Korean Air Co., Ltd. vs. Yuson

An employee who elects optional retirement under Article 287 of the Labor Code and receives the statutory benefits therefor is deemed to have abandoned any claim for benefits under a separate early retirement program, which becomes moot. Moreover, an employer’s offer of an early retirement program that reserves discretion to management and requires further approval by the head office is not a “certain offer” under Article 1319 of the Civil Code; mere acceptance by an employee does not perfect a contract, because the offer is neither definite, complete, nor intentional without further acts by the offeror.

Adelina A.S. Yuson had been employed by Korean Air since 1975, eventually becoming passenger sales manager. In 2000, Korean Air suffered substantial net losses, prompting budget cuts and an Early Retirement Program (ERP) in 2001 aimed at reducing personnel costs before resorting to retrenchment. A memorandum dated 21 August 2001 informed employees of the program, stating it was offered at management’s discretion and that applications would be forwarded to the head office for approval. Yuson accepted the offer in writing but was immediately excluded on the ground that she was due for retirement on 8 January 2002. She protested, claiming a perfected contract, and later filed a labor complaint. On her 60th birthday, 8 January 2002, she availed of optional retirement under Article 287. A compromise agreement with the employer’s officers settled the criminal aspect of her claim, and she received full statutory retirement pay, expressly reserving her right to pursue the ERP claim before the labor tribunals.

• Employment and Travel Benefits: Korean Air hired Adelina A.S. Yuson as reservations agent in July 1975, promoted her to assistant manager in 1993, and to passenger sales manager in 1999. Korean Air maintained an International Passenger Manual (IPM) providing travel benefits, but this was never implemented in the Philippines. Instead, all employees, including Yuson, received travel benefits under the collective bargaining agreement (CBA). During her 26-year tenure, Yuson received more than ten tickets.
• Transfer to Cargo: In April 2001, Yuson requested a temporary transfer from passenger sales to the cargo department in order to learn cargo operations for a post-retirement business. Effective 4 June 2001, she was assigned as “cargo dispatch” while retaining the same compensation and scope of authority as passenger sales manager. Korean Air did not appoint a replacement for her former position.
• Financial Losses and the ERP Offer: Korean Air suffered a net loss of over US$367 million in 2000 and reduced its 2001 budget by 10%. By memorandum dated 21 August 2001, the company offered an Early Retirement Program (ERP) “on its discretion” to employees, stating that availing employees would receive one and a half months’ salary per year of service. The memo indicated the program was implemented throughout Korean Air branches abroad “to prevent further losses” before conducting a retrenchment, and that “MNLSM Management, on its discretion, is hereby offering the said early retirement program to its staff.”
• Yuson’s Acceptance and Exclusion: Yuson accepted the ERP offer in a letter dated 23 August 2001. The following day, General Manager Suk Kyoo Kim informed her she was excluded because she was retiring on 8 January 2002; the program was intended for employees with longer remaining service and was a cost-saving tool. Yuson protested in letters dated 1 September and 22 September 2001, asserting that the offer and acceptance had perfected a contract, accusing Korean Air of harassment and discrimination, and claiming the transfer had caused her embarrassment.
• Employer’s Responses: Korean Air’s letters of 12 September and 10 October 2001 clarified that the ERP memorandum was “not an absolute offer but rather an invitation” subject to head office approval and the company’s discretion; that including Yuson would defeat the program’s cost-saving purpose; that her transfer was voluntary and not a demotion; and that the head office had always retained approval authority over ERP applications. On 20 September 2001, Korean Air informed employees that the ERP application period had ended and only eligible applications would be forwarded for approval.
• Retirement and Compromise Agreement: On 8 January 2002, Yuson turned 60 and availed of optional retirement under Article 287 of the Labor Code. On 14 February 2003, Korean Air officers and Yuson executed a compromise agreement settling the criminal case she had filed, under which Yuson received ₱1,671,546.92 as full retirement benefits under Article 287, with interest and after deductions. The agreement stated it represented complete settlement of her statutory retirement claims, but was without prejudice to her pending NLRC case; Yuson agreed to deduct any NLRC award from the amount already received.

• Mootness: Korean Air and Suk Kyoo Kim argued that Yuson’s claim for ERP benefits became moot when she availed of optional retirement under Article 287 and accepted the corresponding benefits in the compromise agreement.
• No Perfected Contract: Petitioners maintained that the 21 August 2001 memorandum was not a certain offer capable of acceptance but a mere invitation subject to management’s discretion and head office approval; thus, no contract was perfected under Articles 1315 and 1319 of the Civil Code.
• Valid Management Prerogative: Petitioners contended that excluding Yuson from the ERP was a legitimate exercise of management prerogative, as including her would have contradicted the program’s cost-saving objective and she was already scheduled to retire on 8 January 2002.
• Lack of Basis for Ticket Award: The award of ten Korean Air economy tickets was assailed as without legal or factual basis because the IPM had never been implemented in the Philippines and employees received travel benefits under the CBA.

• Perfected Contract: Yuson argued that the ERP memorandum constituted a definite and certain offer, which she absolutely accepted, thereby perfecting a contract under Article 1315 and the last paragraph of Article 1319 of the Civil Code. She claimed Korean Air was bound to perform the obligation arising from this perfected contract.
• Forced Retirement and Discrimination: Yuson asserted that Korean Air forced her to retire on 8 January 2002 and that her exclusion from the ERP was discriminatory and done in bad faith, pointing to her earlier transfer to the cargo department as a demotion that caused her embarrassment.
• Entitlement to Travel Benefits: Yuson claimed entitlement to travel benefits under Chapter 14 of the IPM, contending that non-implementation of the IPM travel benefit in her case was a discriminatory act.

• Mootness of ERP Claim: Whether Yuson’s claim for benefits under the Early Retirement Program was rendered moot by her subsequent availment of optional retirement and acceptance of benefits under Article 287 of the Labor Code.
• Certainty of the Offer: Whether the 21 August 2001 memorandum constituted a certain offer such that a perfected contract arose upon Yuson’s acceptance, entitling her to ERP benefits under the Civil Code.
• Forced Retirement and Management Prerogative: Whether Korean Air forced Yuson to retire on 8 January 2002 or validly exercised its management prerogative in excluding her from the ERP.
• Award of Travel Tickets: Whether the award of ten Korean Air economy tickets under the International Passenger Manual was legally and factually warranted.

• Mootness of ERP Claim: Yuson’s claim for ERP benefits was rendered moot when she availed of optional retirement under Article 287 and accepted full retirement benefits under the compromise agreement. By her acceptance, she is deemed to have opted to retire under the statutory provision, and such election precludes her from maintaining a separate claim under the ERP. The doctrine in Capili v. NLRC — that acceptance of retirement benefits under Article 287 deems the employee to have chosen statutory retirement — was controlling.
• Certainty of the Offer: The 21 August 2001 memorandum did not constitute a certain offer under Article 1319 of the Civil Code. For an offer to be certain, the contract must come into existence by mere acceptance, without any further act on the part of the offeror; the offer must be definite, complete, and intentional. The memorandum expressly stated that the ERP was offered “on its discretion” by management, that applications required head office approval, and that the program’s purpose was “to prevent further losses.” These features demonstrated that further acts by the offeror were necessary before any contract could arise, and that the employer did not intend to ministerially approve all applications. No perfected contract came into being.
• Forced Retirement and Management Prerogative: Korean Air did not force Yuson to retire. The record showed that Yuson was retiring on 8 January 2002: she had requested transfer to the cargo department in April 2001 to prepare for a post-retirement business; Korean Air’s letters consistently stated her retirement date without contradiction from her; she eventually retired under Article 287 on that date; and the Labor Arbiter and the NLRC both found that she was about to retire in January 2002. The exclusion from the ERP was a valid exercise of management prerogative, as it was not shown to be malicious, harsh, oppressive, vindictive, or wanton. Including her would have been contrary to the cost-saving objective of the program.
• Award of Travel Tickets: The award of ten economy tickets was without basis. The IPM travel benefit had never been implemented in the Philippines; Korean Air uniformly granted travel benefits under the CBA, and Yuson had already received more than ten tickets during her employment. Neither the Court of Appeals nor the NLRC’s initial decision provided any factual or legal discussion to support the award, and the record lacked evidence that the IPM benefit had ever been extended to any local manager.

• Election of Statutory Retirement Moots Alternative Claims — An employee who avails of optional retirement under Article 287 of the Labor Code and accepts the corresponding benefits is deemed to have chosen that statutory scheme. Any claim for benefits under a separate early retirement program becomes moot and cannot be pursued. (See Capili v. National Labor Relations Commission, G.R. No. 120802, 17 June 1997, 273 SCRA 576.)
• Certainty of Offer under Article 1319 of the Civil Code — An “offer” in the context of Article 1319 is certain only if the contract can come into existence by the mere acceptance of the offeree, without any further act on the part of the offeror. The offer must be definite, complete, and intentional. An announcement that reserves discretion to management and requires further approval by a higher authority does not satisfy the requirement of certainty and amounts to a mere invitation to apply, not an offer capable of perfection by acceptance. (See Spouses Paderes v. Court of Appeals, 502 Phil. 76 [2005].)
• Management Prerogative in Exclusion from Cost-Saving Programs — The decision to include or exclude employees from a cost-saving early retirement program is within the employer’s management prerogative. Its exercise is valid and will be upheld so long as it is not attended by bad faith or done in a malicious, harsh, oppressive, vindictive, or wanton manner. (See Magdadaro v. Philippine National Bank, G.R. No. 166198, 17 July 2009, 593 SCRA 195.)
• Requirements for a Perfected Contract under the Civil Code — Under Articles 1315, 1318 and 1319, a contract is perfected by the meeting of the parties’ consent upon a certain object and cause. The offer must be certain and the acceptance absolute. If any of these requisites is absent, no contract exists.

• “By his acceptance of retirement benefits the petitioner is deemed to have opted to retire under the third paragraph of Article 287 of the Labor Code, as amended by R.A. No. 7641.” — Quoting Capili v. NLRC, this passage encapsulates the mootness ruling and the doctrine of election of statutory retirement.
• “There is an ‘offer’ in the context of Article 1319 only if the contract can come into existence by the mere acceptance of the offeree, without any further act on the part of the offeror. Hence, the ‘offer’ must be definite, complete and intentional.” — Quoting Spouses Paderes v. Court of Appeals, this defines the standard of certainty required for a valid offer.
• “In the present case, the offer is not certain: (1) the 21 August 2001 memorandum clearly states that, ‘MNLSM Management, on its discretion, is hereby offering the said early retirement program to its staff’; (2) applications for the ERP were forwarded to the head office for approval, and further acts on the offeror’s part were necessary before the contract could come into existence; and (3) the 21 August 2001 memorandum clearly states Korean Air’s intention, which was, ‘to prevent further losses.’” — The Court’s direct application of the certainty standard to the ERP memorandum, illustrating why no perfected contract arose.

• Capili v. National Labor Relations Commission, G.R. No. 120802, 17 June 1997, 273 SCRA 576 — Followed as controlling authority that acceptance of retirement benefits under Article 287 deems the employee to have opted for statutory retirement, mooting other claims.
• Spouses Paderes v. Court of Appeals, 502 Phil. 76 (2005) — Followed for the definition of a “certain offer” under Article 1319, requiring that the contract be capable of coming into existence by mere acceptance without further act by the offeror.
• Magdadaro v. Philippine National Bank, G.R. No. 166198, 17 July 2009, 593 SCRA 195 — Cited to support the principle that management prerogative is valid as long as not exercised in a malicious, harsh, oppressive, vindictive, or wanton manner.

• Article 287, Labor Code of the Philippines (as amended) — The third paragraph provides for optional retirement at age 60 with at least five years of service, entitling the employee to retirement pay equivalent to at least one-half month salary per year of service. Yuson availed of this provision and received benefits, which the Court held mooted her ERP claim.
• Articles 1315, 1318 and 1319, Civil Code of the Philippines — These provisions govern the perfection of contracts. They require consent, object, and cause, with consent manifested by a certain offer and absolute acceptance. Applied to hold that the ERP memorandum was not a certain offer and therefore no contract was perfected.

Associate Justices Arturo D. Brion, Diosdado M. Peralta, Roberto A. Abad, and Jose Portugal Perez concurred. Chief Justice Renato C. Corona certified the decision.