“In the absence of an express or implied prohibition against it, collection of both retirement benefits and separation pay upon severance from employment is allowed. This is grounded on the social justice policy that doubts should always be resolved in favor of labor rights.”

G.R. No. 185449, 12 November 2014

Complainant Marina L. Angus filed a labor complaint against her previous employer Defendants Goodyear Philippines, Inc. and its Human Resource Director Remigio M. Ramos. “In order to maintain the viability of its operations in the midst of economic reversals, Goodyear implemented cost-saving measures which included the streamlining of its workforce.” Complainant received from Defendant Ramos a letter stating that her position as Secretary to the Manager of Quality and Technology “is already redundant or is no longer necessary for its effective operation and is to be abolished effective today.” After 30 days, complainant would be terminated. 

The letter further stated: “As Company practice, termination due to redundancy or retrenchment is paid at 45 days’ pay per year of service. Considering, that you have rendered 34.92 years of service to the Company as of October 18, 2001, and have reached the required minimum age of 55 to qualify for early retirement, Management has decided to grant you early retirement benefit at 47 days’ per year of service.”

On the day she received the letter, Complainant replied thereto accepting the management’s decision but protesting on the terms. She wrote: “… I accept Management decision to avail early retirement benefit. However, I do not agree on the terms stated therein. I suggest I be given a premium of additional 3 days for every year of service which is only 6.3% or a total of 50 days. I gathered it is Philippine industry’s practice to give premium to encourage employees to avail of the early retirement benefit… Acceptance of this proposal will make my separation from Goodyear pleasant.”

Meanwhile, Defendant Goodyear submitted an Establishment Termination Report with DOLE in connection with complainant’s termination.

Subsequently, complainant accepted the checks which covered payment of her retirement benefits computed at 47 days’ pay per year of service and other company benefits. However, she made an annotation in the acknowledgment receipt: “Received under protest – amount is not acceptable. Acceptance is on condition that I will be given a premium of 3 days for every year of service.” This time she also asked for separatin pay. “Since my service was terminated due to redundancy, I now claim my separation pay as mandated by law. This is a separate claim from my early retirement benefit.”

It is claimed that the check were taken back due to the annotation and complainant’s refusal to sign a Release and Quitclaim. Through another letter, Defendant Ramos explained that “the company has already offered her the most favorable separation benefits due to redundancy, that is, 47 days’ pay per year of service instead of the applicable rate of 45 days’ pay per year of service. And based on the Retirement Plan under the Collective Bargaining Agreement (CBA) and the parties’ Employment Contract, Angus is entitled to only one of the following kinds of separation pay: (1) normal retirement which is payable at 47 days’ pay per year of service; (2) early retirement at a maximum of 47 days’ pay per year of service; (3) retrenchment, redundancy, closure of establishment at 45 days’ pay per year of service; (4) medical disability at 45 days’ pay per year of service; or (5) resignation at 20 days’ pay per year of service. Because of these, [defendant] Ramos informed [complainant] that the company cannot anymore entertain any of her additional claims.”

Complainant replied to the last letter reiterating her claims adding the following demands: that she be furnished a copies of the Notice of Redundancy filed with DOLE, specific provisions in the Retirement Plan, CBA and Employment Contract “which could justify the prohibition against the grant of both to a separated employee as asserted by [defendants].” However, her last letter was merely brushed aside and instead she was simply reminded to claim her checks.

As a result, complainant finally accepted a check in the amount of P1,958,927.89 which supposedly includes all termination benefits computed at 47 days’ pay per year of service. Then, she executed a Release and Quitclaim in favor of defendant Goodyear.

Notwithstanding, complainant initiated a labor complaint for illegal dismissal with claims for separation pay, damages and attorney’s fees, against defendants.

The Labor Arbiter upheld the validity of complainant’s termination. However, her claim for both separation pay and retirement benefit were denied holding that such was not allowed under the Retirement Plan/CBA. On appeal, NLRC affirmed the Labor Arbiter. On Petition for Certiorari, the Court of Appeals partially granted complainant’s claims. While the appellate court upheld the dismissal, it ruled that she was entitled to both separation pay and retirement benefits “in view of the absence of any provision in the CBA prohibiting the payment of both.” Further, it was observed that complainant did not voluntarily sign the Release and Quitclaim as that would result in her receiving less than what she was legally entitled to receive. She was granted moral damages and attorney’s fees. On motion for reconsideration by respondents/defendants, the appellate court denied the same.

HELD: Defendants were made liable. Complainant is entitled to both separation pay and early retirement benefit as there is no express and specific provision in the CBA that prohibits recovering for both. Citing earlier jurisprudence, “an employee is entitled to recover both separation pay and retirement benefits in the absence of a specific prohibition in the Retirement Plan or CBA. Concomitantly, the Court ruled that an employee’s right to receive separation pay in addition to retirement benefits depends upon the provisions of the company’s Retirement Plan and/or CBA.”

Retirement benefits and separation pay are not mutually exclusive. “Retirement benefits are a form of reward for an employee’s loyalty and service to an employer and are earned under existing laws, CBAs, employment contracts and company policies. On the other hand, separation pay is that amount which an employee receives at the time of his severance from employment, designed to provide the employee with the wherewithal during the period that he is looking for another employment and is recoverable only in instances enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases when reinstatement is not feasible. In the case at bar, Article 283 clearly entitles [complainant] to separation pay apart from the retirement benefits she received from petitioners.”

The release and quitclaim is invalid. The Supreme Court concurred with the appellate court that “the terms of the quitclaim authorizes Angus to receive less than what she is legally entitled to.” This is contrary to prevailing jurisprudence holding that “a quitclaim cannot bar an employee from demanding benefits to which he is legally entitled.” Such quitclaim was held to be “ineffective in barring claims for the full measure of the worker’s rights and the acceptance of benefits therefrom does not amount to estoppel”. Further, “release and quitclaims are often looked upon with disfavor when the waiver was not done voluntarily by employees who were pressured into signing them by unscrupulous employers seeking to evade their obligations.”

Complainant was entitled to moral damages and attorney’s fees. “Moral damages is awarded when fraud and bad faith have been established, as in this case. [Defendants’] false contention over what has been paid to Angus suggests an attempt to feign compliance with their legal obligation to grant their employee all the benefits provided for by agreement and law. Their bad faith is evident in the intent to circumvent this legal mandate. And as [complainant] was then forced to litigate her just claims when [defendants] refused to heed her demands for the payment of separation pay, the award of attorney’s fees equivalent to 10% of the amount of separation pay is also in order.”