F. Retirement

Frequency: ★★★☆☆

1. CBA or employment contract, primary basis

Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. (Article 287, Labor Code)

2. Retirement benefits

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 in the Labor Code. (Paragraph 2, Article 287, Labor Code)

a. Labor Code retirement benefit

½ month salary computation:
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall constitute the following:
1) 15 days;
2) 1/12 of the 13th month pay; and
3) Cash equivalent of not more than five (5) days of service incentive leaves. (Paragraph 4, Article 287, Labor Code)

3. Retirement age

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. (Paragraph 3, Article 287, Labor Code)

Requisites for retirement:
1) At least 5 years of service; and
2) 65 years old for compulsory retirement or at least 60 years old for optional retirement.
The 2 types of retirement:
1) Compulsory. – This takes place at age 65 years old.
2) Optional. – Thisis primarily determined by the collective bargaining agreement or other employment contract or employer’s retirement plan. In the absence of any provision on optional retirement in a collective bargaining agreement, other employment contract, or employer’s retirement plan, an employee may optionally retire upon reaching the age of 60 years or more, but not beyond 65 years, provided he has served at least five years in the establishment concerned. That prerogative is exclusively lodged in the employee.

Retirement age may be stipulated by the employer and the employee. By its express language, the law permits employers and employees to fix the employee’s retirement age. Absent such an agreement, the law fixes the age for compulsory retirement at sixty-five (65) years, while the minimum age for optional retirement is set at sixty (60) years. Thus, retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of sixty-five (65) years are not per se repugnant to the constitutional guaranty of security of tenure, provided that the retirement benefits are not lower than those prescribed by law and they have the employee’s consent. It is axiomatic, therefore, that a retirement plan giving the employer the option to retire its employees below the ages provided by law must be assented to by the latter, otherwise, its adhesive imposition will amount to a deprivation of property without due process. (Pulong v. Super Manufacturing, Inc., G.R. No. 247819, 14 October 2019)

a. Mandatory retirement age

Retirement benefits, especially those which are given before the mandatory retirement age, are given as a form of reward for the services rendered by the employee to the employer. (Tolentino v. Philippine Airlines, Inc., G.R. No. 218984, 24 January 2018)

Tolentino v. Philippine Airlines, Inc. (January 2018)
… Tolentino, who did not deny his participation in the strike and his failure to promptly comply with the return-to-work order of the Secretary of Labor, could not claim any retirement benefits because he did not retire – he simply lost his employment status.
x x x
Admittedly, Tolentino was hired again by PAL on 20 July 1998.22 This was after he reapplied with the company. He also voluntarily completed the probationary period of six months. It was made clear to Tolentino, and he certainly admitted, that he was rehired on the condition that his employment would be as a new hire. Reemployment, on the condition that the employee will be treated as a new employee, is a valid exercise of the employer’s prerogative, as long as it is not done with antiunion motivation.
x x x
On 16 July 1999, or less than one year after he was rehired as a new pilot, Tolentino resigned from PAL. In this instance, Tolentino had voluntarily resigned from work. However, the act of resignation alone does not entitle him to retirement benefits which he claimed under the PALALPAP Retirement Plan
x x x
For purposes of the retirement plan, the computation of Tolentino’s length of service to the company should be reckoned from the date he was rehired after his own voluntary application as a new pilot. His services from October 1971 to June 1998 cannot be tacked to his new employment starting in July 1998 because the first employment had already been finally terminated – not due to his voluntary resignation or retirement, but because of termination due to just causes. Tolentino joined an illegal strike and defied the return-to-work order of the Secretary of Labor. At this point, he had already lost his employment status with PAL.

b. Optional retirement age

Bilateral act. 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. (Pulong v. Super Manufacturing, Inc., supra.)

Explicit, voluntary, free, and uncompelled. 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. (Cercado v. Uniprom, Inc., G.R. No. 188154, 13 October 2010)

Pulong v. Super Manufacturing, Inc. (October 2019)
… the character of the employee’s consent to the employer’s early retirement policy: it must be explicit, voluntary, free, and uncompelled. Unfortunately, this is not the case here. In fact, petitioner was not at all shown to have voluntarily acquiesced to SMI’s compulsory retirement age of sixty (60).
x x x
SMI has not shown any proof that Abad, Bionat, and Cruz were authorized to represent SMI’s workers to sign the January 1, 2013 MOA in their behalf. It did not even disclose under what capacity or authority they could have represented SMI’s workers, including herein petitioner. In fact, by Decision dated September 30, 2015, the NLRC found that SMI failed to submit any evidence showing that Abad, Bionat, and Cruz were either appointed or elected by their co-workers to represent them in negotiations with SMI. Evidently, the January 1, 2013 MOA is not the “covenant” between SMI and its workers. For Abad, Bionat, and Cruz were not proven to have been chosen by SMI’s workers as their true collective bargaining representative. The MOA dated January 1, 2013, therefore, does not govern the employment terms and conditions of SMI’s workers, let alone, petitioner’s “retirement”.
x x x
As stated, the MOA here was not assented to by petitioner and his co workers. It was not executed after consultations and negotiations with the employees’ authorized bargaining representative. The MOA, therefore, does not bind petitioner; much less, its provisions on compulsory retirement at age sixty (60). For it was not a result of any bilateral act; instead, it was a unilateral imposition of SMI upon petitioner.

3. Exempted employer

Retail, service and agricultural establishments or operations employing not more than (10) employees or workers are exempted from the coverage of this provision. (Paragraph 5, Article 287, Labor Code)

5. Regardless of employment status

Sec. 1. General Statement on Coverage. – This Rule shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted under Section 2 hereof. As used herein, the term “Act” shall refer to Republic Act No. 7641, which took effect on January 7, 1993. (Rule II, Book VI, Omnibus Rules Implementing the Labor Code)
RA 7641 or the Retirement Pay Law shall apply to all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid. They shall include part-time employees, employees of service and other job contractors and domestic helpers or persons in the personal service of another. (Section A, Labor Advisory dated 24 October 1996)

R.A. 7641 as curative legislation. Republic Act No. 7641 is a curative social legislation. It precisely intends to give the minimum retirement benefits to employees not entitled to the same under collective bargaining and other agreements. (De La Salle University v. Bernardo, G.R. No. 190809 13 February 2017)

Regardless of employment status. Republic Act No. 7641 states that “any employee may be retired upon reaching the retirement age x x x;” and “[i]n 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.” The Implementing Rules provide that Republic Act No. 7641 applies to “all employees in the private sector, regardless of their position, designation or status and irrespective of the method by which their wages are paid, except to those specifically exempted x x x.” And Secretary Quisumbing’ s Labor Advisory further clarifies that the employees covered by Republic Act No. 7641 shall “include part-time employees, employees of service and other job contractors and domestic helpers or persons in the personal service of another.” (Ibid.)

De La Salle University v. Bernardo (February 2017)
In the present case, DLS-AU, through Dr. Bautista, denied Bernardo’s claim for retirement benefits because only full-time permanent faculty of DLS-AU are entitled to said benefits pursuant to university policy and the CBA. Since Bernardo has not been granted retirement benefits under any agreement with or by voluntary act of DLS-AU, the next question then is, can Bernardo claim retirement benefits by mandate of any law?
We answer in the affirmative.
Republic Act No. 7641 is a curative social legislation. It precisely intends to give the minimum retirement benefits to employees not entitled to the same under collective bargaining and other agreements. It also applies to establishments with existing collective bargaining or other agreements or voluntary retirement plans whose benefits are Jess than those prescribed in said law.
x x x
Based on Republic Act No. 7641, its Implementing Rules, and Secretary Quisumbing’s Labor Advisory, Bernardo, as a part-time employee of DLS-AU, is entitled to retirement benefits. The general coverage of Republic Act No. 7641 is broad enough to encompass all private sector employees, and part-time employees are not among those specifically exempted from the law. The provisions of Republic Act No. 7641 and its Implementing Rules are plain, direct, unambiguous, and need no further elucidation. Any doubt is dispelled by the unequivocal statement in Secretary Quisumbing’s Labor Advisory that Republic Act No. 7641 applies to even part-time employees.

Disclaimer: All information herein is for educational and general information only intended for those preparing for the bar exam. These should not be taken as professional legal advice or opinion. Please consult a competent lawyer to address your specific concerns. Any statements or opinions of the author are solely his own and do not reflect that of any organization he may be connected.

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