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Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.
AT A GLANCE:
Promissory estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would virtually sanction the perpetration of fraud or would result in other injustice. Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its terms.
To make out a claim of promissory estoppel, a party bears the burden of establishing the following elements: (1) a promise was reasonably expected to induce action or forbearance; (2) such promise did, in fact, induce such action or forbearance; and (3) the party suffered detriment as a result.
Facts:
Riingen, former Senior Regional Vice President for South East Asia and Oceania of respondent Western Union Financial Services Limited, Philippines Representative Office (Western Union) expressed her interest in availing of the early retirement package under the Employees’ Retirement Plan through an e-mail sent to Jocelyn Flordeliza (Flordeliza), Western Union’s Manager for Human Relations in the Philippines.According to the Employees’ Retirement Plan, the employees of Western Union are given the option to retire upon reaching the age of 50 with at least 10 years of service.
Flordeliza replied to Riingen’s query and confirmed that the retirement benefits of Riingen are free from tax reiterating that “As the age [of Riingen] is not more than 50, the lump sum is not taxable.” Laura Manganotti (Manganotti), Western Union’s Senior Manager for Compensation and Benefits also confirmed that the retirement benefits of Riingen are free from tax.
However, on August 24, 2016, Manganotti informed Riingen that her retirement benefits are not tax-free. Manganotti explained that Western Union’s Retirement Plan does not match certain requirements that would grant the tax exemption to qualified retirees.
Western Union strongly maintained that Riingen’s early retirement benefit is subject to withholding tax in accordance with the provisions of the National Internal Revenue Code since the Employees’ Retirement Plan did not meet the requirements for tax exemption under Revenue Regulations (RR) No. 1-68, as amended. Western Union insisted that it was not even obliged by law to put up a retirement plan. There is also nothing under the Labor Code that requires Western Union to register its Employees’ Retirement Plan to the BIR.
The National Labor Relations Commission (NLRC) found Western Union accountable pursuant to promissory estoppel brought by its negligence. The NLRC discussed that the requisites of promissory estoppel, such as: (1) a promise reasonably expected to induce action or forbearance; (2) such promise did in fact induce such action or forbearance; and (3) the party suffered detriment as a result, are present in this case. According to the NLRC, Western Union’s conduct made Riingen expect and believe that she shall receive her retirement benefits free of tax. Western Union failed to inform Riingen or any of its employees that the early retirement plan is taxable. The NLRC likewise noted Western Union’s representatives’ apparent lack of knowledge of the taxability of retirement benefits as shown by the initial e-mail of Flordeliza and Manganotti informing Riingen that the benefits she would receive are tax-free.
Issue:
Whether Western Union should refund to Riingen the amount of taxes withheld from her retirement pay.
Ruling:
Yes. Promissory estoppel may arise from the making of a promise, even though without consideration, if it was intended that the promise should be relied upon, as in fact it was relied upon, and if a refusal to enforce it would virtually sanction the perpetration of fraud or would result in other injustice. Promissory estoppel presupposes the existence of a promise on the part of one against whom estoppel is claimed. The promise must be plain and unambiguous and sufficiently specific so that the court can understand the obligation assumed and enforce the promise according to its terms. To make out a claim of promissory estoppel, a party bears the burden of establishing the following elements: (1) a promise was reasonably expected to induce action or forbearance; (2) such promise did, in fact, induce such action or forbearance; and (3) the party suffered detriment as a result.
In this case, although Western Union, in the strict sense, did not make any promise to Riingen and the other employees that the early retirement benefit under the Employees’ Retirement Plan is tax-free so as to fall under the doctrine of promissory estoppel, nevertheless, the conduct, representations, and silence of Western Union and its responsible officers, before, during, and subsequent to Riingen’s application to avail of the early retirement option under the Plan led her to believe that the benefit she will receive under the Plan is free of tax.
Flordeliza, Western Union’s most Senior Human Relations Manager in the Philippines, and Manganotti, the senior manager for compensation and benefits, informed Riingen that her retirement package is tax-free. Western Union cannot distance itself from the statements of the two of its highest officers. At the very least, Flordeliza and Manganotti’s declarations regarding the non-taxability of the benefits under the Plan reinforces Riingen’s claim that the officers and employees of Western Union indeed shared the same belief that the retirement package under the Employees’ Retirement Plan is taxfree. Moreover, Riingen presented the sworn statements of Western Union’s former employees saying that they too, thought that the retirement benefits are free of tax.
Further, since 2005 when the Employees’ Retirement Plan took effect, Western Union never clarified with its officers and employees that the retirement benefits set forth therein are taxable. It is only when Riingen decided to avail of the option to retire early that Western Union backtracked and said that the benefits are actually subject to tax. Based on these representations, statements, and conduct of Western Union and its officers, Riingen was led to believe that her retirement benefit is not taxable.
Lastly, it should be noted that Riingen will be prejudiced if Western Union can deny the non-taxability of the retirement benefits under the Plan. Due to Riingen’s belief, reinforced by Western Union’s conduct and representations that her early retirement benefit is tax-free, she chose to avail of the early retirement option under the Plan. Western Union’s belated confirmation that the early retirement package is taxable precluded Riingen from exercising her options. As pointed out by Riingen, had Western Union made known to her and the employees that the Plan is taxable, she could either have negotiated for a termination through involuntary separation which grants a higher benefit than the early retirement benefit, or she could have left much earlier considering that the early retirement benefit was not as lucrative as presented, or she could have stayed with Western Union instead of availing of early retirement. In belatedly informing Riingen of the taxability of her early retirement benefit, she was not able to exercise an informed choice. The other options for her could have been more beneficial than retiring early, had she known that the early retirement benefit that she can receive is taxable.
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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding legal services, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/ 0917-5772207/ 09778050020.
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