Dismissed Employee's Retirement Benefits


What is the general rule?

Management discretion may not be exercised arbitrarily or capriciously especially with regards to the implementation of the retirement plan. As held in Razon, Jr. v. NLRC, upon acceptance of employment, a contractual relationship is established giving the employee an enforceable vested interest in the retirement fund. Hence, the dismissed employee is entitled to the retirement benefits provided thereunder.

Valid Denial of Retirement Benefit Claims

However, in a number of cases, the Supreme Court ruled that an employee who is dismissed for cause loses his right to claim for his retirement benefits. San Miguel Corporation v. Lao (G.R. No. 143136-37; July 11, 2002)

An employee who was dismissed for just cause was held not entitled to the retirement benefits under the company’s retirement plan which concededly prohibits the award of retirement benefits to an employee dismissed for just cause, a proscription that binds the parties to it.

Distinguishing Razon and San Miguel, the Supreme Court declared that in Razon, the employer’s refusal to give the employee his retirement benefits is based on the provision of the retirement plan giving management wide discretion to grant or not to grant retirement benefits, a prerogative that obviously cannot be exercised arbitrarily or whimsically. But in San Miguel, the retirement plan expressly prohibits the grant of retirement benefits in case of dismissal for just cause. Hence, the employee is bound by such prohibition.

PLDT v. Bolso (G.R. No. 159701; August 17, 2007)

The same ruling in San Miguel was made. Thus, it was held in this case that since the employee was dismissed for just cause, neither he nor his heirs can avail of the retirement benefits.

Philippine Airlines, Inc. v. NLRC (G.R. No. 123294; October 20, 2010)

It was held that private respondent’s termination for cause thereby rendered nugatory any entitlement to mandatory or optional retirement pay that she might have previously possessed.

Daabay v. Coca-Cola Bottlers Phils., Inc. (G.R. No. 199890; August 19, 2013)

The Supreme Court relied on the above ruling in Philippine Airlines in denying the claim for retirement benefits of petitioner Daabay in view of his lawful dismissal by Coca-Cola on the grounds of serious misconduct, breach of trust and loss of confidence.

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