Case Summary (G.R. No. L-48926)
Petitioner
Manuel Sosito went on an indefinite leave with the company’s consent on January 16, 1976. While still technically in the company’s employ, he was not in active service and received no salary or benefits during the indefinite leave. He submitted a resignation on July 29, 1976 “to avail himself of the gratuity benefits” after the company announced a retrenchment program.
Respondent
Aguinaldo Development Corporation experienced heavy losses and, by memorandum dated July 20, 1976, announced a voluntary retrenchment program offering separation benefits to employees who were in active service as of June 30, 1976 and who would tender resignations by July 31, 1976. The company expressly limited the offer to those “in the active service as of June 30, 1976.”
Key Dates
- Employment began: 1964.
- Indefinite leave commenced: January 16, 1976.
- Memorandum announcing retrenchment program: July 20, 1976.
- Petitioner’s resignation tendered: July 29, 1976.
- Resignation deadline under the program: July 31, 1976.
Applicable Law (as quoted in the record)
Article 272(a) of the Labor Code (in force at the relevant time) allowing termination by employer for, among other causes, the closing or cessation of operation or reduction of workforce due to serious business reverses. The Court also invoked the Constitution’s policy of social justice and protection of the working class in its reasoning.
Facts Material to the Dispute
The company’s memorandum explicitly confined the separation-pay offer to employees who were “in the active service as of June 30, 1976.” The petitioner, having been on indefinite leave since January 16, 1976, was not actively working on that date and thus did not meet the express eligibility condition. Petitioner’s resignation was not acted upon and he did not receive separation pay. He sought relief before the Department of Labor, which sustained his claim and ordered payment; that award was later reversed by the National Labor Relations Commission.
Retrenchment Memorandum — Terms of the Offer
The retrenchment memorandum: (1) stated the company’s financial losses and need to reduce manpower; (2) offered separation benefits as a voluntary measure even though the law would have permitted reduction without separation pay; (3) limited eligibility to employees “in the active service as of June 30, 1976;” (4) set the computation of separation pay at one-half month’s basic salary multiplied by years of service; and (5) required written resignation not later than July 31, 1976. The memorandum further provided that resignations accepted would be paid and that the offer would lapse after July 31, 1976.
Procedural History
The labor arbiter granted petitioner relief and ordered respondent to pay P4,387.50 (equivalent to six and one-half months’ salary at P675 per month). On appeal, the National Labor Relations Commission reversed and held petitioner was not covered by the retrenchment program. The petitioner then sought review in the Supreme Court.
Issue Presented
Whether petitioner, being on indefinite leave on June 30, 1976, qualified for separation pay under the respondent’s retrenchment program which was expressly limited to employees “in the active service as of June 30, 1976.”
Court’s Legal Analysis
- Eligibility under the retrenchment memorandum turned on being “in the active service as of June 30, 1976.” The memorandum’s terms were clear and unambiguous; the offer was limited to those actually working on that cutoff date.
- The petitioner, although still technically an employee by virtue of the leave arrangement, was not in active service on June 30, 1976 because he had been on indefinite leave since January 16, 1976 and, during that period, received no salary or benefits. The Court treated active service as the operative qualifier for the voluntary gratuity.
- The Court emphasized the voluntariness of the petitioner’s leave: there was no showing of temporary layoff or forced leave; rather, the petitioner himself requested the indefinite leave which the company granted. Given that voluntary posture, the Court rejected the petitioner’s attempt to claim the retrenchment gratuity while having insulated himself from the company’s operational insecurities.
- The Court observed that
Case Syllabus (G.R. No. L-48926)
Case Citation and Panel
- Reported at 240 Phil. 373, First Division.
- G.R. No. L-48926.
- Decision promulgated December 14, 1987.
- Decision penned by Justice Cruz.
- Justices Teehankee, C.J., Narvasa, Paras, and Gancayco concurred.
Procedural Posture
- Petition for certiorari/review was given due course by the Supreme Court.
- The parties were required to file simultaneous memoranda on the sole question whether the petitioner was entitled to separation pay under the respondent company's retrenchment program.
- Administrative proceedings: Petitioner complained to the Department of Labor; the Labor Arbiter sustained the complaint and ordered payment.
- Labor Arbiter's award: The company was ordered to pay petitioner P4,387.50, representing six and a half months' salary.
- On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter and held that the petitioner was not covered by the retrenchment program.
- The petitioner then brought the matter to the Supreme Court by petitioning for relief, which the Court dismissed, affirming the NLRC decision, with costs against the petitioner.
Facts — Employment and Leave
- Manuel Sosito was employed by Aguinaldo Development Corporation in 1964.
- His work assignment: in charge of logging importation.
- His monthly salary at the time was P675.00 (citation in rollo, p. 13).
- On January 16, 1976, Sosito went on indefinite leave with the consent of the company (reference in rollo, p. 13).
- During the period of indefinite leave, Sosito received neither salary nor other benefits available to employees in active service.
Facts — Retrenchment Offer and Petitioner's Resignation
- On July 20, 1976, the respondent company's president announced a retrenchment program and issued a memorandum to all employees detailing the program.
- The retrenchment offer: separation pay available only to employees who were in active service as of June 30, 1976, provided they submitted written resignations not later than July 31, 1976.
- Manuel Sosito submitted his resignation on July 29, 1976, expressly "to avail himself of the gratuity benefits" promised in the memorandum (rollo, p. 14).
- His resignation was not acted upon by the company, and he was not paid the separation pay he expected.
- Petitioner sought redress before the Department of Labor; the Labor Arbiter ruled in his favor, but the NLRC reversed that ruling, leading to the present petition.
Respondent Company's July 20, 1976 Memorandum — Key Provisions (as reproduced in the record)
- The memorandum recited that wood-based industry operations in the Philippines had been adversely affected for two years by a worldwide decline in demand and prices for logs and wood products, and that the company suffered heavy losses, nearly P20,000,000.00 in 1975.
- The company had reviewed its operations and decided it needed to adjust manpower strength to survive, aiming to reduce overhead to avoid ultimate closure.
- The memorandum acknowledged that the law allowed a company in such a situation to drastically reduce manpower without obligation to pay separation benefits, but stated the company would nonetheless provide some financial assistance.
- Terms of the retrenchment program:
- Separation benefits would be paid to employees who were in the active service as of June 30, 1976.
- The amount of separation pay: on