Acceptance of Retirement Benefits Can Imply Consent to Retirement

G.R. No. 120802, June 17, 1997

Imagine dedicating decades to your career, only to be told you must retire earlier than you planned. This scenario highlights the tension between an employee’s right to work and an employer’s policies on retirement. The case of Jose T. Capili vs. National Labor Relations Commission and University of Mindanao delves into this very issue, specifically focusing on whether a private school instructor could be compelled to retire at age 60 and the implications of accepting retirement benefits. This case underscores the importance of understanding retirement laws, company policies, and the potential consequences of accepting retirement packages.

Legal Context: Retirement in the Philippines

Philippine labor laws govern retirement policies, aiming to protect employees while allowing employers to manage their workforce. Article 287 of the Labor Code, as amended by Republic Act No. 7641, is central to understanding retirement regulations. This law distinguishes between compulsory and optional retirement.

The law 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 agreement and other agreements shall not be less than those provided herein.

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

Compulsory retirement occurs at age 65. Optional retirement is determined by a collective bargaining agreement, employment contract, or the employer’s retirement plan. If these are absent, an employee can choose to retire at 60 or older, but before 65, provided they’ve worked at least five years for the company. This option belongs solely to the employee.

Before R.A. No. 7641, the Labor Code didn’t specify a retirable age, leaving it to agreements or company policies. However, Policy Instruction No. 25 allowed private educational institutions to retire employees at 60 if no retirement plan existed. R.A. No. 7641 changed this, granting the employee the exclusive right to choose retirement between 60 and 65 in the absence of a retirement plan or agreement.

Case Breakdown: Capili vs. University of Mindanao

Jose T. Capili, Jr., a college instructor at the University of Mindanao (UM), faced mandatory retirement at 60. Believing this was constructive dismissal, he filed a complaint with the NLRC, seeking reinstatement, back wages, and damages. He argued that UM’s retirement plan only applied to its members, which he was not. He also contended that Policy Instruction No. 25 was superseded by R.A. No. 7641, granting him the option to retire at 60.

UM countered that its retirement plan allowed them to retire Capili at 60, citing Article 287 of the Labor Code and Policy Instruction No. 25. The Labor Arbiter sided with UM, stating that the university had a retirement plan fixing the retirement age at 60.

Capili appealed to the NLRC, which initially dismissed his appeal for being filed late. However, upon reconsideration, the NLRC addressed the merits of the case, observing that:

“After a careful review of the respective arguments of the parties, We find no serious inconsistency between the company retirement plan of the university and the provision of Article 287 of the Labor Code, as amended by R.A. 7641. Both speak of fixing the normal retirement age at 60 in the absence of a retirement plan or agreement.”

During the appeal, Capili accepted his retirement benefits. The NLRC saw this as a crucial turning point, stating:

“Complainant therefore by his own act of accepting the proceeds of his retirement benefits as originally offered to him by respondent is now estopped from further pursuing his claims in the instant case.”

The Supreme Court ultimately affirmed the NLRC’s decision, albeit with a modification. The Court found that UM’s retirement plan only covered members, and Capili was not a member. However, the Court held that by accepting retirement benefits, Capili effectively chose to retire under Article 287 of the Labor Code, as amended by R.A. No. 7641. The timeline of events was crucial:

• UM informs Capili of retirement eligibility at 60.
• Capili objects, citing the right to work until 65.
• Capili files an illegal dismissal complaint.
• Labor Arbiter rules in favor of UM.
• Capili receives partial, then full, retirement benefits.
• NLRC initially dismisses, then rules against Capili on appeal, citing estoppel.
• Supreme Court affirms, stating acceptance of benefits implies consent to retire.

Practical Implications: Key Lessons

This case offers valuable lessons for both employers and employees. Employers should ensure their retirement plans are clear, communicated effectively, and consistently applied. Employees should carefully consider the implications of accepting retirement benefits, as it may be construed as consent to retirement.

This ruling highlights that accepting retirement benefits can be interpreted as an agreement to retire, even if the employee initially protested the retirement. This is especially important if the employee accepts the benefits without explicitly reserving their right to contest the retirement.

Key Lessons:

• Clarity of Retirement Plans: Employers must have clear and accessible retirement plans.
• Membership Requirements: Retirement plans should clearly define who is covered.
• Employee Choice: In the absence of a clear plan, employees have the right to choose retirement between 60 and 65.
• Acceptance of Benefits: Accepting retirement benefits can imply consent to retire.
• Reservation of Rights: If contesting retirement, explicitly reserve your rights when accepting benefits.

Frequently Asked Questions

Q: Can my employer force me to retire at 60 in the Philippines?

A: Generally, no. Under R.A. 7641, in the absence of a retirement plan or agreement, you have the option to retire between 60 and 65. Compulsory retirement is at 65.

Q: What if my company has a retirement plan?

A: If there’s a retirement plan or collective bargaining agreement, the retirement age is governed by that plan.

Q: What happens if I accept retirement benefits but don’t want to retire?

A: Accepting retirement benefits can be interpreted as consent to retire. To avoid this, explicitly reserve your right to contest the retirement when accepting the benefits.

Q: What is constructive dismissal?

A: Constructive dismissal occurs when an employer makes working conditions so unbearable that the employee is forced to resign. Forced retirement can be considered constructive dismissal.

Q: What should I do if I believe I was illegally forced to retire?

A: Consult with a labor lawyer immediately. Document all communications with your employer and gather evidence to support your claim.

Q: What is the compulsory retirement age in the Philippines?

A: The compulsory retirement age in the Philippines is 65 years old, as stated in Article 287 of the Labor Code.

Q: How much retirement pay am I entitled to?

A: If there is no existing retirement plan, an employee is entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service.

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