Entitlement to Both Retirement and Separation Pay

There are cases where both retirement pay and separation pay for authorized cause termination were awarded and ordered paid. The best example of this situation is Aquino v. NLRC (G.R. No. 87653; February 11, 1992).

The Supreme Court ordered the payment to the retrenched employees of both the separation pay for retrenchment embodied in the CBA as well as the retirement pay provided under a separate Retirement Plan. The company argued that it has more than complied with the mandate of the law on retrenchment by paying separation pay double that required by the Labor Code -- at the rate of one (1) month pay instead of the one-half (1/2) month pay per year of service.

This argument by the company was not favorably considered by the Supreme Court because the employees were not pleading for generosity but demanding their rights embodied in the CBA which was the result of negotiations between the company and the employees. The company’s counsel should have made it a point to categorically provide in the Retirement Plan and the CBA that an employee who had received separation pay would no longer be entitled to retirement benefits. Or to put it more plainly, collection of retirement benefits was prohibited if the employee had already received separation pay. This, however, he failed to do.

In short, if, by agreement and law, a retrenched employee is entitled to retirement benefits and separation pay, respectively or the other way around, and there is no stipulation barring claim of two (2) benefits, the employer must give both retirement and separation benefits to the employee.