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-ENRIQUEZ SECURITY SERVICES V.

CABOTAJE
Doctrine: One half month salary is equivalent to
22.5 days. It includes 15 days salary based on
latest salary rate + 1/12 of the 13th month pay +
cash equivalent of not more than 5 days of SIL +
all other benefits the employer and employee may
agree upon.
ISSUE: WON the whole 5 days SIL or just a portion
thereof equivalent to 1/12 should be included in
the month salary for purposes of computing
retirement pay
HELD: RA 7641 and Its IRR clearly state that the
whole 5 days of SIL incentive are included in the
computation of month salary for purposes of
computing retirement pay.
RA 7641 Unless the parties provide for broader
inclusions, the term month salary shall mean 15
days plus 1/12 of the 13th month pay and the
cash equivalent of not more than 5 days of SIL.
SEC. 5.2 Rule II of IRR Book VI of the Labor Code
further clarifies what comprises the month
salary due a retiring employee.
a. 15 days salary of the employee based on
his salary rate.
b. the cash equivalent of not more than 5
days of SIL.
c. 1/12 of the 13th month pay due an
employee

d. all other benefits that the employer and


employee may agree upon that should be
included in the computation of the
employees retirement pay.
The foregoing rules are clear that the whole 5
days of SIL are included in the computation of
retiring employees pay.
-REYES V. NLRC & UNIVERSAL ROBINA
ISSUE: Should average monthly sales commission
should be included in the computation of
retirement benefits and 13th month pay?
HELD: NO, Reyes commissions did not form part
of his basic salary because as a unit manager he
didnt enter into actual sales transactions.
Additional payments made to him were not in fact
sales commissions but rather partook of the
nature of profit-sharing payment and had no clear,
direct or necessary relation the amount of worked
he actually performed.
Unit Manager-Merely supervised the salesmen
under his control. The disputed commissions were
not regularly received by him. Only when the
salesmen were able to collect from the sale
transactions can petitioner receive the
commissions. Conversely, if no collections were
made by the salesmen, then Reyes would receive
no commissions at all. The commission which

Reyes received were not part of his salary


structure but were profit sharing payment and had
no clear, direct or necessary relation the amount
of worked he actually performed. The collection
made by the salesmen from the sale transactions
was the profit of Universal Robina Corp. from
which petitioner had a share in the form of a
commission.
It may be argued that Reyes may have
exerted efforts in pushing the salesmen to close
more sale transactions, however , it is not the
critierion which would entitle him to a
commission, but the actual sale transactions
brought about by the individual efforts of the
salesmen.
Basic Salary constitute under PD 851 and its IRR,
it is used as the basis in the determination of his
13th month pay. Any compensations or
remunerations which are deemed not part of his
basic pay is excluded as basis in the computation
of the mandatory bonus.
PD 851 and IRR- following compensations are
deemed not part of the basic salary:
a. COLA pursuant to PD 525 and LOI 174.
b. Profit sharing payments
c. All allowances and monetary benefits
which are not considered or integrated as
part of the regular basic salary of the
employee at the time of the

promulgation of the decree on Dec. 16,


1975.
-BIBIANO ELIGIR V. PAL
Doctrine: SC held that the PALs retirement plan,
not RA 7641, should be used in computing for
Elegirs retirement pay, as this is what would
provide superior benefits.
RA 7641 is only applicable to a situation where:
1. There is no CBA or other applicable
employment contract providing retirement
benefits, or
2. There is CBA but such provides retirement
benefits below requirement set by law. The
determining factor in choosing which
retirement scheme to apply is still
superiority in terms of benefits provided.
ISSUE: What retirement plan should be used in
computing Eligirs retirement pay?
HELD: In this case there 2 retirement schemes:
1. Art. 302(287) of the Labor Code and
2. The PAL-ALPAP Retirement Plan and the
PAL Pilots Benefit Plan.
The two retirement schemes are alternative
in nature such
that the retired pilot can only be entitled to that
which provided for superior benefits .
It is correctly ruled for the computation of
Eligirs retirement benefits based on No. 2 PAL

retirement plans because it is under the same that


he will reap the most benefits. Under the PALALPAP Retirement Plan, Eligir who qualified for late
retirement after rendering more than 20 years of
service as a pilot , is entitled to a lump sum
payment of 125,000 for his 25 years of service to
PAL. (Sec. 2, Article VII of the PAL-ALPP Retirement
Plan)
Sec. 2-Lte Retirement any member who remains
in the service of the company after his normal
retirement date may retire either at his option or
at the option of the company, and when so retired
he shall be entitled either: a) to a lump sum
payment of 5000 for each completed year of
service rendered as a pilot or b) to such
termination pay benefits to which he may be
entitled under existing laws, whichever is the
greater amount.
Apart from the abovementioned benefit,
Eligir is also entitled to the equity of the
retirement fund under PAL Pilots Retirement Plan,
which pertains to the retirement fund raised from
contributions exclusively from PAL of amounts of
equivalent to 20% of each pilots gross monthly
pay. Each pilot stands to receive the full amount of
the contribution upon his retirement which is
equivalent to 240% of his gross monthly income
for every year of service he rendered to PAL. This
is in addition to the amount of not less that

100,000 that he shall receive under the PAL-ALPAP


Retirement Plan.
Comparing the benefits under the 2
retirement schemes, it can readily perceived that
the 22.5 days worth of salary for every year of
service provided under Art. 302of LC cannot
match the 240% of salary or almost 2 month
worth of salary per year of service under the PALALPAP Retirement Plan. Clearly then, it is to
Eligirs advantage that PALs retirement plans
were applied in the computation of the retirement
benefits.

5. WHEN RA 7641 IS APPLICABLE- TOOK


EFFECT JAN. 7, 1993
-GRACE CHRISTIAN HIGH SCHOOL V.
FILIPINAS LAVANDERA
Doctrine: RA 7641 is a social legislation. The law
has been enacted as labor protection measure
and as a curative statute that absent retirement
plan devised by, an agreement with or voluntary
grant an employer can respond, on part at least
to the financial well being of workers during their
twilight years soon following their life of labor.
The Law can apply to labor contracts still existing
at the time the statute has taken effect, and that
its benefits can be reckoned not only from the

date of the laws enactment but retroactively to


the time said employment contracts have been
started.
F. Lavandera An employees retirement benefits
under any CBA and other agreements shall not be
less than those provided. The determining factor
in choosing which retirement scheme to apply is
still superiority in terms of benefits provided.
GCHS retirement plan- teacher who has
rendered at least 20 years of service, regardless
of age, with a retirement pay of month for
every year of service.
RA 7641 Retirement Law month salary
includes
a. 15 days salary of employee based on
latest salary rate
b. 1/12 of the 13th month
c. 5 days SIL Leave or
total of 22.5 days
The retirement benefits payable under GCHS
retirement plan to be deficient via those provided
under RA 7641.
-OXALES V. UNILAB
Doctrine: RA 7641 is only applicable in the
absence of an applicable retirement agreement.
However, an employees retirement benefits
under any agreement shall not be less than those
provided in law.
RA 7641 is only applicable to a situation where:

1. There is no CBA or other applicable


employment contract providing retirement
benefits, or
2. There is CBA but such provides retirement
benefits below requirement set by law. The
determining factor in choosing which
retirement scheme to apply is still
superiority in terms of benefits provided
ISSUE: WON RA 7641 will apply as a retirement
plan
HELD: RA 7641 does not apply because UNILAB
Retiremesssnt Plan grants to the retiring
employee more than what the law gives.
RA 7641: month salary for every year of
service.
URP employee receives a lump sum of 1 pay
per year of service.
Oxales trying to have the best of both
retirement plans, 1 under the URP and the
inclusion of the value of food benefits and other
allowances he was entitled to as employee of
UNILAB with his monthly salary multiplied to his
number of years in the service. It should not be
permitted to do, lest a grave injustice is caused to
UNILAB, and its past and future retirees.
BANCO FILIPINO SAVINGS AND MORTGAGE
BANK V. ATTY, LAZARO

Doctrine: RA 7641 is only applicable in the


absence of an applicable retirement agreement.
However, an employees retirement benefits
under any agreement shall not be less than those
provided in law.
ISSUE: Should his 27 years and 10 months of
services be rounded off to 28 years?
HELD: NO, Lazaro cannot anchor his claim on the
said provision because governing in this case is
the Rules of the Banco Filipino Retirement Fund.
Only in the absence of an applicable retirement
agreement shall Art. 302 of the LC apply. There is
a proviso however, that an employees retirement
benefits under any agreement shall not be less
than those provided in the said article.
In fact, Banco Filipino offers a retirement
pay
equivalent 1 month salary for every year of
service, a rate
over and above the month salary threshold
provided by the
law. Banco Filipino Retirement Fund do not grant
rounding off
scheme. Even they do not grant rounding off, it
cannot be
deemed to be less favorable than that provided by
law.
6. THREE KINDS OF RETIREMENT PLAN
-MARILYN GERLACH V. REUTERS LTD.

Doctrine: 3 kinds of Retirement Scheme


1. Compulsory and Contributory in Character

2. Set up by agreement between employer


and employee in CBA or other agreement
3. Voluntarily given by employer, expressly
as an announced company policy or
impliedly as in a failure to contest the
employees claim for retirement benefits.
ISSUE: Should her retirement benefits be based
on notional Philippine salary or Actual salary
abroad?
HELD:
It should be notional, from the very
start of her assignment overseas it is clear that
Reuters apprised her that the companys
contribution to the plan is based on her notional
Philipine salary. Reuters also informed Gerlach of
the amount of her notional Philippine salary
whenever she was transferred to her next
overseas assignment or where there where
increases in her next salary, both actual and
notional. Reuters, was able to prove that it has
been its practice worldwide that the notional
salary of an employee is its basis in computing its
contribution to the retirement plan for a local
employee detailed abroad.
Gerlach is covered by the third type of retirement
scheme. Reuters based Gerlachs retirement
benefits on its own plan.

7. VOLUNTARY RETIREMENT
-ROBERTO ARIOLA ET. AL V. PHILEX MINING
Doctrine: If the intent to retire is not clearly
established or if retirement is involuntary, it is to
be treated discharge.
ISSUE: Was there voluntary retirement?
HELD: NO, There was retrenchment, not
retirement
Philex, to submit other documents proving
petitioners claimed retirement, such as their
applications for retirement under Philexs early
voluntary retirement program and their clearance
slips, undermines it claim. The submission of
these documents, which should indicate the
reason for petitioners separation from service,
would have put to rest any doubt on the cause of
such separation.
The vouchersin question do not suffice to
prove petitioners retirement from Philex.
Retirement results from voluntary agreement
between the employer and employee where the
latter, after reaching a certain age, agrees to
sever his employment with the former. In the
present case, the intent to retire is not clearly
established or if the retirement is involuntary, it is
to be treated as a discharge.

8. FORFEITURE OF BENEFITS
-INTEL TECHNOLOGY PHILIPPINES INC V.
NLRC ND JEREMIAS CABILES
Doctrine: Resignation is the formal
relinquishment of an office, the overt act of which
is coupled with an intent to renounce. This intent
could be inferred from the acts of the employee
before and after the alleged resignation.
ISSUE: WON Cabiles resigned from Intel
Philippines
HELD: Cabiles resigned from Intel Philippines. The
communication between Cabiles and Intel
Philippines manifested two of his main concerns:
a. clearance procedures
b. the probability of getting his retirement pay
despite the non completion of the required
10 years of employment service. Beyond
these concerns, however was his
acceptance of the fact that he would be
ending his relationship with Intel Phil. as his
employer. The words he used- local hire,
close, clearance- denote nothing but his firm
resolves to voluntarily disassociate himself
from Intel Phil. and take on new
responsibilities with Intel HK.
SY V. METROPOLITAN BANK & TRUST
COMPANY

Doctrine: Only unjustly dismissed employees are


entitled to retirement benefits and other privileges
including reinstatement and backwages. There is
a forfeiture of retirement benefits in valid
dismissal case.
ISSUE: Should Dennis SY still be entitled to his
retirement benefits?
HELD: NO, Sy was validly dismissed on the
ground of fraud and willful breach of trust under
Art. 297 of the Labor Code. He is not entitled to
any retirement benefits, to hold otherwise would
be to reward acts of willful breach of trust by the
employee.

EQUITABLE PCI BANK V. GENEROSA CAGUIOA


Doctrine: Employees who are validly dismissed
from service by reason of timely discovered
offenses may be deprived of retirement benefits.
ISSUE: Was the penalty of forfeiture of benefit
valid?
HELD: Yes, her pleas of leniency based on her
35 years of service cannot offset her dishonest.
Even government employees who are validly
dismissed from the service by reason of timely
discovered offenses are deprived of retirement
benefits. Treating her in the same manner as the
loyal and code-abiding employees, despite the
timely discovery of her Code violations, ms the

loyal and code-abiding employees, despite the


timely discovery of her Code violations, may have
a demoralizing effect on the entire bank. Banks
thrive on and endeavor to retain public trust and
confidence, every violation of which must thus be
accompanied by appropriate sanctions.
9. EQUITABLE REDUCTION OF RETIREMENT
BENEFITS
-XAVIER RAMOS V. BPI FAMILY SAVINGS
BANK
ISSUE: Whether or Not the deduction made from
Ramos retirement benefits to be illegal and
unreasonable
HELD: The deduction complained was illegal and
unreasonable,
a. the alleged negligence committed by Ramos
was not substantially proven as he was not
expected to personally examine all loan
documents that pass through his hands or
to require the client to personally appear
before him because he has subordinates to
do those details for him.
b. The issuance of PO and ATD prior to the
loans approval is not an irregular procedure
but an ordinary occurrence in BPI Family
and

c. The deduction does not fall under the


exceptions prescribed under Art. 113
(allowable deduction)
It ordered BPI Family to return to Ramos the
amount of 546,000 with additional payment of
10% thereof as attorneys fees.
BPI Family was not able to substantially prove its
imputation of negligence against Ramos. (Failed to
establish the duty to confirm and validate
information in credit applications rests under the
Dept. of Ramos)
Ramos merely followed standing company
practice when he issued the PO and ATD without
prior approval from the banks Credit Services
Department.
10. EQUITABLE SOLUTION
-PLDT V. ANTONIO REUS
ISSUE: Is Reus entitled to retirement plan?
HELD: Yes, based on equity. SC affirmed the
NLRC Decision. The NLRC took into consideration
Reus length of service and the fact that the
proximate cause of the loss of the collection is not
solely attributable to him, the equitable solution
would be for Mr. Reus to be entitled to the
retirement benefits under the retirement plan.
11. RETIREMENT PAY DIFFERENTIAL
-JAY RIVERA V. UNILAB

ISSUE: WON Rivera can claim retirement pay


differential for the subsequent work she
undertook.
HELD: No, Retirement carries with it certain legal
effects one of which is the retired employees
termination of services with the company as of
the retirement date, in this case Dec.31, 1988.
With this retirement, her coverage by the UNILAB
retirement plan ceased based on the express
terms of the plan. As a consequence, Rivera
retirement pay was computed, her accrued
retirement benefits under Trust Fund A and B of
the plan were withdrawn, and deposited in Trust
Fund C from which she could make withdrawals. In
fact, she made withdrawals from Trust Fund C.
Her renewed service did not have the benefit
of any retirement plan coverage because the
terms of the retirement plan, before and after its
1992 amendment, continued to exclude those
who have rendered 30 years of service or have
reached 60 years of age. Therefore the plan could
not have covered her. There was also the absence
of evidence of, or of any demand for, any
reimbursement of what Rivera would have paid as
contributions to the plan had her coverage nd
deductions continued after 1988.
Retirement Benefits under Retirement Pay
Law that became effective in Dec. 1992 also
doesnt apply to her because she didnt qualify

under the terms of the law when she was retired


the second time. 1. She was not covered by any
applicable retirement plan anymore, and 2. In the
absence of a plan, the Retirement Pay Law
requires that an employee must have served 5
years to be entitled to coverage. Unfortunately,
her service without any retirement plan coverage
was only for 4 years.
12. COLLECTION OF BOTH RETIRENMENT
BENEFITS AND SEPARATION PAY (TWO ARE
MUTUALLY EXCLUSIVE)
-GOODYEAR PHILS INC. V. MARINA L. ANGUS
ISSUE: WON Angus is entitled to both separation
pay and early retirement benefit.
HELD: Yes, Her dismissal is valid in both
substance and procedural aspects; it declared that
Angus entitled to separation pay in addition to the
retirement pay she already received. The CA ruled
that she is entitled to the payment of both in view
of the absence of any provision in the CBA
prohibiting the payment of both
The SC agrees with the CA that the amount
Angus received from petitioners represented only
her retirement pay and not her separation pay.
Retirement pay and Separation pay are not
mutually exclusive.
Retirement Benefits are a form of reward for an
employees loyalty and service to an employer

and are earned under existing laws, CBA,


employment contracts and company policies.
Separation pay- 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
Art. 298 and 299 of the Labor Code or in illegal
dismissal cases when reinstatement is not
feasible.
Art. 298 clearly entitle Angus to separation
pay apart from retirement benefits she received
from Goodyear Phil. Inc.
13. MANAGEMENT PREROGATIVE
-PAL V. ALPAP
Doctrine: Retirement of an employee may be
done upon initiative and option of the
management. Due Process only requires that
notice be given to the said employee.
ISSUE: WON PAL has to consult with the pilot
concerned before retiring him.
HELD: No, Retirement of an employee may be
done upon initiative and option of the
management. The requirement to consult the
pilots prior to their retirement defeats the exercise
by management its option to retire the said
employees. It gives the pilot concerned an undue

prerogative to assail the decision of management.


Due process only requires that notice be given to
the pilot of petitioners decision to retire him.
-KOREAN AIR CO. LTD V. YUSON
Doctrine: Exercise of management prerogative is
valid as long as it is not done in a malicious,
harsh, oppressive, vindictive or wanton manner.
ISSUE: WON Yuson was entitled to the benefits
under Early Retirement Plan.
HELD: No, because she already availed of the
optional retirement.
Yuson accepted the retirement benefit in the
compromise agreement between her and Korean
Air in the compromise agreement.
Yusons claim under ERP became moot when
she availed the optional retirement under Art. 287
and accepted the benefit. By her acceptance of
the benefit, Yuson is deemed to have opted to
retire under Art. 287.
The Court sees no bad faith in Korean Airs
part, the memo clearly states that Korean Air, on
its discretion, was offering ERP to its employees.
The memo also states that the reason for the ERP
was to prevent further losses. Korean Air did not
abuse its discretion when it excluded Yuson in the
ERP. To allow Yuson to avail of the ERP would have
been contrary to the purpose of ERP.
14. EXEMPTION FROM TAX

Sec. 6, Book 6 Rule 2 Sec. 1 IRR of RA 7641exemption from tax- The retirement pay provided
in the Act may be exempted from tax if the
requirements set by the BIR under Sec. 2 b item 1
of Revenue Regulation No. 12-86 dated Aug 1,
1986 are met.
Pensions, retirement and separation payconstitute compensation subject to withholding,
except the following
1. Retirement benefits received by officials and
employees of private firms under a
reasonable private benefit plan maintained
by the employer, if the following
requirements are met:
a. the benefit plan must be approved by the
BIR
b. the retiring official or employee must
have been in the service of the same
employer for at least 10 years and is not
less than fifty years of age at the time of
retirement; and
c. the retiring official or employee shall not
have previously availed of the privilege
under the retirement benefit plan of the
same or another employer.
-IBC V. NOEMI AMORILLA
Doctrine: For retirement benefits to be
exempt from withholding tax, the

taxpayer is burdened to prove the


concurrence of the following elements;
a. reasonable private benefit plan
maintained by employer
b. retiring employee has been in the
service of same employer at least 10
years
c. retiring employee is not short of 50
years of age time of retirement
d. benefit has been availed of only once.
ISSUE: WON IBC is stopped from defaulting on its
agreement with the employees to pay for taxes on
said retirement.
HELD: Yes, considering that the CBA was not
approved by the BIR (retirement plan). The court
declared that the salary differentials of the
respondents are part of their taxable gross
income.
IBC could not withhold the corresponding tax
liabilities of the respondents due to the then
existing CBA, providing such retirement benefits
would not be subjected to any tax deduction, and
that any such taxes would be for its account.
15. GRATUITY PAY vis--vis RETIREMENT PAY
-STA. CATALINA COLLEGE V. NLRC and
TERCERO

Doctrine: Gratuity pay should not be deducted


from retirement benefits as they two different
things.
Gratuity pay: based on generosity of employer, as
reward for the service if employee.
Retirement Benefits: based on loyalty of the
employee, it is to help the financial well-being of
the employee for the remaining years of his life.
ISSUE: Should the gratuity pay be deducted in
the computation of her retirement benefits.
HELD: No, Gratuity pay is separate and distinct
from retirement benefits. It is paid purely out of
generosity. It is paid to the beneficiary for the past
services of favor rendered purely out of generosity
of the employer to the employee. It is not
intended to pay a worker for actual services
rendered or for actual performance. It is money
benefit or bounty given to the worker, the purpose
of which is to reward employees who have
rendered satisfactory service to the company.
Retirement benefits, are intended to help the
employee enjoy the remaining years of his life,
releasing him from the burden of worrying for his
financial support, and are a form of reward for his
loyalty to the employer.
16. EFFECT OF ACCEPTING REDUNDACY PAY
- ZUELLIG PHARMA V. ALICE M. SIBAL
ISSUE: WON Sibal is entitled to gratuity pay when
her resignation was due to redundancy pay.

HELD: No, employees whose separation from


employment was brought about by sickness,
death, compulsory or optional retirement, or
resignation are entitled to gratuity pay. However
employees whose separation from employment

was by reason of redundancy are not entitled to


the monetary equivalent of their unused sick
leave if cessation from employment was caused
by redundancy.