RETIREMENT POLICY THAT LOWERS THE COMPULSORY RETIREMENT AGE REQUIRES EXPRESS CONSENT OF THE EMPLOYEE

Acquire Mastery of HR/Labor Doctrines, Rules and Principles with Atty. Elvin’s HR Bundle Books at Discounted Rate

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. Lowering the compulsory retirement age requires the express consent of employees.

Thus, the SC held in the following case:

Pulong vs. Super Manufacturing Inc.,
G.R. No. 247819, October 14, 2019

Retirement; Optional retirement; Express consent to retirement plan; Implied knowledge, regardless of duration, cannot equate to the voluntary acceptance required by law in granting an early retirement age option; Dismissal; Security of tenure; Constitutional right to security of tenure; Waiver; Any waiver of a constitutional right must be clear, categorical, knowing, and intelligent

Facts:

Guido B. Pulong (Pulong) alleged that in December 1978 Super Manufacturing Inc (SMI) hired Pulong as a spot welder in its production plant in Quezon City. After the transfer of the production plant to Calamba City, Laguna, SMI re-employed him as a Senior Die Setter. He had since continued working for SMI.

On September 22, 2014, however, he was denied entry into SMI’s production plant. He was shown a document stating that he was compulsory retire since he had already turned sixty (60) years old. He refused to sign the retirement papers because he still wanted to work until sixty-five (65) years old. SMI, nevertheless, prevented him from returning to work.

This prompted Pulong to file a complaint for illegal dismissal with money claims against SMI, Engr. Eduardo Dy, and Ermilo Pico (SMI, et al.).

In their pleadings, respondents countered that Pulong was not illegally dismissed. Rather, he was compulsorily retired pursuant to the Memorandum of Agreement between SMI and its workers, purportedly represented by Safety/Liaison Officer Eduardo K. Abad, Painter II Glenn B. Bionat, and Rewinder I Julio D. Cruz.

However, Pulong argued that the MOA did not bind him for he was not a signatory therein. Abad, Bionat,and Cruz signed the MOA without authority to represent SMI’s workers. SMI, et al. however, maintained that the MOA was validly entered into by SMI and the workers’ representatives. Further, Pulong was estopped from claiming that the MOA did not bind him considering he had already availed of the benefits enumerated therein, e.g., uniform, Christmas gift, monetization of leave credits, and health card.

LA Ruling:

The LA declared complainant to have been illegally dismissed.

The LA held that SMI, et al. failed to prove that the MOA was executed upon consultation with SMI’s workers. Further, SMI failed to establish that Abad, Bionat, and Cruz were authorized bargaining agents of its workers.

SMI, et al. appealed to the NLRC.

NLRC Ruling:

The NLRC affirmed the LA.

The NLRC held that SMI, et al. failed to prove that Abad, Bionat, and Cruz were either appointed or elected by their co-workers to sign the MOA in their behalf.

SMI, et al. filed a motion for reconsideration submitting for the first time documentary proofs of Pulong and his co-workers’ receipt of benefits provided under the MOA.

In a resolution, the NLRC found that Pulong and his co-workers’ acceptance of benefits under the MOA estopped them from assailing its validity, as well as the authority of Abad, Bionat, and Cruz to sign it. Instead of paying Pulong’s money claims on ground of illegal dismissal, SMI was thus ordered to pay him retirement benefits.

Pulong filed a motion for reconsideration but the NLRC denied with modification by increasing the retirement pay. Aggrieved, Pulong sought to nullify the NLRC dispositions via a petition for certiorari before the Court of Appeals (CA).

CA Ruling:

The CA affirmed the NLRC.

The CA upheld SMI’s compulsory retirement under the MOA, finding it was signed by authorized representatives of SMI’s workers. It ruled that the MOA was the covenant between SMI and its workers for there was neither union nor a CBA at that time of its execution.

Pulong moved for reconsideration but the CA denied the same. Thus, he sought affirmative relief from the Supreme Court (SC).

Issue/s:

Whether or not a retirement policy providing for compulsory retirement at the age of 60 requires express consent of the employee

Whether or not the passive receipt of the benefits stated in a document by employees who did not sign the instrument amounts to consent to retirement provision indicated therein

Whether or not the passive receipt of the benefits amounted to estoppel

SC Ruling:

The SC granted the petition.

In ruling, the SC cited Art. 287 [now 302] of the Labor Code, as amended providing that any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. Further, in the absence of a retirement plan or agreement plan 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 declared as the compulsory retirement age.

The SC held that by its express language, the law permits employers and employees to fix the employee’s retirement age. Absent such an agreement, the law fixed 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. Citing the case of Laya, Jr. vs. Philippine Veterans Bank, the SC emphasized the character of employee’s consent to the employer’s early retirement policy: it must be explicit, voluntary, free, and uncompelled.

The SC observed that this is not the case here. In fact, Pulong was not at all shown to have voluntarily acquiesced to SMI’s compulsory retirement age of sixty (60).

Further, the SC ruled that it is incumbent upon SMI to prove that Abad, Bionat, and Cruz were the duly authorized bargaining representatives of SMI’s workers for purposes of signing the MOA. This, SMI failed to do. For it merely asserts that Abad and Bionat were among the representatives of SMI’s workers in the previous MOAs of SMI and the employees. Even assuming that one of the three signatories to the MOA had, on different periods, validly represented SMI’s workers, SMI still had to establish that all three signatories were authorized by SMI’s workers to represent them in the subsequent negotiations and execution of the MOA. But this, SMI failed to do.

SMI has not shown any proof that Abad, Bionat, and Cruz were authorized to represent SMI’s workers to sign the MOA in their behalf. It did not even disclose under what capacity or authority they could have represented SMI’s workers, including Pulong.

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. Citing Cercado vs. Uniprom, Inc., the SC held that an early retirement plan must be voluntarily assented to by the employees. The MOA in this case was not assented to by Pulong and his co-workers. It was not executed after consultations and negotiations with the employees’ authorized bargaining representative.

The MOA, therefore, does not bind Pulong; 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 Pulong.

The benefits received by Pulong are the usual gratuities granted to the employees as a matter of company practice. Pulong’s acceptance of these benefits does not equate to his assent to SMI’s retirement plan. Pulong was a mere passive recipient of whatever benefits given him. Nothing more may be implied thereform.

At any rate, the acquiescence by the employee to an early retirement plan cannot be lightly inferred from his acceptance of employment, or in this case, employment benefits. The acceptance must be unequivocal such that his consent specifically referred to the retirement plan. In early retirement programs, the offer of benefits must be certain while the acceptance to be retired should be absolute.

It would be absurd, therefore, to equate Pulong’s receipt of employment benefits as his acquiescence to SMI’s retirement plan. The employee who did not expressly agree to an early retirement plan cannot be retired from service before he reaches the age of sixty-five (65) years.

Even implied knowledge, regardless of duration, cannot equate to the voluntary acceptance required by law in granting an early retirement age option. The law demands more than a passive acquiescence on the part of the employee, considering that his early retirement age option involves conceding the constutional right to security of tenure. Any waiver of a constitutional right must be clear, categorical, knowing, and intelligent.

Having terminated Pulong solely on the basis of a provision of a retirement plan which was not freely assented to by him, SMI is guilty of illegal dismissal.