G.R. No. 144483 - Sta. Catalina College vs. National Labor Relations Commission

Case Summary (G.R. No. 144483)

Factual Background

Hilaria began her employment with petitioner school in 1955 as an elementary teacher. In 1970, she requested and was granted a one-year leave of absence without pay because of her mother’s illness. When that leave expired in 1971, she did not return to petitioner school. The record reflected that Hilaria later taught elsewhere—at San Pedro Parochial School in school year 1980–1981, and at the Liceo de San Pedro in school year 1981–1982—before reapplying to petitioner school in 1982, when she was hired again with a monthly salary of PHP 6,567.95.

When she retired in 1997, petitioners recognized the period 1982 to 1997 as her credited service for purposes of retirement. Petitioners pegged her retirement benefits at PHP 59,038.35, computed on the basis of fifteen years of service within that period. Petitioners excluded her earlier service from 1955 to 1970, asserting that she abandoned her employment when she failed to return after her leave expired in 1971.

Petitioners further deducted from the computed retirement benefits PHP 28,853.09, representing reimbursement of the employer’s contribution to her retirement benefits under the Private Education Retirement Annuity Association (PERAA), which Hilaria had already received. Petitioners also deducted the PHP 12,000.00 gratuity pay that had been given to her, leaving a balance of PHP 18,185.26.

Hilaria contested the computation. She argued that her retirement benefits should be computed based on thirty years of service, inclusive of 1955 to 1970, and that the gratuity pay should not be deducted from retirement benefits. She thus claimed entitlement to PHP 190,539.90, based on her formula for retirement benefits and retirement pay under the applicable retirement framework.

NLRC Proceedings

Given the parties’ inability to agree, Hilaria filed a complaint before the NLRC Regional Arbitration, Branch No. IV, docketed as NLRC Case No. RAB-IV-3-9860, for non-payment of retirement benefits.

By Decision of October 30, 1998, the labor arbiter upheld petitioners’ position. The arbiter ordered petitioners to pay Hilaria PHP 18,185.26 only as the differential of her retirement benefits.

On appeal, the NLRC reversed the labor arbiter. In Decision of April 27, 1999, the NLRC set aside the labor arbiter’s ruling and ordered petitioners to pay Hilaria the total amount of PHP 85,287.72, computed by taking the retirement components totaling PHP 114,140.81 (based on twenty-nine years of service) and subtracting PHP 28,287.72 representing petitioners’ PERAA contribution already received by Hilaria. The NLRC ruled that the earlier gratuity pay should not be deducted from the retirement package.

Court of Appeals Review

Petitioners then brought the case to the Court of Appeals via certiorari. By Decision of April 28, 2000, the CA dismissed petitioners’ petition and affirmed the NLRC. The CA held that petitioners failed to prove abandonment of Hilaria’s position in 1970. It found persuasive the fact that petitioner school had given Hilaria a Plaque of Appreciation for thirty years of continuous service, and the further finding that petitioner school did not send notice terminating her employment.

The CA ruled that, despite Hilaria’s absence from 1970 to 1982 and her employment elsewhere, the juridical employer-employee relationship with petitioner school remained unsevered. It reasoned that: (a) petitioner school never sent any notice dismissing her due to unexplained and prolonged absence as required by Section 2, Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code (citing Reno Foods, Inc. versus NLRC, et al., 249 SCRA 386); (b) Hilaria did not receive separation-related benefits from petitioner school during that period; (c) petitioner school issued a Plaque of Appreciation for thirty years of continuous service; and (d) Hilaria received a gratuity pay of PHP 12,000.00 as recognition for her exemplary services up to retirement.

As to the PHP 12,000.00 gratuity pay, the CA sustained the NLRC that it should not be deducted from retirement benefits due to Hilaria. Petitioners’ motion for reconsideration was denied by CA resolution on August 11, 2000.

Issues Raised on Petition for Review

In the present petition, petitioners attributed error to the CA for awarding retirement benefits computed based on years of service longer than what they claimed was continuous. They specifically argued that Hilaria rendered only fifteen continuous years of service prior to retirement and that the CA ignored the ruling in Carandang v. Dulay, 188 SCRA 793 (1990), which, according to petitioners, related separation pay computation to the number of continuous years of service prior to separation.

Petitioners asserted that when Hilaria failed to report after her one-year leave expired in 1971 without requesting an extension, she effectively resigned or abandoned her employment. From this premise, they contended that the period 1955 to 1970 should not be credited, because Hilaria, when rehired in 1982, should be treated as a new employee. They also argued that the PHP 12,000.00 gratuity should be treated as part of retirement benefits, as it was allegedly given in connection with retirement and in addition to the amount contributed to PERAA.

Court’s Legal Analysis on Abandonment and Creditable Service

The Court treated as the threshold issue whether Hilaria’s services for petitioner school during 1955 to 1970 could be included in the computation of her retirement benefits. The Court recognized that, generally, factual findings of quasi-judicial agencies like the NLRC receive respect and finality if supported by substantial evidence. It also acknowledged that when NLRC findings conflict with those of the labor arbiter, the reviewing court must examine the evidence to determine which conclusion aligns better with the facts.

On abandonment, the Court held that Hilaria could not be credited for the period 1955 to 1970. It reasoned that once her approved leave of absence without pay expired in 1971 without her requesting an extension or notifying petitioner school of any intention to resume teaching, and after she effectively worked elsewhere during the interim, she abandoned her teaching position and relinquished the retirement benefits accumulated during that earlier period.

The Court reiterated the elements of abandonment: (1) failure to report for work or absence without a valid or justifiable reason; and (2) a clear intention to sever the employer-employee relationship, with the latter being the more determinative element, manifested through overt acts. It further stated that the employer must show a deliberate and unjustifiable refusal to resume work without intention to return, and that abandonment requires a concurrence of intent and overt acts from which an employee may be deduced as having no more intention to work.

Applying these principles, the Court emphasized that it was undisputed that Hilaria’s leave expired in 1971 without her requesting an extension or communicating her intended return. It was also undisputed that she was rehired only in 1982 after she reapplied, and she did not offer any explanation for her more than decade-long absence. The Court concluded that abandonment of work in 1971 was manifest.

On the CA’s insistence on notice under Section 2, Rule XIV, Book V of the Omnibus Rules, the Court held this was erroneous. It explained that when Hilaria abandoned her position in 1971, the governing law was Republic Act No. 1052 (the Termination Pay Law), as amended by Republic Act No. 1787. Under R.A. No. 1052, the employer or employee could terminate employment without just cause through prescribed notice requirements, and where no such notice was served, liability or compensation follows according to the notice scheme. The Court relied on Mapua Institute of Technology v. Manalo, 108 Phil. 628 (1960), to instruct that, absent special law governing dismissal or separation of professors from private colleges and universities, R.A. No. 1052, as amended, should apply.

Because abandonment constituted a just cause for terminating Hilaria’s services, the Court ruled that petitioner school had no obligation to serve written notice in the manner applied by the CA. It also treated Hilaria’s later receipt in 1997 of a plaque of appreciation and a gratuity pay as insufficient to negate the fact that she abandoned her employment in 1971, even if she later resumed work in 1982.

The Court further rejected the CA’s reasoning that absence of separation pay and contribution share meant the employer-employee relationship was not severed. It noted that an employee terminated for just cause is generally not entitled to separation pay. It also observed that PERAA was established only in 1972. Thus, when Hilaria abandoned her work in 1971, there were no PERAA retirement contributions to speak of that could have been shared or reimbursed for the earlier period.

With the conclusion that Hilaria was a new employee upon rejoining petitioner school in 1982, the Court held that her retirement benefits should be computed only based on her service from 1982 to 1997. It cited JAM Transportation Co., Inc. v. Flores, 220 SCRA 114 (1993), to support the principle that reemployment as a new employee renders prior years of service non-existent for purposes of retirement benefits and similar entitlements tied to service continuity.

Gratuity Pay: Separate From Retirement Benefits

On the matter of the PHP 12,000.00 gratuity pay, the Court sustained the CA. It held that gratuity pay is separate and distinct from retirement benefits. Gratuity is paid purely out of generosity and is not intended to pay a worker for actual services rendered or performance. It referenced Republic Planters Bank v. NLRC, 266 SCRA 142, 150 (1997), for the proposition that gratuity rewards satisfactory service or favors. Retirement benefits, by contrast, are meant to help the employee e

Case Syllabus (G.R. No. 144483)

Parties and Procedural Posture

Sta. Catalina College and its then directress Sr. Loreta Oranza brought the petition after the Court of Appeals (CA) affirmed the labor tribunals’ award of retirement benefits to Hilaria G. Tercero.
Hilaria G. Tercero was the private respondent and complainant in the labor case for non-payment and computation of retirement benefits.
The controversy originated in the NLRC Regional Arbitration, Branch No. IV, docketed as NLRC Case No. RAB-IV-3-9860.
The Labor Arbiter favored petitioners by awarding only a small differential.
The NLRC reversed and ordered payment of a larger amount, without deduction of gratuity pay.
The CA dismissed petitioners’ petition for certiorari, sustaining the NLRC and holding that employment was not severed during the years in dispute.
Petitioners sought further review by filing a petition for review on certiorari before the Supreme Court.

Key Factual Allegations

Hilaria was hired by Sta. Catalina College as an elementary school teacher in June 1955.
In 1970, Hilaria was granted a one-year leave of absence without pay due to her mother’s illness.
When the one-year leave expired in 1971, Hilaria did not report back for work and was not heard from until she applied again in 1982.
In the interim, Hilaria worked as a teacher at San Pedro Parochial School for school year 1980-1981 and at Liceo de San Pedro, Binan, Laguna for school year 1981-1982.
In 1982, petitioners hired Hilaria again with a monthly salary of PHP 6,567.95.
On March 22, 1997, Hilaria received a Plaque of Appreciation for thirty years of service and PHP 12,000.00 gratuity pay.
On May 31, 1997, Hilaria reached compulsory retirement age of sixty-five (65).
Petitioners computed retirement benefits under Article 287 of the Labor Code, as amended by R.A. 7641, using only fifteen (15) years from 1982 to 1997, excluding 1955 to 1970 due to asserted abandonment in 1971.
Petitioners pegged retirement benefits at PHP 59,038.35, then deducted PHP 28,853.09 for PERAA reimbursement already received and deducted PHP 12,000.00 gratuity pay, leaving a balance of PHP 18,185.26.
Hilaria demanded inclusion of her earlier service from 1955 to 1970 in computing retirement benefits and insisted that the PHP 12,000.00 gratuity should not be deducted.

Retirement Pay Computation Dispute

Petitioners treated Hilaria’s absence after leave expiration in 1971 as abandonment that severed the employment relationship, so earlier years could not be credited.
Hilaria calculated that her retirement benefits should reflect thirty (30) years of service and her “latest salary” components under Article 287, yielding a higher figure.
The Labor Arbiter upheld petitioners’ computation method and limited award to PHP 18,185.26 as the differential.
The NLRC increased the award to PHP 85,287.72, by crediting more years of service but still offsetting PERAA contributions already received.
The NLRC ruled that the earlier gratuity pay should not be deducted from retirement benefits.
The CA sustained the NLRC approach, holding that petitioners failed to prove abandonment and employment was not severed, thereby allowing service credit for 1955 to 1970.

Issues Presented

The threshold issue was whether Hilaria’s services from 1955 to 1970 should be included in computing her retirement benefits despite her extended absence after leave expired in 1971.
The case also required resolution of whether abandonment required notice under the CA’s cited Omnibus Rules Implementing the Labor Code.
Another issue was whether the PHP 12,000.00 gratuity pay should be deducted from retirement benefits due to Hilaria.
The Court also had to determine the correct application of Article 287 and the retirement benefit effect of employer contributions under PERAA.

Arguments of Petitioners

Petitioners argued that after Hilaria’s one-year leave expired in 1971, she neither reported for work nor requested an extension, which showed voluntary resignation or abandonment.
Petitioners contended that abandonment effectively severed the employer-employee relationship, so the period 1955 to 1970 could not be credited upon her rehiring in 1982.
Petitioners relied on Carandang v. Dulay to argue that when a teacher is rehired after resignation, previous years may be treated as non-continuous for purposes of computing separation benefits.
Petitioners also maintained that the PHP 12,000.00 gratuity should form part of retirement benefits because it was given due to retirement and because it complemented the school’s PERAA retirement contributions.
Petitioners further invoked the general deference accorded to quasi-judicial factual findings, while also insisting that the CA and NLRC erred in ignoring their abandonment theory.

Court’s Analysis on Abandonment

The Court held that the Carandang v. Dulay ruling was not controlling because the controversy there involved separation pay and the present case involved the proper computation of retirement benefits.
The Court ruled that Hilaria could not be credited for services during 1955 to 1970 for purposes of retirement benefit computation.
The Court found that upon expiration of Hilaria’s leave in 1971, she neither requested an extension nor notified petitioners if and when she would resume teaching.
The Court treated her prolonged absence as evidencing abandonment, noting that she was employed elsewhere during the intervening years.
The Court reiterated that a valid finding of abandonment requires two elements: (one) failure to report for work or absence without valid or justifiable reason, and (two) a clear intention to sever the employer-employee relationship manifested by overt acts.
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