Obusan vs. Philippine National Bank

A company retirement plan lowering the compulsory retirement age below 65 is valid and does not violate security of tenure, provided it complies with the minimum retirement benefits under Article 287 of the Labor Code and is accepted by the employees as commensurate to their service, which acceptance may be inferred from lack of dissent upon proper dissemination, union recognition in a collective bargaining agreement, and the non-contributory nature of the plan.

Amelia R. Obusan was hired by Philippine National Bank (PNB) in 1979 when it was a government-owned and controlled corporation, at which time the compulsory retirement age for government employees was 65 under the Revised Government Service Insurance Act of 1977. PNB was privatized in 1996 pursuant to Executive Order No. 80, resulting in the severance of all its employees from government service and the payment of their Government Service Insurance System (GSIS) retirement gratuities. Obusan continued her employment under private sector terms. In 2000, PNB adopted the PNB Regular Retirement Plan (PNB-RRP), setting the compulsory retirement age at 60 and making membership automatic for all regular employees.

• Government Employment and Privatization: Obusan was hired in 1979 as a government employee of PNB, then a government-owned and controlled corporation. Upon PNB's privatization in 1996, all employees were deemed retired from government service. The GSIS confirmed Obusan's retirement and paid her retirement gratuity. Obusan continued working for PNB under private employment terms.
• Adoption of the PNB-RRP: The PNB Board of Directors approved the PNB Regular Retirement Plan (PNB-RRP) on December 22, 2000. The plan set the compulsory retirement age at 60, regardless of length of service. Membership was automatic for all full-time regular and permanent officers and employees. PNB disseminated the terms and implementing guidelines on February 21, 2001. The plan was registered with the Bureau of Internal Revenue and subsequently recognized by the Philnabank Employees Association, the rank-and-file union, in their Collective Bargaining Agreement (CBA). The PNB-RRP is solely and exclusively funded by PNB; no financial burden is imposed on employees.
• Compulsory Retirement and Protest: On February 11, 2002, PNB informed Obusan that her last day of employment would be March 3, 2002, as she would reach the mandatory retirement age of 60 on March 4, 2002. Through counsel, Obusan questioned her compulsory retirement and threatened legal action for illegal dismissal and unfair labor practice, asserting she was then the President of the PNB Supervisors and Officers Association. PNB replied that the retirement was valid and not tantamount to union busting. Obusan then filed an illegal dismissal complaint.

• Vested Right to Retirement Age: Obusan argued she possessed a vested right to retire at 65, the age prescribed by civil service regulations at the time of her hiring. She insisted that the PNB-RRP, which lowered the compulsory retirement age to 60, should only apply to employees hired after its adoption.
• Lack of Consent: Obusan maintained that the PNB-RRP was a unilateral act of PNB to which she did not consent. Relying on Jaculbe v. Silliman University, she argued that imposing a retirement age below 65 requires the employee's consent, and her automatic membership without choice did not constitute genuine acquiescence.
• Illegal Dismissal: Obusan claimed that retiring her at 60 under a plan she did not freely assent to constituted illegal dismissal, violating her right to security of tenure. She asserted that Article 287 of the Labor Code should prevail, giving her the right to compulsorily retire at 65.

• Change in Applicable Law: PNB countered that privatization removed it from the coverage of civil service laws, rendering the Labor Code applicable and allowing the establishment of private retirement plans.
• Validity and Acceptance of PNB-RRP: PNB argued that the PNB-RRP complied with Labor Code standards, provided benefits exceeding the legal minimum, and was accepted by employees as evidenced by the rank-and-file union's recognition of the plan in the CBA and the lack of dissent from other employees or supervisors upon its dissemination.
• No Vested Right to Retirement Age: PNB asserted that Obusan had no vested right to a specific retirement age, as retirement age is not property and can be altered by law or contract; the right to retirement funds vests only at the time of retirement.

• Validity of Lowered Retirement Age: Whether an employer may validly impose a compulsory retirement age of 60 under a unilaterally adopted retirement plan on an employee originally hired under a different retirement age.
• Vested Right to Retirement Age: Whether an employee hired when the employer was a government-owned and controlled corporation acquires a vested right to the compulsory retirement age of 65 that survives the employer's privatization.
• Consent Requirement: Whether the lack of explicit employee consent to a company retirement plan invalidates the plan and renders retirement thereunder an illegal dismissal.

• Validity of Lowered Retirement Age: The imposition of a compulsory retirement age of 60 under the PNB-RRP was valid. Under Article 287 of the Labor Code, the retirement age is primarily determined by existing agreements or employment contracts; absent such, the law fixes the compulsory age at 65 and the optional age at 60. The PNB-RRP serves as the applicable employment contract. Because the plan provides benefits exceeding the minimum requirements of Article 287, it complies with the law.
• Vested Right to Retirement Age: No vested right to a specific retirement age exists. Retirement age is not property and can be amended by laws, contracts, or CBAs. Privatization severed Obusan from the government retirement plan, negating any claim to retire at 65 under the old law. The applicable plan is the one in effect at the time of retirement.
• Consent Requirement: Explicit consent is not strictly required for a retirement plan to be valid, distinguishing Jaculbe v. Silliman University. The PNB-RRP was properly disseminated, giving employees the opportunity to object. The rank-and-file union recognized it in the CBA. Obusan and the supervisors' union remained silent until her retirement, signifying lack of dissent. Furthermore, the plan is non-contributory, imposing no financial burden on employees. Due process requires only notice of the decision to retire, not prior consultation.

• Vested Right to Retirement Age — Retirement age is not a property right that becomes fixed and permanent; it can be altered by law, contract, or CBA. While an employee may have a vested right to retirement funds, the right to a specific retirement age does not vest until the time of retirement, and the employee is subject to the retirement plan in effect at that time.
• Validity of Employer Retirement Plans — A company retirement plan lowering the compulsory retirement age below 65 is valid and not repugnant to the constitutional guaranty of security of tenure, provided it complies with the minimum retirement benefits under Article 287 of the Labor Code and is accepted by the employees as commensurate to their service. Acceptance can be inferred from lack of dissent after proper dissemination, union recognition in a CBA, and the non-contributory nature of the plan. Due process requires only notice of the decision to retire, not prior consultation.

• "Undoubtedly, under this provision, the retirement age is primarily determined by the existing agreement or employment contract. Absent such an agreement, the retirement age shall be fixed by law."
• "Retirement plans allowing employers to retire employees who have not yet reached the compulsory retirement age of 65 years are not per se repugnant to the constitutional guaranty of security of tenure."
• "Due process only requires that notice of the employer’s decision to retire an employee be given to the employee."

• Jaculbe v. Silliman University, G.R. No. 156934, March 16, 2007 — Distinguished. Jaculbe required employee consent for early retirement; here, consent was inferred from lack of dissent upon dissemination, union recognition in the CBA, and the non-contributory nature of the plan.
• Oxales v. United Laboratories, Inc., G.R. No. 152991, July 21, 2008 — Followed. Article 287 applies only where there is no CBA or contract providing for retirement benefits, or where the existing agreement provides benefits below legal requirements.
• Philippine Airlines, Inc. v. Airline Pilots Association of the Philippines, 424 Phil. 356 (2002) — Followed. Prior consultation before retiring an employee is not required; due process only requires notice of the decision to retire.
• Razon, Jr. v. NLRC, 185 SCRA 44 — Distinguished. The case established a vested right to retirement funds, not a vested right to a specific retirement age.

• Article 287, Labor Code of the Philippines, as amended by Republic Act No. 7641 — Governs retirement age and benefits. Sets 65 as the compulsory retirement age and 60 as the minimum optional retirement age in the absence of a CBA or employment contract. Mandates minimum retirement pay equivalent to at least one-half month salary for every year of service. Applied to uphold the PNB-RRP because the plan served as the applicable employment contract providing benefits not less than those required by law.
• Section 6, Executive Order No. 80 (Revised Charter of PNB) — Provides that upon privatization, PNB ceases to be a GOCC subject to the coverage of service-wide agencies like the Civil Service Commission. Applied to sever Obusan's employment from government service and the civil service retirement rules.
• Presidential Decree No. 1146 (Revised Government Service Insurance Act of 1977) — Previously governed PNB employees when it was a GOCC, setting compulsory retirement at 65. Ceased to apply upon PNB's privatization.

Antonio T. Carpio, Diosdado M. Peralta, Roberto A. Abad, Jose Catral Mendoza