The Supreme Court ruled that an employee is bound by a company’s retirement plan, even if the plan was established before the employee’s tenure, provided the employee was sufficiently informed and consented to the plan’s terms. This decision clarifies the enforceability of early retirement policies and emphasizes the importance of explicit or implied consent from employees. It highlights that accepting employment with a company implies agreement with its existing rules and regulations, including retirement policies, if those policies are made known to the employee.

Retirement Realities: Can Banks Enforce Pre-Employment Retirement Ages?

This case revolves around Guillermo Sagaysay’s compulsory retirement from Banco de Oro Unibank, Inc. (BDO) at the age of 60, pursuant to the bank’s retirement policy implemented long before he joined the company. Sagaysay contested his retirement, arguing it was illegal dismissal as he had not voluntarily agreed to retire at 60. The central legal question is whether a retirement plan established before an employee’s hiring is binding on that employee, particularly when the employee later signs a quitclaim.

The Supreme Court anchored its decision on Article 287 of the Labor Code, which governs retirement age and benefits. The Court emphasized that retirement is generally a bilateral act, requiring voluntary agreement between employer and employee. However, Article 287 also recognizes that an agreement or employment contract can dictate the retirement age. In the absence of such agreement, the law sets a compulsory retirement age of 65, with an optional retirement age starting at 60.

The Court noted that retirement plans allowing employers to retire employees before the age of 65 are permissible, provided they do not undermine the employees’ rights.

“By its express language, the Labor Code permits employers and employees to fix the applicable retirement age at 60 years or below, provided that the employees’ retirement benefits under any CBA and other agreements shall not be less than those provided therein.”

This underscores the principle that while early retirement plans are not inherently illegal, they must respect the employees’ entitlements.

A crucial aspect of the ruling was the Court’s assessment of whether Sagaysay had been adequately informed of and had consented to BDO’s retirement plan. The Court identified several factors supporting the conclusion that Sagaysay was indeed aware and had impliedly agreed to the plan. First, the retirement plan had been in place since 1994, long before Sagaysay’s employment in 2006. Second, the Court stated that accepting employment with BDO implied assent to the bank’s existing rules, regulations, and policies, including the retirement plan. Third, a memorandum issued by BDO in 2009 reiterated the normal retirement age, further indicating that Sagaysay had been informed of the policy.

Perhaps the most compelling evidence of Sagaysay’s consent came from his emails to the bank. In these communications, Sagaysay did not object to the compulsory retirement age; instead, he requested an extension of service to reach five years of employment. This request indicated his awareness of and acquiescence to the retirement plan’s terms. It also demonstrated a recognition that the BDO Retirement Program would be implemented to those reaching the age of sixty (60).” This acknowledgement significantly weakened his claim that he was unaware of the retirement policy.

The Court distinguished this case from Cercado v. UNIPROM Inc., a case heavily relied upon by the Court of Appeals. In Cercado, the retirement plan was adopted *before* the employee was hired, and the employee had consistently objected to it. In contrast, Sagaysay was employed *after* the retirement plan was already in effect, and he initially sought to benefit from it by requesting an extension. This difference in timing and initial reaction was critical to the Supreme Court’s decision. The Court found that Sagaysay had the opportunity to reject the employment if he disagreed with the retirement policy.

Building on this principle, the Court validated the quitclaim signed by Sagaysay. The Court emphasized that quitclaims are generally viewed with caution, they can be upheld if executed voluntarily, with full understanding, and for reasonable consideration. In Sagaysay’s case, the Court found that the consideration he received was justified, given that he had not yet met the minimum service requirement for full retirement benefits. Furthermore, Sagaysay’s extensive banking experience suggested that he understood the implications of signing the quitclaim.

The ruling reinforces the employer’s prerogative to deny an extension of service beyond the compulsory retirement age. Once an employee reaches the compulsory retirement age, their employment is deemed terminated, and any extension is at the employer’s discretion. This discretion is critical for business planning and workforce management.

FAQs

What was the key issue in this case?	The key issue was whether an employee is bound by a retirement plan that was already in place when they were hired, particularly when the employee later signs a quitclaim.
What did the Supreme Court rule?	The Supreme Court ruled that the employee was bound by the retirement plan because he was sufficiently informed of it and impliedly consented to it by accepting employment with the bank.
What is the significance of Article 287 of the Labor Code?	Article 287 governs retirement age and benefits, allowing for agreements between employers and employees to set retirement ages, but establishing a default compulsory retirement age of 65 in the absence of such agreements.
How did the Court distinguish this case from Cercado v. UNIPROM Inc.?	The Court distinguished this case because, unlike in Cercado, the retirement plan was already in place before Sagaysay was hired, and Sagaysay initially sought to benefit from the plan.
Is it legal for a company to have an early retirement plan?	Yes, it is legal for a company to have an early retirement plan, as long as it is implemented fairly and employees are properly informed and their rights are respected.
What makes a quitclaim valid?	A quitclaim is valid if it is executed voluntarily, with full understanding of its terms, and for reasonable consideration.
Can an employer force an employee to retire early?	An employer can enforce an early retirement plan if the employee has agreed to it, either explicitly or implicitly by accepting employment with the company with knowledge of the plan.
What is the effect of an employee requesting an extension of service?	An employee’s request for an extension of service can be seen as an acknowledgement and acceptance of the existing retirement plan.
Can an employer deny an employee’s request for an extension of service?	Yes, an employer has the management prerogative to deny an employee’s request for an extension of service beyond the compulsory retirement age.

In conclusion, this case emphasizes the importance of clear communication and mutual agreement between employers and employees regarding retirement policies. It clarifies that accepting employment with a company implies agreement with its existing rules and regulations, provided those policies are made known to the employee. Retirement plans adopted before employment are deemed binding on the employee.

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: BANCO DE ORO UNIBANK, INC. vs. GUILLERMO C. SAGAYSAY, G.R. No. 214961, September 16, 2015