Compulsory Retirement Policy Lowering the Age Requires the Express Consent Of Employees

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Compulsory retirement age of sixty-five (65) years can be lowered by the parties. If so it is not per se repugnant to the constitutional guaranty of security of tenure, provided that the retirement benefits are not lower than those prescribed by law and they have the employee’s consent.

Article 302 of the Labor Code, as amended, provides that any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. Further, in the absence of a retirement plan or agreement plan 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 declared as the compulsory retirement age.

By its express language, the law permits employers and employees to fix the employee’s retirement age. Absent such an agreement, the law fixed the age for compulsory retirement at sixty-five (65) years, while the minimum age for optional retirement is set at sixty (60) years.

Thus, retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of sixty-five (65) years are not per se repugnant to the constitutional guaranty of security of tenure, provided that the retirement benefits are not lower than those prescribed by law and they have the employee’s consent.

A retirement plan giving the employer the option to retire its employees below the ages provided by law must be assented to by the latter, otherwise, its adhesive imposition will amount to a deprivation of property without due process of law.

The case of Laya, Jr. vs. Philippine Veterans Bank, the SC emphasized the character of employee’s consent to the employer’s early retirement policy: it must be explicit, voluntary, free, and uncompelled.

In the case of Pulong vs. Super Manufacturing Inc., [G.R. No. 247819, October 14, 2019] the SC held it is incumbent upon the employer to prove the express consent of employees in lowering the compulsory retirement age.

See the full digest of Pulong vs. Super Manufacturing Inc. here.

While the employer in Pulong case claims that the availment of the benefits listed in the MOA signed by some employees by the complainant amounted to consent to the lowering of the compulsory retirement age, the Supreme Court disagreed. The employer, SMI failed to prove that Abad, Bionat, and Cruz were the duly authorized bargaining representatives of SMI’s workers for purposes of signing the MOA. For it merely asserts that Abad and Bionat were among the representatives of SMI’s workers in the previous MOAs of SMI and the employees.

The SC held further that even assuming that one of the three signatories to the MOA had, on different periods, validly represented SMI’s workers, SMI still had to establish that all three signatories were authorized by SMI’s workers to represent them in the subsequent negotiations and execution of the MOA. But this, SMI failed to do.

SMI has not shown any proof that Abad, Bionat, and Cruz were authorized to represent SMI’s workers to sign the MOA in their behalf. It did not even disclose under what capacity or authority they could have represented SMI’s workers, including Pulong.

Retirement is the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter, after reaching a certain age, agrees to sever his or her employment with the former. Citing Cercado vs. Uniprom, Inc., the SC held that an early retirement plan must be voluntarily assented to by the employees. The MOA in this case was not assented to by Pulong and his co-workers. It was not executed after consultations and negotiations with the employees’ authorized bargaining representative.

The MOA, therefore, does not bind Pulong; much less, its provisions on compulsory retirement at age sixty (60). For it was not a result of any bilateral act; instead, it was a unilateral imposition of SMI upon Pulong.

The benefits received by Pulong are the usual gratuities granted to the employees as a matter of company practice. Pulong’s acceptance of these benefits does not equate to his assent to SMI’s retirement plan. Pulong was a mere passive recipient of whatever benefits given him. Nothing more may be implied thereform.

At any rate, the acquiescence by the employee to an early retirement plan cannot be lightly inferred from his acceptance of employment, or in this case, employment benefits. The acceptance must be unequivocal such that his consent specifically referred to the retirement plan. In early retirement programs, the offer of benefits must be certain while the acceptance to be retired should be absolute.

It would be absurd, therefore, to equate Pulong’s receipt of employment benefits as his acquiescence to SMI’s retirement plan. The employee who did not expressly agree to an early retirement plan cannot be retired from service before he reaches the age of sixty-five (65) years.

Even implied knowledge, regardless of duration, cannot equate to the voluntary acceptance required by law in granting an early retirement age option. The law demands more than a passive acquiescence on the part of the employee, considering that his early retirement age option involves conceding the constutional right to security of tenure. Any waiver of a constitutional right must be clear, categorical, knowing, and intelligent.

Having terminated Pulong solely on the basis of a provision of a retirement plan which was not freely assented to by him, SMI is guilty of illegal dismissal.