Llora Motors

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Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. 82895 November 7, 1989

LLORA MOTORS, INC. and/or CONSTANTINO CARLOTA, JR., petitioners, vs.HON. FRANKLIN DRILON in his capacity as the Secretary of the Department of Labor andEmployment, HON. DANIEL M. LUCAS, DOMINGO H. ZAPANTA and OSCAR N. ABELLA, in theircapacity as Commissioners of the National Labor Relations Commission (NLRC) Manila,Second Division, HON. RICARDO N. OLAIREZ, in his capacity as the Labor Arbiter of theRegional Arbitration Branch No. I, San Fernando, La Union and PRIMITIVO ALVIAR,respondents.

Yabes & Associates Law office for petitioners.

Francisco T. Gualberto and Humberto M. Tutaan, Sr. counsel and Tupas ROI Representatives forAlviar.

FELICIANO, J.:

The subject of the present Petition for certiorari with Preliminary Injunction is the Resolution 1 dated 20January 1988 of the public respondent National Labor Relations Commission (NLRC) in NLRC Case No. RAB-1-0096-85(entitled "Primitivo V. Alviar, complainant. versus Llora Motors Inc., and/or Constatino Carlota, respondents").

Sometime in September of 1968, private respondent Primitivo V. Alviar began his employment with petitioner Llora Motors,Inc. As a truck driver, Mr. Alviar rendered services to the company eight (8) hours a day (exluding overtime) seven days aweek, and for his labor received a salary computed on a per trip basis plus emergency cost of living allowance (ECOLA). Atthe time he stopped working on 19 April 1985, Mr. Alviar was 65 Years of age.

On 28 October 1985, private respondent Alviar filed with NLRC Regional Arbitration Branch No. I (San Fernando, La Union) acomplaint 2 (docketed as NLRC Case No. RAB-I-0096-85) for "Separation Pay and Non-Payment of Daily Wages" againstpetitioners Llora Motors and Constantino Carlota, Jr., the company manager. In a Position Paper 3 he filed in support of hiscomplaint, Mr. Alviar claimed entitlement to, among other things, ECOLA underpayments from November 1982 up to April1985 in the amount of P4,709.54 as well as "retirement benefits," computed at one-half month's pay for every year of service.

The complaint was opposed by petitioners who, in their own Position Paper, 4 alleged that all of the employment benefitsclaimed by private respondent Alviar had already been fully paid. On the matter of retirement benefits, it was contended thatMr. Alviar had not been dismissed by Llora Motors, but that "[s]ometime in the early part of 1985, [Alviar] showed utter lackof interest in his work [and] would be absent for no apparent reason; "that "[i]n the meantime, Truck No. 802, assigned tocomplainant, laid Idle and because of non-use for sometime, it deteriorated so seriously;" that in the last week of April of1985, Mr. Alviar reported for work and was then informed that "while Truck 802 has not been rehabilitated as yet, he couldact as relief driver;" that "complainant did not like to be a relief driver in the meantime for since then he did not report forwork;" and that "it was complainant who abandoned his work since the last week of April 1985 and never reported sincethen." Neither had Mr. Alviar been retired, petitioners claimed, "for the simple reason that respondent corporation does nothave any retirement plan ... [or] any collective bargaining agreement with the employees for no union exists within thecompany because the employees, drivers included, received more than the standard benefits for their labor." Petitionerscontended further that "records will show that complainant had received retirement benefits from the Social Security Systemwhen he retired therefrom in 1983."

Mr. Alviar, in his pleadings submitted before the Labor Arbiter, did not controvert petitioner's allegations of abandonment andnon-dismissal. Mr. Alviar there simply alleged that in April of 1985, he "retired from the service due to his old age of 65years."

On 27 January 1987, the respondent Labor Arbiter rendered a Decision, 5 the dispositive portion of which read:WHEREFORE, premises all considered, we hereby order the respondents to pay complainants Primitivo Alviar, as follows:

1. P4,709.54 Unpaid ECOLA differentials 2. 9,985.80 Retirement benefits(for 17 years) P14,695.34

3. 1,469.53 10% attorney's feesP16,164.87 Total award

and to pay complainant legal interest on the total award to be compounded annually after ten (10) days from receipt of this decision.

Respondents are finally ordered to pay complainant through this Regional Arbitration Branch Office or present proof of compliance with

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this order within ten (10) days from receipt hereof

SO ORDERED.

An appeal was subsequently interposed with public respondent NLRC, petitioners there claiming that they had been denied due process by the LaborArbiter, who had rendered judgment in NLRC Case No. RAB-1-0096-85 without first conducting formal hearings therein. In addition, petitioners,reiterating that private respondent Alviar had neither been dismissed nor retired by the company, questioned the propriety of the P9,985.80 award ofretirement benefits.

On 20 January 1988, public respondent NLRC issued the disputed Resolution, affirming the decision of the Labor Arbiter and ordering dismissal of theappeal. A Motion for Reconsideration was denied on 28 March 1988. 6

The Petition at bar raises two (2) principal issues: (1) whether or not petitioners had been denied due process of law by theLabor Arbiter; and (2) whether or not private respondent Alviar is legally entitled to receive retirement benefits frompetitioner's, his former employers.With respect to the first issue, petitioners allege that failure by the Labor Arbiter to conduct a formal hearing, prior to rendition of judgment. resulted inviolation of their constitutional right to due process. We do not agree. This Court has held in the past that a formal or trial-type hearing is not at all timesand in all instances essential to due process, 7 the requirements of which are satisfied where parties are afforded fair and reasonable opportunity to explain theirside of the controversy at hand. 8 Such opportunity had not here been withheld from petitioners. The record shows that inresponse to private respondent Alviar's complaint below and before the Labor Arbiter rendered his decision of 27 January1987, petitioners submitted on 21 January 1987, petitioners submitted on 21 January 1986 a Position Paper, complete withannexes, 9 where they had set out and argued the factual as well as the legal bases of their position. Petitioners do notclaim that their submissions there were ignored or disregarded altogether by the Labor Arbiter. The record moreover showsthat petitioners were given additional opportunity to argue their case on appeal before public respondent NLRC, in aMemorandum, 10 and Motion for Reconsideration, 11 which pleadings were likewise considered by that labor agency in thecourse of resolving the case. All told, the due process argument put forward by petitioners must fail.

In respect of the second and principal issue, it is urged by petitioners that the award of retirement benefits to privaterespondent Alviar is improper, there being no contractual or statutory basis for such award.

Our Labor Code has only one article that deals with the subject of "retirement from the service." Article 287 of the Codereads as follows:

Article 287. Retirement. Any employee may be retired upon reaching the retirement age established in the Collective BargainingAgreement 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 andany collective bargaining or other agreement. (Emphasis supplied)

Examination of Article 287 above shows that entitlement to retirement benefits may accrue either (a) under existing laws or (b) under a collectivebargaining agreement or other employment contract. It is at once apparent that Article 287 does not itself purport to impose any obligation uponemployers to set up a retirement scheme for their employees over and above that already established under existing laws. In other words, Article 287recognizes that existing laws already provide for a scheme by which retirement benefits may be earned or accrue in favor of employees, as part of abroader social security system that provides not only for retirement benefits but also death and funeral benefits, permanent disability benefits, sicknessbenefits and maternity leave benefits. 12 As is commonplace knowledge, the Social Security Act provides for retirement benefitswhich essentially consist of the right to receive a monthly pension for the rest of the covered employee's life provided that: (1)such employee had paid at least one hundred twenty (120) monthly contributions prior to retirement; and (2) has reached theage of sixty (60) years (if his salary is less than P300.00 a month) or 65 years. The retirement scheme here 'established iscompulsory and contributory in character on the part of both the employer and the employee, backed up by criminalsanctions and administered by a large and elaborate bureaucracy.

Article 287 of the Labor Code recognizes that employers and employees may, by a colective bargaining or other agreement,set up a retirement plan in addition to that stablished by the Social Security law, but prescribes at the same time that suchconsensual additional retirement plan cannot be substituted for or reduce the retirement benefits available under thecompulsory scheme established by the Social Security law. Such is the thrust of the second paragraph of Article 287 whichdirects that the employee shall be entitled to receive retirement benefits earned "under existing laws and any collectivebargaining or other agreement."

It is also important here to examine Section 13 and 14 of Rule, I, book VI of the Rules and Regulations Implementing theLabor Code (hereafter, "Implementing rule I"). Implementing Rule I deals with both termination of services and retirement,being entitled "Termination of Employment and Retirement." But Sections 13 and 14 of Implementing Rule I are the onlyprovisions which deal with retirement matters. Under Section 13 which provides as follows:

Sec. 13. Retirement. In the absence of any collective bargaining agreement or other applicable agreement concerning terms andconditions of employment which provides for retirement at an older age, an employee may be retired upon reaching the age of sixty (60)years. (Emphasis supplied)

where an additional retirement plan has been established by a collective bargaining agreement, or other applicable agreement (or, under Section 14, an"established employer policy"), but such plan fails to specify another, older, age of retirement, an employee may retire, and may in turn be retired by hisemployer, upon reaching age sixty (60).

That there was some confusion in the mind of the Labor Arbiter in the case at bar between "termination pay" and "retirement benefits" would seementirely possible: private respondent Alviar initially asked for "separation pay" and the Labor Arbiter awarded him "retirement benefits." That confusionwas perhaps due to the Labor Arbiter's citing Section 14 of Implementing Rule I, which reads as follows:

Sec. 14. Retirement benefits. (a) An employee who is retired pursuant to a bona-fide retirement plan or a in accordance with theapplicable individual or collective agreement or established employer policy shall be entitled to all the retirement benefits providedtherein or to termination pay equivalent at least one-half month salary for every year of service, whichever is higher, a fraction of at leastsix (6) months being considered as one whole year.

(b) Where both the employer and the employee contribute to the retirement plan, agreement or policy, the employer's total contributionthereto shall not be less than the total termination pay to which the employee would have been entitled had there been no suchretirement fund. In case the employer's contribution is less than the termination pay the employee is entitled to receive, the employershall pay the deficiency upon the retirement of the employee.

(c) This Section shall apply where the employee retires at the age of sixty (60) years or older. (Emphasis supplied)

Section 14 (a) refers to "termination pay equivalent to at least one-half (1/2) month for every year of service" while Section 14 (b) mentions "terminationpay to which the employee would have been entitled had there been no such retirement fund" as well as "termination pay the employee is entitled toreceive." It should be recalled that Sections 13 and 14 are found in Implementing rule I which deals with both "termination of employment" and"retirement." It is important to keep the two (2) concepts of "termination pay" and "retirement benefits" separate and distinct from each other. Terminationpay or separation pay is required to be paid by an employer in particular situations Identified by the Labor Code itself or by Implementing rule I. 13Termination pay where properly due and payable under some applicable provision of the Labor Code or under Section 4 (b) ofImplementing Rule 1, must be paid whether or not an additional retirement plan has been set up under an agreement with the

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employer or under an "established employer policy."

What needs to be stressed, however, is that Section 14 of Implementing Rule 1, like Article 287 of the Labor Code, does notpurport to require "termination pay" to be paid to an employee who may want to retire but for whom no additional retirementplan had been set tip by prior agreement with the employer. Thus, Section 14 itself speaks of an employee "who is retiredpursuant to a bona-fide retirement plan or in accordance with the applicable individual or collective agreement or establishedemployer policy." What Section 14 of Implementing Rule I may be seen to be saying is that where termination pay isotherwise payable to an employee under an applicable provision of the Labor Code, and an additional or consensualretirement plan exists, then payments under such retirement plan may be credited against the termination pay that is due,subject, however, to certain conditions. These conditions are: (a) that payments under the additional retirement plan cannothave the effect of reducing the amount of termination pay due and payable to less than one-half (1/2) month's salary for everyyear of service; and (b) the employee cannot be made to contribute to the termination pay that he is entitled to receive undersome provision of the Labor Code; in other words, the employee is entitled to the full amount of his termination pay plus atleast the return of his own contributions to the additional retirement plan.

The respondents, in defending the award of retirement benefits granted by the Labor Arbiter and affirmed by the NLRC, invokeAllied Investigation Bureau, Inc. v. Ople. 14 Examination, however, of Allied shows that respondents' reliance thereon is quitemisplaced. In Allied, Victoriano Velasquez had been an employee of the Allied Investigation Bureau, Inc., a security guardagency, since 1953. In 1976, having reached the age of sixty (60) years, Velasquez submitted to Allied an application forretirement benefits, which application was subsequently approved by Allied, although there was then no collective bargainingagreement or employer policy establishing an additional retirement plan for employees of the agency. A controversy arose inrespect of the method adopted by Allied in computing the amount of retirement benefits it had undertaken to pay toVelasquez. Instead of basing that amount upon Velasquez's actual period of employment with the agency (i.e., from 1953 to1976), Allied computed such amount as starting from the date of effectivity of the Labor Code (i.e., 1 November 1974 to1976). Acting on the complaint for retirement benefits, the Labor Arbiter ordered Allied to pay Velasquez on amountcomputed on the basis of the latter's twenty- three (23) years of service with the agency. On a Petition for Certiorari, theCourt upheld the Labor Arbiter's computation of retirement benefits in favor of Velasquez. The Court, speaking through thenMr. Justice Fernando, said:

1. There is no question that petitioner had agreed to grant retirement benefits to private respondent. It would, however, limit suchretirement benefits only from the date of the effectivity of the Labor Code. That is its contention. The refutation given in the Comment ofSolicitor General Estelito P. Mendoza is persuasive. As was pointed out," in the computation thereof, public respondents actedjudiciously in reckoning the retirement pay from the time private respondent started working with petitioner since respondent employee'sapplication for retirement benefits and the company's approval of the same make express mention of Sections 13 and 14, rule I, Book VIof the Implementing Rules and Regulations of the Labor Code as the basis for retirement pay. Section 14 (a) of said rule provides thatan employee who is retired pursuant to a bona-fide retirement plan or in accordance with the applicable individual or collectiveagreement or established employer policy shall be entitled to all the retirement benefits provided therein or to termination payequivalent to at least one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months beingconsidered as one whole year." Further it was stated: 'This position taken by public respondents squares with the principle that sociallegislation should be interpreted in favor of workers in the light of the Constitutional mandate that the State shall afford protection tolabor. 15 (Emphasis supplied)

Because Allied had agreed to pay retirement benefits to Velasquez, the mode of computation adopted by the Labor Arbiter which is the generallyaccepted mode of computation in retirement plans could hardly be regarded as merely arbitrary or capricious. Thus, while Allied had no collectivebargaining agreement or similar employment contract establishing a plan under which employees could retire, its approval of Velasquez's application,although unilateral and possibly ad hoc, supplied the necessary consensual basis. In the instant case, Llora Motors consistently resisted the demand forseparation pay or retirement benefits by private respondent Alviar, precisely pointing to the fact that there was no collective bargaining agreement orother contractual basis or any "established employer policy" that contemplated the grant of such retirement benefits.

Clearly, there was in the instant case no consensual basis fro the required payment of additional retirement benefits. 16 The Labor Arbiter and theNLRC had not declared private respondent Alviar to have been illegally dismissed by petitioners. neither was there anypretense on the part of private respondent Alviar that labor-saving devices had been installed, or that redundancy orretrenchment or cessation of operations had occurred in Llora Motors or that he was afflicted by some disabling disease, orthat, being entitled to reinstatement, he could not be reinstated to this old position. Under these circumstances, the portionof the Labor Arbiter's award which required petitioners to pay an amount equivalent to a half month's pay for every year ofservice of Mr. Alviar cannot be justified either as (additional) retirement benefits or as termination pay and hence constitutedan act without or in excess of jurisdiction.

WHEREFORE, the Decision of the Labor Arbiter dated 27 January 1987 and the Resolution of the National Labor RelationsCommission dated 20 January 1988 in NLRC Case No. RAB-I-0096-85 are hereby SET ASIDE and a new decision shall beentered REQUIRING petitioners to pay private respondent Primitivo Alviar the amount of P4,709.54 for unpaid ECOLAdifferentials, plus ten percent (10%) thereof as attorney's fees and to pay private respondent legal interest on the total award,compounded annually, from the date of petitioners' receipt of the original (now vacated) decision of the Labor Arbiter, and untilfull payment of the amount here awarded. No pronouncement as to costs.

SO ORDERED.

Fernan, C.J., Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Footnotes1 Rollo, pp. 55-58.

2 Id., p. 15.

3 Id., pp. 31-40.

4 Id., pp. 16-22.

5 Id., pp. 42-46.

6 Id., p. 67.

7 Richards v. Asoy, 152 SCRA 45 (1987).

8 Tajonera v. Lamaroza, 110 SCRa 438 (1981).

9 Rollo, pp. 23-30.

10 Id., pp. 47-53.

11 Id., pp. 59-66.

12 See Social Security Act, Republic Act No. 1161 (effective 18 June 1954), as amended by a whole series of Republic Acts,

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Presidential Decrees and Executive Orders: Section 12-B (Retirement Benefits); 13 (Death Benefits); 13-A (Permanent DisabilityBenefits); 13-B (Funeral Benefit); 14 (Sickness Benefit); and 14-A (Maternity Leave Benefit).

13 See Article 283 of the Labor Code dealing with"

1. installation of labor saving devices;

2. redundancy;

3.retrenchment to prevent losses;

4. closing or cessation of operation of the company; and Article 284 referring to

5.termination of services by reason of disease; and Section 4 (b), Rule I, book VI of the Implementing Rules and Regulations relating tosituations

6. where the reinstatement of the employee to his former position is required but is not possible because the company has closed orceased operations or his former position no longer exists at the time of reinstatement (for reasons not attributable to the fault of theemployer).

14 91 SCRA 265 (1975).

15 91 SCRA at 268-269.

16 That is, in addition to the retirement benefits provided by the Social Security Act.

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Manila

THIRD DIVISION

G.R. No. 72971 October 15, 1990

ABAQUIN SECURITY AND DETECTIVE AGENCY, INC., petitioner, vs.HON. DIEGO P. ATIENZA, HON. CLETO T. VILLATUYA, HON. GERONIMO Q. CUADRA,NATIONAL LABOR RELATIONS COMMISSION and ANTONIO B. JOSE, respondents.

D. P. Mercado & Associates for petitioner.

FERNAN, C.J.:The instant petition for certiorari raises primarily the issue of whether or not a security agency may be required to pay retirement or termination benefits infavor of its security guard who voluntarily resigned, in the absence of an agreement, contract or management policy regarding such benefits.

Petitioner security agency employed private respondent Antonio B. Jose as a security guard on August 29, 1959. Almost twenty-five (25) years later or onApril 12, 1984, Jose voluntarily resigned in view of his failing health and his desire to withdraw his cash deposits with petitioner. He was then sixty-one(61) years old. After Jose had executed a certificate of discharge acknowledging full payment of his services as well as a quitclaim of all demands againstpetitioner, the latter, relying on the absence of any management policy or agreement between them regarding retirement or termination benefits, paidJose only his cash deposits. Feeling aggrieved, Jose filed before the Arbitration Branch of the National Labor Relations Commission (NLRC) a complaintagainst petitioner for separation pay, or in lieu thereof, gratuity benefits equal to one-half month salary for every year of service and other benefitsprovided for by law.

Labor Arbiter Domingo V. del Rosario dismissed Jose's complaint on the following grounds: (a) an employee's enjoyment of retirement benefits orseparation pay under Article 288 of the Labor Code and Sections 13 and 14 (a), Rule I, Book VI of the Rules and Regulations Implementing the LaborCode is subject to the existence of a retirement plan, individual or collective agreement or established management policy; (b) Jose cannot claim undersaid implementing rules benefits which are not granted by the Code, otherwise the then Ministry of Labor would be guilty of legislative usurpation; and (c)Jose was put in estoppel when he executed the certificate of discharge and when he voluntarily resigned. 1

On appeal, the NLRC in its decision of September 30, 1985, set aside the labor arbiter's decision, disposing, thus:

WHEREFORE, premises considered, the appealed decision is hereby SET ASIDE and another one enteredordering respondent-appellee to pay complainant-appellant (herein private respondent Jose) his retirement ortermination pay as provided for under existing laws and rules in an amount equivalent to one-half () monthsalary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Consequently, respondent-appellee (herein petitioner) is directed to show proof of immediate compliance to(sic) the mandate of this Decision after ten (10) days from receipt hereof.

SO ORDERED. 2

The NLRC construed Section 14 (a) of Rule I, Book VI of the Implementing Rules and Regulations of the Labor Code inrelation to the second paragraph of Article 288 as entitling a retiring employee to termination pay of one-half () month forevery year of service in the absence of any agreement or employer policy on retirement pay. It ruled that said Section 14 (a)was intended "to give full effect and application to Article 288 of the Labor Code (which) covers all retiring employees,regardless of the existence of any agreement, company policy or otherwise." 3 It added that under the principle of equity, it isonly just and fair to reward retiring employees for their long years of faithful service to their employer. Moreover, the NLRCsaid that Jose's execution of the certificate of discharge "never implied (his) abdication" or waiver of the benefits due himunder existing laws on account of the principle that labor standards are not subject to waiver or any agreement which woulddeprive the workingman of said benefits.

Hence, the instant petition for certiorari raising the issues of whether or not a 61-year-old security guard who voluntarilyresigned is entitled to retirement benefits under Article 288 of the Labor Code and whether or not Sections 13 and 14 (a),Rule I, Book VI of the Rules and Regulations Implementing the Labor Code can alter, repeal or modify said Article 288.

The Court dismissed the instant petition for lack of merit on December 16, 1985. 4 Expectedly, petitioner filed a motion forreconsideration reiterating as grounds therefor the two issues it had raised in the petition and, in addition, the grounds thatthe aforesaid sections of the implementing rules may not be the sources of a privilege in favor of private respondent and thatequity demands that it "be not unduly burdened in paying retirement benefits to a former employee." 5

Respondents having filed their comments on the motion for reconsideration, the Court reconsidered the dismissal resolutionin view of the fact that this case requires the interpretation of Article 288 of the Labor Code and said Sections 13 and 14 (a)of Implementing Rule I. 6

The legal provisions involved in this petition provide as follows:

Art, 288. * Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargainingagreement 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 andany collective bargaining or other agreement. (Labor Code)

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Sec. 13. Retirement. In the absence of any collective bargaining agreement or other applicable agreement concerning terms andconditions of employment which provides for retirement at an older age, an employee may be retired upon reaching the age of sixty (60)years.

Sec. 14. Retirement benefits. An employee who is retired pursuant to a bona-fide retirement plan or in accordance with theapplicable individual or collective agreement or established employer policy shall be entitled to all the retirement benefits providedtherein or to termination pay equivalent at least to one-half month salary for every year of service, whichever is higher, a fraction of atleast six (6) months being considered as one whole year. 7

Construing these provisions in relation to the same issue presented in this petition, this Court in the case of Llora Motors,Inc., and/ or Constantino Carlota, Jr. vs. Hon. Franklin Drilon, et al., 8 clarified that Article 288 (now 287) "does not itselfpurport to impose any obligation upon employers to set up a retirement scheme for their employees over and above thatalready established under existing laws. In other words, Article 287 recognizes that existing laws already provide for ascheme by which retirement benefits may be earned or accrue in favor of employees, as part of a broader social securitysystem that provides not only for retirement benefits but also death and funeral benefits, permanent disability benefits,sickness benefits and maternity leave benefits. 9

Llora went further to elucidate on the import of Sections 13 and 14 of Implementing Rule I to end the confusion between theconcepts "retirement benefits" and "termination pay" inadvertently engendered by the phraseology of Section 14, which dealswith both. Thus:

... It is important to keep the two (2) concepts of "termination pay" and "retirement benefits" separate anddistinct from each other. Termination pay or separation pay is required to be paid by an employer in particularsituations Identified by the Labor Code itself or by Implementing Rule I. Termination pay where properly dueand payable under some applicable provision of the Labor Code or under Section 4 (b) of Implementing Rule I,must be paid whether or not an additional retirement plan has been set up under an agreement with theemployer or under an "established employer policy."

What needs to be stressed, however, is that Section 14 of Implementing Rule I, like Article 287 of the LaborCode, does not purport to require termination pay to be paid to an employee who may want to retire but forwhom no additional retirement plan had been set up by prior agreement with the employer. ... What Section 14of Implementing Rule I may be seen to be saying is that where termination pay is otherwise payable to anemployee under an applicable provision of the Labor Code, and an additional or consensual retirement planexists, then payments under such retirement plan may be credited against the termination pay that is due,subject, however to certain conditions. ... 10

Based on the foregoing, there being no individual or collective agreement between the parties or established employer'spolicy regarding retirement benefits, petitioner's resistance to private respondent's claim therefor is legally defensible.

However, it must be noted that the complaint filed by private respondent prayed primarily for termination benefits and only inthe alternative for gratuity benefits. In fact, the dispositive portion of the decision. under review ordered petitioner to payprivate respondent "retirement or termination pay". In so ordering, the NLRC reasoned:

... The implementing rule particularly applicable to paragraph No. 2 Art. 288 is Section 14 (a) of Rule I, BookVI, of the Implementing Rules and Regulations of the Labor Code. This rule provides retirement benefits toemployees who have reached the retirement age, in an amount equivalent either to a bona-fide retirement plan,a CBA or individual agreement, an established employer policy, or in the absence of the preceeding threepractices, a termination pay of at least one-half (1/2) month salary for every year of service, a fraction of atleast six (6) months being considered as one whole year. ... 11

Taken in the light of our pronouncements in Llora, the incorrectness of the interpretation given by the NLRC to Article 288 inrelation to Section 14 (a) of Implementing Rule I is at once apparent. "While it is true that the contemporaneous constructionplaced upon a statute by executive officers whose duty is to enforce it should be given great weight by the courts, still if suchconstruction is so erroneous, as in the instant case, the same must be declared as null and void. It is the role of theJudiciary to refine and, when necessary, correct constitutional (and/or statutory) interpretation, in the context of theinteractions of the three branches of the government, almost always in situations where some agency of the State hasengaged in action that stems ultimately from some legitimate area of governmental power (The Supreme Court in ModernRole, C. B. Swisher, 1958, p. 36)." 12 We hasten to add, lest a misimpression is created, that we are here setting aside asnull and void merely the interpretation given in the instant case by the NLRC to Section 14(a) of Implementing Rule I inrelation to Article 288 of the Labor Code, and not Section 14(a) itself which had been given by this Court in Llora supra aconstruction that is in harmony and consistent with Article 288 of the Labor Code.

Be that as it may, we are not prepared to altogether set aside the award of termination pay, considering that there existsanother legal basis therefor. As keenly observed by the Solicitor General:

It may not be improper to state that respondent Jose should be paid termination pay for reasons analogous tothose contemplated under Article 285 of the Labor Code, which provides:

Art. 285. Disease as ground for termination. An employer may terminate the services of anemployee who has been found to be suffering from any disease and whose continuedemployment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salaryor to one half () month salary for every year of service, whichever is greater, a fraction of at leastsix (6) months being considered as one (1) whole year.

It is true that respondent Jose voluntarily resigned but he resigned because, among others, he suffered from illhealth. When petitioner accepted his resignation, it terminated his services partly for that reason. 13

Under Article 245 of the Labor Code, "(s)ecurity guards and other personnel employed for the protection and security of theperson, properties and premises of the employer shall not be eligible for membership in any labor organization." As such,they are a special class of employees in that they are deprived of the right to ventilate demands collectively. They are subjectto terms and conditions of employment circumscribed by employment contracts imposed on them by their employer. Whilethey may make particular individual demands in said contracts, more often than not, they fail to do so at the time of hiring.Hence, their only refuge is the liberality of the law. Private respondent, who was in the employ of petitioner for almost aquarter of a century and whose reason for terminating his employment was his failing health, deserves the full measure of thelaw's benevolence.

WHEREFORE, the petition is DISMISSED. The monetary award in favor of private respondent Antonio B. Jose is understood

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to be in the concept of termination pay, rather than retirement benefits.

This decision is immediately executory.

SO ORDERED.

Gutierrez, Jr., Bidin and Cortes, JJ., concur.

Feliciano, J., is on leave.

Footnotes

1 Rollo, pp. 18-21.

2 Rollo, pp. 16-17.

3 Rollo, p. 16.

4 Rollo, p. 22.

5 Rollo, p. 29.

6 Rollo, p. 115.

* Renumbered Art. 287 in subsequent amendments.

7 Rule 1, Book VI, Rules and Regulations Implementing the Labor Code.

8 G.R. No. 82895, November 7, 1989.

9 p. 7, Decision, underscoring in the original.

10 pp. 10-11, Decision, emphasis in the original.

11 Rollo, p. 15.

12 Insular Bank of Asia and America Employees' Union (IBAAEU) vs. Inciong, G.R. No. 52415, October 23, 1984, 132 SCRA 663.

13 Rollo, p. 107.



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Manila

FIRST DIVISION

G.R. No. 156934 March 16, 2007

ALPHA C. JACULBE, Petitioner, vs.SILLIMAN UNIVERSITY,Respondent.

D E C I S I O N

CORONA, J.:

Petitioner comes to us via this petition for review on certiorari1 to challenge a decision2 of the Court ofAppeals (CA) and the resolution3 affirming it.

Sometime in 1958, petitioner began working for respondents 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 forautomatic retirement on November 18, 1993, at which time she would be 57 years old. This was pursuantto respondents retirement plan for its employees which provided that its members could be automaticallyretired "upon reaching the age of 65 or after 35 years of uninterrupted service to the university."6Respondent required certain documents in connection with petitioners impending retirement.

A brief exchange of letters7 between petitioner and respondent followed. Petitioner emphatically insistedthat the compulsory retirement under the plan was tantamount to a dismissal and pleaded withrespondent to be allowed to work until the age of 60 because this was the minimum age at which shecould qualify for SSS8 pension. But respondent stood pat on its decision to retire her, citing "companypolicy."

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 respondentguilty of illegal dismissal and ordered that petitioner be reinstated and paid full backwages.10 On appeal,however, the NLRC reversed the labor arbiters decision and dismissed the complaint for lack of merit.11The NLRC likewise denied petitioners motion for reconsideration.12 In the assailed decision andresolution, the CA affirmed the NLRC.

Hence, this petition.

The issues for our consideration are:

1) did respondents retirement plan imposing automatic retirement after 35 years of servicecontravene 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 provisionin its retirement plan?

Retirement plans allowing employers to retire employees who are less than the compulsory retirementage of 65 are not per se repugnant to the constitutional guaranty of security of tenure. Article 287 of theLabor Code provides:

ART. 287. Retirement - Any employee may be retired upon reaching the retirement age established inthe collective bargaining agreement or other applicable employment contract. xxx

By its express language, the Labor Code permits employers and employees to fix the applicableretirement age at below 60 years.13

However, after reviewing the assailed decision together with the rules and regulations of respondents

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retirement plan, we find that the plan runs afoul of the constitutional guaranty of security of tenurecontained 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 voluntaryparticipation therein:

The petitioner in this case may, however, argue that the Pantranco case is not applicable in the case atbar as the controversy in the said case involves a compulsory retirement on the basis of the length ofservice rendered by the employee as agreed in an existing CBA, whereas in the present case, theprivate respondent compulsorily retired the petitioner not based on a CBA but on the retirement schemeprovided for in the private respondents retirement plan. Nonetheless, this argument must fail. Thecontract fixing for retirement age as allowed under Article 287 of the Labor Code does not exclusivelyrefer 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 respondents Retirement Plan has been in effect for more than 30years. The said plan is deemed integrated into the employment contract between private respondent andits employees as evidenced by the latters voluntary contribution through monthly salarydeductions. Previous retirees have already enjoyed the benefits of the retirement plan, and ever sincethe said plan was effected, no questions or disagreement have been raised, until the same was made toapply 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 thatparticipation 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 eligiblefor membership in the Plan. A member who continues to serve the University cannot withdrawfrom 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 ortermination of employees 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 3% of the basic salariesof the faculty and staff. To this shall be added a 5% deduction from the basic salaries of the faculty andstaff.

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 onleave without pay should pay his contributions based on his salary plus the Universitys contributionswhile 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 sixmonths after his reinstatement.16

From the language of the foregoing retirement plan rules, the compulsory nature of both membership inand contribution to the plan debunked the CAs theory that petitioners "voluntary contributions" wereevidence of her willing participation therein. It was through no voluntary act of her own that petitionerbecame a member of the plan. In fact, the only way she could have ceased to be a member thereof was ifshe stopped working for respondent altogether. Furthermore, in the rule on contributions, the repeateduse of the word "shall" ineluctably pointed to the conclusion that employees had no choice but tocontribute to the plan (even when they were on leave).

According to the assailed decision, respondents retirement plan "ha(d) been in effect for more than 30years."17 What was not pointed out, however, was that the retirement plan came into being in 197018 or12 years after petitioner started working for respondent. In short, it was not part of the terms ofemployment to which petitioner agreed when she started working for respondent. Neither did it becomepart of those terms shortly thereafter, as the CA would have us believe.

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Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer andthe employee whereby the latter, after reaching a certain age agrees to sever his or her employment withthe 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 becausethis was part of the CBA between the employer and the employees. The consent of the employees, asrepresented by their bargaining unit, to be retired even before the statutory retirement age of 65 was laidout 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 thelatters imposition of the early retirement age in its retirement plan, opting instead to harp on petitionersalleged "voluntary" contributions to the plan, which was simply untrue. The truth was that petitioner had nochoice but to participate in the plan, given that the only way she could refrain from doing so was to resignor lose her job. It is axiomatic that employer and employee do not stand on equal footing,21 a situationwhich often causes an employee to act out of need instead of any genuine acquiescence to theemployer. This was clearly just such an instance.

Not only was petitioner still a good eight years away from the compulsory retirement age but she wasalso still fully capable of discharging her duties as shown by the fact that respondents board of trusteesseriously 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 theemployees consent. Stated conversely, employees are free to accept the employers offer to lower theretirement 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 notfreely assented to by her, respondent was guilty of illegal dismissal.

At this point, reinstatement is out of the question.1awphi1.nt Petitioner is now 71 years old andtherefore well over the statutory compulsory retirement age. For this reason, we grant her separation payin lieu of reinstatement. It is also for this reason that we modify the award of backwages in her favor, to becomputed from the time of her illegal dismissal on November 18, 1993 up to her compulsory retirementage.

WHEREFORE, the petition is hereby GRANTED. The decision of the Court of Appeals in CA-G.R. SPNo. 50445 is REVERSED and SET ASIDE. The October 25, 1994 decision of the labor arbiter findingrespondent guilty of illegal dismissal is REINSTATED, with the MODIFICATION that, in lieu ofreinstatement, petitioner is awarded separation pay, the award of backwages to be computed from thetime of her illegal dismissal up to her compulsory retirement age.

SO ORDERED.

RENATO C. CORONAAssociate Justice

WE CONCUR:

REYNATO S. PUNOChief JusticeChairperson

ANGELINA SANDOVAL-GUTIERREZAssociate Justice

ADOLFO S. AZCUNAAsscociate Justice

CANCIO C. GARCIAAssociate Justice

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above decisionhad been reached in consultation before the case was assigned to the writer of the opinion of the CourtsDivision.

REYNATO S. PUNOChief Justice

Foonotes

1 Under Rule 45 of the Rules of Court.

2 Dated July 11, 2002 in CA-G.R. SP No. 50445, penned by Associate Justice Amelita G.Tolentino and concurred in by Associate Justices Ruben T. Reyes (now Presiding Justice) and

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Renato C. Dacudao of the Eighth Division of the Court of Appeals; rollo, pp. 149-158.

3 Dated January 20, 2003 in CA-G.R. SP No. 50445, penned by Associate Justice Amelita G.Tolentino and concurred in by Associate Justices Ruben T. Reyes (now Presiding Justice) andRenato C. Dacudao of the Eighth Division of the Court of Appeals; id., p. 197.

4 Id., p. 15.

5 Id., pp. 60-61.

6 Id., p. 135.

7 Id., pp. 62-70.

8 Social Security System.

9 Rollo, pp. 55-59.

10 Id., pp. 88-97.

11 Id., pp. 116-120.

12 Id., pp. 129-132.

13 Pantranco North Express, Inc. v. NLRC, 328 Phil. 470 (1996).

14 Supra note 2, at 155-156.

15 Rollo, p. 134.

16 Id., p. 135.

17 Supra note 2, at 156.

18 Rollo, p. 133.

19 Soberano v. Clave, G.R. Nos. L-43753-56 & L-50991, 29 August 1980, 99 SCRA 549.

20 Id.

21 Mercury Drug Co., Inc. v. CIR, 155 Phil. 636 (1974).

22 Id., pp. 79-80.



G.R. No. 156934 1/28/2014


Republic of the Philippines

Supreme Court

Manila

THIRD DIVISION

ALBERTO P. OXALES, G.R. No. 152991

Petitioner,

Present:

YNARES-SANTIAGO, J.,

Chairperson,

- versus - QUISUMBING*

AUSTRIA-MARTINEZ,

AZCUNA,** and

REYES, JJ.

Promulgated:

UNITED LABORATORIES, INC.,

Respondent. July 21, 2008

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

REYES, R.T., J.:

HOW should a private company retirement plan for employees be implemented vis--vis The Retirement Pay Law (Republic Act No.7641)?

Papaano ipapatupad ang isang plano ng pribadong kompanya para sa pagreretiro ng mga empleyado sa harap ngBatas ng Pagbabayad sa Pagreretiro (Batas Republika Blg. 7641)?

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We address the concern in this appeal by certiorari of the Decision[1] of the Court of Appeals (CA) affirming the Resolution[2]and Decision[3] of the Labor Arbiter and the National Labor Relations Commission (NLRC), respectively, dismissing petitionerAlberto P. Oxales complaint for additional retirement benefits, recovery of the cash equivalent of his unused sick leaves, damages,and attorneys fees, against respondent United Laboratories, Inc. (UNILAB).

The Facts

Sometime in 1959, UNILAB established the United Retirement Plan (URP).[4] The plan is a comprehensive retirement programaimed at providing for retirement, resignation, disability, and death benefits of its members. An employee of UNILAB becomes amember of the URP upon his regularization in the company. The URP mandates the compulsory retirement of any member-employeewho reaches the age of 60.

Both UNILAB and the employee contribute to the URP. On one hand, UNILAB provides for the account of the employee an actuarially-determined amount to Trust Fund A. On the other hand, the employee chips in 2% of his monthly salary to Trust Fund B. Uponretirement, the employee gets both amounts standing in his name in Trust Fund A and Trust Fund B.

As retirement benefits, the employee receives (1) from Trust Fund A a lump sum of 1 months pay per year of service based on themembers last or terminal basic monthly salary,[5] and (2) whatever the employee has contributed to Trust Fund B, together with theincome minus any losses incurred. The URP excludes commissions, overtime, bonuses, or extra compensations in the computationof the basic salary for purposes of retirement.

Oxales joined UNILAB on September 1, 1968. He was compulsorily retired by UNILAB when he reached his 60th birthday onSeptember 7, 1994, after having rendered service of twenty-five (25) years, eleven (11) months, and six (6) days. He was thenDirector of Manufacturing Services Group.

In computing the retirement benefits of Oxales based on the 1 months for every year of service under the URP, UNILAB took intoaccount only his basic monthly salary. It did not include as part of the salary base the permanent and regular bonuses, reasonablevalue of food allowances, 1/12 of the 13th month pay, and the cash equivalent of service incentive leave.

Thus, Oxales received from Trust Fund A P1,599,179.00, instead of P4,260,255.70. He also received P176,313.06, instead ofP456,039.20 as cash equivalent of his unused sick leaves. Lastly, he received P397,738.33 from his contributions to Trust Fund B. Insum, Oxales received the total amount of P2,173,230.39 as his retirement benefits.

On August 21, 1997, Oxales wrote UNILAB, claiming that he should have been paid P1,775,907.23 more in retirement pay andunused leave credits. He insisted that his bonuses, allowances and 13th month pay should have been factored in the computation ofhis retirement benefits.[6]

On September 9, 1997, UNILAB wrote[7] back and reminded Oxales about the provision of the URP excluding any commissions,overtime, bonuses or extra compensations in the computation of the basic salary of the retiring employee.

Disgruntled, Oxales filed a complaint with the Labor Arbiter for (1) the correct computation of his retirement benefits, (2) recoveryof the cash equivalent of his unused sick leaves, (3) damages, and (4) attorneys fees. He argued that in the computation of hisretirement benefits, UNILAB should have included in his basic pay the following, to wit: (a) cash equivalent of not more than five (5)days service incentive leave; (b) 1/12th of 13th month pay; and (c) all other benefits he has been receiving.

Efforts were exerted for a possible amicable settlement. As this proved futile, the parties were required to submit their respectivepleadings and position papers.

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Labor Arbiter, NLRC and CA Dispositions

On June 30, 1998, Labor Arbiter Romulus A. Protasio rendered a decision dismissing the complaint, thus:

WHEREFORE, premises considered, judgment is hereby rendered dismissing the instant complaint for lack of merit.

SO ORDERED.[8]

The Labor Arbiter held that the URP clearly excludes commission, overtime, bonuses, or other extra compensation. Hence, thebenefits asked by Oxales to be included in the computation of his retirement benefits should be excluded.[9]

The Arbiter also held that the inclusion of the fringe benefits claimed by Oxales would put UNILAB in violation of the terms andconditions set forth by the Bureau of Internal Revenue (BIR) when it approved the URP as a tax-qualified plan. More, any overpaymentof benefits would adversely affect the actuarial soundness of the plan. It would also expose the trustees of the URP to liabilities andprejudice the other employees. Worse, the BIR might even withdraw the tax exemption granted to the URP.[10] Lastly, the LaborArbiter opined that the URP precludes the application of the provisions of R.A. No. 7641.[11]

Oxales appealed to the NLRC. On February 8, 1999, the NLRC affirmed the decision of the Labor Arbiter, disposing as follows:

WHEREFORE, in view thereof, the instant appeal is hereby dismissed for lack of merit and the appealed decision is orderedaffirmed.

SO ORDERED.[12]

The NLRC ruled that the interpretation by Oxales of R.A. No. 7641 is selective. He only culled the provisions that are beneficial to him,putting in grave doubt the sincerity of his motives. For instance, he claims that the value of the food benefits and other allowancesshould be included in his monthly salary as multiplicand to the number of his years of service with UNILAB. At the same time,however, he does not intend to reduce the 1 month salary as multiplier under the URP to under R.A. No. 7641.[13]

The NLRC agreed with the Labor Arbiter that the provisions of R.A. No. 7641 do not apply in view of the URP. The NLRC alsotook into account the fact that the benefits granted to Oxales by virtue of the URP was even higher than what R.A. No. 7641requires.[14]

His motion for reconsideration having been denied, Oxales filed with the CA a petition for certiorari under Rule 65.

In a decision promulgated on April 12, 2002, the CA dismissed the petition. The CA ruled that the petition of Oxales calls for a reviewof the factual findings of the Labor Arbiter as affirmed by the NLRC. It is not the normal function of the CA in a special civil action forcertiorari to inquire into the correctness of the evaluation of the evidence by the Labor Arbiter. Its authority is confined only to issues ofjurisdiction or grave abuse of discretion.[15]

Just like the Labor Arbiter and the NLRC, the CA also held that R.A. No. 7641 is applicable only in the absence of a retirement plan oragreement providing for the retirement benefits of employees in an establishment.[16]

Finally, the CA denied the claim of Oxales to moral and exemplary damages. According to the appellate court, he failed to prove thepresence of bad faith or fraud on the part of UNILAB. His mere allegations of having suffered sleepless nights, serious anxiety, and

G.R. No. 152991 1/28/2014


mental anguish are not enough. No premium should be placed on the right to litigate.[17]

Left with no other option, Oxales filed the present recourse under Rule 45 of the 1997 Rules of Civil Procedure.[18]

Issues

In his Memorandum,[19] Oxales raises the following issues for Our disposition, to wit:

1. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT ACCORDING TO PREVAILINGJURISPRUDENCE, SUCH ERRORS IN THE COMPUTATION OF RETIREMENT BENEFITS OF PETITIONER SHOULD BECORRECTED IN A SPECIAL ACTION FOR CERTIORARI;

2. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT THE NLRC COMMITTED GRAVEABUSE OF DISCRETION IN INCORRECTLY INTERPRETING THE URP TO EXCLUDE SEVERAL REMUNERATIONS FROM THESAID SALARY BASE;

3. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION INTOTALLY IGNORING THE ISSUE AND IN NOT FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OF DISCRETION ININCORRECTLY INTERPRETING THE URP TO EXCLUDE PERMANENT AND REGULAR ALLOWANCES FROM THE SALARYBASE FOR COMPUTING RETIREMENT BENEFITS OF PETITIONER;

4. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT THE NLRC COMMITTED GRAVEABUSE OF DISCRETION IN INCORRECTLY INTERPRETING THE URP TO EXCLUDE PERMANENT AND REGULARREMUNERATIONS MISLABELED AS BONUSES FROM THE SALARY BASE FOR COMPUTING THE RETIREMENT BENEFITSOF THE PETITIONER;

5. WHETHER OR NOT THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OFDISCRETION IN INCORRECTLY INTERPRETING THE URP TO EXCLUDE ONE TWELFTH (1/12th) OF THE STATUTORYTHIRTEENTH MONTH PAY FROM THE SALARY BASE FOR COMPUTING RETIREMENT BENEFITS;

6. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN THE INTERPRETATION OF R.A. NO. 7641 WHEN ITCONCLUDED THAT THE SAID LAW IS APPLICABLE ONLY IN THE ABSENCE OF RETIREMENT PLAN OR AGREEMENTPROVIDING FOR THE RETIREMENT BENEFITS OF EMPLOYEES IN AN ESTABLISHMENT;

7. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING THAT THE DEFINITION OF SALARYUNDER THE IMPLEMENTING RULES OF R.A. NO. 7641 SHOULD BE INTERPRETED TO INCLUDE THE PERMANENT ANDREGULAR REMUNERATIONS OF PETITIONER IN THE SALARY BASE FOR COMPUTING RETIREMENT BENEFITS;

8. WHETHER OR NOT THE LABOR ARBITER, THE NLRC, AND COURT OF APPEALS COMMITTED GRAVE ABUSE OFDISCRETION IN IGNORING AND NOT RESOLVING THE ISSUES REGARDING PETITIONERS UNPAID CASH EQUIVALENT OFTHE UNUSED SICK LEAVE CREDITS;

9. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT THE NLRC GRAVELY ABUSEDITS DISCRETION IN ITS FAILURE TO PROPERLY INTERPRET THE URP IN DETERMINING THE EMPLOYMENT PERIOD OFPETITIONER FOR THE PURPOSE OF COMPUTING RETIREMENT BENEFITS;

10. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT RULING THAT THE NLRC COMMITTED GRAVEABUSE OF DISCRETION IN NOT REINSTATING THE MEDICAL RETIREMENT BENEFITS OF PETITIONER;

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11. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION INTOTALLY AND ARBITRARILY IGNORING THE ISSUE AND IN NOT FINDING THAT THE NLRC COMMITTED GRAVE ABUSE OFDISCRETION IN RENDERING A DECISION IN VIOLATION OF THE CONSTITUTIONAL REQUIREMENTS WHICH IN EFFECTDENIED PETITIONERS RIGHT TO DUE PROCESS;

12. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED AND GRAVELY ABUSED ITS DISCRETION INLIKEWISE RENDERING A DECISION IN VIOLATION OF THE CONSTITUTIONAL REQUIREMENT THAT DECISIONS SHOULDEXPRESS CLEARLY AND DISTINCTLY THE FACTS OF THE CASE AND THE LAW ON WHICH IT IS BASED;

13. WHETHER OR NOT THE COURT OF APPEALS SERIOUSLY ERRED IN NOT GRANTING MORAL AND EXEMPLARYDAMAGES AND ATTORNEYS FEES TO PETITIONER;

14. WHETHER OR NOT THE SUPREME COURT SHOULD GRANT PETITIONER UNPAID RETIREMENT PAY, UNPAID CASHEQUIVALENT OF UNUSED LEAVE CREDITS, REINSTATEMENT OF MEDICAL BENEFITS, MORAL AND EXEMPLARYDAMAGES, AND ATTORNEYS FEES.[20] (Underscoring supplied)

The issues posed by Oxales may be compressed as follows: first, whether in the computation of his retirement and sick leavebenefits, UNILAB should have factored such benefits like bonuses, cash and meal allowances, rice rations, service incentive leaves,and 1/12 of the 13th month pay; second, whether R.A. No. 7641 is applicable for purposes of computing his retirement benefits; andthird, whether UNILAB is liable for moral damages, exemplary damages, and attorneys fees.

Our Ruling

The clear language of the URP should be respected.

A retirement plan in a company partakes the nature of a contract, with the employer and the employee as the contracting parties. Itcreates a contractual obligation in which the promise to pay retirement benefits is made in consideration of the continued faithfulservice of the employee for the requisite period.[21]

The employer and the employee may establish such stipulations, clauses, terms, and conditions as they may deem convenient.[22] InAllgeyer v. Louisiana,[23] New York Life Ins. Co. v. Dodge,[24] Coppage v. Kansas,[25] Adair v. United States,[26] Lochner v. NewYork,[27] and Muller v. Oregon,[28] the United States Supreme Court held that the right to contract about ones affair is part andparcel of the liberty of the individual which is protected by the due process of law clause of the Constitution.

The obligations arising from the agreement between the employer and the employee have the force of law between them and shouldbe complied with in good faith.[29] However, though the employer and the employee are given the widest latitude possible in thecrafting of their contract, such right is not absolute. There is no such thing as absolute freedom of contract. A limitation is provided forby the law itself. Their stipulations, clauses, terms, and conditions should not be contrary to law, morals, good customs, public order,or public policy.[30] Indeed, the law respects the freedom to contract but, at the same time, is very zealous in protecting thecontracting parties and the public in general. So much so that the contracting parties need not incorporate the existing laws in theircontract, as the law is deemed written in every contract. Quando abest, proviso parties, adest proviso legis. When the provision ofthe party is lacking, the provision of the law supplies it. Kung may kulang na kondisyon sa isang kasunduan, ang batas angmagdaragdag dito.

Viewed from the foregoing, We rule that Oxales is not entitled to the additional retirement benefits he is asking. The URP is very

G.R. No. 152991 1/28/2014


clear: basic monthly salary for purposes of computing the retirement pay is the basic monthly salary, or if daily[,] means the basicrate of pay converted to basic monthly salary of the employee excluding any commissions, overtime, bonuses, or extracompensations.[31] Inclusio unius est exclusio alterius. The inclusion of one is the exclusion of others. Ang pagsama ng isa,pagpwera naman sa iba.

The URP is not contrary to law, morals, good customs, public order, or public policy to merit its nullification. We, thus,sustain it. At first blush, the URP seems to be disadvantageous to the retiring employee because of the exclusion of commissions,overtime, bonuses, or extra compensations in the computation of the basic monthly salary. However, a close reading of its provisionswould reveal otherwise. We quote with approval the explanation of the NLRC in this regard, viz.:

x x x the United Retirement Plan of the respondent [Unilab] has a one and one-half months salary for every year of service as the basisof entitlement. Under the new law, only one-half month of the retirees salary inclusive however, of not more than five (5) days ofservice incentive leave and one-twelfth (1/12) of the 13th month pay are used as the bases in the retirement benefits computation.

Mathematically speaking therefore, complainants [Oxales] benefits received amounting to P1,599,179.00 under Trust Fund Atogether with the cash equivalent of his unused leaves which has an amount of P176,313.06 and his contribution in the Trust Fund Bamounting to P397,738.33 are way above the entitlement he could have received under Republic Act 7641, otherwise known as theNew Retirement Law.[32] (Underscoring supplied)

Both law[33] and jurisprudence[34] mandate that if the terms of a contract are clear and leave no doubt upon the intention of thecontracting parties, the literal meaning of its stipulations shall control. Thus, if the terms of a writing are plain and unambiguous, thereis no room for construction, since the only purpose of judicial construction is to remove doubt and uncertainty.[35] Only where thelanguage of a contract is ambiguous and uncertain that a court may, under well-established rules of construction, interfere to reach aproper construction and make certain that which in itself is uncertain.[36] Where the language of a contract is plain and unambiguous,its meaning should be determined without reference to extrinsic facts or aids.[37]

R.A. No. 7641 does not apply in view of the URP which gives to the retiring employee more than what the law requires; thesupporting cases cited by Oxales are off-tangent.

R.A. No. 7641, otherwise known as The Retirement Pay Law, only applies in a situation where (1) there is no collective bargainingagreement or other applicable employment contract providing for retirement benefits for an employee; or (2) there is a collectivebargaining agreement or other applicable employment contract providing for retirement benefits for an employee, but it is below therequirements set for by law. The reason for the first situation is to prevent the absurd situation where an employee, who is otherwisedeserving, is denied retirement benefits by the nefarious scheme of employers in not providing for retirement benefits for theiremployees. The reason for the second situation is expressed in the latin maxim pacta privata juri publico derogare non possunt. Private contracts cannot derogate from the public law. Ang kasunduang pribado ay hindi makasisira sa batas publiko. Five (5)reasons support this conclusion.

First, a plain reading of the Retirement Pay Law. R.A. No. 7641 originated from the House of Representatives as House Bill 317which was later consolidated with Senate Bill 132. It was approved on December 9, 1992 and took effect on January 7, 1993.[38] Amending Article 287 of the Labor Code, it provides as follows:

Art. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargainingagreement 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 lawsand any collective bargaining agreement and other agreements: Provided, however, that an employees retirement benefits under anycollective bargaining 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 employeeupon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsoryretirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay

G.R. No. 152991 1/28/2014


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 asone 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. (Underscoringsupplied)

Second, the legislative history of the Retirement Pay Law. It may be recalled that R.A. No. 7641 traces back its history in thecase of Llora Motors, Inc. v. Drilon.[39] In this case, the Court held that the then Article 287 of the Labor Code[40] and itsImplementing Rules[41] may not be the source of an employees entitlement to retirement pay absent the presence of a collectivebargaining agreement or voluntary company policy that provides for retirement benefits for the employee.[42]

Third, the legislative intent of the Retirement Pay Law. A reading of the explanatory note of Representative Alberto S. Veloso wouldshow why Congress sought to pass the Retirement Pay Law: many employers refuse or neglect to adopt a retirement plan for theiremployees because of the absence of any legal compulsion for them to do so, thus:

When the Labor Code came into effect in 1974, retirement pay had, as a matter of course, been granted to employees in the privatesector when they reach the age of sixty (60) years. This had practically been the rule observed by employers in the country pursuant tothe rules and regulations issued by the then Minister of Labor and Employment to implement the provisions of the Labor Code, moreparticularly, where there is no provision for the same in the collective bargaining agreement or retirement plan of the establishment.

At present, however, such benefit of retirement pay is no longer available where there is no collective agreement thereon or anyretirement plan at all. This is so because, in a decision of the Supreme Court (Llora Motors vs. Drilon and NLRC, et al., G.R. No.82895, November 7, 1989), it was held that the grant of such benefit under the rules implementing the Labor Code is not supported byany express provision of the Labor Code itself. In short, there is no specific statutory basis for the grant of retirement benefits foremployees in the private sector reaching the age of 60 years.

Since the time of such nullification by the Supreme Court of said implementing rules on retirement pay for private sector employees,many employers simply refuse or neglect to adopt any retirement plan for their workers, obviously emboldened by the thought that,after said ruling, there is no longer any legal compulsion to grant such retirement benefits. In our continuous quest to promote socialjustice, unfair situations like this, productive of grievance or irritants in the labor-management relations, must immediately be correctedor remedied by legislation. (Underscoring supplied)

Fourth, the title of the Retirement Pay Law. The complete title of R.A. No. 7641 is An Act Amending Article 287 of PresidentialDecree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, By Providing for Retirement Pay to QualifiedPrivate Sector in the Absence of Any Retirement Plan in the Establishment. Res ipsa loquitur. The thing speaks for itself. Isangbagay na nangungusap na sa kanyang sarili.

Fifth, jurisprudence. In Oro Enterprises, Inc. v. National Labor Relations Commission,[43] the Court held that R.A. No. 7641is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative statute that absent aretirement plan devised by, an agreement with, or a voluntary grant from, an employer can respond, in part at least, to the financialwell-being of workers during their twilight years soon following their life of labor.[44]

In Pantranco North Express, Inc. v. National Labor Relations Commission,[45] the Court held that Article 287 of the Labor Codemakes clear the intention and spirit of the law to give employers and employees a free hand to determine and agree upon the termsand conditions of retirement,[46] and that the law presumes that employees know what they want and what is good for them absentany showing that fraud or intimidation was employed to secure their consent thereto.[47]

Lastly, in Brion v. South Philippine Union Mission of the Seventh Day Adventist Church,[48] the Court ruled that a reading of Article287 of the Labor Code would reveal that the employer and employee are free to stipulate on retirement benefits, as long as these donot fall below floor limits provided by law.[49]

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We are aware of the several cases cited by Oxales to support his claim that the computation of his retirement benefits shouldnot have been limited to the basic monthly salary as defined by the URP. However, these cases negate, rather than support, his claim.

In Villena v. National Labor Relations Commission,[50] the compulsory retirement of Villena was, in fact, an illegal dismissalin disguise. Thus, the Court ordered the Batangas, Laguna, Tayabas Bus Co. to pay Villena his full backwages, allowances, andother benefits for a period of three (3) years after his illegal dismissal on April 24, 1987, until he reached the compulsory retirementage plus his retirement benefits equivalent to his gross monthly pay, allowances and other benefits for every year of service up to agesixty (60), which is the normal retirement age for him.[51]

The distinction between Villena with the instant case is readily apparent. The Court used the regular compensation of Villena incomputing his retirement benefits because the provision of the CBA for rank-and-file employees is inapplicable to him, being amanagerial employee. The Villena case was also decided before the passage of R.A. No. 7641.

In Planters Products, Inc. v. National Labor Relations Commission,[52] the petitioning employees were given termination benefitsbased on their basic salary. However, Planters Products, Inc. had integrated the allowances of its remaining employees into theirbasic salary. Thus, it was the basic salary that increased. Also, it was the basic salary as increased (not the basic salary andallowances) which still formed the basis for the computation of the termination benefits of the remaining employees of the company. The Court held that fairness demanded that the terminated employees receive the same treatment.[53] Clearly, such situation isabsent here.

In Manuel L. Quezon University v. National Labor Relations Commission,[54] the issue raised was whether respondents are entitledto the retirement benefits provided for under R.A. No. 7641, even if petitioner has an existing valid retirement plan. The Court held thatthe coverage of the law applies to establishments with existing collective bargaining or other agreements or voluntary retirementplans whose benefits are less than those prescribed under the proviso in question.[55]

Admittedly, this Court held in the case of Songco v. National Labor Relations Commission[56] that not only the basic salary but alsothe allowances (like transportation and emergency living allowances) and earned sales commissions should be taken intoconsideration in computing the backwages and separation pay of the employee. However, a closer examination of the case wouldshow that the CBA[57] between Zuellig and F.E. Zuellig Employees Association, in which Songco was a member, did not contain anexplicit definition of what salary is. Neither was there any inclusions or exclusions in the determination of the salary of the employee. Here, the URP has an explicit provision excluding any commissions, overtime, bonuses, or extra compensations for purposes ofcomputing the basic salary of a retiring employee. Too, the Songco case was decided before the passage of R.A. No. 7641.

Clearly then, R.A. No. 7641 does not apply because the URP grants to the retiring employee more than what the law gives. Under the URP, the employee receives a lump sum of 1 pay per year of service, compared to the minimum month salary for everyyear of service set forth by R.A. No. 7641.

Oxales is trying to have the best of both worlds. He wants to have his cake and eat it too: the 1 months formula under the URP,and the inclusion of the value of food benefits and other allowances he was entitled to as employee of UNILAB with his monthly salaryas the multiplicand of his number of years in the service. This he should not be permitted to do, lest a grave injustice is caused toUNILAB, and its past and future retirees.

We agree with the NLRC observation on this score:

As an illustration, Complainant claims that his monthly salary as the multiplicand of his number of years in the service shouldinclude the value of the food benefits and other allowances he was entitled while in the employ of respondent. However, he did noteven, by implication, intend to reduce the 1 month salary as multiplier under the URP to under the law he invoked. This is a sign ofcovetousness, unfair both to the employer and those employees who have earlier retired under said plan.[58]

Oxales is not entitled to the reinstatement of his medical benefits, which are not part of the URP. Corollarily, he is not also

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entitled to moral damages, exemplary damages, and attorneys fees.

Oxales claims that UNILAB unilaterally revoked his medical benefits, causing him humiliation and anxiety. This, he argues,entitles him to moral damages, exemplary damages, plus attorneys fees.

We cannot agree. The records bear out that after Oxales retired from UNILAB, he chose to join a rival company, LloydsLaboratories, Inc. As UNILAB correctly puts it, [i]f any employer can legally and validly do the supreme act of dismissing a disloyalemployee for having joined or sympathized with a rival company, with more reason may it do the lesser act of merely discontinuing abenefit unilaterally given to an already-retired employee.[59] As a retired employee, Oxales may not claim a vested right on thesemedical benefits. A careful examination of the URP would show that medical benefits are not included in the URP.

Indeed, while there is nothing wrong in the act of Oxales in joining a rival company after his retirement, justice and fair play woulddictate that by doing so, he cannot now legally demand the continuance of his medical benefits from UNILAB. To rule otherwise wouldresult in an absurd situation where Oxales would continue to receive medical benefits from UNILAB while working in a rival company. We note that these medical benefits are merely unilaterally given by UNILAB to its retired employees.

We are not unaware of this Courts pronouncement in Brion v. South Philippine Union Mission of the Seventh Day AdventistChurch.[60] However, Oxales plight differs from Brion because the URP does not expressly cover medical benefits to retirees. Incontrast, the retired employee in Brion had acquired a vested right to the withheld benefits.

The claim of Oxales to moral damages, exemplary damages, and attorneys fees must also be denied for want of basis in law orjurisprudence. On this score, We echo the pronouncement of the Court in Audion v. Electric Co., Inc. v. National Labor RelationsCommission,[61] to wit:

Moral and exemplary damages are recoverable only where the dismissal of an employee was attended by bad faith or fraud, orconstituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. The personclaiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes goodfaith. It is not enough that one merely suffered sleepless nights, mental anguish, serious anxiety as the result of the actuations of theother party. Invariably, such action must be shown to have been willfully done in bad faith or with ill motive, and bad faith or ill motiveunder the law cannot be presumed but must be established with clear and convincing evidence. Private respondent predicated hisclaim for such damages on his own allegations of sleepless nights and mental anguish, without establishing bad faith, fraud or ill motive as legal basis therefor.

Private respondent not being entitled to award of moral damages, an award of exemplary damages is likewise baseless. Where theaward of moral and exemplary damages is eliminated, so must the award for attorneys fees be deleted. Private respondent has notshown that he is entitled thereto pursuant to Art. 2208 of the Civil Code.[62] (Citations omitted)

Here, there was no dismissal, as Oxales was retired by UNILAB by virtue of the URP. He was also paid his complete retirementbenefits.

Epilogue

It is not disputed that Oxales has worked tirelessly for UNILAB. For one thing, he has spent a considerable amount of years with thecompany. For another, he has contributed much to its growth and expansion. However, even as We empathize with him in his time ofgreat need, it behooves Us to interpret the law according to what it mandates.

We reiterate the time-honored principle that the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. While the Constitution is committed to the policy of social justice and the protection of the working class,management also has its own rights, which are entitled to respect and enforcement in the interest of fair play. Out of its concern forthose with less privilege in life, this Court has inclined more often than not toward the employee and upheld his cause with his conflictswith the employer. Such favorable treatment, however, has not blinded the Court to rule that justice is in every case for the deserving. Justice should be dispensed in the light of the established facts and applicable law and doctrine.[63]

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WHEREFORE, the appealed Decision is AFFIRMED. No costs.

SO ORDERED.

RUBEN T. REYES

Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

LEONARDO A. QUISUMBING MA. ALICIA AUSTRIA-MARTINEZ Associate Justice AssociateJustice

ADOLFO S. AZCUNA

Associate Justice

A T T E S T A T I O N

G.R. No. 152991 1/28/2014


I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writerof the opinion of the Courts Division.

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in theabove Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO

Chief Justice

* Vice Associate Justice Minita V. Chico-Nazario. Justice Nazario is on official leave per Special Order No. 508 dated June 25,2008.

** Designated as additional member vice Associate Justice Antonio Eduardo B. Nachura per raffle dated June 25, 2008. JusticeNachura participated as Solicitor General in the present case.

[1] Rollo, pp. 122-128; Annex A. CA-G.R. SP No. 55528. Penned by Associate Justice Juan Q. Enriquez, Jr., with AssociateJustices Delilah Vidallon-Magtolis and Eliezer R. De Los Santos, concurring.

[2] Id. at 170-182; Annex O. NLRC-CA 016627-98. Penned by Commissioner Alberto R. Quimpo, with Commissioners Rogelio I.Rayala and Vicente S.E. Veloso, concurring.

[3] Id. at 163-169; Annex N. NLRC-NCR Case No. 00-08-06073-97. Penned by Labor Arbiter Romulus S. Protasio.

[4] Annex C.

[5] United Retirement Plan, Art. V, Sec. 1(a).

[6] Annex L.

[7] Annex L-1.

[8] Rollo, p. 169.

[9] Id. at 168.

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[10] Id. at 168-169.

[11] Id. at 169.

[12] Id. at 181.

[13] Id. at 179-180.

[14] Id. at 178-179.

[15] Id. at 126.

[16] Id. at 127.

[17] Id. at 126-127.

[18] Id. at 11-120.

[19] Id. at 438-568.

[20] Id. at 456-458.

[21] Brion v. South Philippine Union Mission of the Seventh Day Adventist Church, G.R. No. 135136, May 19, 1999, 307 SCRA497, 504.

[22] See Civil Code, Art. 1306.

[23] 165 US 578, 591.

[24] 246 US 357, 373, 374.

[25] 236 US 1, 10, 14.

[26] 208 US 161.

[27] 198 US 45, 49.

[28] 208 US 412, 421.

[29] See Civil Code, Art. 1159; Pichel v. Alonzo, G.R. No. L-36902, January 30, 1982, 111 SCRA 341; De Cortes v. Venturanza,G.R. No. L-260

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