Title
Pantranco North Express, Inc. vs. National Labor Relations Commission
Case
G.R. No. 95940
Decision Date
Jul 24, 1996
A bus conductor retired after 25 years under a CBA provision; he challenged it as illegal dismissal. The Supreme Court upheld the CBA's validity, ruling the retirement was legal and enforceable, binding union members to its terms.
labor dispute
compulsory retirement
collective bargaining agreement

Case Summary (G.R. No. 95940)

Factual Background

Private respondent was hired in 1964 as a bus conductor by petitioner. He later joined the Pantranco Employees Association-PTGWO. He remained in petitioner’s employ until August 12, 1989, when petitioner retired him at age fifty-two (52) after he had rendered twenty-five (25) years of service. The retirement was implemented pursuant to the CBA’s compulsory retirement provision, and private respondent received retirement pay in the amount of P49,300.00.

On February 15, 1990, private respondent filed a complaint for illegal dismissal against petitioner with the NLRC’s Sub-Regional Arbitration Branch in Dagupan City. The complaint was consolidated with two other illegal dismissal cases arising from similar facts and issues and involving other employees, including non-union members.

After hearings and the filing of position papers, Labor Arbiter Ricardo N. Olairez rendered a decision on March 26, 1990 declaring the complainants illegally and unjustly dismissed. With respect to private respondent, the Labor Arbiter ordered reinstatement to the former or substantially equivalent positions without loss of seniority rights, and with full backwages and other benefits computed by date. The Labor Arbiter further directed that the amounts already received by the complainants would be treated as advanced payment of retirement pay, to be deducted when they would actually retire or be separated. Reinstatement was declared immediately executory even pending appeal.

Proceedings Before the NLRC and the Petition for Certiorari

Petitioner appealed to the NLRC. The NLRC issued the assailed Resolution dated September 28, 1990, which affirmed the Labor Arbiter’s decision in toto, sustaining the ruling that the compulsory retirement constituted illegal dismissal. Petitioner then filed the present petition for certiorari, seeking nullification of the NLRC Resolution.

Issues Raised by Petitioner

Petitioner contended that the NLRC gravely abused its discretion in affirming the Labor Arbiter’s assumption of jurisdiction. It argued that the dispute necessarily involved the interpretation and implementation of the CBA and should therefore have been referred to the grievance machinery or the voluntary arbitrators under Article 261 of the Labor Code.

Petitioner further argued that, assuming jurisdiction in the Labor Arbiter, the NLRC also gravely abused its discretion in affirming the Labor Arbiter’s conclusion that private respondent’s compulsory retirement was illegal dismissal.

Jurisdiction of the Labor Arbiter Versus Voluntary Arbitration

Petitioner relied on Article 261 of the Labor Code, which provides that voluntary arbitrators or panels of voluntary arbitrators have original and exclusive jurisdiction to hear and decide unresolved grievances arising from the interpretation or implementation of the CBA and from the interpretation or enforcement of company personnel policies referred to in the immediately preceding article. The provision also states that disputes within the exclusive jurisdiction of voluntary arbitration should not be entertained by the Commission or its regional offices and regional directors, and should instead be referred to the grievance machinery or voluntary arbitration provided in the CBA.

The Labor Arbiter, however, held that jurisdiction lay with the labor tribunal because the complaint was for illegal dismissal, and the interpretation or enforcement of the CBA was treated as merely corollary to the illegal dismissal charge. The Labor Arbiter also noted that petitioner had submitted to the labor arbiter’s jurisdiction by advancing arguments on the legality of the act of retirement and by praying for relief on the merits, reasoning that a litigant could not both seek merits-based relief and later attack jurisdiction.

On review, the Court affirmed the NLRC’s acceptance of the Labor Arbiter’s jurisdiction in this case. The Court relied on its ruling in Sanyo Philippines Workers Union - PSSLU vs. Canizares, where it had explained that the grievance machinery and voluntary arbitrators are directed to disputes that properly constitute a grievance between the union and the company and that, absent any grievance between them, the dispute must be settled before an impartial body, particularly after an actual termination has already occurred, in which case it falls within the labor arbiter’s jurisdiction.

Applying that rationale, the Court held that in the case at bar the “dispute” could not be characterized as a controversy between the union and petitioner, because both the union and the company had already agreed upon the CBA provision on compulsory retirement. Only private respondent, acting alone, questioned the application of the compulsory retirement provision. For that reason, the Court treated the controversy as a termination dispute that properly came under the jurisdiction of labor arbiters. Thus, the Court found no grave abuse of discretion committed by the NLRC in upholding the labor arbiter’s jurisdiction.

Legality of the CBA Provision on Compulsory Retirement

The core issue then turned on whether the CBA provision authorizing compulsory retirement after twenty-five (25) years of service was lawful. The CBA, dated May 2, 1989, contained an agreement requiring the company to grant retirement benefits to regular employees who would be separated from the company under specified conditions, including: upon reaching the age of sixty (60) years or upon completing twenty-five (25) years of service to the company, whichever comes first, with the employee being compulsory retired and paid the retirement benefits provided in the agreement.

Petitioner argued that the CBA provision was valid because it was consistent with Article 287 of the Labor Code, which allows an employee to be retired upon reaching the retirement age established in the CBA or other applicable employment contract, and entitles the employee to retirement benefits earned under existing laws and the CBA or other agreements. The Solicitor General, in his Manifestation in Lieu of Comment, supported petitioner’s view that the law permits the fixing of retirement age by the employer and employees. He cited a rule in the Omnibus Rules implementing the Labor Code indicating that in the absence of a CBA or other applicable agreement concerning retirement at an older age, retirement may occur upon reaching age sixty (60). The Solicitor General interpreted the use of the word “may” as indicating no prohibition against fixing a lower compulsory retirement age.

Respondent, through the NLRC position, took the contrary view, treating the early compulsory retirement as illegal dismissal. The question therefore required the Court to determine whether compulsory retirement under the CBA should be treated as dismissal in law and in consequence.

Retirement Distinguished from Dismissal

The Court considered the parties’ reliance on Soberano vs. Clave. In that case, the Court had distinguished retirement from dismissal. Retirement was described as the result of a bilateral act and agreement between employer and employees, grounded on consent and severance of employment upon reaching an agreed age or conditions. Dismissal, by contrast, was characterized as a unilateral act of the employer terminating services with or without cause. The Court noted that retirement provisions in labor agreements are tied to stipulations on retirement benefits, while dismissals without just cause involve statutory separation pay considerations. The Court also emphasized that the Labor Code recognizes retirement as separate from dismissal or termination of employment and that the employer’s right to retire an employee who has reached the retirement age in the CBA is coupled with the employee’s entitlement to earned benefits.

The Court agreed with petitioner and the Solicitor General that Article 287 as worded allows retirement age to be fixed at below sixty (60). It also held that providing for early retirement does not constitute diminution of benefits. The Court reasoned that early retirement is commonly treated internationally as a reward for services rendered because it allows the employee to receive retirement benefits earlier and to derive financial security sooner. It further considered that CBAs with early retirement provisions were not uncommon and that such arrangements should not be treated as a reduction or impairment of employment benefits.

Binding Nature of the CBA and Application to Union Member Employees

The Court also addressed the binding effect of the CBA. It held that, as a union member, private respondent was bound by the CBA because its terms and conditions constituted the law between the parties. The Court reiterated that a CBA binds not only the union but also its members, and that the parties are bound not only to what is expressly stipulated but also to consequences that, by their nature, align with good

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