The Supreme Court (SC) has reaffirmed that early retirement requires an employee’s explicit and voluntary consent, stressing that employers cannot presume a worker has agreed to retire.

In a decision penned by Associate Justice Ramon Paul L. Hernando, the Court’s First Division held that an employee’s reference to a possible retirement date did not establish voluntary retirement when the correspondence also demanded reinstatement.

“Given that petitioner’s early retirement age option involved conceding the constitutional right to security of tenure, the law demands more than a passive acquiescence on his part,” the Court said.

The Court awarded the illegally dismissed employee backwages until compulsory retirement at age 65, along with separation pay and retirement benefits.

FACTS AND ISSUE

The dispute arose after Colegio de San Juan de Letran (Laguna) reorganized in June 2018 and appointed Rodolfo C. Ondevilla controller until August 29, 2019. Hired in 2004, he had served as assistant vice president for finance and controller since 2006 under repeatedly renewed appointments.

Ondevilla protested that the change demoted him and would reduce his compensation. Management maintained that he was a consultant rather than a regular employee and directed him to turn over his functions before his appointment ended.

In November 2019, he filed an illegal dismissal complaint against the school and its president, Rev. Fr. Arthur Dingel. He cited his appointments, employment records and duties as proof of regular employment; the respondents maintained that he was an independent contractor.

The labor arbiter found him illegally dismissed and ordered reinstatement and monetary awards. The National Labor Relations Commission upheld his regular employment and found his demotion constituted constructive dismissal.

On reconsideration, the commission maintained that finding despite unchanged salary and benefits. However, it treated him as retired in August 2019, deleted backwages and awarded separation pay and retirement pay instead of reinstatement.

The Court of Appeals (CA) held that the demotion did not constitute constructive dismissal but found him illegally dismissed on August 29, 2019, when the school considered his appointment expired.

The CA interpreted his correspondence about repaying a cash advance as an election to retire on July 31, 2020 and limited backwages to that date. It also awarded retirement pay and attorney’s fees but denied separation pay.

Before the SC, Ondevilla denied expressly agreeing to early retirement. The respondents maintained that he had sought retirement at the end of the school year.

Ondevilla also contested the denial of collective bargaining agreement (CBA) benefits and argued that labor tribunals could resolve his claim involving allegedly excessive withholding taxes.

THE RULING

The SC partly granted Ondevilla’s petition, finding that his letter responded to a demand to repay a cash advance and sought immediate reinstatement rather than expressed a decision to retire. His objections to early retirement and his illegal dismissal complaint also contradicted an intention to retire before 65.

“In fact, there was no proposal for a retirement plan, but an illegal dismissal in the guise of expiration of employment contract,” the Court said.

Absent an applicable agreement fixing the retirement age, the Labor Code sets 60 as the minimum age for optional retirement and 65 as the compulsory retirement age, the Court explained.

It rejected the finding that Ondevilla voluntarily retired on July 31, 2020 and declared him mandatorily retired on August 29, 2024, when he turned 65.

The Court ordered Letran to pay full backwages from August 29, 2019 to August 29, 2024, and separation pay equivalent to one month’s pay for every year of service, covering June 16, 2004 to August 29, 2024.

It awarded separation pay because reinstatement was no longer feasible after Ondevilla reached compulsory retirement age. It also granted retirement benefits and attorney’s fees, with 6 percent annual interest on the total monetary award from August 29, 2019 until fully paid.

The Court denied his CBA benefits claim for lack of proof that those benefits extended to managerial employees and held that the withholding tax dispute belonged before the Commissioner of Internal Revenue.

Because Ondevilla died while the case was pending, the award will go to his estate. The case was returned to the labor arbitration branch to compute the amount due.

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