Paulino Ungos III

Lawyer | Law Professor | Author

Tag: company practice

  • A Long-Standing Practice

    Quintin was hired in June 1990 by AMA Education System (AMA) as a Mathematics and CAD Instructor. Eight years later, he was promoted as its School Registrar and was able to work as such until April 1999. While serving as School Registrar, he was promoted to the position of School Administrator/Chief Operations Officer of AMA’s College in Biñan, Laguna in January 1999.

    Quintin alleged that sometime in 2008, he applied for retirement relying on a long-standing policy of AMA Education System in granting early retirement benefits to its employees. While the said application for early retirement was being processed, Quintin was requested to continue his employment until after the enrollment period. Later, he was informed of the approval of his application, and the processing of the payment of his benefits.

    On June 3, 2008 Quintin was compelled to leave immediately for the USA to avoid the cancellation of his visa as a permanent resident.

    On September 3, 2010, while on vacation in the Philippines, Quintin filed a complaint for payment of retirement benefits/separation pay against AMA.

    AMA contended that Quintin’s request in 2008 for early retirement was disapproved. Before the denial could be communicated to him, Quintin had already left the country without submitting a resignation letter and following the standard company policy on proper turn over of work and accomplishment of clearance. AMA added that it was willing and ready to release to Quintin his last salary and 13th month pay in the total amount of PhP28,046.34, less an unliquidated amount for the 2008 graduation.

    Quintin retorted that he underwent an exit interview, clearance procedures, and turn over of work accountabilities. Quintin then claimed that his basic monthly salary was PhP51,310.00 and not PhP25,000.00. He also denied that he received the unliquidated budget for the 2008 graduation. Lastly, Quintin argued that while it had no written retirement plan, AMA had a long-standing practice of granting early retirement, separation pay, or cash gift or benefit to those who have not reached the compulsory retirement age or mandatory twenty-year service requirement.

    Was Quintin entitled to retirement benefits?

    The Supreme Court ruled that Quintin was entitled to retirement benefits from AMA.

    The Court stated that Article 3021formerly Article 287 of the Labor Code of the Philippines provides for the voluntary retirement age of 60 years old and mandatory retirement age of 65 years old. In addition to the age requirements, the employee must have served at least five years in the company. The statutory retirement benefit is pegged at one-half month salary for every year of service or a fraction thereof. The employer however, is free to grant other retirement benefits and impose different age or service requirements, provided that the benefits shall not be lesser than those provided in Article 302.

    The Court then discussed Article 1002ARTICLE 100. Prohibition against Elimination or Diminution of Benefits. — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. of the Labor Code of the Philippines. According to the Court, the said Article expressly prohibits the elimination or reduction of benefits received by employees. However, the basis for the grant of said benefit must be shown through an express policy, written contract, or an unwritten policy that has ripened into a company practice. To be considered a practice, it must be consistently and deliberately made by the employer over a significant period of time.3Central Azucarera de Tarlac v. Central Azucarera de Tarlac Labor Union-NLU, 639 Phil. 633, 641 (2010). The Court added that it has not defined what constitutes a “significant period of time.” Jurisprudence4Metropolitan Bank and Trust Co. v. National Labor Relations Commission, 607 Phil. 359 (2009). explains that the matter is decided according to the peculiar facts and circumstances of each case, the common denominator of which is the regularity and deliberateness of the grant of benefits over a significant period of time.

    In the present case, the Court found that Quintin was able to prove through substantial evidence the existence of an established company practice of granting early retirement to its employees who have rendered at least ten years of service, regardless of age. Specifically, the Court admitted the affidavits of Salvacion and Elsa, two former AMA employees, who both attested in their separate affidavits that they were former employees of AMA who were granted retirement benefits. The Court noted that although they did not personally confirm the award of their early retirement, the affidavits showed that they occupied managerial positions and were privy to the policies of the school and to the movements or retirement of their subordinate personnel. Nonetheless, the Court found that the affidavits revealed the following:

    • Salvacion was AMA’s School Director in Quezon City, while Elsa was its Registrar of the Basic Education Department, also in Quezon City;
    • Salvacion worked for AMA for 11 years and Elsa was with AMA for 18 years;
    • AMA granted an early retirement program to its employees who had rendered at least 10 years of service;
    • Both received early retirement benefits of one-month salary for every year of service pursuant to the early retirement program of AMA; and
    • Eight other employees were able to avail of the early retirement program.

    On the other hand, the Court also found that AMA merely denied that it had any existing early retirement policy and the grant of Salvacion and Elsa’s requests were isolated cases. However, the Court stressed that AMA did not submit controverting evidence to refute Salvacion and Elsa’s statements in their affidavits as to the grant of early retirement benefits to its other employees. Notably, AMA did not explain why Salvacion and Elsa’s requests for early retirement were granted but Quintin’s request was denied.

    The Court held that Quintin substantially proved that AMA had a consistent company practice of granting early retirement to its employees who have rendered at least 10 years of service. For the Court, Quintin is entitled to retirement benefits.

    Further reading:

    • Beltran v. AMA Computer College-Biñan, G.R. No. 223795, April 3, 2019.

  • Managerial Employees’ Entitlement to Optional Retirement Benefits under a Collective Bargaining Agreement

    Erika and Edna were both employees of Philippine Journalists, Inc. Erika started with the company on 11 May 1994 and left the company on 15 November 2008. She was an Ad Taker/Account Executive. Edna was employed since 05 September 1989 and was the Human Resources Department Supervisor when she ended her employment on 15 March 2009.

    Erika and Edna wrote separate letters on 28 October 2008 and 23 January 2009, respectively, informing Philippine Journalists, Inc. of their desire to avail of its optional retirement plan as embodied in the Collective Bargaining Agreement. They tendered their resignation from employment.

    Since Philippine Journalists, Inc. refused to give their optional retirement benefits, Erika and Edna filed a complaint for unfair labor practice and money claims, nonpayment of optional retirement benefits and service incentive leave against Philippine Journalists, Inc. before the Office of the Labor Arbiter.

    Philippine Journalists, Inc. countered that at the time Erika and Edna applied for optional retirement, it was suffering losses and had implemented a retrenchment program owing to these losses. It also averred that there was no express company policy on optional retirement when Erika and Edna applied for the same.

    Philippine Journalists, Inc. further asserted that there were employees who were granted optional retirement benefits in the past, but they were covered by an existing and approved optional retirement program. Two former employees attested to this assertion.

    The Office of the Labor Arbiter dismissed the complaint for lack of merit. It found that the Collective Bargaining Agreement categorized certain positions within Philippine Journalists, Inc. as managerial and are therefore excluded from the bargaining unit. According to the Office of the Labor Arbiter, since Erika and Edna were managerial employees, they were not entitled to optional retirement benefits.

    The National Labor Relations Commission, however, set aside the Decision of the Office of the Labor Arbiter and ruled that Erika and Edna were entitled to optional retirement benefits under the Collective Bargaining Agreement. According to the Commission, even if managerial employees were excluded from the coverage of the Collective Bargaining Agreement, there was a showing that there were certain managerial employees who were able to avail of, and were granted, optional retirement benefits.

    The Court of Appeals affirmed the ruling of the Commission on the ground that Philippine Journalists Inc.’s grant of optional retirement benefits to two of its managerial employees had ripened into a company practice that may be considered an enforceable obligation. Specifically, one managerial employee availed of the optional retirement benefits in 2003 while another retired optionally in 2001. For the Court of Appeals, Philippine Journalists, Inc. consistently granted optional retirement benefits in a considerable length of two years.

    Thus, the grant of optional retirement benefits by Philippine Journalists, Inc., even if it was not obliged under the Collective Bargaining Agreement, already constituted voluntary employer practice which cannot be unilaterally withdrawn or diminished by the employer without violating the Labor Code of the Philippines.1Article 100 of the Labor Code of the Philippines states: “ART. 100. Prohibition against elimination or diminution of benefits. — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code.”

    Ruling:

    In agreeing with the Court of Appeals, the Supreme Court ruled:

    To be considered as a regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. Jurisprudence has not laid down any hard-and-fast rule as to the length of time that company practice should have been exercised in order to constitute voluntary employer practice. The common denominator in previously decided cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof. In sum, the benefit must be characterized by regularity, voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time.

    In the present case, the Supreme Court found that the grant of optional retirement benefits to two managerial employees in the past was voluntary, deliberate, and done with sufficient regularity as would indicate that this had become a company practice within Philippine Journalists, Inc.

    The Supreme Court further found that Philippine Journalists, Inc. was not incurring losses, and was in fact exhibiting conduct inconsistent with the claim.

    1)

    Philippine Journalists, Inc. appeared to have discriminated against its core employees, such as Erika and Edna, while it favored those in the upper tier of its management. It had been found guilty of illegal dismissal based on an illegal retrenchment scheme, while upper management continued to enjoy its perks and privileges and refused to tighten its belt in this respect.

    2)

    Philippine Journalists, Inc. pursued a scheme to reduce its personnel by any means necessary, which the Supreme Court viewed as unfair and prejudicial to the interests of labor. The Court took note of the situation of Erika and Edna, who resigned under the honest belief that they could avail of an optional retirement scheme similar to other employees in the past. According to the Court, if Philippine Journalists, Inc. believed that Erika and Edna were not entitled to avail of the optional retirement scheme, then it should have at least put their respective resignations on hold to clarify any issues. Instead, Philippine Journalists, Inc. was found to have taken a hostile stance, and had quickly grabbed the opportunity to declare Erika and Edna separated from their employment by voluntary resignation. It failed to take time to explain that the optional retirement program was no longer in effect and afford Erika and Edna the opportunity to reconsider their actions. The Court stated that Philippine Journalists, Inc. exhibited bad faith.

    3)

    Finally, the Court stressed that Philippine Journalists, Inc.’s bad faith was further evident when it falsely declared that it had suffered financial reverses since 1997. The Court found that Philippine Journalists, Inc. deceived their employees and used this false claim to deprive the latter of a fair appraisal of the facts and circumstances during negotiations leading to such agreement.

    For the Supreme Court, Philippine Journalists, Inc. engaged in unfair labor activities and took an anti-labor stance at the expense of its employees, which included Erika and Edna. The Court did not countenance the same.

    Further reading:

    • Philippine Journalists, Inc. v. De Guzman, G.R. No. 208027, April 1, 2019.