ASG Law

Category: Retirement Law

  • Retirement Benefits: Determining Employee Status in Constructive Dismissal Cases

    The Supreme Court in Maria De Leon Transportation, Inc. v. Macuray ruled that an employee who took a company-sanctioned sabbatical but was not formally dismissed is entitled to retirement benefits upon reaching retirement age. The court clarified that the absence of a formal dismissal, even with a prolonged absence, does not negate an employee’s right to retirement benefits if they meet the age and service requirements under the Labor Code. This decision highlights the importance of clearly defining employment status and ensuring that employees receive their due benefits, regardless of informal company practices.

    When a Bus Driver’s ‘Sabbatical’ Leads to a Retirement Claim: Was There Dismissal?

    This case revolves around Daniel M. Macuray, a bus driver for Maria De Leon Transportation, Inc., who, after 18 years of service, stopped working, claiming constructive dismissal. Macuray alleged that the company stopped assigning him buses, effectively terminating his employment without notice or cause. The company, however, contended that Macuray voluntarily abandoned his job to work for his family’s trucking business, a practice they allegedly permitted as a form of sabbatical for drivers.

    The central legal question is whether Macuray was illegally dismissed, either actually or constructively, or whether he voluntarily abandoned his employment. This determination impacts his entitlement to various monetary claims, including backwages, separation pay, retirement pay, and damages. The court had to examine the circumstances surrounding Macuray’s departure from the company, the company’s policies regarding driver absences, and the applicable provisions of the Labor Code concerning retirement benefits.

    The Labor Arbiter initially dismissed Macuray’s complaint, finding that he could not definitively state the date of his dismissal and that there was no evidence of constructive dismissal. The National Labor Relations Commission (NLRC) modified this decision, awarding Macuray financial assistance of P50,000, recognizing that he may no longer be fit for the job due to his age but finding no basis for abandonment. The Court of Appeals (CA) reversed the NLRC’s decision, ruling that Macuray was constructively dismissed and entitled to separation pay, backwages, retirement pay, service incentive leave, damages, and attorney’s fees.

    The Supreme Court, however, disagreed with the CA’s finding of illegal dismissal. The Court noted that Macuray failed to provide concrete evidence that he was formally dismissed or constructively forced to resign. Instead, the evidence suggested that Macuray availed himself of the company’s unwritten policy of allowing drivers to take breaks or sabbaticals to work elsewhere, without formally severing their employment. This practice, the Court found, was intended to alleviate the monotony of long-distance driving and prevent accidents due to driver fatigue.

    The Court emphasized that a mere bus dispatcher does not have the authority to terminate an employee.

    “An ordinary bus dispatcher has no power to dismiss an employee; in a typical bus company, a driver might even be of more significance than an ordinary dispatcher. Bus drivers are a more valuable resource than a dispatcher; without the former, the latter is useless. Without a driver, there could be no bus to dispatch or trip to schedule. It cannot therefore be said that an ordinary dispatcher is superior to a bus driver; at most, they are equal in rank.”

    The absence of a formal dismissal process, coupled with the company’s practice of allowing drivers to take sabbaticals, led the Court to conclude that Macuray was not illegally dismissed.

    However, the Court also found that Macuray did not abandon his employment. Abandonment requires both the intention to abandon and an overt act of doing so without justifiable reason. While Macuray stopped reporting for work, the company’s own policy of allowing drivers to take breaks negated the element of intent to abandon. Since he reached the retirement age of 60 while still technically under the company’s employ (albeit on a prolonged sabbatical), he was entitled to retirement benefits under Article 287 of the Labor Code.

    Article 287 of the Labor Code states:

    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 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.

    Given the absence of a retirement plan in Maria De Leon Transportation, Inc., the Court determined that Macuray was entitled to one month’s salary for every year of service, amounting to P180,000.00. The Court reasoned that this amount was more equitable, considering the company’s practice of paying its drivers commissions that were often less than the minimum wage, and the delayed payment of Macuray’s compensation for three months prior to his departure. The Court also upheld the CA’s award of attorney’s fees, finding it reasonable and just under the circumstances, as provided for in Article 2208 of the Civil Code.

    The Supreme Court emphasized the importance of upholding substantive rights over procedural technicalities. While the company argued that Macuray’s petition for certiorari was filed late and was procedurally defective, the Court found that Macuray was indeed entitled to part of his monetary claims, and the NLRC’s judgment failed to recognize his continued employment status. Therefore, the Court prioritized the protection of Macuray’s substantive rights, setting aside the CA’s decision to the extent that it declared him illegally dismissed and awarded claims he was not entitled to.

    FAQs

    What was the key issue in this case? The key issue was whether the bus driver, Daniel Macuray, was illegally dismissed or had voluntarily abandoned his job, and whether he was entitled to retirement benefits. The court determined that he was not illegally dismissed but was entitled to retirement benefits.
    Was Daniel Macuray considered illegally dismissed by the Supreme Court? No, the Supreme Court reversed the Court of Appeals’ finding of illegal dismissal. The Court found that Macuray had availed himself of the company’s practice of allowing drivers to take sabbaticals.
    What is constructive dismissal? Constructive dismissal occurs when an employer’s actions or inactions make continued employment so unbearable that the employee is forced to resign or leave their job. It is considered an involuntary termination initiated by the employer.
    Did the company have a formal policy on driver sabbaticals? No, the company’s policy of allowing drivers to take breaks was an unwritten practice. The Supreme Court acknowledged this practice as a form of sabbatical that allowed drivers to recover from the stress of long-distance driving.
    What retirement benefits was Daniel Macuray entitled to? The Supreme Court awarded Macuray retirement pay equivalent to one month’s salary for every year of service, amounting to P180,000.00. This was based on Article 287 of the Labor Code, since the company did not have a retirement plan.
    What is the legal basis for retirement pay in the Philippines? Retirement pay is governed by Article 287 of the Labor Code, as amended by Republic Act No. 7641. It provides that an employee who has reached the age of 60 and has served at least five years is entitled to retirement pay.
    What is the significance of Article 2208 of the Civil Code? Article 2208 of the Civil Code specifies the instances where attorney’s fees and expenses of litigation can be recovered. The Supreme Court cited this article in awarding attorney’s fees to Macuray.
    Why did the Supreme Court award attorney’s fees in this case? The Court awarded attorney’s fees because the case involved the recovery of wages and the Court deemed it just and equitable under the circumstances. This is allowed under Article 2208 of the Civil Code.
    What other monetary awards did the Supreme Court grant to Daniel Macuray? Aside from retirement pay and attorney’s fees, the Court also awarded Macuray P30,000.00 as unpaid salaries/commissions for the period of January to March 2009. Additionally, interest was imposed on the total monetary awards.

    This case underscores the importance of clear communication and documentation of employment status, especially when companies have informal practices like allowing employees to take extended breaks. Employers should ensure that their policies align with labor laws to avoid disputes regarding employee benefits. The Supreme Court’s decision serves as a reminder that substantive rights prevail over procedural technicalities when justice demands it.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: MARIA DE LEON TRANSPORTATION, INC. VS. DANIEL M. MACURAY, G.R. No. 214940, June 06, 2018

  • Judicial Retirement Benefits: Tacking Leave Credits for Optional Retirees

    The Supreme Court ruled that justices and judges who opt for optional retirement are entitled to include their unused leave credits when calculating their longevity pay. This decision ensures that all retirees, regardless of whether they retire compulsorily or optionally, receive appropriate compensation for their years of service. The Court emphasized that denying this benefit to optional retirees would be inconsistent with the purpose of rewarding loyalty and long service to the judiciary. Furthermore, the Court clarified that while service as a bar examiner during one’s tenure as a judge cannot be included in longevity pay calculations, the fractional portion of the five-year period immediately prior to retirement should be considered.

    Rewarding Judicial Loyalty: Should Optional Retirees Receive the Same Benefits as Compulsory Retirees?

    The core issue in this case revolves around the application of Administrative Circular (A.C.) No. 58-2003, which allows the tacking of earned leave credits to the length of judicial service for computing longevity pay. Initially, A.C. No. 58-2003 was interpreted to apply exclusively to justices and judges undergoing compulsory retirement. This led to a situation where those who chose to retire early, despite years of dedicated service, were potentially denied the same benefits. Associate Justice Martin S. Villarama, Jr., sought clarification on this matter upon his optional retirement, prompting the Supreme Court to re-evaluate the scope and intent of A.C. No. 58-2003.

    The Special Committee on Retirement and Civil Service Benefits recommended denying Justice Villarama’s requests, arguing that A.C. No. 58-2003 was specifically designed for compulsory retirees. The committee also contended that the pro hac vice ruling in the case of Justice Ma. Alicia Austria-Martinez, which extended similar benefits to an optional retiree, should not be considered a precedent. This viewpoint hinged on a strict interpretation of Section 42 of Batas Pambansa Bilang 129 (B.P. Blg. 129), which governs longevity pay, suggesting that tacking leave credits and paying fractional longevity lacked explicit statutory support.

    However, the Supreme Court disagreed with the committee’s narrow interpretation. It highlighted that the purpose of Section 42 of B.P. Blg. 129 is to reward justices and judges for their continuous, efficient, and meritorious service, regardless of whether they retire compulsorily or optionally. The Court emphasized that imposing such a distinction would lead to unfair outcomes, potentially disadvantaging long-serving judges who opt for early retirement. In essence, the justices recognized that loyalty and dedication to the judiciary should be equally valued, irrespective of the circumstances surrounding retirement.

    The Court articulated that A.C. No. 58-2003 serves as an implementation of Section 42 of B.P. Blg. 129, which provides for longevity pay to justices and judges in the judiciary. Section 42 of B.P. Blg. 129 aims to compensate these judicial officers for each five-year period of continuous, efficient, and meritorious service rendered. The purpose of this law is to reward long service within the judiciary, spanning from the lowest to the highest courts. To this end, the Court quoted pertinent provisions of law such as:

    Section 42 of B.P. Blg. 129 is intended to recompense justices and judges for each five-year period of continuous, efficient, and meritorious service rendered in the Judiciary. The purpose of the law is to reward long service, from the lowest to the highest court in the land.

    The Court emphasized that a plain reading of Section 42 reveals that longevity pay is provided monthly alongside the basic pay for justices or judges who have completed at least five years of continuous, efficient, and meritorious service. This amount is equivalent to five percent of the monthly basic pay, increasing by an increment of 5% for each additional cycle of five years of qualifying service. Critically, this pay is provided while the justice or judge is still actively serving and becomes part of the monthly pension benefit upon retirement or the survivorship benefit upon death after retirement.

    Further, the Court addressed the issue of tacking leave credits, noting that the Department of Budget and Management (DBM) had previously argued against this practice, claiming that unused leave credits do not constitute actual service. However, the Court firmly rejected this view, affirming its earlier stance that A.C. No. 58-2003 explicitly allows the tacking of earned leave credits to judicial service. The Supreme Court, therefore, reinforced the principle that earned leave credits represent a form of compensation for past service and should be included in the calculation of longevity pay.

    The Court also addressed the matter of fractional longevity pay, reiterating its position that any fraction of the five-year period immediately preceding retirement should be included in the computation. This stance acknowledges that justices and judges may be unable to complete a full five-year term due to the constitutional limitations on their tenure. To disregard this fractional portion would undermine the liberal approach in treating retirement laws and would unfairly disadvantage retiring justices and judges. In particular, the court states that:

    It would be a mockery of the liberal approach in the treatment of retirement laws for government personnel if such fractional portion is disregarded to the detriment of the retiring justice or judge. Going back to the rationale behind the grant of longevity pay, it cannot be gainsaid that service during such fractional portion of the five-year period is an eloquent manifestation as well of the justice’s or judge’s loyalty to the judiciary as the service rendered during the previously completed five-year periods.

    To provide clarity and consistency in the application of A.C. No. 58-2003, the Court established a guideline for rounding off the fractional period. A fraction of at least two years and six months will be considered as one whole five-year cycle, allowing for a full 5% adjustment in the longevity pay. For those with service below this threshold, an additional one percent will be added for every year of service in the judiciary. This approach seeks to align the tacking of leave credits with the intent of Section 42 of B.P. Blg. 129, which aims to provide a full 5% adjustment for every five-year period of judicial service.

    On the other hand, the Court upheld the denial of Justice Villarama’s request to include his service as a bar examiner in the computation of his longevity pay. The Court clarifies that services rendered by a Justice of the Supreme Court as Bar Examiners prior to their appointment to the Judiciary shall be credited as part of their government service and be tacked in the computation of their longevity pay upon compulsory or optional retirement.

    Henceforth, services rendered by all Justices of the Supreme Court as Bar Examiners prior to their appointment to the Judiciary shall be credited as part of their government service and be tacked in the computation of their longevity pay upon compulsory or optional retirement.

    According to the Court, this policy, as outlined in A.M. No. 08-12-7-SC, applies only to services rendered prior to one’s appointment to the judiciary. Since Justice Villarama was already a member of the judiciary when he served as a bar examiner, this provision does not apply to him. The Court reasoned that allowing incumbent members of the judiciary to include their service as bar examiners would be illogical, as the regular functions of a justice or judge and the service performed as a bar examiner are not separable and finite judicial services if they coincide during the same period. It also stated that there would be no basis to extend the length of judicial service even if no additional time was really spent in the performance of the service as bar examiner outside of the time or period actually served as justice or judge.

    FAQs

    What was the key issue in this case? The key issue was whether justices and judges who opt for optional retirement are entitled to have their earned leave credits tacked onto their judicial service for longevity pay calculation, similar to those who retire compulsorily.
    What is A.C. No. 58-2003? A.C. No. 58-2003 is an Administrative Circular issued by the Supreme Court allowing the tacking of earned leave credits to the length of judicial service for the purpose of increasing the longevity pay of justices and judges.
    Did the Court grant Justice Villarama’s request? The Court partially granted Justice Villarama’s request, allowing the inclusion of his unused leave credits but excluding his service as a bar examiner in the calculation of his longevity pay.
    What is the significance of tacking leave credits? Tacking leave credits increases the total years of service, resulting in a higher longevity pay upon retirement, which is a percentage of the basic monthly pay based on the years of service.
    Why was Justice Villarama’s service as a bar examiner excluded? His service as a bar examiner was excluded because the existing policy (A.M. No. 08-12-7-SC) only allows the crediting of such service if rendered prior to one’s appointment to the judiciary.
    What is the rule for the fractional portion of the five-year period? The Court ruled that any fraction of the five-year period immediately preceding retirement should be included in the computation of longevity pay, ensuring that retiring justices and judges are fully compensated for their service.
    What is the rounding off policy for the fractional period? A fraction of at least two years and six months will be considered as one whole five-year cycle. For those with service below this threshold, an additional one percent will be added for every year of service in the judiciary.
    Does this ruling apply to all justices and judges? Yes, this ruling sets a precedent that applies to all members of the judiciary who are similarly situated, ensuring that optional retirees receive the same benefits as compulsory retirees.

    In conclusion, the Supreme Court’s decision affirms the principle of equitable treatment for all retiring members of the judiciary, regardless of whether they choose to retire early or continue until the mandatory retirement age. This ruling reinforces the value of long service and dedication to the judiciary and clarifies the application of existing policies regarding longevity pay. It ensures that all justices and judges are appropriately compensated for their contributions to the legal system.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: RE: APPLICATION FOR OPTIONAL RETIREMENT UNDER REPUBLIC ACT NO. 910, AS AMENDED BY REPUBLIC ACT NO. 5095 AND REPUBLIC ACT NO. 9946, OF ASSOCIATE JUSTICE MARTIN S. VILLARAMA, JR., 63859, March 06, 2018

  • Defiance and Dismissal: Loss of Retirement Benefits for Striking Employees

    The Supreme Court ruled that an employee who participates in an illegal strike and defies a return-to-work order loses their employment status and, consequently, the right to retirement benefits. This decision underscores the importance of adhering to labor laws and lawful orders, as defiance can result in the forfeiture of benefits that would otherwise accrue to an employee. The case clarifies that retirement benefits are intended as a reward for loyal service, not as an entitlement for those who engage in unlawful labor practices. The Court emphasized that retirement requires a voluntary agreement, which is absent when an employee is terminated for just cause.

    Striking Out: Can Illegal Actions Erase Years of Service?

    The case of Armando M. Tolentino (deceased), herein represented by his surviving spouse Merla F. Tolentino and children vs. Philippine Airlines, Inc., stemmed from a labor dispute involving Philippine Airlines (PAL) and its pilots. Armando M. Tolentino, a long-time pilot for PAL and a member of the Airline Pilots Association of the Philippines (ALPAP), participated in a strike that was later declared illegal by the Secretary of Labor. The central legal question was whether Tolentino, despite his years of service, was entitled to retirement benefits and other compensation from PAL, considering his participation in the illegal strike and subsequent failure to comply with a return-to-work order. The Supreme Court’s decision hinged on whether Tolentino’s actions constituted a just cause for termination, thereby forfeiting his right to claim retirement benefits.

    Tolentino’s journey with PAL began on October 22, 1971, and by July 16, 1999, he had achieved the rank of A340/A330 Captain. However, his career took a turn when ALPAP members initiated a strike on June 5, 1998. The Secretary of Labor intervened, issuing an Order on June 7, 1998, mandating all striking ALPAP members to return to work within 24 hours, with PAL management required to accept them under the same terms and conditions as before the strike. Despite this Order, Tolentino, along with some other pilots, continued to participate in the strike. This act of defiance proved consequential.

    When Tolentino and other striking pilots eventually sought to return to work on June 26, 1998, PAL refused to readmit them, leading to a complaint for illegal lockout filed by the pilots. Subsequently, on July 20, 1998, Tolentino reapplied for employment with PAL as a newly hired pilot, voluntarily undergoing a six-month probationary period. Less than a year later, on July 16, 1999, he resigned. In the interim, on June 1, 1999, the Secretary of Labor officially declared the strike illegal due to procedural infirmities and defiance of the return-to-work order. This declaration had far-reaching implications for the striking ALPAP members, including Tolentino, as the resolution stated that those who participated in defiance of the return-to-work order had lost their employment status. This resolution was later affirmed by the Supreme Court on April 10, 2002.

    Upon returning to the Philippines after working for a foreign airline, Tolentino sought to collect his separation and/or retirement benefits under the collective bargaining agreement (CBA) with PAL. However, PAL refused to grant him these benefits, leading Tolentino to file a complaint for non-payment of holiday pay, rest day pay, separation pay, and retirement benefits, along with a claim for damages and attorney’s fees. The Labor Arbiter dismissed Tolentino’s complaint, finding that his participation in the illegal strike and defiance of the return-to-work order constituted a valid dismissal, thereby disqualifying him from separation pay and other benefits. The Labor Arbiter also denied his claim for retirement benefits, as Tolentino had resigned less than a year after being rehired by PAL. The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s decision, further cementing the denial of Tolentino’s claims.

    The case eventually reached the Court of Appeals (CA), which affirmed the NLRC’s decision with a modification, ordering PAL to pay Tolentino his accrued vacation leave. The CA reasoned that the CBA justified the claim for vacation pay upon separation from the company, regardless of the validity of the termination. However, the Supreme Court ultimately reversed this decision, denying Tolentino’s claims for retirement benefits and other compensation. The Court emphasized that Tolentino’s participation in the illegal strike and his failure to comply with the return-to-work order constituted a just cause for dismissal under Article 282 of the Labor Code. The Court cited PAL, Inc. v. Acting Secretary of Labor, which stated that striking employees who defy a return-to-work order are deemed to have lost their employment status.

    Furthermore, the Supreme Court clarified that Tolentino’s reemployment with PAL as a new hire did not restore his previous employment status for the purpose of retirement benefits. The Court stated that reemployment on the condition that the employee be treated as a new employee is a valid exercise of the employer’s prerogative, provided it is not motivated by anti-union sentiments. Since Tolentino resigned less than a year after being rehired, he did not meet the minimum service requirement for retirement benefits under the PAL-ALPAP Retirement Plan. The Court also rejected the argument that Tolentino was entitled to the equity in the retirement fund under the PAL Pilots’ Retirement Benefit Plan. It was clarified that the retirement fund was raised exclusively from PAL’s contributions, and only pilots who retired were entitled to receive the full amount of the contribution.

    In essence, the Supreme Court’s decision reinforced the principle that employees who engage in illegal strikes and defy return-to-work orders face the risk of losing their employment status and the benefits associated with it. The ruling serves as a cautionary tale, highlighting the importance of adhering to labor laws and lawful orders in the workplace. The implications of this ruling are significant, particularly for union members and employees involved in labor disputes. It underscores the need to carefully consider the consequences of participating in strikes or defying lawful orders, as such actions can have long-term repercussions on their employment and retirement prospects.

    FAQs

    What was the key issue in this case? The key issue was whether an employee, who participated in an illegal strike and defied a return-to-work order, was entitled to retirement benefits despite being terminated for just cause. The Supreme Court ruled against the employee, stating that such actions result in the loss of employment status and forfeiture of retirement benefits.
    What is a return-to-work order? A return-to-work order is a directive issued by the Secretary of Labor during a labor dispute, requiring striking employees to resume their duties under the same terms and conditions of employment that existed before the strike. It is intended to maintain essential services and prevent economic disruption.
    What happens if an employee defies a return-to-work order? If an employee defies a return-to-work order, they are deemed to have committed an illegal act, which is a just cause for dismissal under Article 282 of the Labor Code. This can lead to the loss of employment status and the forfeiture of certain benefits, such as retirement pay.
    Can an employee be rehired after participating in an illegal strike? Yes, an employee can be rehired after participating in an illegal strike, but the employer has the prerogative to treat the reemployment as a new hire. This means the employee’s previous employment status and seniority may not be recognized for the purpose of benefits, such as retirement.
    What are the requirements for retirement benefits under the PAL-ALPAP Retirement Plan? Under the PAL-ALPAP Retirement Plan, a member-pilot must complete at least five years of continuous service with PAL to be entitled to the resignation benefit. To be eligible for normal retirement, a pilot must have either 20 years of service or 20,000 flight hours with PAL.
    What is the PAL Pilots’ Retirement Benefit Plan? The PAL Pilots’ Retirement Benefit Plan is a retirement fund raised exclusively from contributions made by Philippine Airlines (PAL). Upon retirement, each pilot is entitled to receive the full amount of the contribution, which is separate from the benefits under the PAL-ALPAP Retirement Plan.
    Can an employee claim retirement benefits if terminated for just cause? No, an employee who is terminated for just cause is generally not entitled to retirement benefits. Retirement benefits are considered a reward for loyal service, and it would be contrary to the purpose of these benefits to grant them to an employee who was terminated for misconduct or violation of company policies.
    What does the Personnel Policies and Procedures Manual say about benefits after dismissal? The PAL Personnel Policies and Procedures Manual states that generally, a dismissed employee forfeits all entitlements to company benefits and privileges. This policy is applicable to employees who are terminated for just cause, such as participating in an illegal strike.

    This case serves as a crucial reminder for both employers and employees regarding the consequences of labor disputes and the importance of adhering to legal and contractual obligations. The Supreme Court’s decision underscores that retirement benefits are not an automatic entitlement but rather a reward for fulfilling the duties and responsibilities of employment in accordance with the law.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Armando M. Tolentino (Deceased) vs. Philippine Airlines, Inc., G.R. No. 218984, January 24, 2018

  • Optional Retirement: Employer’s Consent is Key to Benefit Entitlement

    The Supreme Court has affirmed that an employee’s right to optional retirement benefits is contingent upon the employer’s consent, as stipulated in the company’s retirement plan. Maureen P. Perez, a former Marketing Manager at Comparts Industries, Inc. (CII), was denied her claim for optional retirement benefits after resigning from her position. The Court emphasized that optional retirement, by its nature, cannot be mandatory and that the employer retains the prerogative to grant or withhold such benefits based on the terms of the retirement plan.

    Resignation vs. Retirement: Whose Choice Dictates Separation Pay?

    Maureen P. Perez sought optional retirement benefits from Comparts Industries, Inc. (CII) after more than 20 years of service. Her applications were repeatedly denied, leading her to file a complaint with the National Labor Relations Commission (NLRC). Perez argued that she was entitled to these benefits based on the company’s Retirement Plan, the Collective Bargaining Agreement (CBA), or the company’s alleged practice of providing separation pay to managerial employees. The core legal question revolves around whether an employee who resigns can claim optional retirement benefits when the employer’s consent is a prerequisite under the company’s retirement plan.

    The NLRC Regional Arbitration Branch initially ruled in favor of Perez, awarding her optional retirement benefits and attorney’s fees. However, the NLRC, on appeal, reversed this decision, a ruling that was subsequently upheld by the Court of Appeals. The appellate court emphasized that under the CII Retirement Plan, which applied to Perez as a managerial employee, the granting of optional retirement benefits required the consent of CII. The denial of her application was justified as CII cited financial constraints and the need for her services.

    The Supreme Court, in affirming the lower courts’ decisions, underscored the fundamental distinction between termination of employment initiated by the employee (resignation) and termination initiated by the employer. In the case of resignation, the employee is generally not entitled to separation pay. Separation pay is designed to provide financial support during the transition to new employment and is typically recoverable only in cases of involuntary termination, such as retrenchment or illegal dismissal.

    Regarding Perez’s claim for optional retirement benefits, the Court examined the relevant provisions of the CII Retirement Plan. Specifically, Section 2 of Article V states:

    COMPARTS INDUSTRIES, INC.
    EMPLOYEES RETIREMENT PLAN
    RULES AND REGULATIONS

    ARTICLE V

    RETIREMENT DATES AND BENEFITS

    Section 2. OPTIONAL/EARLY RETIREMENT

    With the consent of the Company, a member may elect to retire prior to his Normal Retirement Date provided he has completed at least fifteen (15) years of Credit Service. The Member’s Early Retirement Benefit shall be an amount equivalent to a Number of days Pay for every year of Credited Service in accordance with the schedule below or with the Collective Bargaining Agreement whichever is greater: (Effective January 25, 2001)

    The Court emphasized the significance of the phrase “With the consent of the Company.” This stipulation makes it clear that an employee’s eligibility for optional retirement is not solely based on meeting the minimum years of service. The employer’s approval is a necessary condition for the availment of such benefits.

    The Supreme Court distinguished this case from situations where retirement is a matter of right upon meeting certain age and service requirements. Quoting from Eastern Shipping Lines, Inc. v. Antonio, the Court reiterated that optional retirement remains a management prerogative:

    [E]ven if shipboard personnel may have rendered 3,650 days of service on board a vessel, optional retirement does not become a matter of right… otherwise, such, “would not have been termed as optional, as the foregoing would make the retirement mandatory and compulsory.”

    Perez also argued that the company had established a practice of granting optional retirement benefits to managerial employees, citing instances where other employees had received such benefits. However, the Court found that these instances did not constitute a consistent and deliberate company practice. Some of the cited examples occurred before the Retirement Plan took effect, while others involved separation pay due to retrenchment, not optional retirement.

    The Court emphasized that to establish a company practice, the benefits must have been given over a long period and shown to be consistent and deliberate. In this case, the evidence did not demonstrate that CII consistently granted optional retirement benefits to managerial employees without requiring their application and the company’s consent.

    The argument regarding retrenchment was also addressed. Retrenchment is a management prerogative exercised to prevent losses and ensure the company’s financial stability. It is not a substitute for an employee’s rejected request for early retirement.

    The Court emphasized that the option to undertake retrenchment lies with the employer and serves the interests of the business. It is not a tool for an employee to leverage in place of an unapproved early retirement.

    In conclusion, the Supreme Court upheld the Court of Appeals’ decision, finding that Perez was not entitled to optional retirement benefits without CII’s consent, nor was there a company practice that mandated such benefits. The Court reinforced the principle that optional retirement remains a management prerogative, and employees cannot claim it as a matter of right unless explicitly provided in the retirement plan or through a consistent company practice.

    FAQs

    What was the key issue in this case? The key issue was whether an employee who voluntarily resigns is entitled to optional retirement benefits when the employer’s consent is required under the company’s retirement plan.
    What is separation pay? Separation pay is the amount an employee receives upon severance from employment, typically provided in cases of involuntary termination like retrenchment or illegal dismissal to help the employee transition to new employment.
    What is retrenchment? Retrenchment is the termination of employment initiated by the employer to prevent losses or financial difficulties, often involving a reduction in personnel to cut costs.
    What did the Court rule about the company’s retirement plan? The Court ruled that the company’s retirement plan required the employer’s consent for an employee to avail of optional retirement benefits, emphasizing that meeting the minimum years of service was not sufficient.
    Did the company have a practice of granting optional retirement benefits? The Court found that the company did not have a consistent and deliberate practice of granting optional retirement benefits to managerial employees without requiring an application and the company’s consent.
    Can an employee demand optional retirement benefits as a right? No, the Court clarified that optional retirement is not a matter of right but rather a management prerogative, and employees cannot demand it unless the retirement plan explicitly provides for it as a right.
    What is the difference between optional and mandatory retirement? Optional retirement is when an employee chooses to retire before the mandatory retirement age, while mandatory retirement is when an employee is required to retire upon reaching a specific age set by the company or law.
    What was the basis for the employee’s claim in this case? The employee claimed entitlement to optional retirement benefits under the Retirement Plan, the CBA, and an alleged company practice of providing separation pay to managerial employees.

    This case underscores the importance of clearly defined terms and conditions in retirement plans. The requirement of employer consent in optional retirement schemes provides companies with the necessary flexibility to manage their workforce and finances while ensuring that employees are aware of the conditions under which they can avail of retirement benefits.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Maureen P. Perez vs. Comparts Industries, Inc., G.R. No. 197557, October 05, 2016

  • Retirement Benefits: Prior Agreements Prevail Over Labor Code

    In the case of Philippine Airlines, Inc. v. Arjan T. Hassaram, the Supreme Court ruled that retirement benefits should be computed based on the existing retirement plans agreed upon by the company and its employees, rather than the general provisions of the Labor Code, provided that these plans offer superior benefits. The Court emphasized that when specific agreements, such as collective bargaining agreements (CBAs) and retirement plans, provide more favorable retirement terms than the Labor Code, those agreements take precedence. This decision clarifies that employees are entitled to the most beneficial retirement package available, reinforcing the importance of negotiated agreements in determining retirement benefits.

    Pilots’ Retirement Pay: Which Plan Takes Flight?

    Arjan T. Hassaram, a former pilot of Philippine Airlines, Inc. (PAL), filed a complaint against PAL seeking retirement benefits under Article 287 of the Labor Code. Hassaram had previously received P4,456,817.75 under the PAL Pilots’ Retirement Benefit Plan (the Plan). The central legal question was whether Hassaram’s prior receipt of benefits under the Plan precluded him from claiming additional retirement benefits under Article 287 of the Labor Code, or whether the specific retirement plans negotiated between PAL and its pilots should govern the computation of his retirement pay.

    The Labor Arbiter (LA) initially ruled in favor of Hassaram, stating that Article 287 of the Labor Code should apply since it provided better benefits than the PAL-ALPAP CBA. However, the National Labor Relations Commission (NLRC) reversed the LA’s decision upon PAL’s motion for reconsideration, citing Hassaram’s receipt of retirement benefits under the Plan. Hassaram then elevated the matter to the Court of Appeals (CA), which reversed the NLRC and reinstated the LA’s ruling, stating that the funds received under the Plan were not the retirement benefits contemplated by law. This divergence in rulings set the stage for the Supreme Court to clarify the applicable legal principles.

    The Supreme Court addressed two primary issues: first, whether the amount Hassaram received under the Plan should be considered part of his retirement pay; and second, whether Hassaram was entitled to receive retirement benefits under Article 287 of the Labor Code. The Court referenced previous decisions, particularly Elegir v. PAL and PAL v. ALPAP, to establish that amounts received under the PAL Pilots’ Retirement Benefit Plan are indeed part of an employee’s retirement pay. Building on this principle, the Court needed to determine whether Article 287 of the Labor Code should be used to compute Hassaram’s retirement benefits, or whether the company’s own retirement plans should take precedence.

    The Court emphasized that Article 287 of the Labor Code is applicable only when there is no Collective Bargaining Agreement (CBA) or other applicable employment contract providing for retirement benefits, or when such agreements provide benefits inferior to those mandated by law. To fully understand the Court’s reasoning, it’s important to examine the provisions of Article 287 of the Labor Code:

    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 and other agreements shall not be less than those provided therein.

    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.

    In this context, the Supreme Court had to determine which retirement scheme provided superior benefits to Hassaram. This determination involved comparing the benefits provided under Article 287 of the Labor Code with those offered under the retirement plans negotiated between PAL and ALPAP. The Court contrasted these benefits:

    Retirement Scheme Benefits Provided
    Article 287 of the Labor Code Equivalent to at least one-half (1/2) month salary for every year of service (approximately 22.5 days of salary per year).
    PAL-ALPAP Retirement Plans (a) P5,000 for every year of service under the PAL-ALPAP Retirement Plan; and (b) an equity equivalent to 240% of his gross monthly salary for every year of employment pursuant to the Plan.

    After comparing the schemes, the Supreme Court concluded that the retirement plans provided by PAL were more beneficial than those mandated by Article 287 of the Labor Code. The Court noted that Hassaram, as a member of ALPAP, was entitled to benefits from both the retirement plans under the 1967 PAL-ALPAP CBA and the Plan. Specifically, he was entitled to P5,000 for every year of service under the PAL-ALPAP Retirement Plan and an equity equivalent to 240% of his gross monthly salary for every year of employment pursuant to the Plan. This approach contrasts with the CA’s conclusion that Article 287 should apply because its benefits were supposedly superior. The Supreme Court clarified that the actual benefits under PAL’s retirement plans far exceeded those under the Labor Code.

    Building on this conclusion, the Court declared that Hassaram’s retirement benefits should be computed based on the retirement plans of PAL, not on Article 287 of the Labor Code. Since Hassaram had already received benefits under the Plan, he was only entitled to claim his remaining benefits under the CBA. This meant that PAL was ordered to pay Hassaram the amount of P120,000 (24 years x P5,000) for his 24 years of service to the company. The ruling emphasizes the importance of adhering to negotiated agreements that provide superior benefits to employees, reinforcing the principle that specific agreements prevail over general legal provisions when they are more advantageous to the employee.

    FAQs

    What was the key issue in this case? The key issue was whether Hassaram’s retirement benefits should be computed based on Article 287 of the Labor Code or on the retirement plans provided by Philippine Airlines (PAL).
    What did the Court rule regarding the PAL Pilots’ Retirement Benefit Plan? The Court ruled that the amount received by Hassaram under the PAL Pilots’ Retirement Benefit Plan must be considered part of his retirement pay. This determination was crucial in deciding which retirement scheme applied.
    When is Article 287 of the Labor Code applicable? Article 287 of the Labor Code is applicable only when there is no CBA or other applicable employment contract providing for retirement benefits, or when such agreements provide benefits inferior to those mandated by law.
    How did the Court compare the benefits under Article 287 and the PAL retirement plans? The Court found that the PAL retirement plans provided superior benefits, including a higher monthly salary percentage per year of service, compared to the standard formula in Article 287.
    What benefits was Hassaram entitled to? As a member of ALPAP, Hassaram was entitled to P5,000 for every year of service under the PAL-ALPAP Retirement Plan and an equity equivalent to 240% of his gross monthly salary for every year of employment pursuant to the Plan.
    What was the final order of the Court? The Court ordered Philippine Airlines, Inc., to pay respondent Arjan T. Hassaram the amount of P120,000, representing the balance of his retirement pay, computed based on the 1967 PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement Benefit Plan.
    Why did the Court choose PAL’s retirement plans over the Labor Code? The Court chose PAL’s retirement plans because they offered more beneficial terms to the employee, consistent with the principle that employees are entitled to the most advantageous retirement package available.
    What was the significance of Hassaram already receiving benefits under the Plan? Because Hassaram had already received benefits under the Plan, he was only entitled to claim his remaining benefits under the CBA, which was calculated based on his years of service.

    In conclusion, the Supreme Court’s decision in Philippine Airlines, Inc. v. Arjan T. Hassaram reaffirms the principle that negotiated retirement agreements, offering superior benefits, take precedence over the general provisions of the Labor Code. This ensures that employees receive the most favorable retirement terms available under their specific employment conditions.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Philippine Airlines, Inc. v. Arjan T. Hassaram, G.R. No. 217730, June 05, 2017

  • Retirement Rights for Part-Time Employees: De La Salle Araneta University vs. Bernardo

    In De La Salle Araneta University vs. Juanito C. Bernardo, the Supreme Court affirmed that part-time employees are entitled to retirement benefits under Republic Act No. 7641, also known as the New Retirement Law. The Court emphasized that the law’s coverage extends to all employees in the private sector, regardless of their employment status, unless specifically exempted. This decision ensures that part-time workers who meet the age and service requirements receive retirement pay, promoting social justice and protecting vulnerable employees.

    Beyond Full-Time: Does Retirement Law Protect Part-Time Lecturers?

    Juanito C. Bernardo, a part-time lecturer at De La Salle Araneta University (DLS-AU), sought retirement benefits after teaching for 27 years. Despite his long service, DLS-AU denied his claim, arguing that only full-time permanent faculty were entitled to such benefits based on university policy and the Collective Bargaining Agreement (CBA). Bernardo filed a complaint, leading to a legal battle that questioned whether Republic Act No. 7641, the New Retirement Law, extends protection to part-time employees. The core legal question was whether Bernardo, as a part-time lecturer, was entitled to retirement benefits under the law, despite the university’s internal policies.

    The Labor Arbiter initially dismissed Bernardo’s complaint, citing prescription. It was argued that Bernardo should have claimed his retirement benefits upon reaching the compulsory retirement age of 65, not ten years later when he was 75. However, the National Labor Relations Commission (NLRC) reversed this decision, finding that Bernardo’s claim was timely because DLS-AU had extended his employment beyond the standard retirement age. The NLRC emphasized that Republic Act No. 7641 does not exclude part-time employees from enjoying retirement benefits, citing the law’s broad coverage of all private-sector employees, regardless of status.

    The Court of Appeals affirmed the NLRC’s decision, reinforcing the principle that labor and social laws should be liberally construed to favor employees. DLS-AU then elevated the case to the Supreme Court, raising two key issues: whether part-time employees are excluded from retirement benefits under Republic Act No. 7641, and whether Bernardo’s claim had prescribed under Article 291 of the Labor Code. The Supreme Court ultimately sided with Bernardo, emphasizing that Republic Act No. 7641’s coverage includes part-time employees unless they fall under specific exemptions.

    The Supreme Court began its analysis by addressing Bernardo’s employment status. While acknowledging that Bernardo was a part-time lecturer with a fixed-term contract, the Court clarified that these factors were not relevant to his claim for retirement benefits. Bernardo was not questioning his termination but asserting his right to retirement benefits after the termination of his employment at age 75. This distinction was crucial in understanding the legal basis for Bernardo’s claim.

    The Court then delved into the core issue of whether part-time employees are entitled to retirement benefits. The Court emphasized that Republic Act No. 7641 is a curative social legislation designed to provide minimum retirement benefits to employees not covered by collective bargaining agreements or other retirement plans. Article 302 [287] of the Labor Code, as amended by Republic Act No. 7641, states that any employee may be retired upon reaching the retirement age and is entitled to retirement benefits under existing laws and agreements.

    To reinforce this point, the Court cited Book VI, Rule II of the Rules Implementing the Labor Code, which describes the broad coverage of Republic Act No. 7641, explicitly including all employees in the private sector, regardless of their position, designation, or status. The only exemptions are employees of the National Government, domestic helpers, and employees of retail, service, and agricultural establishments employing not more than ten employees. The Court noted that Bernardo did not fall under any of these exemptions.

    The Court also highlighted a Labor Advisory issued by then Secretary of Labor Leonardo A. Quisumbing, which provided guidelines for the effective implementation of Republic Act No. 7641. This advisory explicitly stated that the law applies to all employees in the private sector, including part-time employees. The Supreme Court gave weight to this contemporaneous interpretation of the law by administrative officials charged with its enforcement.

    The Court applied the rule of statutory construction of expressio unius est exclusio alterius, meaning the express mention of one thing implies the exclusion of all others. Since part-time employees were not among those specifically exempted under Republic Act No. 7641, their claim for retirement benefits could not be denied on that basis. The Court stated that the Implementing Rules partake the nature of a statute and are binding as if written in the law itself.

    Addressing the issue of prescription, the Court rejected DLS-AU’s argument that Bernardo’s claim had prescribed because he filed it more than three years after reaching the compulsory retirement age of 65. The Court emphasized that a cause of action has three elements: a right in favor of the plaintiff, an obligation on the part of the defendant, and a violation of the plaintiff’s right by the defendant.

    In Bernardo’s case, the cause of action accrued only after DLS-AU informed him that his contract would not be renewed and subsequently denied his claim for retirement benefits. The Court found that DLS-AU’s refusal to pay the retirement benefits, as expressed in Dr. Bautista’s letter dated February 12, 2004, triggered the prescriptive period. Therefore, Bernardo’s complaint filed on February 26, 2004, was well within the three-year period provided under Article 291 of the Labor Code.

    The Court further invoked the equitable doctrine of estoppel. This doctrine prevents a party from denying a fact that they have previously acted in a way that suggests its truth, especially when another party has relied on that conduct to their detriment. DLS-AU had repeatedly extended Bernardo’s employment even after he reached the compulsory retirement age, leading him to believe that he would be entitled to retirement benefits upon the actual termination of his employment. The Court held that DLS-AU could not now escape its obligation by blaming Bernardo for the delayed claim.

    FAQs

    What was the key issue in this case? The primary issue was whether a part-time employee is entitled to retirement benefits under Republic Act No. 7641, despite not being a full-time permanent employee.
    What is Republic Act No. 7641? Republic Act No. 7641, also known as the New Retirement Law, provides for retirement benefits for employees in the private sector, aiming to ensure their financial security after retirement.
    Are part-time employees covered by Republic Act No. 7641? Yes, the Supreme Court affirmed that part-time employees are covered by Republic Act No. 7641 unless they fall under specific exemptions, such as government employees or those in small retail establishments.
    What are the requirements to qualify for retirement benefits under this law? To qualify, an employee must have reached the age of 60 for optional retirement or 65 for compulsory retirement, and must have served at least five years in the establishment.
    What does “expressio unius est exclusio alterius” mean? It’s a rule of statutory construction meaning the express mention of one thing implies the exclusion of all others. In this case, since part-time employees weren’t excluded, they’re included.
    When does the cause of action for retirement benefits accrue? The cause of action accrues when the employer refuses to pay the retirement benefits after the employee’s separation from service. This is when the prescriptive period begins.
    What is the doctrine of estoppel? The doctrine of estoppel prevents a party from denying a fact that they have previously acted in a way that suggests its truth, especially when another party has relied on that conduct.
    Why was the doctrine of estoppel applied in this case? It was applied because DLS-AU continuously extended Bernardo’s employment beyond the compulsory retirement age, leading him to believe he would receive retirement benefits upon termination.
    How is retirement pay calculated under Republic Act No. 7641? Retirement pay is equivalent to at least one-half month salary for every year of service, with a fraction of at least six months being considered as one whole year.

    The Supreme Court’s decision in De La Salle Araneta University vs. Juanito C. Bernardo reinforces the broad protective scope of Republic Act No. 7641, ensuring that part-time employees are not unjustly excluded from retirement benefits. This ruling underscores the importance of social justice and equitable treatment in labor relations, providing a safety net for vulnerable employees who contribute significantly to the workforce. For businesses, it is a reminder to review retirement policies to ensure compliance with the law and to avoid potential liabilities.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: De La Salle Araneta University, vs. Juanito C. Bernardo, G.R. No. 190809, February 13, 2017

  • Retirement Benefits: Premium Contributions Determine Creditable Service for Government Employees

    The Supreme Court has ruled that only periods of government service for which premium payments were actually made and remitted to the Government Service Insurance System (GSIS) can be included in the computation of retirement benefits. This decision underscores the importance of premium contributions in determining an employee’s creditable service for retirement purposes. It clarifies that prior to Republic Act No. 8291, casual and temporary employees were not covered by the GSIS retirement insurance plan, therefore, their periods of service cannot be included in retirement benefit calculations unless premiums were paid during those times.

    From Casual Laborer to Retirement Claim: When Does Government Service Count?

    Apolinario C. Pauig, a retired Municipal Agriculturist, sought to include his initial fourteen years of government service, during which he worked as an emergency laborer and temporary employee, in the computation of his retirement benefits. The GSIS denied this request, citing that no premium payments were remitted during those years. Pauig argued that retirement laws should be liberally construed in favor of retirees. The heart of the matter lies in determining whether service rendered before GSIS membership and premium contributions can be credited towards retirement benefits, especially considering the laws and policies in effect during Pauig’s early years of government service.

    The Court addressed Pauig’s claim by examining the historical context of GSIS coverage. Prior to Republic Act (R.A.) No. 8291, GSIS membership was primarily compulsory for regular and permanent employees. Commonwealth Act (C.A.) No. 186, the Government Service Insurance Act of 1936, explicitly stated that regular membership was compulsory upon regularly and permanently appointed employees. Similarly, Republic Act Nos. 4968 and 660 reinforced this principle, emphasizing compulsory membership for regularly and permanently appointed employees.

    SEC. 4. Scope of application of System.—Regular membership in the system shall be compulsory upon —(a) All regularly and permanently appointed employees of the Government of the Commonwealth.

    The Court acknowledged that Presidential Decree (P.D.) No. 1146 allowed for the extension of compulsory coverage to non-permanent employees under certain conditions, this extension required presidential approval and fund availability. However, this provision did not automatically include casual or temporary employees in the retirement insurance plan. The pivotal change came with R.A. No. 8291 in 1997, which made GSIS membership compulsory for all employees, irrespective of employment status.

    SEC. 3. Compulsory Membership. – Membership in the GSIS shall be compulsory for all employees receiving compensation who have not reached the compulsory retirement age, irrespective of employment status.

    Pauig’s reliance on the principle of liberal construction of retirement laws was deemed inapplicable. The Court emphasized that the doctrine of liberal construction cannot be applied when the law is clear and leaves no room for interpretation. To uphold Pauig’s position would contradict the explicit provisions of the law and undermine its intended purpose. The Court distinguished the case of GSIS v. CSC, where claimants were allowed retirement benefits despite a period of non-deduction of premiums because deductions were made before and after the period of controversy, and the claimants were elective officials, not casual or temporary employees.

    The RTC’s decision, which favored Pauig, relied on Policy and Procedural Guidelines No. 171-03, stating that services with a fixed basic monthly compensation and timely remitted premium contributions should be included. However, the Supreme Court clarified that this policy must be interpreted in conjunction with existing laws at the time of Pauig’s service. During Pauig’s initial fourteen years, his employment status as an emergency laborer and temporary employee did not mandate GSIS membership or premium contributions.

    The Supreme Court contrasted the situation with cases where deductions were made from a claimant’s fixed salary both before and after a disputed period. In such instances, the Court has been more lenient, recognizing the employee’s good faith assumption of continued GSIS coverage. However, in Pauig’s case, there was no legal obligation to pay premiums during his initial fourteen years because he was not yet a GSIS member. Therefore, the absence of premium payments during that period meant that it could not be included in his creditable service for retirement benefits.

    In essence, the Supreme Court underscored that the computation of retirement benefits is intrinsically linked to the payment of premium contributions. The Court affirmed that the language of the retirement law is clear and unequivocal, leaving no room for interpretation. Pauig’s casual and temporary service from February 12, 1964, to July 18, 1977, was necessarily excluded from the creditable period of service for retirement purposes. This ruling serves as a reminder of the importance of understanding the legal framework governing GSIS membership and the requirements for creditable service in retirement benefit calculations.

    FAQs

    What was the key issue in this case? The central issue was whether the GSIS should include Pauig’s initial fourteen years of government service, during which he was a casual or temporary employee and no premium payments were made, in the calculation of his retirement benefits.
    What was the Supreme Court’s ruling? The Supreme Court ruled against including Pauig’s casual and temporary service in the computation of his retirement benefits, stating that only periods of service where premium payments were actually made and remitted to the GSIS could be included.
    Why were Pauig’s early years of service excluded? Pauig’s early years of service were excluded because, during that time, he was a casual or temporary employee, and GSIS membership was compulsory only for regular and permanent employees; therefore, no premium payments were made.
    What is the significance of R.A. No. 8291 in this case? R.A. No. 8291, which took effect in 1997, made GSIS membership compulsory for all employees, irrespective of employment status; however, this law did not retroactively apply to Pauig’s prior casual and temporary service.
    Can retirement laws be liberally construed in favor of retirees? While retirement laws are often liberally construed in favor of retirees, the Supreme Court clarified that this principle cannot be applied when the law is clear and leaves no room for interpretation.
    What was the basis for the GSIS’s denial of Pauig’s claim? The GSIS denied Pauig’s claim based on the premium-based policy, which stipulates that only periods of service where premium payments were actually made and duly remitted to the GSIS should be included in the computation of retirement benefits.
    How does this ruling affect other government employees? This ruling clarifies that government employees’ retirement benefits are primarily based on periods of service where GSIS premiums were paid, underscoring the importance of understanding the laws and policies governing GSIS membership and creditable service.
    Is the payment of premiums the sole basis for claiming retirement benefits? The fact that these contributions are minimal when compared to the amount of retirement benefits actually received shows that such contributions, while necessary, are not absolutely determinative in drawing up criteria for those who would qualify as recipients of the retirement benefit system.

    This case underscores the critical link between premium contributions and creditable service in the computation of retirement benefits for government employees. The Supreme Court’s decision emphasizes adherence to the existing legal framework and clarifies the scope of GSIS coverage during different periods of government service. As retirement laws and policies evolve, it is essential for government employees to stay informed and ensure that their contributions are accurately recorded to secure their future benefits.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: GOVERNMENT SERVICE INSURANCE SYSTEM (GSIS) vs. APOLINARIO C. PAUIG, G.R. No. 210328, January 30, 2017

  • Early Retirement Plans: Enforceability and Employee Consent in Philippine Labor Law

    The Supreme Court ruled that an employee is bound by a company’s retirement plan, even if the plan was established before the employee’s tenure, provided the employee was sufficiently informed and consented to the plan’s terms. This decision clarifies the enforceability of early retirement policies and emphasizes the importance of explicit or implied consent from employees. It highlights that accepting employment with a company implies agreement with its existing rules and regulations, including retirement policies, if those policies are made known to the employee.

    Retirement Realities: Can Banks Enforce Pre-Employment Retirement Ages?

    This case revolves around Guillermo Sagaysay’s compulsory retirement from Banco de Oro Unibank, Inc. (BDO) at the age of 60, pursuant to the bank’s retirement policy implemented long before he joined the company. Sagaysay contested his retirement, arguing it was illegal dismissal as he had not voluntarily agreed to retire at 60. The central legal question is whether a retirement plan established before an employee’s hiring is binding on that employee, particularly when the employee later signs a quitclaim.

    The Supreme Court anchored its decision on Article 287 of the Labor Code, which governs retirement age and benefits. The Court emphasized that retirement is generally a bilateral act, requiring voluntary agreement between employer and employee. However, Article 287 also recognizes that an agreement or employment contract can dictate the retirement age. In the absence of such agreement, the law sets a compulsory retirement age of 65, with an optional retirement age starting at 60.

    The Court noted that retirement plans allowing employers to retire employees before the age of 65 are permissible, provided they do not undermine the employees’ rights.

    “By its express language, the Labor Code permits employers and employees to fix the applicable retirement age at 60 years or below, provided that the employees’ retirement benefits under any CBA and other agreements shall not be less than those provided therein.”

    This underscores the principle that while early retirement plans are not inherently illegal, they must respect the employees’ entitlements.

    A crucial aspect of the ruling was the Court’s assessment of whether Sagaysay had been adequately informed of and had consented to BDO’s retirement plan. The Court identified several factors supporting the conclusion that Sagaysay was indeed aware and had impliedly agreed to the plan. First, the retirement plan had been in place since 1994, long before Sagaysay’s employment in 2006. Second, the Court stated that accepting employment with BDO implied assent to the bank’s existing rules, regulations, and policies, including the retirement plan. Third, a memorandum issued by BDO in 2009 reiterated the normal retirement age, further indicating that Sagaysay had been informed of the policy.

    Perhaps the most compelling evidence of Sagaysay’s consent came from his emails to the bank. In these communications, Sagaysay did not object to the compulsory retirement age; instead, he requested an extension of service to reach five years of employment. This request indicated his awareness of and acquiescence to the retirement plan’s terms. It also demonstrated a recognition that the BDO Retirement Program would be implemented to those reaching the age of sixty (60).” This acknowledgement significantly weakened his claim that he was unaware of the retirement policy.

    The Court distinguished this case from Cercado v. UNIPROM Inc., a case heavily relied upon by the Court of Appeals. In Cercado, the retirement plan was adopted *before* the employee was hired, and the employee had consistently objected to it. In contrast, Sagaysay was employed *after* the retirement plan was already in effect, and he initially sought to benefit from it by requesting an extension. This difference in timing and initial reaction was critical to the Supreme Court’s decision. The Court found that Sagaysay had the opportunity to reject the employment if he disagreed with the retirement policy.

    Building on this principle, the Court validated the quitclaim signed by Sagaysay. The Court emphasized that quitclaims are generally viewed with caution, they can be upheld if executed voluntarily, with full understanding, and for reasonable consideration. In Sagaysay’s case, the Court found that the consideration he received was justified, given that he had not yet met the minimum service requirement for full retirement benefits. Furthermore, Sagaysay’s extensive banking experience suggested that he understood the implications of signing the quitclaim.

    The ruling reinforces the employer’s prerogative to deny an extension of service beyond the compulsory retirement age. Once an employee reaches the compulsory retirement age, their employment is deemed terminated, and any extension is at the employer’s discretion. This discretion is critical for business planning and workforce management.

    FAQs

    What was the key issue in this case? The key issue was whether an employee is bound by a retirement plan that was already in place when they were hired, particularly when the employee later signs a quitclaim.
    What did the Supreme Court rule? The Supreme Court ruled that the employee was bound by the retirement plan because he was sufficiently informed of it and impliedly consented to it by accepting employment with the bank.
    What is the significance of Article 287 of the Labor Code? Article 287 governs retirement age and benefits, allowing for agreements between employers and employees to set retirement ages, but establishing a default compulsory retirement age of 65 in the absence of such agreements.
    How did the Court distinguish this case from Cercado v. UNIPROM Inc.? The Court distinguished this case because, unlike in Cercado, the retirement plan was already in place before Sagaysay was hired, and Sagaysay initially sought to benefit from the plan.
    Is it legal for a company to have an early retirement plan? Yes, it is legal for a company to have an early retirement plan, as long as it is implemented fairly and employees are properly informed and their rights are respected.
    What makes a quitclaim valid? A quitclaim is valid if it is executed voluntarily, with full understanding of its terms, and for reasonable consideration.
    Can an employer force an employee to retire early? An employer can enforce an early retirement plan if the employee has agreed to it, either explicitly or implicitly by accepting employment with the company with knowledge of the plan.
    What is the effect of an employee requesting an extension of service? An employee’s request for an extension of service can be seen as an acknowledgement and acceptance of the existing retirement plan.
    Can an employer deny an employee’s request for an extension of service? Yes, an employer has the management prerogative to deny an employee’s request for an extension of service beyond the compulsory retirement age.

    In conclusion, this case emphasizes the importance of clear communication and mutual agreement between employers and employees regarding retirement policies. It clarifies that accepting employment with a company implies agreement with its existing rules and regulations, provided those policies are made known to the employee. Retirement plans adopted before employment are deemed binding on the employee.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: BANCO DE ORO UNIBANK, INC. vs. GUILLERMO C. SAGAYSAY, G.R. No. 214961, September 16, 2015

  • Lifetime Pension for Jurisconsults: Expanding the Scope of Retirement Benefits Under R.A. 910

    The Supreme Court, in this case, ruled that a Jurisconsult, specifically Atty. Saaduddin A. Alauya, is entitled to a lifetime monthly pension under Republic Act (R.A.) No. 910, as amended, despite not being a Justice or Judge. The Court recognized that granting Atty. Alauya the rank and privileges of a Regional Trial Court (RTC) judge included the right to receive retirement benefits, ensuring equitable treatment compared to other Court officials with similar ranks and privileges.

    Beyond the Bench: Does Judicial Rank Extend to Retirement Benefits?

    This case revolves around the request of Atty. Saaduddin A. Alauya for a lifetime monthly pension, a benefit typically associated with Justices and Judges, under R.A. No. 910. Atty. Alauya served as a Jurisconsult in Islamic Law, a position within the judiciary but distinct from that of a Justice or Judge. The central legal question is whether the “rank and privileges” of a Regional Trial Court (RTC) judge, previously conferred upon Atty. Alauya by the Court, include the entitlement to a lifetime monthly pension under R.A. No. 910. This case highlights the complexities in interpreting retirement laws and the extent to which administrative decisions can expand the scope of benefits to non-traditional judicial roles.

    The Supreme Court addressed this issue by examining the intent and application of R.A. No. 910, as amended. It considered the fact that Atty. Alauya had been granted the “rank and privileges” of an RTC judge through prior Court resolutions. This conferment, the Court reasoned, should not be treated as merely symbolic but should extend to tangible benefits associated with that rank, including retirement entitlements. To fully understand the court’s decision it is vital to look at the context of R.A. No. 910.

    Section 1 of R.A. 910, as amended by R.A. 5095, states:

    Sec. 1. When a Justice of the Supreme Court, the Court of Appeals,  [or] a judge of [the regional trial court] xxx  who has rendered at least twenty (20) years of service in the judiciary or in any other branch of the Government, or in both  (a) retires for having attained the age of seventy years, or resigns by reason of his incapacity to discharge the duties of his office, he shall receive during the residue of his natural life … the salary xxxx And when a justice of the Supreme Court, the Court of Appeals,  xxx [or] a judge of [the regional trial court], xxx or a city or municipal judge  has attained the age of sixty  years and has rendered at least twenty  years service in the Government, the last five  of which shall have been continuously rendered in the judiciary, he shall likewise be entitled to retire and receive during the residue of his/her natural life also in the manner hereinafter provided, the salary he was then receiving.

    The Court interpreted the phrase “privileges of a judge of the RTC” to encompass the retirement benefits outlined in R.A. No. 910, including the lifetime monthly pension. This interpretation aligns with the principle of liberal construction applied to retirement laws, which seeks to ensure the well-being of retirees and reward their past service. The court emphasized that Atty. Alauya met the qualifications for retirement under Section 1 of R.A. 910, which made him eligible for the pension under the succeeding Section 3. Moreover, the legal principle of equal treatment and non-discrimination in the judiciary played a crucial role in the court’s decision.

    The Court considered its past practices of granting judicial ranks and privileges to court officials who were not Justices or Judges, allowing them to retire under R.A. No. 910. Denying Atty. Alauya the same benefit would create an unjust disparity and could be perceived as discriminatory, particularly given his background. It is important to note that this decision does not grant blanket entitlement but rather clarifies the extent of previously conferred benefits.

    The Court distinguished this case from its earlier ruling in A.M. No. 11838-Ret. (Re: Request of Retired Deputy Court Administrator [DCA] Bernardo T. Ponferrada for Automatic Adjustment of His Retirement Benefits to Include Special Allowance granted under [RA] No. 9227). In the Ponferrada case, the issue was whether a retired DCA was entitled to an automatic adjustment of retirement benefits to include special allowances granted under R.A. No. 9227, which took effect after his retirement. The Court held that R.A. 9227 was a grant of special allowance to incumbents in the service as of the effectivity of the law. Hence, it cannot be applied retroactively.

    In the present case, the issue is Atty. Alauya’s basic entitlement to a monthly lifetime pension under R.A. 910, based on his rank and privileges at the time of retirement. Therefore, the Ponferrada ruling was not applicable in denying Atty. Alauya’s claim. The Court’s decision reflects a commitment to interpreting retirement laws in a way that promotes fairness, consistency, and the well-being of those who have served the judiciary.

    The Supreme Court has consistently adopted a liberal approach when interpreting retirement laws, aligning with their intended purpose of providing sustenance and comfort to retirees. This principle was reiterated in Government Service Insurance System v. De Leon:

    Retirement laws, in particular, are liberally construed in favor of the retiree because their objective is to provide for the retiree’s sustenance and, hopefully, even comfort, when he no longer has the capability to earn a livelihood. The liberal approach aims to achieve the humanitarian purposes of the law in order that efficiency, security, and well-being of government employees may be enhanced. Indeed, retirement laws are liberally construed and administered in favor of the persons intended to be benefited, and all doubts are resolved in favor of the retiree to achieve their humanitarian purpose.

    The court emphasized that interpreting “privileges of an RTC judge” should encompass retirement benefits under R.A. 910, aligning with the law’s purpose. Section 3, which outlines the benefits, cannot be separated from Section 1, which establishes eligibility. The court recognized instances where officers with judicial ranks, such as assistant/deputy court administrators and clerks of court, were allowed to retire under R.A. 910, emphasizing the need for consistency. This approach recognizes the importance of honoring the commitments made to those who serve the judiciary, even in roles that may not be traditionally considered judicial positions. This consistency also addresses concerns about potential discrimination and ensures that all individuals are treated fairly based on their contributions and the privileges conferred upon them.

    FAQs

    What was the key issue in this case? The key issue was whether Atty. Alauya, as a Jurisconsult with the rank and privileges of an RTC judge, was entitled to a lifetime monthly pension under R.A. No. 910.
    What is R.A. No. 910? R.A. No. 910 is a law that provides for the retirement of Justices of the Supreme Court and the Court of Appeals, as well as Judges of lower courts, outlining the benefits they are entitled to upon retirement.
    Why was Atty. Alauya’s case initially denied? Atty. Alauya’s case was initially denied because the Office of the Court Administrator (OCA) believed that Sec. 1 of R.A. 910 applied only to Justices or Judges, and Atty. Alauya was neither.
    How did the Court justify granting the pension to Atty. Alauya? The Court justified granting the pension by emphasizing that it had previously conferred upon Atty. Alauya the rank and privileges of an RTC judge, which included the right to receive retirement benefits under R.A. No. 910.
    What is the significance of the phrase “rank and privileges” in this case? The phrase “rank and privileges” is significant because it determined whether Atty. Alauya was entitled to the same benefits as an RTC judge, including the lifetime monthly pension.
    What is the principle of liberal construction in retirement laws? The principle of liberal construction in retirement laws means that these laws should be interpreted broadly in favor of the retiree to ensure they receive the benefits intended to support them in their retirement years.
    How does this case differ from the Ponferrada case? This case differs from the Ponferrada case because Ponferrada involved a claim for an adjustment of retirement benefits based on a law that took effect after his retirement, while Alauya’s case involved the basic entitlement to a pension based on his rank at the time of retirement.
    Will Atty. Alauya receive special allowances under R.A. 9227 or additional benefits under R.A. 9946? No, Atty. Alauya will not receive special allowances under R.A. 9227 or additional benefits under R.A. 9946 because these laws took effect after his retirement and do not apply retroactively to his case.
    What does the Court mean by treating the grant of Atty. Alauya’s claim as “pro hac vice”? Treating the grant as “pro hac vice” means that the decision applies specifically to Atty. Alauya’s unique circumstances and does not set a general precedent for all Jurisconsults or similar positions.

    This decision clarifies the scope of retirement benefits for court officials who have been granted judicial ranks and privileges, even if they do not hold traditional judicial positions. It reinforces the principle of equitable treatment within the judiciary and underscores the importance of interpreting retirement laws in a manner that aligns with their beneficial intent. This ruling provides guidance for future cases involving similar circumstances and promotes fairness in the administration of retirement benefits.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: IN RE: EXPIRATION OF FIXED TERM OF OFFICE OF ATTY. SAADUDDIN A. ALAUYA, OFFICE OF THE JURISCONSULT, ZAMBOANGA CITY, G.R. No. 60991, August 18, 2015

  • Retirement Pay Computation: Defining ‘One-Half Month Salary’ Under Philippine Law

    The Supreme Court ruled that the computation of retirement benefits, specifically the term ‘one-half month salary,’ should be interpreted as 22.5 days. This calculation includes 15 days, plus 2.5 days representing one-twelfth of the 13th-month pay, and 5 days for service incentive leave (SIL). This clarifies the minimum retirement benefits an employee is entitled to under Republic Act No. 7641, ensuring that retirement plans provide at least the legally mandated benefits.

    Beyond 20 Years: Calculating Teachers’ Retirement Benefits

    In Grace Christian High School v. Lavandera, the central legal question revolves around the proper computation of retirement benefits for a long-serving teacher. Filipinas Lavandera, a high school teacher at Grace Christian High School (GCHS) for over two decades, was informed of her retirement under the school’s retirement plan. The dispute arose when Lavandera claimed that the retirement benefits offered by GCHS were deficient compared to what is mandated under Republic Act No. 7641, also known as the “Retirement Pay Law.”

    The heart of the matter lies in interpreting the term “one-half (½) month salary” as used in the context of retirement pay computation. GCHS argued that the computation should only include 15 days of salary, while Lavandera contended that it should also include one-twelfth of the 13th-month pay and the cash equivalent of service incentive leaves. This difference in interpretation led to a significant discrepancy in the retirement benefits due to Lavandera, prompting her to file a complaint for illegal dismissal and seeking proper retirement benefits.

    The Labor Arbiter (LA) initially dismissed the illegal dismissal complaint, recognizing GCHS’s right to retire employees under its retirement plan after 20 years of service. However, the LA found the retirement benefits deficient compared to RA 7641 and awarded Lavandera retirement pay differentials based on her latest salary. On appeal, the National Labor Relations Commission (NLRC) modified the LA’s decision, computing the retirement pay based on Lavandera’s salary at the time of her initial retirement eligibility in 1997 and excluding certain benefits. The Court of Appeals (CA) then intervened, affirming with modification the NLRC’s Decision by applying a 22.5-day multiplier, which included SIL and the 13th-month pay equivalent.

    The Supreme Court was tasked to resolve whether the CA erred in using the multiplier “22.5 days” to compute Lavandera’s retirement pay differentials. The legal framework for this case is primarily based on RA 7641, which amended Article 287 of the Labor Code. This provision stipulates the minimum retirement benefits private sector employees are entitled to in the absence of a retirement plan or if the existing plan provides benefits below the legal requirement. Specifically, it defines “one-half (½) month salary” to include 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.

    The Supreme Court referenced the established interpretation in Elegir v. Philippine Airlines, Inc., reiterating that “one-half (½) month salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the 13th month pay and the remaining 5 days for [SIL].” This interpretation aligns with the Implementing Rules of Book VI of the Labor Code, which further clarifies the components of the “½ month salary”. The Court found no reason to deviate from this interpretation, reinforcing the inclusion of the entire 5 days of SIL in the computation of retirement benefits.

    However, the Court also addressed the issue of when legal interest should be applied to the retirement pay differentials. Citing Eastern Shipping Lines, Inc. v. CA, the Court clarified that the legal interest should be reckoned from the rendition of the LA’s Decision on March 26, 2002, not from the filing of the illegal dismissal complaint. Since the obligation to provide retirement pay was only determined upon the LA’s Decision, it is from this date that GCHS’s obligation to pay the retirement pay differentials was deemed reasonably ascertained.

    This clarification ensures that interest is applied only when the quantification of damages is reasonably established, aligning with established legal principles on awarding interest. The actual base for the computation of legal interest, in any case, is on the amount finally adjudged. The Supreme Court ultimately denied GCHS’s petition, affirming the CA’s decision with a modification on the reckoning date for legal interest, ensuring that Lavandera received her rightful retirement benefits as mandated by law.

    FAQs

    What was the key issue in this case? The central issue was the proper computation of retirement benefits, specifically the interpretation of “one-half month salary” under Republic Act No. 7641, including whether to include service incentive leave and 13th-month pay.
    What does “one-half month salary” include for retirement pay? According to the Supreme Court, “one-half month salary” includes 15 days of salary, one-twelfth of the 13th-month pay, and the cash equivalent of not more than five days of service incentive leaves, totaling 22.5 days.
    When does legal interest on retirement benefits start accruing? Legal interest on retirement benefits starts accruing from the date the Labor Arbiter’s decision is rendered, as it is from this point that the obligation to pay is deemed reasonably ascertained.
    What is the significance of Republic Act No. 7641 in this case? Republic Act No. 7641 sets the minimum retirement benefits for private sector employees and serves as the legal basis for determining whether Grace Christian High School’s retirement plan met the minimum requirements.
    How did the Court use the Elegir v. Philippine Airlines case? The Court cited the Elegir case to reinforce the established interpretation that “one-half month salary” is equivalent to 22.5 days, including 13th-month pay and service incentive leave.
    What was Grace Christian High School’s main argument in the case? Grace Christian High School argued that the computation of retirement pay should not include the full value of service incentive leave and that the benefits should be based on the salary at the time of initial retirement eligibility.
    How did the Labor Arbiter, NLRC, and Court of Appeals differ in their rulings? The Labor Arbiter initially found deficiencies but was modified by NLRC, then the CA affirmed with modifications and was affirmed by the Supreme Court with modifications as well.
    What was the outcome of the case? The Supreme Court ultimately ruled in favor of Lavandera, affirming the Court of Appeals’ decision with a modification on the start date for legal interest, ensuring she received the correct retirement benefits.

    This case clarifies the proper computation of retirement benefits under Philippine law, ensuring that employees receive at least the minimum benefits mandated by RA 7641. It also highlights the importance of accurately interpreting labor laws to protect employees’ rights and welfare.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Grace Christian High School vs. Lavandera, G.R. No. 177845, August 20, 2014