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