J.V. Angeles Construction Corporation vs. NLRC

R.A. 7641 may be applied retroactively to entitle an employee to retirement benefits only when two circumstances concur: (1) the claimant was still an employee of the employer at the time the statute took effect, and (2) the claimant has complied with the requirements for eligibility under the statute. An employee who had already retired and severed the employment relationship before the law's effectivity cannot avail of its beneficial provisions.

Petitioner J.V. Angeles Construction Corporation is a private employer engaged in construction. Private respondent Pedro Santos was its employee, hired as a carpenter in 1969 and promoted to foreman in 1973. Republic Act No. 7641, which amended Article 287 of the Labor Code by providing for retirement pay in the absence of a retirement plan or agreement, took effect on January 7, 1993. The dispute centers on whether that statute may be applied retroactively to benefit an employee who retired before its effectivity.

Pedro Santos was employed in 1969 as a carpenter by J.V. Angeles Construction Corporation. In 1973, he was promoted to the position of foreman, which he held until his retirement in February 1992, when he was sixty-two years old. At that time, there was no collective bargaining agreement or other employment contract providing for a retirement plan beyond the benefits available through the Social Security System.

On October 25, 1993, Santos filed a complaint for retirement benefits and service incentive leave pay before the NLRC, National Capital Region Arbitration Branch, against the corporation. Conciliatory proceedings failed to yield an amicable settlement, and the parties were required to submit their respective position papers. On July 25, 1995, Labor Arbiter Ariel Cadiente Santos rendered a decision in favor of private respondent, directing the corporation to pay retirement pay equivalent to one-half month salary for every year of service, including five days of service incentive leave pay for three years prior to the filing of the complaint and one-half of the 13th month pay.

Petitioner appealed to the NLRC on August 14, 1995, contending that the Labor Arbiter erred in giving R.A. 7641 retroactive application since Santos had retired almost a year before the law's effectivity on January 7, 1993. On May 31, 1996, the NLRC Third Division upheld the Labor Arbiter's award, relying on the ruling in Oro Enterprises vs. NLRC that R.A. 7641 may be retroactively applied when the claim for benefits was filed after the law had taken effect. Petitioner's Partial Motion for Reconsideration was denied by the NLRC on July 10, 1996, prompting the present petition for certiorari.

• Retroactivity of R.A. 7641: Petitioner argued that the NLRC gravely abused its discretion in affirming the Labor Arbiter's award of retirement benefits by giving retroactive application to R.A. 7641, since private respondent Pedro Santos had retired almost a year before the law's effectivity on January 7, 1993.
• Applicability of Llora Motors Doctrine: Petitioner maintained that the ruling in Llora Motors, Inc. vs. Drilon should govern, under which, in the absence of a collective bargaining agreement or other employment contract, there is no obligation on the part of the employer to set up a retirement scheme over and above that established under existing laws.
• Sufficiency of SSS Benefits: Petitioner contended that since Santos had been receiving retirement benefits from the Social Security System, he could no longer demand additional benefits from his employer absent any company practice, policy, or contract granting such benefits.

• Retroactive Application of R.A. 7641: Whether R.A. 7641 may be given retroactive effect to entitle an employee who retired before the law's effectivity to retirement benefits.

• Retroactive Application of R.A. 7641: No. R.A. 7641 cannot be applied retroactively in favor of an employee who had already retired and ceased to be employed before the statute took effect, the first of two required concurrence of circumstances for retroactive application being absent.

• Retroactive Application of R.A. 7641: R.A. 7641 is a social legislation enacted as a labor protection measure, and its benefits can be reckoned retroactively to the time employment contracts started, as held in Oro Enterprises, Inc. vs. NLRC. However, the doctrine was elaborated in CJC Trading, Inc. vs. NLRC, which enumerated two circumstances that must concur before the law could be given retroactive effect: (1) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect, and (2) the claimant has complied with the requirements for eligibility under the statute. In Philippine Scout Veterans Security and Investigation Agency vs. NLRC, the Court applied these requisites and denied retroactive application where the employee had resigned before the law's effectivity. In the present case, Santos retired and ceased to be an employee in February 1992, eleven months before R.A. 7641 took effect on January 7, 1993. Although he filed his complaint on October 23, 1993, nine months after the law's effectivity, the first circumstance — that the claimant still be an employee when the statute took effect — was absent. Accordingly, the NLRC erred in upholding the Labor Arbiter's award of retirement benefits.

• Retroactive Application of R.A. 7641 — R.A. 7641, as a social legislation and curative statute, may be applied retroactively to labor contracts still existing at the time the statute took effect, and its benefits may be reckoned from the start of the employment relationship. However, retroactive application requires the concurrence of two circumstances: (1) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect, and (2) the claimant has complied with the requirements for eligibility under the statute. In this case, the first circumstance was absent because Santos had retired eleven months before the law's effectivity, precluding retroactive application.

• "R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative statute that — absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer — can respond, in part at least, to the financial well-being of workers during their twilight years soon following their life of labor." — This passage, quoted from Oro Enterprises, Inc. vs. NLRC, articulates the legislative purpose behind R.A. 7641 and the rationale for its potential retroactive application.
• "the laws can apply to labor contracts still existing at the time the statute has taken effect, and that its benefits can be reckoned not only from the date of the law's enactment but retroactively to the time said employment contracts have started." — This formulation from Oro Enterprises defines the scope of retroactive application, emphasizing the requirement that the employment contract must still exist when the statute takes effect.
• "In the case under scrutiny, private respondent Santos retired and ceased to be an employee of petitioner on February 1992, eleven (11) months before the effectivity of R.A. 7641, and he brought his complaint on October 23, 1993, nine (9) months after the law's effectivity. It is thus decisively clear that the provisions of R.A. 7641 could not be given retroactive effect in his favor." — This is the ratio decidendi applying the two-circumstance test to the facts and concluding that retroactive application was unwarranted.

• Oro Enterprises, Inc. vs. NLRC, 238 SCRA 105 — Controlling precedent establishing that R.A. 7641, as social legislation, may be applied retroactively to labor contracts still existing at the time the statute took effect. The NLRC relied on this case, but the Supreme Court found it inapplicable because the employment relationship had already been severed before the law's effectivity.
• CJC Trading, Inc. vs. NLRC, 246 SCRA 724 — Followed and applied. This case elaborated the Oro Enterprises doctrine by enumerating the two circumstances that must concur before R.A. 7641 could be given retroactive effect: (1) the claimant was still an employee when the statute took effect, and (2) the claimant complied with the eligibility requirements.
• Philippine Scout Veterans Security and Investigation Agency vs. NLRC, G.R. No. 110519, April 14, 1997 — Applied. The Court used this case to illustrate the application of the two-circumstance test, where retroactive application was denied because the employee had resigned before the law's effectivity.
• Llora Motors, Inc. vs. Drilon, 179 SCRA 175 — Cited by petitioner for the proposition that absent a collective bargaining agreement or other employment contract, there is no obligation on the employer to set up a retirement scheme beyond what existing laws provide.

• Article 287, Labor Code, as amended by R.A. 7641 — This provision governs retirement benefits, stating that in the absence of a retirement plan or agreement, an employee upon reaching at least sixty years of age who has served at least five years may retire and is entitled to retirement pay equivalent to at least one-half month salary for every year of service. The provision took effect on January 7, 1993, and the case turned on whether it could be applied retroactively to an employee who had retired before that date.

Romero, Vitug, Panganiban, and Gonzaga-Reyes, JJ., concurred.