The Supreme Court ruled that an employee is bound by a retirement plan implemented by the employer before the employee’s date of hire. In Banco de Oro Unibank, Inc. v. Sagaysay, the Court found that by accepting employment, the employee had implicitly agreed to the bank’s existing retirement policy, which mandated retirement at age 60. This decision highlights the importance of understanding company policies before accepting a job offer, especially regarding retirement plans. It reinforces an employer’s right to enforce existing policies when they are clearly communicated and in place prior to employment, as the employees would be deemed to have knowledge of such company policies.

BDO’s Retirement Age: Binding Contract or Forced Exit?

Guillermo Sagaysay, previously employed at Metropolitan Bank and Trust Co. (Metrobank) for 28 years and United Overseas Bank (UOB) for two years, was hired by Banco De Oro Unibank, Inc. (BDO) in 2006. In January 2010, BDO informed Sagaysay that he would be retired effective September 1, 2010, pursuant to the bank’s retirement policy mandating retirement at age 60. Sagaysay requested an extension, which BDO denied, leading to his retirement and subsequent signing of a quitclaim in exchange for P98,376.14. Sagaysay then filed a complaint for illegal dismissal, arguing that he was forced to retire at 60, contrary to Article 287 of the Labor Code.

The Labor Arbiter (LA) initially ruled in favor of Sagaysay, declaring his dismissal illegal. The National Labor Relations Commission (NLRC), however, reversed the LA’s decision, stating that Sagaysay had assented to BDO’s retirement plan when he accepted employment. On appeal, the Court of Appeals (CA) reversed the NLRC’s ruling, citing that the retirement plan was not a result of mutual agreement and that Sagaysay was forced to participate. The Supreme Court then took up the case to resolve whether the retirement plan was valid and enforceable, and whether the quitclaim signed by Sagaysay was also valid.

The Supreme Court began its analysis by examining the relevant laws and jurisprudence concerning early retirement. Article 287 of the Labor Code dictates retirement ages, stating:

Art. 287. Retirement. xxx

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

The Court emphasized that retirement age is primarily determined by agreement or contract. Only in the absence of such agreement does the law set the compulsory retirement age at 65, with an optional retirement age starting at 60. The Court recognized that employers and employees can agree to a retirement age below 65, provided the employees’ benefits meet the minimum requirements.

Examining prior cases, the Supreme Court distinguished situations where retirement plans were implemented *after* the employee’s hiring, versus before. Cases like Pantranco North Express, Inc. v. NLRC and Progressive Development Corporation v. NLRC showed that when employees agreed to retirement plans, even with lower retirement ages, such agreements were enforceable. However, in Jaculbe v. Silliman University and Cercado v. UNIPROM Inc., the Court did not allow the application of lower retirement ages because the plans were implemented after the employees were hired and without their explicit consent. In Cercado v. UNIPROM Inc, the Supreme Court elucidated that:

Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and uncompelled. While an employer may unilaterally retire an employee earlier than the legally permissible ages under the Labor Code, this prerogative must be exercised pursuant to a mutually instituted early retirement plan. In other words, only the implementation and execution of the option may be unilateral, but not the adoption and institution of the retirement plan containing such option. For the option to be valid, the retirement plan containing it must be voluntarily assented to by the employees or at least by a majority of them through a bargaining representative.

The Supreme Court pointed out a key difference in Sagaysay’s case: the retirement plan was in place *before* he was hired. This, according to the Court, changed the legal landscape significantly.

The Court found compelling evidence that Sagaysay was informed of and consented to BDO’s retirement plan. Firstly, the plan was established in 1994 to create a retirement fund and support CBA benefits. Secondly, by accepting employment with BDO, Sagaysay was deemed to have agreed to the bank’s existing rules, including the retirement plan. The Collective Bargaining Agreement (CBA) also stated that “[t]he Bank shall continue to grant retirement/gratuity pay…”, showing it was a recognized practice. Thirdly, in 2009, BDO issued a memorandum regarding the retirement program, reiterating the normal retirement date. Sagaysay, already an employee, did not deny receiving this memorandum.

Crucially, Sagaysay’s emails requesting an extension, while not opposing the compulsory retirement age, revealed his awareness of the BDO Retirement Program. In one email he recognized that “the time has come that BDO Retirement Program will be implemented to those reaching the age of sixty (60).” The Court viewed his request for an extension to reach five years of service as an implicit acknowledgment of the plan. Since Sagaysay never objected to the plan for four years, the Court inferred his consent.

The Court also distinguished Sagaysay’s situation from Cercado. In *Cercado*, the retirement plan was implemented *after* the employee was hired, essentially forcing participation. Sagaysay, however, was hired *after* the retirement plan was already in place. He had the choice to accept the employment with its conditions or decline it. Because of this, his security of tenure was not violated. The Supreme Court emphasized that Sagaysay was not forced to participate and was free to seek employment elsewhere if he disagreed with the policy.

Furthermore, Sagaysay had signed a quitclaim for P98,376.14, releasing BDO from any claims related to his employment. The Court recognized quitclaims as generally frowned upon, but valid if executed voluntarily, with full understanding, and for reasonable consideration. Given Sagaysay’s 34 years of banking experience, the Court found that he understood the implications of the quitclaim and signed it without undue influence from BDO. The consideration was also deemed reasonable, as it was based on standard liquidation data for rank-and-file employees, and it would be unreasonable for the court to demand a higher amount for separation benefits, considering Sagaysay’s ineligibility to the said plan due to failure to render the required years of service.

Finally, the Supreme Court addressed Sagaysay’s denied request for an extension, stating that BDO had the management prerogative to deny it. The Court cited that upon compulsory retirement, employment is terminated, and extension is a privilege granted at the employer’s discretion. The Court reinforced the principle that justice must be dispensed in light of the established facts, applicable law, and doctrine.

FAQs

What was the key issue in this case?	The central issue was whether an employee is bound by a retirement plan implemented by the employer before the employee’s date of hire. The Supreme Court needed to determine if the retirement plan was valid and enforceable.
What did the Supreme Court decide?	The Supreme Court ruled that the employee was bound by the retirement plan because it was in effect before he was hired. By accepting employment, he implicitly agreed to the existing company policy.
What is the compulsory retirement age under Philippine law?	Under Article 287 of the Labor Code, the compulsory retirement age is 65 years old, but this is only in the absence of a retirement plan or agreement. Employers and employees can agree to a different retirement age, provided the employee’s benefits are not less than those provided by law.
When is a quitclaim considered valid?	A quitclaim is valid when it is executed voluntarily, with a full understanding of its terms, and for a reasonable consideration. The employee must not have been unduly pressured or influenced by the employer.
What is management prerogative in relation to retirement?	Management prerogative allows employers to make decisions about the extension of service for employees who have reached the compulsory retirement age. The employer has the discretion to grant or deny such extensions.
How did the Cercado case differ from this one?	In the Cercado case, the retirement plan was implemented *after* the employee was hired, without the employee’s explicit consent. In this case, the retirement plan was in place *before* the employee was hired, making it a condition of employment.
What is the significance of the CBA in this case?	The Collective Bargaining Agreement (CBA) between BDO and its employees recognized the bank’s practice of granting retirement pay. This further supported the argument that the retirement plan was a known and accepted part of BDO’s employment terms.
What should employees do before accepting a job offer?	Employees should carefully review and understand all company policies, especially those related to retirement plans. If they disagree with any policies, they should raise their concerns with the employer before accepting the offer.
Can an employer force an employee to retire early?	An employer can enforce a retirement plan with an early retirement age if the plan was in place before the employee was hired or if the employee explicitly agreed to it. The key factor is whether the employee voluntarily accepted the terms of the retirement plan.

This case reinforces the importance of understanding and agreeing to company policies, particularly retirement plans, before accepting employment. It also highlights the validity of quitclaims when executed voluntarily and with full understanding. While the courts often lean in favor of labor, the Supreme Court decision in Banco de Oro Unibank, Inc. v. Sagaysay underscores the importance of contractual obligations and the employer’s right to enforce pre-existing policies when they are transparent and understood.

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. v. Sagaysay, G.R. No. 214961, September 16, 2015