Favored class

Under the Labor code, separation pay may be awarded only in cases when the termination of employment is due to: (a) installation of labor saving device; (b) redundancy; (c) retrenchment; (d) closing or cessation of business operations; (e) disease of an employee whose continued employment is prejudicial to himself or his co-employees; or (f) when an employee is illegally dismissed but reinstatement is no longer feasible. Supposing the employee voluntarily resigns, is she entitled to separation pay? This is answered in this case of Cheryl.

Cheryl started working in HPI as a sewer on July 17, 1978. The company had a Collective Bargaining Agreement (CBA) with the employees. Section 1 Article IV of said CBA provides that: Regular Employees or workers separated by the company because of reduction of personnel and employees or workers who may be separated without cause, or those whose services are terminated from work due to suspension or cessation of operation shall be entitled to termination pay in accordance with law. The company shall give termination pay to those who voluntarily resign due to the reasons heretofore stated subject to the following terms and conditions: (a) 1 to 30 years of service shall be paid 20 days for every year of service; (b) 16 to 20 years shall be paid 15 days for every year of service; (c) 11 to 15 years – 10 days for every year of service; and (d) 5 to 10 years – 5 days for every year of service.

On August 10, 1998 or after more than 20 years of service, Cheryl voluntarily tendered her resignation effective September 17, 1998. The following day, the Company accepted her resignation and correspondingly paid her last salary, 13th month pay and the cash conversion of her unused vacation and sick leave. Subsequently, Cheryl sent a letter to HPI requesting payment of her separation pay pursuant to said Section 1, Article IV of the CBA. HPI however denied Cheryl’s request on the ground that under the Labor Code voluntary resignation is not one of the grounds which justifies the grant of separation pay. Was the Company correct?

No. It is true that under the Labor Code and as a general rule, an employee who voluntarily resigns is not entitled to separation pay. But when it is stipulated in the employment contract or CBA or such payment is authorized by the employer’s practice or policy, then it should be paid.

In this case it is very clear from the CBA that an employee or worker is entitled to separation pay when he voluntarily resigns due to, among others, separation from the company without cause. Cheryl’s separation from the service is one without cause as provided in the CBA. Hence pursuant thereto she is entitled to a separation pay.

In the interpretation of an employer’s program for separation benefits, all doubts should be construed in favor of labor. After all, workers are the intended beneficiaries of such program and our Constitution mandates a clear bias in favor of the working class (Hanford Philippines vs. Joseph, G.R. 158251, March 31, 2005. 454 SCRA 786).

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