Optional or Compulsory Retirement Age


The Labor Code's Article 287

This article provides for two (2) types of retirement:

[1] Optional retirement upon reaching the age of sixty (60) years.
[2] Compulsory retirement upon reaching the age of sixty-five (65) years.

It is the employee who exercises the option under [1] above. Option [2] is not really an option since it is by operation of law.

Retirement Plans

The optional and compulsory retirement schemes provided under Article 287 come into play only in the absence of a retirement plan or agreement setting forth other forms of optional or compulsory retirement schemes. Thus, if there is a retirement plan or agreement in an establishment providing for an earlier or older age of retirement (but not beyond 65 which has been declared the compulsory retirement age), the same shall be controlling.

Retirement at an Earlier Age
Retirement after Rendering Certain-Period Service

Based on Article 287 the employers and employees are free to agree and stipulate on the retirement age, either in a CBA or employment contract. It is only in the absence of such agreement that the retirement age shall be fixed by law, that is, in accordance with the optional and compulsory retirement age prescribed under Article 287.

This is so because retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former.

By Mutual Agreement

By contract, employers may be granted the sole and exclusive prerogative to retire employees at an earlier age or after rendering a certain period of service.

This agreement may be stipulated in an employment contract or a CBA. By entering into an employment contract containing such stipulation, the employee is bound to adhere thereto. In the same vein, by their acceptance of the CBA, the union and its members are obliged to abide by the commitments and limitations they had agreed to cede to the employer. It is not repugnant to the constitutional guarantee of security of tenure.

Cainta Catholic School v. Cainta Catholic School Employees Union [CCSEU], where the Supreme Court upheld the exercise by the school of its option to retire employees pursuant to the existing CBA where it is provided that the school has the option to retire an employee upon reaching the age limit of sixty (60) or after having rendered at least twenty (20) years of service to the school, the last three (3) years of which must be continuous. Hence, the termination of employment of the employees, arising as it did from an exercise of a management prerogative granted by the mutually-negotiated CBA between the school and the union is valid.

In Pantranco North Express, Inc. v. NLRC, the Supreme Court upheld the validity of the CBA stipulation that allowed the employee to be compulsorily retired upon reaching the age of sixty (60) “or upon completing [25] years of service to [Pantranco].”