Obusan v. PNB (G.R. No. 181178; July 26, 2010)


Back in 1979, respondent Philippine National Bank (PNB) hired petitioner Amelia R. Obusan (Obusan), who eventually became the Manager of the PNB Medical Office.At that time, PNB was a government-owned or controlled corporation, whose retirement program for its employees was administered by the Government Service Insurance System (GSIS), pursuant to the Revised Government Service Insurance Act of 1977 (Presidential Decree No. 1146).

On May 27, 1996, PNB was privatized.Section 6 of the Revised Charter of the PNB (Executive Order No. 80, December 3, 1986), with respect to the effect of privatization of PNB, provides

Change in Ownership of the Majority of the Voting Equity of the Bank. When the ownership of the majority of the issued common voting shares passes to private investors, the stockholders shall cause the adoption and registration with the Securities and Exchange Commission of the appropriate Articles of Incorporation and revised by-laws within three (3) months from such transfer of ownership.Upon the issuance of the certificate of incorporation under the provisions of the Corporation Code, this Charter shall cease to have force and effect, and shall be deemed repealed.Any special privileges granted to the Bank such as the authority to act as official government depository, or restrictions imposed upon the Bank, shall be withdrawn, and the Bank shall thereafter be considered a privately organized bank subject to the laws and regulations generally applicable to private banks.The bank shall likewise cease to be a government owned or controlled corporation subject to the coverage of service-wide agenciessuch as the Commission on Audit and the Civil Service Commission.

Consequent to the privatization, all PNB employees, including Obusan, were deemed retired from the government service.The GSIS, in its letterdated February 3, 1997, confirmed Obusans retirement from the government service, and accordingly paid her retirement gratuity in the net amount of P390, 633.76.Thereafter, Obusan continued to be an employee of PNB.

Later, the PNB Board of Directors, through Resolution No. 30 dated December 22, 2000, as amended, approved the PNB Regular Retirement Plan (PNB-RRP). Section 1, Article VI of which provides

Normal Retirement.The normal retirement date of a Member shall be the day he attains sixty (60) years of age, regardless of length of service or has rendered thirty (30) years of service, regardless of age, whichever of the said conditions comes first.A Member who has reached the normal retirement date shall have to compulsorily retire and shall be entitled to receive the retirement benefits under the Plan.

In a Memorandum dated February 21, 2001, PNB informed its officers and employees of the terms and conditions of the PNB-RRP, along with its implementing guidelines.

Subsequently, the PNB-RRP was registered with the Bureau of Internal Revenue, per its letter dated June 27, 2001.Later, the Philnabank Employees Association, the union of PNB rank-and-file employees, recognized the PNB-RRP in the Collective Bargaining Agreement (CBA) it entered with PNB.

In a Memorandum dated February 11, 2002, PNB informed Obusan that her last day of employment would be on March 3, 2002, as she would reach the mandatory retirement age of 60 years on March 4, 2002.In her counsels letterdated February 26, 2002, Obusan questioned her compulsory retirement and even threatened to take legal action against PNB for illegal dismissal and unfair labor practice in the form of union busting, Obusan being then the President of the PNB Supervisors and Officers Association.

On April 25, 2003, the Labor Arbiter rendered a decision, dismissing Obusans complaint as he upheld the validity of the PNB-RRP and its provisions on compulsory retirement upon reaching the age of 60 years.

Obusan then appealed to the National Labor Relations Commission (NLRC).In a resolution dated May 31, 2004, the NLRC dismissed Obusans appeal, and affirmed the assailed decision in toto .Obusans motion for reconsideration of this resolution was later denied in an NLRC resolution dated August 28, 2006.

Undaunted, Obusan filed a petition for certiorari before the CA, ascribing grave abuse of discretion to the NLRC when it affirmed the decision of the Labor Arbiter.The CA, however, dismissed the petition in its assailed Decision dated September 21, 2007, ratiocinating that the PNB-RRPs lowering the compulsory retirement age to 60 years is not violative of Article 287 of the Labor Code of thePhilippines, as amended, despite the issuance of the plan years after Obusan was hired.Obusans motion for reconsideration of this Decision was subsequently denied by the CA in its Resolution dated January 8, 2008.

Hence, this petition anchored on the argument that PNB cannot unilaterally lower the compulsory retirement age to 60 years without violating Article 287 of the Labor Code and Obusans alleged right to retire at the age of 65 years.


Was Obusan illegally dismissed?

HELD: The pertinent law on this matter, Article 287 of the Labor Code, as amended by Republic Act No. 7641, which took effect on January 7, 1993, provides

ART. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other 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 employees retirement benefits under any collective bargaining agreement 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 the 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 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 (1/12) of the 13thmonth pay and the cash equivalent of not more than five (5) days of service incentive leaves.

Undoubtedly, under this provision, the retirement age is primarily determined by the existing agreement or employment contract.Absent such an agreement, theretirement age shall be fixed by law.The above-cited law mandates that thecompulsory retirement age is at 65 years, while the minimum age for optional retirement is set at 60 years.Moreover, Article 287 of the Labor Code, as amended, applies only to a situation where (1) there is no CBA or other applicable employment contract providing for retirement benefits for an employee; or (2) there is a collective bargaining agreement or other applicable employment contract providing for retirement benefits for an employee, but it is below the requirement set by law.The rationale for the first situation is to prevent the absurd situation where an employee, deserving to receive retirement benefits, is denied them through the nefarious scheme of employers to deprive employees of the benefits due them under existing labor laws.The rationale for the second situation is to prevent private contracts from derogating from the public law.

In this case, Obusan was initially hired in 1979 as a government employee, PNB then being a government-owned and controlled corporation.As such, she was governed by civil service laws, and the compulsory retirement age, as imposed by law, was at 65 years.Peculiar to her situation, however, was that the corporate entity that hired her ceased to be government-owned and controlled when it was privatized in 1996. As a result of the privatization of PNB, all of its officers and employees were deemed retired from the government service.Consequently, many of them, Obusan included, received their respective retirement gratuities.

It cannot be said that the PNB-RRP is a retirement plan providing retirement benefits less than what the law requires.In fact, in the computation of the employees retirement pay, the plan factored what Article 287 requires.Thus the plan provides:


For service rendered after privatization, a Member, regardless whether or not he received GSIS Retirement Gratuity Benefits, shall be entitled to one hundred twelve (112%) percent of his Latest Monthly Plan Salary for every year of service rendered, a fraction of at least six (6) months being considered as one (1) whole year.

The vesting multiple of one hundred twelve (112%) percent that is applied to the Latest Monthly Plan Salary is derived as the sum of fifteen (15) days of the Latest Daily Plan Salary plus five (5) days of the service incentive leave (based on Latest Daily Plan Salary) plus one-twelfth (1/12) of the Latest Monthly Plan Salary.The Daily Plan Salary used is computed as Latest Monthly Plan Salary multiplied by thirteen (13) months and divided by two hundred fifty-one (251) days.

Moreover, the PNB-RRP also considered the effects of PNBs privatization, as it also provided for additional benefits to those employees who were not qualified to receive the GSIS Retirement Gratuity Benefits, viz.


A Member who failed to qualify to receive GSIS Retirement Gratuity Benefits shall be entitled [to] one Month Basic Salary (as of May 26, 1996) for every year of service rendered before privatization.

Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure. By its express language, the Labor Code permits employers and employees to fix the applicable retirement age at 60 years or below, provided that the employees retirement benefits under any CBA and other agreements shall not be less than those provided therein. By this yardstick, the PNB-RRP complies.

However, company retirement plans must not only comply with the standards set by existing labor laws, but they should also be accepted by the employees to be commensurate to their faithful service to the employer within the requisite period.

To our mind, Obusan's invocation of Jaculbe on account of her lack of consent to the PNB-RRP, particularly as regards the provision on compulsory retirement age, is rather misplaced.

Finally, it is also worthy to mention that, unlike in Jaculbe, the PNB-RRP is solely and exclusively funded by PNB, and no financial burden is imposed on the employees for their retirement benefits.

All told, we hold that the PNB-RRP is a valid exercise of PNBs prerogative to provide a retirement plan for all its employees.


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