Retirement plan allowing employers to retire employees before reaching the compulsory retirement age of 65 years is 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

The mere mention of the retirement plan in the letter of appointment did not sufficiently inform Laya of the contents or details of the retirement program.

Thus, the Supreme Court held in the January 10, 2018 case, as follows:

Alfredo F. Laya, Jr. vs. Court of Appeals, et al.
G.R. No. 205813, January 10, 2018


Petitioner Alfredo F. Laya, Jr. (Laya) was hired by PVB Philippine Veterans Bank (PVB) as its Chief Legal Counsel with a rank of Vice President. Among others, the terms and conditions of his appointment includes membership in the Provident Fund Program/Retirement Program.

PVB has its Retirement Plan Rules and Regulations which provides under Section 1 of Article IV that the normal retirement date of a member shall be the first day of the month coincident with or next following his attainment of age 60.

PVB also has the rule for late retirement which states that a member may, with the approval of the Board of Directors, extend his service beyond his normal retirement date but not beyond age 65. Such deferred retirement shall be on a case by case and yearly extension basis.

Laya was informed thru letter by PVB of his retirement effective on 1 July 2007 (note: before reaching 65 years old). Laya wrote Col. Emmanuel V. De Ocampo, Chairman of PVB bank, requesting for an extension of his tenure for two (2) more years pursuant to the Bank’s Retirement Plan (Late Retirement).

PVB issued a memorandum directing Laya to continue to discharge his official duties and functions as chief legal counsel pending his request. However, Laya was later informed thru its president Ricardo A. Balbido Jr. that his request for an extension of tenure was denied.

According to Laya, he was made aware of the retirement plan of PVB only after he had long been employed and was shown a photocopy of the Retirement Plan Rules and Regulations, but PVB’s President Ricardo A. Balbido, Jr. had told him then that his request for extension of his service would be denied “to avoid precedence.” He sought the reconsideration of the denial of the request for the extension of his retirement, but PVB certified his retirement from the service as of July 1, 2007 on March 6, 2008.

Several months thereafter, Laya filed his complaint for illegal dismissal against PVB and Balbido, Jr. in the NLRC to protest his unexpected retirement.

LA Ruling:

The Labor Arbiter rendered a decision dismissing the complaint for illegal dismissal. After his motion for reconsideration was denied, Laya appealed to the NLRC. [Note: the Decision of the LA becomes final and executory if not appealed to the Commission within ten calendar days from receipt of said decision. Further, no MR of the LA Decision shall be filed before the Commission]

NLRC Ruling:

The NLRC affirmed the Decision of the LA.

Laya assailed the NLRC Decision before the CA via a petition for certiorari.

CA Ruling:

The CA denied the petition.

The CA held that Laya’s acceptance of his appointment as Chief Legal Officer of PVB signified his conformity to the retirement program. He could not have been unaware of the retirement program which had been in effect since January 1, 1996 (note: Laya was hired June 1, 2001).

The Ca held further that the lowering of the retirement age through the retirement plan was a recognized exception under the provisions of Article 287 of the Labor Code. Considering his failure to adduce evidence showing that PVB had acted maliciously in applying the provisions of the retirement plan to him and in denying his request for the extension of his service, PVB ‘s implementation of the retirement plan was a valid exercise of its management prerogative.

Laya filed a petition for review on certiorari before the SC. This was raffled to the SC First Division.

On April 8, 2013, the Supreme Court (First Division) denied the petition for review on certiorari. In his motion for reconsideration, Laya not only prayed for the reconsideration of the denial but also sought the referral of his petition to the Court En Banc, arguing that the CA and the NLRC had erroneously applied laws and legal principles intended for corporations in the private sector to a public instrumentality like PVB.

The SC (First Division) denied Laya’s motion for reconsideration, as well as his prayer to refer the case to the Court En Banc. The entry of judgment was issued on December 6, 2013.

Laya filed a second motion for reconsideration on December 18, 2013 whereby he expounded on the issues he was raising in his first motion for reconsideration. He urged that the SC should find and declare PVB as a public instrumentality. According to him, the law applicable to his case was Presidential Decree No. 1146 (GSIS Law), which stipulated the compulsory retirement age of 65 years. The compulsory retirement age for civil servants could not be “contracted out.”

The First Division referred the case to SC En Banc.


Whether or not an employee who signed an employment contract stating that he becomes an automatic member of the Retirement Program which provides for normal retirement at 60 years old can refuse to retire at such age when directed by the company

Whether or not PVB is a public entity

SC Ruling En Banc:

The SC En Banc granted the petition.

Although PVB could validly impose a retirement age lower than 65 years for as long as it did so with the employees’ consent, the consent must be explicit, voluntary, free, and uncompelled.

In dismissing the petition for review on certiorari, the SC’s First Division inadvertently overlooked that the law required the employees’ consent to be express and voluntary in order for them to be bound by the retirement program providing for a retirement age earlier than the age of 65 years. Hence, the SC en banc found it proper to render a fair adjudication on the merits of the appeal upon Laya’s second motion for reconsideration.

According to SC en banc, Laya was not validly retired at age 60. The retirement of employees in the private sector is governed by Article 287 [now Article 302] of the Labor Code.

Labor Code of the Philippines 2018 Edition (re-numbered) by Atty. Villanueva is now available online and in major book stores (National Book Store, Fully Booked, and Power Books) nationwide

Under the provision, the employers and employees may agree to fix the retirement age for the latter, and to embody their agreement in either their collective bargaining agreements (CBAs) or their employment contracts. Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of 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.

The mere mention of the retirement plan in the letter of appointment did not sufficiently inform Laya of the contents or details of the retirement program. To construe from Laya’s acceptance of his appointment that he had acquiesced to be retired earlier than the compulsory age of 65 years would, therefore, not be warranted. This is because retirement should be the result of the bilateral act of both the employer and the employee based on their voluntary agreement that the employee agrees to sever his employment upon reaching a certain age.

That Laya might be well aware of the existence of the retirement program at the time of his engagement did not suffice. His implied knowledge, regardless of duration, did not equate to the voluntary acceptance required by law in granting an early retirement age option to the employee.

The law demanded more than a passive acquiescence on the part of the employee, considering that his early retirement age option involved conceding the constitutional right to security of tenure.

Citing Cercado vs. Uniprom, Inc., the SC held that the character of the employee’s consent in agreeing to the early retirement policy of the employer must be explicit, voluntary, free, and uncompelled.

Furthermore, Laya’s membership in the retirement plan could not be justifiably attributed to his signing of the letter of appointment that only listed the minimum benefits provided to PVB’s employees. In Cercado, the employee’s consent to the retirement plan that came into being two years after the hiring could not be inferred from her signature on the personnel action forms accepting the terms of her job description, and compliance with the company policies, rules and regulations.

Employee’s consent to the retirement plan cannot be inferred from signature in the personnel action forms containing the phrase: “Employee hereby expressly acknowledges receipt of and undertakes to abide by the provisions of his/her Job Description, Company Code of Conduct and such other policies, guidelines, rules and regulations the company may prescribe.”

The personnel action forms used in the Cercado case relates to the increase in employee’s salary at various periodic intervals. To conclude that acceptance of the salary increases was also, simultaneously, a concurrence to the retirement plan would be tantamount to compelling her to agree to the latter. Moreover, voluntary and equivocal acceptance by an employee of an early retirement age option in a retirement plan necessarily connotes that her consent specifically refers to the plan or that she has at least read the same when she affixed her conformity thereto.

The pertinent rule on retirement plans does not presume consent or acquiescence from the high educational attainment or legal knowledge of the employee. In fact, the rule provides that the acquiescence by the employee cannot be lightly inferred from his acceptance of employment.

Learn more how to make retirement valid and prevent finding of illegal dismissal in a book Guide to Valid Dismissal of Employees by Atty. Villanueva

As regards the issue of whether PVB is a public entity, the Constitution provides in its Article IX-B, Section 2(1) that “the Civil Service embraces all branches, subdivisions, instrumentalities, and agencies of the Government, including government-owned or controlled corporations with original charters.”

As the Bank is not owned or controlled by the Government although it does have an original charter in the form of R.A. No. 3518, it clearly does not fall under the Civil Service and should be regarded as an ordinary commercial corporation. Section 28 of the said law so provides. The consequence is that the relations of the Bank with its employees should be governed by the labor laws, under which in fact they have already been paid some of their claims.

Anent whether PVB was a government or a private entity, therefore, we declare that it is the latter.

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