Related article about employee retirement: Who are Eligible for Retirement Pay?
Our Labor Code provides the following provision as regards Retirement Pay:
“Article 302 (287). Retirement: Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or applicable employment contract.
In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided however, That an employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement 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 hereby declared as compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to 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 (1) whole year.
Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth of the 13th 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 hereby declared the compulsory age of retirement for both underground and surface mine workers, who has served at least five (5) years as underground or surface mine worker may retire and shall be entitled to all the retirement benefits provided for in this Article.
For purposes of this Act, surface mining workers shall only include mill plant workers, electrical, mechanical and tailings pond personnel.
Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to the penal provision provided under Article 302 of this Code.
Nothing in this Article shall deprive any employee of benefits which he may be entitled under Section 23-B of Republic Act No1161, as amended, otherwise known as the Social Security Act of 1997 and other existing laws or company policies or practices.”
As mentioned on the provision cited above, it is in the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, that the employee shall be given his retirement pay upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is the standard compulsory retirement age, provided that the employee has served at least five (5) years in the said establishment. This is the rule in case the private establishment has no concrete retirement plan.
As regards Retirement Plan, the established rule is that, it must be a bilateral act between the employer and the employee. This means that the employee must read and expressly signify his consent on the retirement plan laid down by the employer. Thus, in case an employee was put into a retirement program upon reaching a certain age, therefore dismissing him from employment due to the retirement age but without giving the employee a prior notice of the retirement plan and his express consent thereto, the employer may be held liable for premature retirement, which is considered as an illegal dismissal (Laya Jr., vs CA & NLRC, G.R. No. 205813, January 10, 2018).
Premature Retirement
Premature retirement is an act of an employer in dismissing the employee on the guise of an early retirement plan where the employee did not expressly agree to the terms of the retirement plan.
In the 2018 case of Laya Jr., vs CA & NLRC, we learned from the employee, Laya, who found no retirement program in his employment contract. As such, the employer as a rule, in the absence of any retirement plan in a private entity, the age of retirement is 65 years of age. However, Laya received a notice of early retirement program, and his pending separation from the Company. Laya insisted that he did not give his consent to the retirement program. On the other hand, the Company pointed out that his signature appeared on every personnel action forms where it contained the following:
“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 Supreme Court was not impressed on the Employer’s position and ruled that the Company cannot rely on the signature of Laya appearing on the alleged personnel forms. Laya’s signature on the said forms cannot be a subscription of consent to the alleged retirement plan of the Company. Obviously, 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 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.
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 the employee prematurely is guilty of illegal dismissal, and is liable to pay his backwages and to reinstate him without loss of seniority and other benefits, unless the employee has meanwhile reached the mandatory retirement age under the Labor Code, in which case he is entitled to separation pay pursuant to the terms of the plan, with legal interest on the backwages and separation pay reckoned from the finality of the decision. Thus, premature retirement of employees is NOT ALLOWED.
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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