The Supreme Court held that when a company has a long-standing practice of granting early retirement benefits, even without a formal written policy, it is considered an enforceable benefit. This means that employees who meet the established criteria for early retirement, based on consistent company practice, are entitled to those benefits, protecting them from arbitrary denial by the employer. This decision reinforces the principle of non-diminution of benefits, ensuring employers honor established customs that have become an integral part of the employment relationship.

From School Administrator to Supreme Court Victory: Can Custom Override a Missing Retirement Policy?

Quintin V. Beltran, a former school administrator at AMA Computer College-Biñan, sought early retirement benefits based on what he claimed was a long-standing company practice. Despite the absence of a formal written retirement plan, Beltran argued that AMA had consistently granted early retirement benefits to employees who had rendered at least 10 years of service. The case reached the Supreme Court after the Court of Appeals (CA) affirmed the National Labor Relations Commission’s (NLRC) denial of Beltran’s claim. The central legal question was whether an unwritten company practice of granting early retirement benefits could be considered a binding policy, entitling an employee to such benefits, even without a formal, written agreement.

The Supreme Court addressed the procedural aspects of the case, emphasizing the liberal approach in labor disputes. The Court noted that the NLRC has latitude in applying its rules and that technical rules of procedure may be relaxed in the interest of substantial justice. The Court cited Loon v. Power Master, Inc., stating:

In labor cases, strict adherence to the technical rules of procedure is not required. Time and again, we have allowed evidence to be submitted for the first time on appeal with the NLRC in the interest of substantial justice… However, this liberal policy should still be subject to rules of reason and fairplay: (1) a party should adequately explain any delay in the submission of evidence; and (2) a party should sufficiently prove the allegations sought to be proven.

Beltran adequately explained the delay in submitting affidavits from former employees, citing difficulties in contacting them and their fear of reprisal from AMA. The Court found that the affidavits sufficiently proved that AMA had been granting early retirement benefits as a company practice. This established the context for examining the substantive issue of whether a company practice can create an enforceable right to early retirement benefits.

Building on this principle, the Court examined the concept of non-diminution of benefits. Article 100 of the Labor Code prohibits the elimination or reduction of benefits received by employees. For such a benefit to be enforceable, it must be shown through an express policy, a written contract, or an unwritten policy that has ripened into a company practice. The Court emphasized that to be considered a practice, it must be consistently and deliberately made by the employer over a significant period. The determination of what constitutes a “significant period of time” depends on the specific facts and circumstances of each case.

The Court referenced Metropolitan Bank and Trust Co. v. National Labor Relations Commission to highlight the importance of regularity and deliberateness in the grant of benefits:

With regard to the length of time the company practice should have been exercised to constitute voluntary employer practice which cannot be unilaterally withdrawn by the employer, jurisprudence has not laid down any hard and fast rule… The common denominator in these cases appears to be the regularity and deliberateness of the grant of benefits over a significant period of time.

In Beltran’s case, the Court found substantial evidence that AMA had an established company practice of granting early retirement. Affidavits from two former AMA employees attested to the existence of the early retirement program, stating that AMA granted early retirement benefits to employees with at least 10 years of service. They also listed eight other employees who had availed of the program. While these other employees did not personally confirm their early retirement, the Court deemed the affidavits sufficient, given the managerial positions and length of service of the affiants.

This approach contrasts with the respondents’ bare denials, which the Court found insufficient to refute the evidence presented by Beltran. The respondents did not provide controverting evidence to disprove the statements in the affidavits or to explain why Beltran’s request for early retirement was denied while others had been granted. The Court contrasted Beltran’s situation with that of the affiants, who held similar positions and had similar years of service but were granted early retirement. Furthermore, Beltran presented documentary evidence showing he had complied with the company’s procedures for turnover and employee separation, disproving the respondents’ claim that he had abandoned his position.

The Court also addressed the issue of damages and attorney’s fees. Moral damages were awarded because AMA acted in bad faith by refusing to grant Beltran’s request for early retirement and falsely accusing him of abandoning his position. Exemplary damages were imposed as a corrective measure for the public good. Attorney’s fees were awarded because Beltran was compelled to litigate to protect his rights. However, the liability for these monetary awards was imposed only on AMA, not on the individual respondents (Cheryl Rojas, Evangeline Bondoc, and Amable R. Aguiluz V), because there was no evidence of their personal participation, bad faith, or malice in the refusal to grant Beltran’s application for early retirement.

The Supreme Court’s decision underscores the importance of upholding company practices that have become an integral part of the employment relationship. This means that employers cannot arbitrarily deny benefits that have been consistently granted to employees over a significant period, even in the absence of a formal written policy. The ruling reinforces the principle of non-diminution of benefits, protecting employees from the erosion of their rights and entitlements.

FAQs

What was the key issue in this case?	The key issue was whether AMA Computer College had an established company practice of granting early retirement benefits, even without a formal written policy, and whether Quintin V. Beltran was entitled to such benefits.
What is the principle of non-diminution of benefits?	The principle of non-diminution of benefits, as enshrined in Article 100 of the Labor Code, prohibits employers from eliminating or reducing benefits that employees are already receiving. This protects employees from arbitrary reductions in their compensation and benefits.
What evidence did Beltran present to support his claim?	Beltran presented affidavits from two former AMA employees who attested that the company had a practice of granting early retirement benefits. He also presented documentary evidence showing that he had complied with the company’s procedures for turnover and employee separation.
Why were the affidavits of former employees considered credible?	The affidavits were considered credible because the former employees held managerial positions and had long tenures with the company, making them knowledgeable about company policies and practices. Also, they had nothing to gain or lose in the case.
What is the significance of establishing a ‘company practice’?	Establishing a company practice means demonstrating that the employer has consistently and deliberately granted a particular benefit over a significant period. Once a practice is established, it becomes an enforceable right for employees.
Why were moral and exemplary damages awarded in this case?	Moral and exemplary damages were awarded because AMA acted in bad faith by denying Beltran’s request for early retirement and falsely accusing him of abandoning his position. This caused Beltran emotional distress and warranted compensation.
Were the individual respondents held personally liable?	No, the individual respondents (Cheryl Rojas, Evangeline Bondoc, and Amable R. Aguiluz V) were not held personally liable because there was no evidence of their personal participation, bad faith, or malice in the denial of Beltran’s application for early retirement.
What is the legal interest rate applicable to the monetary awards?	The first two monetary awards (last salary and 13th month pay, and early retirement benefit) shall earn legal interest of 12% per annum from the date of filing of the complaint on September 3, 2010 to June 30, 2013 and 6% per annum from July 1, 2013 until their full satisfaction. The award of moral and exemplary damages and attorney’s fees shall begin to earn legal interest of 6% per annum from the finality of this Decision until full satisfaction.

The Supreme Court’s decision in Beltran v. AMA Computer College clarifies the enforceability of company practices in the realm of labor law. Employers must be mindful of the benefits they have consistently provided to employees, as these can create enforceable rights, even without a formal written policy. This ruling serves as a reminder to employers to honor established customs and practices that have become an integral part of the employment relationship, ensuring fairness and stability in the workplace.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Quintin V. Beltran vs. AMA Computer College-Biñan/AMA Education System, G.R. No. 223795, April 03, 2019