is also
for this reason that we modify the award of backwages in her favor, to be
computed from the time of her illegal dismissal on November 18, 1993 up to
her compulsory retirement age.
WHEREFORE, the petition is hereby GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 50445 is REVERSED and SET ASIDE. The October 25,
1994 decision of the labor arbiter finding respondent guilty of illegal dismissal
is REINSTATED, with the MODIFICATION that, in lieu of reinstatement,
petitioner is awarded separation pay, the award of backwages to be computed
from the time of her illegal dismissal up to her compulsory retirement age.
SO ORDERED.
G.R. No. 188154 October 13, 2010
LOURDES A. CERCADO, Petitioner,
vs.
UNIPROM, INC., Respondent.
31
DECISION
NACHURA, J.:
Assailed in this Petition for Review on Certiorari 1 are the July 31, 2007
Decision2 and the May 26, 2009 Resolution 3 of the Court of Appeals (CA) in CA-
G.R. SP No. 87508, declaring as valid the unilateral retirement of petitioner by
respondent.
The 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 Plan4 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.
Sometime in December 2000, UNIPROM implemented a company-wide early
retirement program for its 41 employees, including herein petitioner, who, at
that time, was 47 years old, with 22 years of continuous service to the company.
She was offered an early retirement package amounting to ₱171,982.90, but she
rejected the same.
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 ₱100,811.70, representing her retirement benefits
under the regular retirement package, was issued to her. Cercado refused to
accept the check.
UNIPROM nonetheless pursued its decision and Cercado was no longer given
any work assignment after February 15, 2001. This prompted Cercado to file a
complaint 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.
For its part, respondent UNIPROM averred that Cercado was automatically
covered by the retirement plan when she agreed to the company’s rules and
regulations, and that her retirement from service was a valid exercise of a
management prerogative.
After submission of the parties’ position papers, the LA rendered a decision 7
finding petitioner to be illegally dismissed. Respondent company was ordered
to reinstate her with payment of full backwages.
The National Labor Relations Commission (NLRC) affirmed the LA’s decision,
adding that there was no evidence that Cercado consented to the alleged
retirement plan of UNIPROM or that she was notified thereof. 8
On certiorari, the CA set aside the decisions of the LA and the NLRC. The
decretal portion of the Decision reads:
WHEREFORE, the petition is GRANTED. The Decision of the Labor Arbiter and
the assailed Resolutions of the NLRC are NULLIFIED and SET ASIDE. Judgment
is hereby rendered declaring respondent’s retirement as valid and legal being in
conformity with petitioners’ Retirement Plan.9
The CA ruled that UNIPROM’s retirement plan was consistent with Article 287
of the Labor Code, which provides that "any employee may be retired upon
reaching the retirement age established in the collective bargaining agreement
or other applicable employment contract." The CA applied the doctrine laid
down in Progressive Development Corporation v. NLRC 10 wherein the phrase
"may be retired" in Article 287 of the Labor Code was interpreted to mean that
an option is given to an employer to retire an employee, and such option is
within the discretion of the employer to exercise.
The CA further noted that Cercado cannot feign ignorance of the retirement
plan considering that she was already working with the company when it took
effect in 1980.
Cercado moved for reconsideration, but the same was denied. 11 Hence, the
instant recourse raising the following issues: 1) whether UNIPROM has a bona
fide retirement plan; and 2) whether petitioner was validly retired pursuant
thereto.
32
The petition is meritorious.
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. 12
Article 287 of the Labor Code, as amended by R.A. No. 7641, 13 pegs the age for
compulsory retirement at 65 years, while the minimum age for optional
retirement is set at 60 years. An employer is, however, free to impose a
retirement age earlier than the foregoing mandates. This has been upheld in
numerous cases14 as a valid exercise of management prerogative.
In this case, petitioner was retired by UNIPROM at the age of 47, after having
served the company for 22 years, pursuant to UNIPROM’s Employees’ Non-
Contributory Retirement Plan,15 which provides that employees who have
rendered at least 20 years of service may be retired at the option of the
company. At first blush, respondent’s retirement plan can be expediently
stamped with validity and justified under the all encompassing phrase
"management prerogative," which is what the CA did. But the attendant
circumstances in this case, vis-aà -vis the factual milieu of the string of
jurisprudence on this matter, impel us to take a deeper look.
In Pantranco North Express, Inc. v. NLRC, 16 the Court upheld the retirement of
private respondent pursuant to a Collective Bargaining Agreement (CBA)
allowing Pantranco to compulsorily retire employees upon completing 25 years
of service to the company. Interpreting Article 287, the Court ruled that the
Labor Code permits employers and employees to fix the applicable retirement
age lower than 60 years of age. The Court also held that there was no illegal
dismissal involved, since it was the CBA itself that incorporated the agreement
between the employer and the bargaining agent with respect to the terms and
conditions of employment. Hence, when the private respondent ratified the
CBA, he concurrently agreed to conform to and abide by its provisions. Thus,
the Court stressed, "[p]roviding 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."
Similarly, in Philippine Airlines, Inc. (PAL) v. Airline Pilots Association of the
Philippines (APAP),17 the retirement plan contained in the CBA between PAL
and APAP was declared valid. The Court explained that by their acceptance of
the CBA, APAP and its members are obliged to abide by the commitments and
limitations they had agreed to cede to management.
The foregoing pronouncements served as guiding principles in the recent
Cainta Catholic School v. Cainta Catholic School Employees Union (CCSEU), 18
wherein the compulsory retirement of two teachers was upheld as valid and
consistent with the CBA provision allowing an employee to be retired by the
school even before reaching the age of 60, provided that he/she had rendered
20 years of service.
In Progressive Development Corporation v. NLRC, 19 although the retirement
plan was not embodied in a CBA, its provisions were made known to the
employees’ union. The validity of the retirement plan was sustained on the
basis of the finding of the Director of the Bureau of Working Conditions of the
Department of Labor and Employment that it was expressly made known to the
employees and accepted by them.
It is axiomatic that a retirement plan giving the employer the option to retire its
employees below the ages provided by law must be assented to and accepted by
the latter, otherwise, its adhesive imposition will amount to a deprivation of
property without due process of law.
In the above-discussed cases, the retirement plans in issue were the result of
negotiations and eventual agreement between the employer and the employees.
The plan was either embodied in a CBA, or established after consultations and
negotiations with the employees’ bargaining representative. The consent of the
employees to be retired even before the statutory retirement age of 65 years
was thus clear and unequivocal.
Unfortunately, no similar situation obtains in the present case. In fact, not even
an iota of voluntary acquiescence to UNIPROM’s early retirement age option is
attributable to petitioner.
The assailed retirement plan of UNIPROM is not embodied in a CBA or in any
employment contract or agreement assented to by petitioner and her co-
employees. On the contrary, UNIPROM’s Employees’ Non-Contributory
Retirement Plan was unilaterally and compulsorily imposed on them. This is
evident in the following provisions of the 1980 retirement plan and its
amended version in 2000:
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
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Section 1. Any regular employee, as of the Effective Date, shall automatically
become a Participant in the Plan, provided the Employee was hired below age
60.
Verily, petitioner was forced to participate in the plan, and the only way she
could have rejected the same was to resign or lose her job. The assailed CA
Decision did not really make a finding that petitioner actually accepted and
consented to the plan. The CA simply declared that petitioner was deemed
aware of the retirement plan on account of the length of her employment with
respondent. Implied knowledge, regardless of duration, cannot equate to the
voluntary acceptance required by law in granting an early retirement age
option to an employer. The law demands more than a passive acquiescence on
the part of employees, considering that an employer’s early retirement age
option involves a concession of the former’s constitutional right to security of
tenure.
We reiterate the well-established meaning of retirement in this jurisdiction:
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. 20
Acceptance by the employees of an early retirement age option must be explicit,
voluntary, free, and uncompelled. While an employer may unilaterally retire an
employee earlier than the legally permissible ages under the Labor Code, this
prerogative must be exercised pursuant to a mutually instituted early
retirement plan. In other words, only the implementation and execution of the
option may be unilateral, but not the adoption and institution of the retirement
plan containing such option. For the option to be valid, the retirement plan
containing it must be voluntarily assented to by the employees or at least by a
majority of them through a bargaining representative.
The following pronouncements in Jaculbe v. Silliman University 21 are
elucidating:
[A]n 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.1avvphi1
We disagree with the CA’s conclusion that the retirement plan is part of
petitioner’s employment contract with respondent. It must be underscored that
petitioner was hired in 1978 or 2 years before the institution of UNIPROM’s
retirement plan in 1980. Logically, her employment contract did not include the
retirement plan, much less the early retirement age option contained therein.

We also cannot subscribe to respondent’s submission that petitioner’s consent

to the retirement plan may be inferred from her signature in the personnel
action forms22 containing the phrase: "Employee hereby expressly
acknowledges receipt of and undertakes to abide by the provisions of his/her
Job Description, Company Code of Conduct and such other policies, guidelines,
rules and regulations the company may prescribe."

It should be noted that the personnel action forms relate to the increase in
petitioner’s salary at various periodic intervals. To conclude that her acceptance
of the salary increases was also, simultaneously, a concurrence to the
retirement plan would be tantamount to compelling her to agree to the latter.
Moreover, voluntary and equivocal acceptance by an employee of an early
retirement age option in a retirement plan necessarily connotes that her
consent specifically refers to the plan or that she has at least read the same
when she affixed her conformity thereto.

Hence, consistent with the Court’s ruling in Jaculbe, 23 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 24 relative to the award of
separation pay in case reinstatement is no longer feasible.

WHEREFORE, the petition is GRANTED. The July 31, 2007 Decision and the May
26, 2009 Resolution of the Court of Appeals in CA- G.R. SP No. 87508 are hereby
REVERSED and SET ASIDE. The October 30, 2002 Decision of the Labor Arbiter G.R. No. 187698 August 9, 2010
is REINSTATED, with the MODIFICATION that the award of backwages shall be
computed from the time of her illegal dismissal until the actual date of her RODOLFO J. SERRANO, Petitioner,
reinstatement. If reinstatement is no longer possible because the position that vs.
petitioner held no longer exists, respondent UNIPROM shall pay backwages as SEVERINO SANTOS TRANSIT and/or SEVERINO SANTOS, Respondents.
computed above, plus, in lieu of reinstatement, separation pay equivalent to
one-month pay for every year of service.
DECISION

SO ORDERED.
CARPIO MORALES, J.:

34
Petitioner Rodolfo J. Serrano was hired on September 28, 1992 as bus
conductor by respondent Severino Santos Transit, a bus company owned and
operated by its co-respondent Severino Santos.
After 14 years of service or on July 14, 2006, petitioner applied for optional
retirement from the company whose representative advised him that he must
first sign the already prepared Quitclaim before his retirement pay could be
released. As petitioner’s request to first go over the computation of his
retirement pay was denied, he signed the Quitclaim on which he wrote "U.P."
(under protest) after his signature, indicating his protest to the amount of
₱75,277.45 which he received, computed by the company at 15 days per year of
service.
Petitioner soon after filed a complaint 1 before the Labor Arbiter, alleging that
the company erred in its computation since under Republic Act No. 7641,
otherwise known as the Retirement Pay Law, his retirement pay should have
been computed at 22.5 days per year of service to include the cash equivalent of
the 5-day service incentive leave (SIL) and 1/12 of the 13th month pay which the
company did not.
The company maintained, however, that the Quitclaim signed by petitioner
barred his claim and, in any event, its computation was correct since petitioner
was not entitled to the 5-day SIL and pro-rated 13th month pay for, as a bus
conductor, he was paid on commission basis. Respondents, noting that the
retirement differential pay amounted to only ₱1,431.15, explained that in the
computation of petitioner’s retirement pay, five months were inadvertently not
included because some index cards containing his records had been lost.
By Decision2 of February 15, 2007, Labor Arbiter Cresencio Ramos, Jr. ruled in
favor of petitioner, awarding him ₱116,135.45 as retirement pay differential,
and 10% of the total monetary award as attorney’s fees. In arriving at such
computation, the Labor Arbiter ratiocinated:
In the same Labor Advisory on Retirement Pay Law, it was likewise decisively
made clear that "the law expanded the concept of "one-half month salary" from
the usual one-month salary divided by two", to wit:
B. COMPUTATION OF RETIREMENT PAY
A covered employee who retires pursuant to RA 7641 shall be entitled to
retirement pay equivalent to at least one-half ( 1/12) month salary for every year
35
of service, a fraction of at least six (6) months being considered as one whole
year.
The law is explicit that "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 service incentive leaves" unless the parties provide for
broader inclusions. Evidently, the law expanded the concept of "one-half month
salary" from the usual one-month salary divided by two.
The retirement pay is equal to half-month’s pay per year of service. But "half-
month’s pay" is "expanded" because it means not just the salary for 15 days but
also one-twelfth of the 13th-month pay and the cash value of five-day service
incentive leave. THIS IS THE MINIMUM. The retirement pay package can be
improved upon by voluntary company policy, or particular agreement with the
employee, or through a collective bargaining agreement." (The Labor Code with
Comments and Cases, C.A. Azcunea, Vol. II, page 765, Fifth Edition 2004).
Thus, having established that 22.5 days pay per year of service is the correct
formula in arriving at the complete retirement pay of complainant and
inasmuch as complainant’s daily earning is based on commission earned in a
day, which varies each day, the next critical issue that needs discernment is the
determination of what is a fair and rational amount of daily earning of
complainant to be used in the computation of his retirement pay.
While complainant endeavored to substantiate his claim that he earned average
daily commission of ₱700.00, however, the documents he presented are not
complete, simply representative copies, therefore unreliable. On the other
haNd, while respondents question complainant’s use of ₱700.00 (daily income)
as basis in determining the latter’s correct retirement pay, however it does not
help their defense that they did not present a single Conductor’s Trip Report to
contradict the claim of complainant. Instead, respondents adduced a
handwritten summary of complainant’s monthly income from 1993 until June
2006. It must be noted also that complainant did not contest the amounts
stated on the summary of his monthly income as reported by respondents.
Given the above considerations, and most importantly that complainant did not
dispute the figures stated in that document, we find it logical, just and equitable
for both parties to rely on the summary of monthly income provided by
respondent, thus, we added complainant’s monthly income from June 2005
until June 2006 or the last twelve months and we arrived at ₱189,591.30) and
we divided it by twelve (12) to arrive at complainant’s average monthly earning
of ₱15,799.28. Thereafter, the average monthly of ₱15,799.28 is divided by
twenty-six (26) days, the factor commonly used in determining the regular
working days in a month, to arrive at his average daily income of ₱607.66.
Finally, ₱607.66 (average daily income) x 22.5 days = ₱13,672.35 x 14 (length of
service) = ₱191,412.90 (COMPLETE RETIREMENT PAY). However, inasmuch as
complainant already received ₱75,277.45, the retirement differential pay due
him is ₱116,135.45 (₱191,412.90 – ₱75,277.45). (underscoring partly in the
original and partly supplied)
The National Labor Relations Commission (NLRC) to which respondents
appealed reversed the Labor Arbiter’s ruling and dismissed petitioner’s
complaint by Decision3 dated April 23, 2008. It, however, ordered respondents
to pay retirement differential in the amount of ₱2,365.35.
Citing R & E Transport, Inc. v. Latag, 4 the NLRC held that since petitioner was
paid on purely commission basis, he was excluded from the coverage of the laws
on 13th month pay and SIL pay, hence, the 1/12 of the 13th month pay and the 5-
day SIL should not be factored in the computation of his retirement pay.
Petitioner’s motion for reconsideration having been denied by Resolution 5 of
June 27, 2008, he appealed to the Court of Appeals.
By the assailed Decision6 of February 11, 2009, the appellate court affirmed the
NLRC’s ruling, it merely holding that it was based on substantial evidence,
hence, should be respected.
Petitioner’s motion for reconsideration was denied, hence, the present petition
for review on certiorari.
The petition is meritorious.
Republic Act No. 7641 which was enacted on December 9, 1992 amended
Article 287 of the Labor Code by providing for retirement pay to qualified
private sector employees in the absence of any retirement plan in the
establishment. The pertinent provision of said law reads:
Section 1. Article 287 of Presidential Decree No. 442, as amended, otherwise
known as the Labor Code of the Philippines, is hereby amended to read as
follows:
xxxx
In the absence of a retirement plan or agreement providing for retirement
benefits of employees in the establishment, an employee upon reaching
36
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 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 (1/2)
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.
Retail, service and agricultural establishments or operations employing
not more than (10) employees or workers are exempted from the
coverage of this provision.
x x x x (emphasis and underscoring supplied)
Further, the Implementing Rules of said law provide:
RULE II
Retirement Benefits
SECTION 1.
General Statement on Coverage. — This Rule shall apply to all employees in
the private sector, regardless of their position, designation or status and
irrespective of the method by which their wages are paid, except to those
specifically exempted under Section 2 hereof. As used herein, the term "Act"
shall refer to Republic Act No. 7641 which took effect on January 7, 1993.
SECTION 2
Exemptions. — This Rule shall not apply to the following employees:
2.1 Employees of the National Government and its political subdivisions,
including Government-owned and/or controlled corporations, if they are
covered by the Civil Service Law and its regulations.
2.2 Domestic helpers and persons in the personal service of another.
2.3 Employees of retail, service and agricultural establishment or
operations regularly employing not more than ten (10) employees. As used
in this sub-section;
xxxx
SECTION
Retirement Benefits.
5.1 In the absence of an applicable agreement or retirement plan, an employee
who retires pursuant to the Act shall be entitled to retirement pay equivalent to
at least one-half (―) month salary for every year of service, a fraction of at least
six (6) months being considered as one whole year.
5.2 Components of One-half (―) Month Salary. — For the purpose of
determining the minimum retirement pay due an employee under this Rule, the
term "one-half month salary" shall include all of the following:
(a) Fifteen (15) days salary of the employee based on his latest salary
rate. As used herein, the term "salary" includes all remunerations paid by
an employer to his employees for services rendered during normal
working days and hours, whether such payments are fixed or ascertained
on a time, task, piece of commission basis, or other method of calculating
the same, and includes the fair and reasonable value, as determined by the
Secretary of Labor and Employment, of food, lodging or other facilities
customarily furnished by the employer to his employees. The term does not
include cost of living allowances, profit-sharing payments and other monetary
benefits which are not considered as part of or integrated into the regular
salary of the employees.
(b) The cash equivalent of not more than five (5) days of service incentive
leave;
(c) One-twelfth of the 13th month pay due the employee.
(d) All other benefits that the employer and employee may agree upon that
should be included in the computation of the employee’s retirement pay.
x x x x (emphasis supplied)
Admittedly, petitioner worked for 14 years for the bus company which did not
adopt any retirement scheme. Even if petitioner as bus conductor was paid on
commission basis then, he falls within the coverage of R.A. 7641 and its
implementing rules. As thus correctly ruled by the Labor Arbiter, petitioner’s
retirement pay should include the cash equivalent of the 5-day SIL and 1/12 of
the 13th month pay.
The affirmance by the appellate court of the reliance by the NLRC on R & E
5 Transport, Inc. is erroneous. In said case, the Court held that a taxi driver paid
according to the "boundary system" is not entitled to the 13th month and the
SIL pay, hence, his retirement pay should be computed on the sole basis of his
salary.
For purposes, however, of applying the law on SIL, as well as on retirement, the
Court notes that there is a difference between drivers paid under the "boundary
system" and conductors who are paid on commission basis.
In practice, taxi drivers do not receive fixed wages. They retain only those sums
in excess of the "boundary" or fee they pay to the owners or operators of the
vehicles.7 Conductors, on the other hand, are paid a certain percentage of the
bus’ earnings for the day.
It bears emphasis that under P.D. 851 or the SIL Law, the exclusion from its
coverage of workers who are paid on a purely commission basis is only with
respect to field personnel. The more recent case of Auto Bus Transport Systems,
Inc., v. Bautista8 clarifies that an employee who is paid on purely commission
basis is entitled to SIL:
A careful perusal of said provisions of law will result in the conclusion that the
grant of service incentive leave has been delimited by the Implementing Rules
and Regulations of the Labor Code to apply only to those employees not
explicitly excluded by Section 1 of Rule V. According to the Implementing
Rules, Service Incentive Leave shall not apply to employees classified as
"field personnel." The phrase "other employees whose performance is
unsupervised by the employer" must not be understood as a separate
classification of employees to which service incentive leave shall not be granted.
Rather, it serves as an amplification of the interpretation of the definition of
field personnel under the Labor Code as those "whose actual hours of work in
the field cannot be determined with reasonable certainty."
The same is true with respect to the phrase "those who are engaged on
task or contract basis, purely commission basis." Said phrase should be
related with "field personnel," applying the rule on ejusdem generis that
general and unlimited terms are restrained and limited by the particular terms
37
that they follow. Hence, employees engaged on task or contract basis or
paid on purely commission basis are not automatically exempted from the
grant of service incentive leave, unless, they fall under the classification of
field personnel.

xxxx

According to Article 82 of the Labor Code, "field personnel" shall refer to

non-agricultural employees who regularly perform their duties away from
the principal place of business or branch office of the employer and whose
actual hours of work in the field cannot be determined with reasonable
certainty. This definition is further elaborated in the Bureau of Working
Conditions (BWC), Advisory Opinion to Philippine Technical-Clerical Commercial
Employees Association which states that:

As a general rule, [field personnel] are those whose performance of their

job/service is not supervised by the employer or his representative, the
workplace being away from the principal office and whose hours and days of
work cannot be determined with reasonable certainty; hence, they are paid
specific amount for rendering specific service or performing specific work. If
required to be at specific places at specific times, employees including
drivers cannot be said to be field personnel despite the fact that they are
performing work away from the principal office of the employee.

x x x x (emphasis, italics and underscoring supplied)

WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of

February 11, 2009 and Resolution of April 28, 2009 are REVERSED and SET
ASIDE and the Labor Arbiter’s Decision dated February 15, 2007 is
REINSTATED.

SO ORDERED.

38