Title
Odchimar Gerlach vs. Reuters Limited Phils.
Case
G.R. No. 148542
Decision Date
Jan 17, 2005
Employee disputes retirement benefits based on notional salary vs. actual overseas salary; Supreme Court upholds notional salary policy, grants disturbance allowance.
retirement benefits
actual salary abroad
company contribution

Case Summary (G.R. No. 148542)

Factual Background

Reuters hired petitioner on February 15, 1982 as its local correspondent. On October 1, 1983, Reuters implemented the Plan for Philippine-hired employees. The Plan was company-funded, though employees had the option to contribute a percentage of their basic monthly salary. Because of her age and length of service, petitioner was automatically covered by the Plan, but she opted not to contribute.

Petitioner worked in Reuters Philippines until December 23, 1983. On January 23, 1984, Reuters assigned her as a journalist to Reuters Singapore. Before petitioner left, Rachel Addison, Reuters Eastern Region Staff Manager, informed her in writing that her home base would continue to be the Philippines, and that upon her assignment, her Philippine salary would cease while she would receive a Singapore salary. Addison also confirmed that if petitioner returned to Manila at the end of the assignment or subsequent assignments, her terms and conditions would revert to those of local staff. Addison further clarified her retirement and pension arrangements during her stay in Singapore. She stated that it was agreed petitioner would not join the Singaporean Central Provident Fund because Singapore was not her home base and the assignment duration was expected to be one year. She instructed petitioner to join the Plan introduced in the Philippines effective October 1, 1983, and described it as a non-contributory fund. For purposes of computing the company contribution, Addison stated that petitioner would retain a notional Philippine salary of Peso 5,980 per month, payable thirteen times a year. The notional salary, she added, would be reviewed on October 1 in line with Manila office staff.

Petitioner remained in Singapore until December 1985. On April 15, 1985, Addison informed her that increases in both her actual and notional salaries had been effected, and that her notional peso salary had been increased to 6,900 per month, with pension contributions to be adjusted accordingly. From March 26 to June 4, 1986, petitioner was assigned to Reuters Hongkong. Thereafter, in July 1986, she became a correspondent in Sri Lanka, where she was paid a peso salary increased to P12,600 per month. Her appointment letter reiterated that her home base would continue to be the Philippines, and that if she returned to the Philippines at the end of the assignment or subsequent assignments, her terms and conditions would be those of national staff. It also stated that she would remain a member of the pension plan for Philippines-based participants and that contributions would be based on her notional peso salary. While in Sri Lanka, petitioner’s notional peso salary was increased twice.

On October 12, 1988, petitioner was directed to return to Manila and resume her post by December 15, 1988. She instead requested assignment to Reuters offices in Bonn or London, but Reuters denied her request due to worldwide personnel reduction. Petitioner then applied for a fourteen-month study leave to take up economic subjects at Bonn University. Reuters approved a fourteen-month leave without pay from January 1, 1989 to March 1, 1990. On May 20, 1990, petitioner resigned from Reuters.

Retirement Benefits and Petitioner’s Claims

On March 1, 1991, petitioner received retirement benefits under the Plan in the amount of P79,228.04, computed based on her notional salary. Petitioner questioned both the amount she received and her entitlement to a disturbance grant. She contended that retirement benefits should be computed using her actual salary abroad, rather than her notional salary.

On October 25, 1991, Reuters, through its Manila Office Manager Roberto Moreno, replied that the initial reply petitioner received was only for six years and that the final amount paid was computed for seven years as corrected after her recomputation request. Reuters also reaffirmed that the notional salary concept was standard practice globally, and that petitioner had been repeatedly informed about it in assignment and salary increase letters. Reuters stated that it believed there was a basis for increasing the final salary used in computing retirement payment and that a resettlement allowance was due. It recommended that it could send a cheque to petitioner in Bonn, or through another payment method.

Proceedings Before the Labor Arbiter and the NLRC

Petitioner eventually filed a money claim with the Office of the Labor Arbiter in the NCR. The case was docketed as NLRC NCR Case No. 00-09-05002-92. On March 28, 1994, the Labor Arbiter issued a first Decision ordering Reuters to pay petitioner additional retirement benefits amounting to P436,000.00, computed on the basis of petitioner’s actual salary abroad rather than her notional salary. The Labor Arbiter likewise awarded a disturbance grant of Stg 1,750 or its equivalent in pesos, plus attorneys’ fees.

Reuters appealed. The NLRC rendered a Decision on August 31, 1994 setting aside the Labor Arbiter’s Decision and remanding the case for trial on the merits. After the remand, the Labor Arbiter issued a second Decision on July 31, 1996 awarding the same amounts as in the first Decision.

Reuters again appealed. On May 30, 1997, the NLRC reversed the Labor Arbiter’s Decision and dismissed petitioner’s complaint for lack of merit. Petitioner filed a motion for reconsideration. The NLRC granted it, dismissing Reuters’ appeal in a Decision/Resolution dated August 29, 1997. Reuters filed a motion for reconsideration, which the NLRC denied in an Order dated January 15, 1998.

Court of Appeals Proceedings

Reuters then sought judicial review before the Court of Appeals through a petition for certiorari under Rule 65. Pursuant to the Court’s earlier ruling in St. Martin Funeral Homes vs. NLRC (G.R. No. 130866, September 16, 1998, 295 SCRA 494), the petition was referred to the Court of Appeals. On September 29, 2000, the Court of Appeals granted Reuters’ petition. It reversed the NLRC Resolutions dated August 29, 1997 and January 9, 1998, reinstated the NLRC Decision dated May 30, 1997, and modified the award by ordering that petitioner be paid her disturbance and resettlement grant.

In arriving at this result, the Court of Appeals held that, although the Plan rules were not clear on the computation of the company’s contribution for overseas assignees, the surrounding circumstances demonstrated that the retirement computation should still be based on petitioner’s notional Philippine salary. It emphasized that from the beginning of petitioner’s first overseas assignment, petitioner had been apprised of her notional Philippine salary, and that petitioner was informed of such notional salary whenever she was transferred overseas or whenever her actual and notional salaries increased. The Court of Appeals noted that Reuters proved a worldwide practice of using notional salary for contributions for local employees detailed abroad. It also found that petitioner was not discriminated against.

The Court of Appeals further reasoned that the incorporation of notional salary into the Plan’s governing rules should be deemed part of a company policy. It supported this by applying construction rules, treating the Plan as a gratuitous contract because only the company was obligated to contribute. It invoked Article 1378 of the New Civil Code to favor the interpretation that would result in the least transmission of rights and interests. The Court of Appeals also ruled that petitioner’s claim for disturbance and resettlement grants had not yet prescribed.

Petitioner’s motion for reconsideration was denied on June 21, 2001.

Issues Raised in the Petition

Petitioner then filed the present petition for review on certiorari under Rule 45, assigning that the Court of Appeals: (a) erred in reinstating the earlier NLRC Decision which had reversed the Labor Arbiter; (b) erred in reversing the NLRC finding that Reuters’ appeal was filed out of time; and (c) erred in ruling that petitioner was not entitled to additional compensation under the Plan.

Legal Reasoning of the Supreme Court

Reuters argued that the petition should be dismissed because petitioner allegedly failed to raise any question of law. The Court reiterated that in a petition for review on certiorari under Rule 45, its review is generally confined to questions of law, and that questions of fact are not entertained. It explained that the Court does not reevaluate the sufficiency of evidence relied upon by labor tribunals, and that factual findings of the labor authorities are accorded respect and finality when supported by substantial evidence.

However, the Court recognized an exception when there is a variance between the findings of the NLRC and the Court of Appeals, which it deemed present in this case. The Court then characterized the nature of the retirement scheme. It identified three types of retirement schemes: (1) compulsory and contributory; (2) schemes set up by agreement in collective bargaining agreements or other agreements between employer and employees; and (3) schemes voluntarily given by the employer, either as announced company policy or impliedly by the employer’s failure to contest claims. The Court held that Reuters’ Plan fell under the third category, since it represented a voluntary employer policy.

The Court addressed Article 287 of the Labor Code, noting that

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