Should employees receive both separation pay and retirement benefit?

WHEN ARE EMPLOYEES ENTITLED TO ONLY ONE FORM OF BENEFIT: SEPARATION OR RETIREMENT?

Cipriano v. San Miguel Corporation

It was ruled that in case the retirement plan of the company provides that the employee shall be entitled to either the retirement benefit provided therein or the separation pay provided by law, whichever is higher, the employee cannot be entitled to both benefits.

G.R. No. L-24774; August 21, 1968

Direct appeal, on questions purely of law, from a decision of the Court of First Instance of Manila, dismissing plaintiff's complaint, without costs.

The pertinent facts have been stipulated. Plaintiff, Raul Cipriano, was first employed, on September 1, 1953, as an apprentice salesman of San Miguel Corporation, with a monthly salary of P215. On March 1, 1954, he became a regular salesman, with a monthly salary of P240. Owing to regular promotions given from time to time to defendant's employees, plaintiff's salary was subsequently increased until it reached, on January 1, 1963, to P290 a month. From the date last mentioned to April 17, 1964, he, moreover, got an average commission of P367.11 a month.

On April 21, 1964, plaintiff received a notice to the effect that, the medical department having certified that he could no longer continue performing his functions as a salesman, the defendant was constrained to retire him at the close of business on April 17, 1964. Plaintiff was then, as he had been for sometime prior thereto, a member in good standing of San Miguel Brewery Sales Force Union, which had with the defendant, an agreement, dated February 20, 1963, establishing a "Health, Welfare and Retirement Plan," which was in force. Section 2 of Article VIII of said plan, provided for retirement benefits at the rate of "one (1) month's guaranteed basic compensation for each year of service." Pursuant to this provision, plaintiff got the total sum of P2,292.28, computed on the basis of the compensation for one (1) month for each year of service rendered to the defendant. Subsequently, however, plaintiff demanded payment of the separation pay prescribed in the Termination Pay Law and, upon failure of the defendant to heed the demand, or on December 1964, he filed this action to recover said pay, as well as moral damages, exemplary damages and attorney's fees.

After appropriate proceedings, the lower court rendered the appealed decision dismissing plaintiff's complaint, upon the ground that the retirement benefits, received by plaintiff under the aforementioned "Health, Welfare and Retirement Plan", are in lieu of the termination pay provided by law, contrary to plaintiff's claim to the effect that this pay is not excluded by said benefits.

Plaintiff's contention is manifestly devoid of merit. His right to the benefits of the aforementioned plan came into existence by virtue of the agreement between the defendant and the labor union, of which plaintiff is a member. Admittedly, said right is subject to the limitations prescribed in the agreement, Article X of which reads:

Regular employees who are separated from the service of the company for any reason other than misconduct or voluntary resignation shall be entitled to either 100% of the benefits provided in Section 2, Article VIII hereof, regardless of their length of service in the company or to the severance pay provided by law, whichever is the greater amount.

Pursuant thereto, plaintiff was entitled to "either" the amount prescribed in the plan "or" the "severance pay provided by law, whichever is the greater amount." In other words, he had a right to one of the two benefits, not to both, at the same time. The exclusion of one by the other is clearly deducible, not only from the terms "either" and "or" used in the agreement, but, also, by the qualifying phrase "whichever is the greater amount." Indeed, "whichever is the greater amount" would be immaterial, if the retiring employee were entitled to both. Needless to say, the benefits under said plan — compensation for one (1) month for each year of service — is bigger than the termination pay provided by law, which is limited to one-half of the monthly compensation for every year of service. (Chief Justice Concepcion)

Zuellig Pharma Corporation v. Sibal

Thirty-six (36) employees were terminated on the ground of redundancy. They were properly notified of their termination and were paid their respective separation pay in accordance with the CBA for which respondents individually signed Release and Quitclaim in full settlement of all claims arising from their employment with Zuellig. Controversy arose when respondents later on filed separate Complaints (which were later consolidated) before the Labor Arbiter for payment of retirement gratuity and monetary equivalent of their unused sick leave on top of the separation pay already given them. Respondents claimed that they are still entitled to retirement benefits and that their receipt of separation pay and execution of Release and Quitclaim do not preclude pursuing such claim. In ruling against respondents, the Supreme Court declared that the provision in the CBA is an effective bar to the availment of retirement benefits once the employees have chosen separation pay or vice versa. Thus, having chosen and accepted redundancy pay, respondents are thus precluded from seeking payment of retirement pay under the CBA, which enunciates express prohibition against “double recovery.”

G.R. No.173587; July 15, 2013

Having chosen and accepted redundancy pay, respondents are thus precluded from seeking payment of retirement pay. Moreover, as correctly pointed out by Zuellig, Section 5, Article V of the 1968 Retirement Gratuity Plan was already superseded by Section 2, Article XIV of the 1995 CBA, a much later contract which reiterates the express prohibition against "double recovery." In addition, unlike in Aquino where the employees have served the company for at least ten years making them eligible for retirement, none of the respondents herein appear to be qualified for optional retirement. Under Section 1[a] and [b], Article XIV of the CBA earlier quoted, to be entitled to retirement gratuity, the employee must have reached 60 years of age, resigned, suffered illness, or opted to retire even before reaching the age of 60 but has been in the employ of Zuellig for at least 25 years. None of the respondents who initiated the complaints appear to have met the above requirements. They never even bothered to controvert Zuellig’s contention that they are not qualified for retirement. (Justice Del Castillo)

It is a familiar and fundamental doctrine in labor law that the CBA is the law between the parties and they are obliged to comply with its provisions. In Honda Phils., Inc. v. Samahan ng Malayang Manggagawa sa Honda this Court elucidated as follows:

A collective bargaining agreement [or CBA] refers to the negotiated contract between a legitimate labor organization and the employer concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations, clauses, terms and conditions as they may deem convenient provided these are not contrary to law, morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it becomes the law between the parties and compliance therewith is mandated by the express policy of the law.

Here, and as discussed above, the parties’ CBA provides in no uncertain terms that whatever amount of money the employees will receive as retirement gratuity shall be chargeable against separation pay. It is the unequivocal manifestation of their agreement that acceptance of retirement gratuity forecloses receipt of separation pay and vice versa. The CBA likewise exclusively enumerates departing employees who are entitled to the monetary equivalent of their unused sick leave. These agreements must prevail and be given full effect.

The Release and Quitclaim executed by each of the respondents remains valid.

It is true that quitclaims executed by employees are often frowned upon as contrary to public policy. But that is not to say that all waivers and quitclaims are invalid as against public policy. Quitclaims will be upheld as valid if the following requisites are present: "(1) the employee executes a deed of quitclaim voluntarily; (2) there is no fraud or deceit on the part of any of the parties; (3) the consideration of the quitclaim is credible and reasonable; and, (4) the contract is not contrary to law, public order, public policy, morals or good customs or prejudicial to a third person with a right recognized by law."

In this case, there is no showing that Zuellig coerced or forced respondents to sign the Release and Quitclaim. In fact, there is no allegation that Zuellig employed fraud or deceit in making respondents sign the Release and Quitclaim. On the other hand, respondents declared that they had received the separation pay in full settlement of all claims arising from their employment with Zuellig. For which reason, they have remised, released and discharged Zuellig. (Justice Del Castillo)

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