Almirante: Retirement plan

RESPONDENT University of Cebu (UC) has a Faculty Manual on optional retirement plan providing that a permanent employee may, upon reaching his 55th birthday or having completed at least 15 years of service, opt for an early retirement and shall be entitled to a retirement pay equivalent to a total of 15 days for every year of service based on the average monthly salary of the employee computed for the past three years. It refers to this plan as a resignation with separation pay.

Petitioner Carissa E. Santo, a full-time instructor, applied for optional retirement. She was then only 42 years old but had already completed 16 years of service with respondent. UC approved her application and computed her optional retirement pay at 15 days for every year of service pursuant to its Faculty Manual.

Not contented, petitioner filed a complaint for payment of retirement benefits, damages and attorney’s fees against UC. She argued that her retirement pay should be equivalent to 22.5 days pay per year of service in accordance with Article 287 of the Labor Code. UC argued that petitioner was not covered by the Retirement Pay Law being less than 60 years old at the time of her retirement.

Whose argument finds merit?

Ruling: That of petitioner.

Clearly, the Faculty Manual intends to grant retirement benefits to qualified employees. It entitles an employee to retire after 15 years of service or upon reaching the age of 55 and accordingly collect retirement benefits. It even mandates compliance with Republic Act 7641 such that when the computation of its retirement plan is found to be lower than what the law requires, respondent is bound to pay the deficiency.

Respondent’s claim – that its optional retirement benefit is actually a form of separation pay to qualified employees who wish to resign is belied by its own company policy. This benefit clearly falls within the category of “Retirement Pay,” specifically under “Optional Retirement.” For sure, respondent is precluded from claiming otherwise.

In another vein, the conflict between respondent’s own categorization of the benefit as “retirement pay,” on the one hand, and its description of it as “a resignation with separation pay,” on the other, could only be taken against respondent. For settled is the rule that ambiguities in a contract are interpreted against the party that caused the ambiguity.

Now, comparing the optional retirement benefits under the two retirement schemes, it is apparent that 15 days’ worth of salary for every year of service provided under respondent’s Faculty Manual is much less than 22.5 days’ worth of salary for every year of service provided under Article 287 of the Labor Code. Obviously, it is more beneficial for petitioner if Article 287’s retirement plan will be applied in the computation of her retirement benefits.

Too, in Elegir v. Philippine Airlines Inc., 691 Phil. 58, 73 (2012), the Court decreed that the determining factor in choosing which retirement scheme to apply is superiority in terms of benefits provided. Thus, we ruled that even if the employer has an existing retirement scheme but the same does not provide for retirement benefits equal or superior to that which is provided under Article 287 of the Labor Code, the latter will apply. In this manner, the employee can be assured of a reasonable amount of retirement pay for his or her sustenance.

The retirement benefits under Article 287 of the Labor Code, therefore, should be applied in the computation of petitioner’s retirement pay. It is more advantageous to petitioner and it is what the law commands. (Carissa E. Santo vs. University of Cebu G.R. 232522, August 28, 2019).

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