COMPULSORY RETIREMENT AGE FOR EMPLOYEES IN THE PRIVATE SECTOR

Aside from knowing about the compulsory retirement age in the private sector, you may also read: IS PREMATURE RETIREMENT OF EMPLOYEES ALLOWED?

• An employee may be retired in accordance with a Retirement Plan

• An employee in the private sector who did not expressly agree to the terms of an early Retirement Plan cannot be separated from the service before he reaches the age of 65 years

• The employer who retires an employee prematurely may be liable for illegal dismissal

Mandates of laws regarding retirement age should not be ignored

The retirement of employees in the private sector is governed by Article 302 of the Labor Code of the Philippines.

The Labor Code provides that any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

From the foregoing, it is clear that the law itself recognizes the right and freedom of employers to establish their own retirement plan.

Retirement plans allowing employers to retire employees who have not 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.

But what if there is no retirement plan established by the employer for his employees?

The law says:

In the absence of a retirement plan or agreement providing for retirement benefits for employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65), who has served at least five (5) years in the said establishment, may retire.

Said employee is entitled to a 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. Unless the parties provide for broader inclusions, the term ‘one-half (1/2) month salary’ means fifteen (15) days plus one-twelfth (1/12) of the 13^th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

An underground or surface mining employee, upon reaching the age of fifty (50) years or more, but not beyond sixty (60) years which is the declared compulsory retirement age for both underground and surface mine workers, who has served at least five (5) years as underground or surface mine worker may retire and is entitled to all the retirement benefits as provided above.

Surface mine workers shall only include mill plant workers, electrical, mechanical and tailings pond personnel.

May an employee be forced to retire on the ground that he accepted a Letter of Appointment which mentions the retirement plan?

The law says:

No.

In the case of Alfredo F. Laya, Jr., vs. Court of Appeals, National Labor Relations Commission, Philippine Veterans Bank and Ricardo A. Balbido, Jr., (G.R. 205813, January 10, 2018), the Supreme Court ruled that the mere mention of the retirement plan in the Letter of Appointment did not sufficiently inform the employee of the contents or details of the retirement program.

To construe from the employee’s acceptance of his appointment that he had acquiesced to be retired earlier than the compulsory age of 65 years would 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.

Furthermore, in this case, the employee’s membership in the retirement plan could not be justifiably attributed to his signing of the appointment that only listed the minimum benefits provided to the employees. Acceptance by the employees of an early retirement age option must be explicit, voluntary, free, and uncompelled.

To emphasize, retirement plans must not only comply with the standards set by the prevailing labor laws but must also be accepted by the employees as commensurate to their faithful services to the employer within the requisite period. Although the employer could be free to impose a retirement age lower than 65 years for as long as its employees consented, the retirement of the employee whose intent to retire was not clearly established, or whose retirement was involuntary is to be treated as discharge. Meaning, the employer may be liable for illegal dismissal.

In this case, the forced retirement of the employee was held to be invalid. As a consequence, the employer was held to liable for illegal dismissal.

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Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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