Labor Law: Book VI; Title II Retirement from Service (Art. 302)

  Book VI

Labor Relations

Title II

Retirement from Service

Art. 302

1. Is retirement pay under the Labor Code apart from the SSS retirement benefit? 
2. And is it still apart from a retirement program embodied in a CBA?
3. May an employee be entitled to retirement benefit aside from separation pay?
4. May an employer fix at 50 or 55 the retirement age of his employees?

Art. 302. Retirement. 

Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves.

An underground mining employee upon reaching the age of fifty (50) years or more, but not beyond sixty (60) years which is hereby declared the compulsory retirement age for underground mine workers, who has served at least five (5) years as underground mine worker, may retire and shall be entitled to all the retirement benefits provided for in this Article.

Retail, service and agricultural establishments or operations employing not more than ten (10) employees or workers are exempted from the coverage of this provision.

Violation of this provision is hereby declared unlawful and subject to the penal provisions provided under Article 288 of this Code.

Nothing in this Article shall deprive any employee of benefits to which he may be entitled under existing laws or company policies or practices.

Own Notes:

• Retirement Age:
• Retirement age is established in the:
• collective bargaining agreement or 
• other applicable employment contract.
• Optional: 60 years old.
• Compulsory: 65 years old.
• Underground mining employee:
• Optional: 50 years old.
• Compulsory: 60 years old.
• Retirement Benefits:
• Employee shall be entitled to receive retirement benefits as he may have earned under:
• existing laws and
• any collective bargaining agreement and 
• other agreements
• The employee’s retirement benefits under any collective bargaining and other agreements shall not be less than those provided therein.
• Retirement Pay:
• In absence of specific plans, employees who reach 60-65 years old and have served at least 5 years receive a minimum retirement pay.
• Retirement pay: 1/2 a month's salary for each year of service.
• Fraction of 6 months = 1 year
• includes:
1. 15 days salary
2. 1/12th of the 13th month pay
3. 5 days SIL
• Exceptions:
• Retail, service and agricultural establishments with not more than 10 employees (10 max)
• Penalty:
• Violating this article is punishable under Article 288 of the Labor Code.

Notes

• Article 302, as worded above, implements R.A. No. 7641, a law which was approved on December 9, 1992 and took effect on January 7, 1993.
• The fifth paragraph regarding underground mine workers is a further amendment introduced by R.A. No. 8558, approved on February 26, 1998. 
• An even more recent amendment is R.A. No. 10757 (2015). It reduced the retirement age of surface mine workers from 60 to 50 years.

Effect of CBA or Employment Contract

• This Article is subordinate to a binding contract such as:
• a CBA or 
• an individual employment contract. 
• Such contract may stipulate a retirement package different from what this Article provides. 
• If the CBA provides for retirement benefits greater than that under the Labor Code, the benefit should be computed according to the CBA formula. 
• But if the benefits under such contract are lesser than those under this Article, then the employer must pay the difference.
• The Court has ruled, however, that restriction in private retirement plan will not prevent the employee from retiring optionally at age 60. (Manuel V Quezon University, June 19 1997)

Is compulsory retirement at age below 60 allowable?

• If the agreement to this effect is part of a collective bargaining agreement freely entered into and subsequently duly ratified by the employees, such agreement is valid and enforceable. (Pantranco North, July 24, 1996)
• A CBA may validly stipulate that the employer has the option to retire an employee who has reached a specified age (even below 60) or a specified retirement criterion.
• When such option is exercised, there is no need to consult the employee. (Philippine Airlines, January 15, 2002)

Amount of Retirement Pay

• The retirement pay under this Article consists of three items:

1. A = Fifteen days salary based on the latest salary rate
2. B = Cash equivalent of five days of service incentive leave
3. C = One-twelfth (1/12) of the thirteenth month pay (1/12 x 365/12 = .083 x 30.41 = 2.5)

• These items make a total of 22.5 days' pay, to be multiplied by the retiree's total years of employment, a fraction of at least six months being counted as one year. (Capitol Wireless, November 13, 1996)
• Total = (A + B + C) x Years of Employment
• The service incentive leave, as part of the required retirement benefit, means five full days, not just a portion of it. (Enriquez Security, July 21, 2006)
• The cash equivalent of the five days service incentive leave (SIL) and one-twelfth of the 13th month pay are specific components of the law for purposes of the computation of the retirement benefits. 
• It may be pointed out that the SIL provisions under Book III of the Labor Code and the 13th month pay provisions under the 13th Month Pay Law (PD 851) are different from the cash equivalent of the five days service incentive leave (SIL) and the one-twelfth of the 13th month pay referred to under R.A. No. 7641. (BWC Opinion, 30 October 2002).
• This interpretation holds true whether the retiring employee is managerial or not. (BWC Opinion, 27 March 2001)

Retroaction

• Recognizing R.A. No. 7641 as a social legislation, the Supreme Court applied its benefits to an employee who retired on September 3, 1990 but whose case was pending resolution at the NLRC when the law took effect on January 7, 1993. (Oro Enterprises, November 14, 1994)
• The retroaction of R.A. No. 7641 includes services rendered prior to its effectivity by employees in the employ of covered employers at the time the law took effect and who are eligible to benefits under that statute (MLQ University, October 17, 2001)

Part-time Workers

• Part-time workers are entitled to retirement pay under this Article after satisfying these conditions for optional retirement:

1. there is no retirement plan between the employer and the employee, and
2. the employee should have reached the age of 60 years, and
3. should have rendered at least five years of service with the employer. (Handbook on Workers Statutory Monetary Benefits, 2016, p. 48)

Part-time Employee, Even with Fixed-term Employment Contract, Entitled to Retirement Benefits

• Any doubt or question regarding entitlement to retirement benefit of part-time employees has been dispelled by the categorical affirmative ruling of the Supreme Court promulgated on February 13, 2017.
• Part-time employees, even of non-permanent status such as those under fixed-term employment contracts, are covered by the retirement law under Article 302 of the Labor Code, as amended by R.A. No. 7641. 
• The employee must have reached 60 years of age (for optional retirement) or 65 years (for compulsory retirement), and has served at least five years in the employer establishment. 
• But excluded from this coverage are:
1. government employees (because they are governed by another law). 
2. employees of retail, service and agricultural establishments/operations regularly employing not more than 10 employees (10 max).
• The entitlement of part-timers to retirement benefits has three legal bases:

1. Article 302 (formerly 287) of the Labor Code
2. Book VI, Rule II of the Rules Implementing the Labor Code, and 
3. Labor Advisory, dated October 24, 1996, entitled "Guidelines for the Effective Implementation of Republic Act No. 7641" issued by the Secretary of Labor. (De La Salle Araneta University v. Juanito C. Bernardo, G.R. No. 190809, February 13, 2017)

Separate Benefit

• The retirement pay payable under Article 302, as as amended, is apart from the retirement benefit claimable by the qualified employee under the social security law.
• Retirement Benefit = Art. 302 + SSS Law
• This has to be so because R.A. No. 7641 in its Section 2 states that "Nothing in this Act shall deprive any employee of benefits to which he may be entitled under existing law or company policies or practices."