Curative law

A recurring question on Labor Law is about the benefits which employees are entitled to in case of termination of employment. The answer really depends on the reasons for the termination.

If the employment has been terminated without just cause or for a false or nonexistent cause, the employee is entitled either to reinstatement with full back wages and without loss of seniority rights plus damages if warranted, or to separation pay of one month salary for every year of service in case reinstatement is no longer possible because the company has closed or ceased operations or his former position no longer exist at the time of reinstatement for reasons not attributable to the employer.

If on the other hand, the employment has been terminated for serious misconduct or willful disobedience of lawful orders, gross habitual neglect of duties, fraud or willful breach of trust, commission of a crime or offense against the person of the employer, his immediate family member or duly authorized representative and other analogous causes, the employee is not entitled to payment of any benefits, although in exceptional cases like first offense after long service, financial assistance may be given. If the termination is for a just cause but is done without due process, damages may also be awarded.

If the termination of employment is due to installation of labor savings device, redundancy, retrenchment to prevent losses, closing or cessation of operation, contraction of highly communicable disease, the employee is entitled to termination pay equivalent to at least one-half month salary for every year of service.

If the employment has been terminated because the employee has reached the retirement age established in the collective bargaining agreement or other applicable employment contract, the employee shall be entitled to such retirement benefits under existing laws (SSS) and under any collective bargaining or other agreements.

In the absence of any retirement benefits provided in the CBA or other employment contract, the employee could only rely on his SSS retirement benefits. But on January 7, 1993, RA 7641 took effect. Under said law, in the absence of any retirement plan or agreement in the establishment, a private sector employee who has served at least 5 years shall be entitled to retirement pay equivalent to at least one-half month salary for every year of service, a fraction of at least six months being considered as one whole year, upon reaching the age of 60 years or more but not beyond the compulsory retirement age of 65 years.

With the passage of RA 7641 therefore, a private sector employee enjoys both the SSS retirement benefits and that provided in said law. The question however is whether RA 7641 can still be used retroactively by those employed in establishments with retirement plans of their own. This is answered in this case of Maura and Benny.

Maura and Benny were both teachers of a big university which has a retirement plan of its own approved by the BIR. Maura had been teaching for 29 years already while Benny for 25 years. When they reached retirement ages under the plan, the University decided to retire them and pay their benefits. Maura’s benefits amounted only to P 71,674.91 while Benny was to receive only P34, 282.02 per the University’s computation. Maura and Benny received their benefits under protest believing that they should be entitled to P 149,401.62 and P150, 215.75 respectively under RA 7641.

When their protests went unheeded, they filed a complaint in the NLRC for payment of their differentials. Eventually, the NLRC ordered the University to pay Maura the additional amount of P77,726.72 and to Benny P115, 933.73. The University questioned this decision. They contended that when RA 7641 was passed, they already have a retirement plan, so the said RA should not be given retroactive effect.

Was the University correct?

No.

RA 7641 intends to give the minimum retirement benefits to employees not entitled thereto under collective bargaining or other agreements. Its coverage applies to establishments with existing collective bargaining or other agreements or voluntary retirement plans whose benefits are less than those prescribed under the proviso in question.

RA 7641 is a curative social legislation. By their nature, curative statutes may be given retroactive effect, unless it impairs vested rights. RA 7641 has retroactive effect to include in its coverage the employees’ services to an employer prior to its effectivity. It applies to to employees in the employ of employers at the time the law took effect and who are eligible to the benefits under the statute (MLQ vs. NLRC et.al. G.R. 141673, October 17,2001).

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