RETIREMENT BENEFITS UNDER ARTICLE 287 DO NOT APPLY WHEN THE COMPANY HAS ITS SUPERIOR RETIREMENT PLAN

Retirement plan of the company that is superior to the provisions of Article 287 shall apply to a retiring employee.

Philippine Airlines, Inc. vs. Arjan T. Hassaram
G.R. No. 217730, June 5, 2017

Facts:

Hassaram had applied for retirement from PAL in August 2000 after rendering 24 years of service as a pilot, but that his application was denied. Instead, PAL informed him that he had lost his employment in the company as of 9 June 1998, in view of his failure to comply with the Return to Work Order issued by the Secretary of Labor against members of the Airline Pilots Association of the Philippines (ALPAP) on 7 June 1998.

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Hence, Hassaram filed a complaint against PAL for illegal dismissal and the payment of retirement benefits, damages, and attorney’s fees.

Hassaram argued that he was not covered by the Secretary’s Return to Work Order; hence, PAL had no valid ground for his dismissal. He asserted that on 9 June 1998, he was already on his way to Taipei to report for work at Eva Air, pursuant to a four-year contract approved by PAL itself. He further claimed that his arrangement with PAL allowed him to go on leave without pay while working for Eva Air, with the right to accrue seniority and retire from PAL during the period of his leave.

PAL contended that the LA had no jurisdiction over the case, which was a mere off-shoot of ALPAP’s strike, a matter over which the Secretary of Labor had already assumed jurisdiction. Further, that the Complaint should be considered barred by res judicata, forum shopping, and prescription, and that the case should be suspended while PAL was under receivership; and finally, if at all, Hassaram was entitled only to retirement benefits of P5,000 for every year of service pursuant to the Collective Bargaining Agreement (CBA) between PAL and ALPAP.

LA Ruling:

The LA awarded retirement benefits and attorney’s fees to Hassaram. The former explained that Hassaram did not defy the Return to Work Order, as he was in fact already on leave when the order was implemented. As to the computation of benefits, the LA ruled that Aiiicle 287 of the Labor Code should be applied, since the statute provided better benefits than the PAL-ALPAP CBA. Hassaram’s other claims, on the other hand, were dismissed.

PAL appealed the LA Decision to the NLRC. Aside from reiterating its arguments on lack of jurisdiction, res judicata, and prescription, PAL contended that Hassaram was not entitled to retirement benefits, because he had earlier been terminated from employment for defying the Return to Work Order. It further claimed that the LA’ s Decision contradicted the ruling in PAL v. ALPAP, in which the Supreme Court awarded retirement benefits to qualified PAL pilots under the company’s own retirement plans, instead of the Labor Code.

NLRC Ruling:

The NLRC initially affirmed the LA’s Decision to award retirement benefits to Hassaram under Article 287 of the Labor Code. This affirmation prompted PAL to seek reconsideration of the ruling citing, for the first time, Hassaram’s purported receipt of retirement benefits in the amount of P4,456,817.75 pursuant to the Plan. PAL likewise alleged that, as a consequence of this newly discovered payment, any claim made by Hassaram for retirement benefits should be deemed extinguished.

The NLRC granted PAL’s Motion for Reconsideration. Reversing its earlier Decision, it set aside the ruling of the LA on account of Hassaram’ s receipt of retirement benefits under the Plan. This payment, according to the NLRC, was sufficient to discharge his claim for retirement pay. Hassaram sought reconsideration of the NLRC Resolution, but his motion was denied. He then elevated the matter to the CA via a Petition for Certiorari.

CA Ruling:

The CA issued the assailed Decision reversing the NLRC and reinstating the ruling of the LA. The appellate court declared that the funds received under the Plan were not the retirement benefits contemplated by law. Hence, it ruled that Hassaram was still entitled to receive retirement benefits in the amount of P2, 111,984.60 pursuant to Article 287 of the Labor Code.

PAL sought reconsideration of the ruling,34 but its motion was denied.

Issue/s:

Whether or not Hassaram is entitled to retirement benefit under Article 287 despite availment of benefit under the company’s retirement plan.

SC Ruling

The SC granted the petition.

In Philippine Airlines, Inc. v. Airline Pilots Association of the Phils., the Supreme Court utilized these provisions to explain the nature of the Plan: The PAL Pilots’ Retirement Benefit Plan is a retirement fund raised from contributions exclusively from [PAL] of amounts equivalent to 20% of each pilot’s gross monthly pay.

Based on the foregoing characterization, the Court included the amount received from the Plan in the computation of the retirement pay of the pilot involved in that case. The same rule was later applied to Elegir v. Philippine Airlines, Inc. where it was held that apart from the abovementioned benefit, the employee is also entitled to the equity of the retirement fund under PAL Pilots’ Retirement Benefit Plan, which pertains to the retirement fund raised from contributions exclusively from PAL of amounts equivalent to 20% of each pilot’s gross monthly pay.

Considering that the very same retirement plan is involved in the petition, the SC adopted the pronouncements in the said cases. The SC therefore ruled that the amount of P4,456,817.75 received by Hassaram from the PAL Plan formed part of its retirement pay.

As held in Elegir, Article 287 is applicable only to a situation where

(1) there is no CBA or other applicable employment contract providing for retirement benefits for an employee, or

(2) there is a CBA or other applicable employment contract providing for retirement benefits for an employee, but it is below the requirement set by law.

It is clear from the records that Hassaram is a member of ALPAP and as such, is entitled to benefits from both the retirement plans under the 1967 PAL-ALPAP CBA and the Plan. In contrast, Article 287 would entitle a retiring pilot to the equivalent of only 22.5 days of his monthly salary for every year of service. This scheme was thus considered by the Court as inferior to the retirement plans granted by PAL to the latter’s pilots in Elegir and PAL.

One-half (112) month salary means 22.5 days: 15 days plus 2.5 days representing one-twelfth (1/12) of the 13th month pay and the remaining 5 days for service incentive leave. Comparing the benefits under the two (2) retirement schemes, it can readily be perceived that the 22.5 days worth of salary for every year of service provided under Article 287 of the Labor Code cannot match the 240% of salary or almost two and a half worth of monthly salary per year of service provided under the PAL Pilots’ Retirement Benefit Plan, which will be further added to the P125,000.00 to which the petitioner is entitled under the PAL-ALP AP Retirement Plan.

Learn more about retirement benefits in relation to employee separation: Guide to Valid Dismissal of Employees Second Edition

Following the above pronouncement, the SC therefore declared that Hassaram’s retirement benefits must be computed based on the retirement plans of PAL, and not on Article 287 of the Labor Code. In view of the undisputed fact that Hassaram has received his benefits under the Plan, he is now entitled to claim only his remaining benefits under the CBA, i.e. the amount of Pl 20,000 (24 years x P5,000) for his 24 years of service to the company.