159 Eastern Shipping v CA
160 Aurora Land v NLRC (1997)
161 M+W Zander v Enriqez (2009)
162 Agabon v NLRC (2004)
163 BPI v NLRC (2010)
Concept
- Awarded to validly dismissed employees as a measure of social justice and equity.163
- Also awarded to unjustly dismissed employees if reinstatement is not feasible.
Separation pay may be awarded only in cases when the termination of employment is due to:
- Installation of labor-saving devices - Redundancy
- Retrenchment
- Closing or cessation of business operations, (e) d - Disease of an employee and his continued employment is
prejudicial to himself or his co-employees
- When an employee is illegally dismissed but reinstatement is no longer feasible.
- A valid dismissed for just causes other than serious misconduct, wilful disobedience, gross and habitual neglect of duty, fraud or wilful breach of trust, commission of a crime against the employer or his family, or those reflecting on his moral character.164
Separation Pay for Resigned Employees165
G.R.: An employee who voluntarily resigns from employment is not entitled to separation pay
E: When it is stipulated in the employment contract or CBA It is sanctioned by established employer practice or policy.
BACKWAGES SEPARATION PAY CONCEPT To restore withheld
income because of unjust dismissal
Awarded to validly dismissed employees as a measure of social justice and equity.
Also awarded to unjustly dismissed employees if reinstatement is not feasible.
WHEN
AWARDED Upon finding of LA of
unjust dismissal Upon termination of employee
When reinstatement is no longer feasible
COMPUTATION From time compensation was withheld up to time of reinstatement
Will depend upon the CBA, agreement between the ER and EE or the cause of the termination EFFECT OF
RECEIPT Not returnable Time it can be claimed that the ER-EE relationship has formally ceased.
Not a bar from contesting the legality of dismissal.
- Must be based on employee’s basic wage + transportation + ECOLA - Commissions earned shall also be included in the computation
o Must be based on the average commissions earned during their last year of employment.166
- Employees who received their separation pay are not barred from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel.167
164 Toyota Motor Phils. Corp. Workers Association v. NLRC
165 “J” Marketing Corp v Taran (2009)
166 Songco v NLRC (1990)
167 San Miguel Corp v Javate (1992)
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- Generally allowed as a measure of social justice and equity - May also be awarded in case of exception circumstances, such as
recurring illness preventing the employee from working168
- Employee is validly dismissed for the following causes:
o Serious misconduct o Wilful disobedience
o Gross and habitual neglect of duty o Fraud or wilful breach of trust
o Commission of a crime against the employer or his family, or those reflecting on his moral character
168 Paduata v Meralco (2012)
G.R.: Corporate Officers are not personally liable for their official acts, because a corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and members.
E: Unless they have exceeded their authority or where
terminations of employment are done with malice or in bad faith o In this case, they should be held solidarily liable with the
corporation169
169 AMA Computer College v Ignacio (2009)
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I. Coverage
Art. 293, par. 1; Book VI, Rule II, Sec. 1; Labor Advisory on Retirement Pay Law
- Applies to all employees in the private sector, regardless of their position, designation or status an d irrespective of the method by which their wages are paid
Sec. 2
- Employees of the National Government and its political subdivisions
- GOCCs if they are under the Civil Service Law
- Employees of retail, service and agricultural establishments employing not more than 10 employees
II. Definition
- Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age agrees to sever his or her employment with the former.170
- Took effect on Jan. 7, 1993
III. Retroactive Application of RA 7641
Requisites in order for RA 7641 may be given a retroactive effect171 1. Claimant was still in the employ of the employer at the time the
statute took effect; and
2. Claimant had complied with the requirements for eligibility for such retirement benefits under the statute.
IV. Components of ½ Month Pay/Salary
Rules Implementing the New Retirement Law, Rule II, Sec. 5.2, Guidelines 5.2
15 days of salary 15 days 5 days service incentive leave 5 days 1/12th of 13th month pay 2.5 days
Other benefits ________
Total 22.5 days
Notes:
- Salary shall not include the following:172 o ECOLA
o Profit-Sharing payments
o Other monetary benefits which are not considered as part of or integrated into the regular salary of the employees
V. When RA 7641 is applicable
G.R.: The company’s retirement scheme shall apply E: Art. 293 shall apply in the following cases:
o There is no CBA or other applicable employment contract providing retirement benefits
o There is a CBA but such provides retirement benefits below requirement set by law
VI. Three Kinds of Retirement Plans
1731. Compulsory and Contributory in character (Art. 293) 2. CBA / Agreed retirement schemes
3. Voluntarily provided retirement schemes a. Announced company policy
b. Implied in its failure to contest the employee’s claim for retirement benefits
170 Jaculbe v Silliman University (2007)
171 Universal Robina Sugar Milling v Caballeda (2008)
172 Reyes v NLRC (2007)
173 Banco Filipino v Lazaro (2012)
174 Ariola v Philex Mining (2005)
VII. Voluntary Retirement
1. Voluntary Retirement 2. Compulsory Retirement
- Retirement by virtue of EE’s intention to severe the ER-EE relationship upon reaching retirement age
- In the absence of any agreement, an employee may retire upon reaching the age of 60 years
- If the intent to retire is not clearly established or if the retirement is involuntary, it is to be treated as a discharge.174
- In the absence of any agreement, an employee shall be retired upon reaching the age of 65 years
VIII. Forfeiture of Benefits
- Under the Labor Code, only unjustly dismissed employees are entitled to retirement benefits and other privileges including reinstatement and backwages. 175
o Employees who are validly dismissed from service by reason of timely discovered offenses are deprived of retirement benefits.176
IX. Equitable Solution
- The Courts may order the payment of retirement benefits not because there is legal basis for such but on the basis of equity
o It serves as a measure of what should be paid as
“equitable solution”177
X. Retirement Pay Differential
- If the benefits in a CBA or Company-provided retirement scheme are less than those provided in the law, the employer shall pay the difference.
XI. Management Prerogative
- Retirement of an employee may be done upon initiative and option of the management. And where there are cases of voluntary retirement, the same is effective only upon the approval of management.178
XII. Exemption from Tax
Rules Implementing the New Retirement Law, Rule II, Sec. 6
Requisites in order for the Retirement Plan to be Tax-Exempt 1. The benefit plan must be approved by the Bureau of Internal
Revenue;
2. The retiring official or employee must have been in the service of the same employer for at least 10 years and is not less than 50 years of age at the time of retirement; and
3. The retiring official or employee shall not have previously availed of the privilege under the retirement benefit plan of the same or another employer.
Note:
- An agreement to pay the taxes on the retirement benefits as an incentive to prospective retirees and for them to avail of the optional retirement scheme is not contrary to law or to public morals.179
175 Sy v. Metrobank (2006)
176 Equitable PCI Bank v Caguioa (2005)
177 PLDT v Reus (2008)
178 PAL v ALPAP (2002)
179 Intercontinental Broadcasting Corp. v Amorilla (2006)
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XIII. Gratuity vis-à-vis Retirement Pay
- Gratuity pay is separate and distinct from retirement benefits. It is paid purely out of generosity.180