G.R. No. L-48926 - Sosito vs. Aguinaldo Development Corp.

Manuel Sosito was employed by Aguinaldo Development Corporation, a logging company, since 1964.
He held the responsibility of managing logging importation and earned a monthly salary of P675.00.
On January 16, 1976, Sosito went on an indefinite leave with the consent of his employer.

On July 20, 1976, the company, through its president, announced a retrenchment program due to significant financial losses in the wood-based industries.
The memorandum clarified that:

Only employees in active service as of June 30, 1976, were eligible for separation benefits.
Employees qualifying under the program needed to tender their resignations by July 31, 1976.
The separation benefit was computed as one-half (1/2) month’s basic salary multiplied by the number of years of service with the company.

The program was described as a compassionate measure, offering financial assistance even though the law permitted the company to reduce its workforce without any obligation to pay separation benefits under financial distress (in accordance with the original Article 272(a) of the Labor Code).

Despite being on indefinite leave, Sosito decided to avail himself of the retrenchment offer.
He submitted his resignation on July 29, 1976, ostensibly to secure the promised gratuity benefits, although his resignation was never acted upon by the company.
Following the company’s refusal to give him separation pay, Sosito sought relief from the Department of Labor.

The labor arbiter ruled in favor of Sosito, ordering the company to pay separation benefits equivalent to his salary for six and a half months (P4,387.50).
On appeal to the National Labor Relations Commission, the decision was reversed on the ground that Sosito was not covered by the retrenchment program because he was not in active service as of June 30, 1976.
Sosito subsequently petitioned to the court, which then scrutinized the entire retrenchment scheme and the eligibility requirements outlined therein.

Whether Manuel Sosito, having been on indefinite leave and not in active service as of June 30, 1976, could rightfully claim the separation benefits offered under the retrenchment program.

Whether the conditions stipulated in the company’s memorandum were clear and binding, particularly the requirement that only employees in active service as of a specific cutoff date were eligible for separation pay.

The extent to which a petitioner on an open-ended leave arrangement might appear to be attempting to retain the benefits of both continued employment and those offered under retrenchment, thereby creating an imbalance in the application of managerial policies versus employee entitlements.