Sta. Catalina College vs. NLRC

An employee who abandons employment severs the employer-employee relationship, such that prior years of service cannot be credited in the computation of retirement benefits upon re-employment. Furthermore, gratuity pay is separate and distinct from retirement benefits and cannot be deducted therefrom.

Hilaria G. Tercero was hired as an elementary school teacher at Sta. Catalina College in 1955. In 1970, she applied for and was granted a one-year leave of absence without pay due to her mother's illness. After the leave expired in 1971, Tercero did not report for work, request an extension, or notify the school of her intent to return. She subsequently taught at the San Pedro Parochial School (1980–1981) and the Liceo de San Pedro (1981–1982). In 1982, she filed a new application and was rehired by Sta. Catalina College. Upon reaching the compulsory retirement age of 65 in 1997, the school computed her retirement benefits based only on her 15 years of continuous service from 1982 to 1997, excluding her prior service from 1955 to 1970 on the ground of abandonment.

• Initial Employment: Hilaria G. Tercero was hired as an elementary school teacher at Sta. Catalina College in June 1955.
• Leave of Absence and Absence: In 1970, Tercero was granted a one-year leave of absence without pay due to her mother's illness. Upon its expiration in 1971, she did not return to work, request an extension, or notify the school of her status.
• Employment Elsewhere: During her absence, Tercero was employed at the San Pedro Parochial School (school year 1980-1981) and the Liceo de San Pedro (school year 1981-1982).
• Re-employment: In 1982, Tercero filed a new application with Sta. Catalina College and was rehired with a monthly salary of ₱6,567.95.
• Retirement and Disputed Computation: On March 22, 1997, during the 51st Commencement Exercises, Tercero was awarded a Plaque of Appreciation for thirty years of service and ₱12,000.00 as gratuity pay. She reached the compulsory retirement age of 65 on May 31, 1997. Petitioner school computed her retirement benefits at ₱59,038.35, based solely on her 15 years of service from 1982 to 1997. Deducting the ₱28,853.09 employer's PERAA contribution and the ₱12,000.00 gratuity pay, the balance was pegged at ₱18,185.26. Tercero demanded computation based on 30 years of service (inclusive of 1955-1970) without the gratuity pay deduction, claiming ₱190,539.90.

• Abandonment and Severance of Employment: Petitioners maintained that Tercero's failure to report upon the expiration of her leave in 1971, without requesting an extension, constituted voluntary resignation or abandonment, effectively severing the employer-employee relationship and forfeiting benefits earned from 1955 to 1970. When rehired in 1982, she was a new employee.
• Basis of Computation: Petitioners argued that retirement benefits should be computed based only on the last continuous period of service prior to retirement, relying on Carandang v. Dulay.
• Deduction of Gratuity Pay: Petitioners contended that the ₱12,000.00 gratuity pay should be deducted from the retirement benefits because it was given precisely on account of her retirement and in addition to the employer's PERAA contributions.

• Continuity of Employment: Respondent countered that the employer-employee relationship was never severed, arguing that the school never sent a notice of dismissal, never paid separation pay or her retirement contributions upon her leave in 1971, and even awarded her a Plaque of Appreciation for thirty years of continuous service and a gratuity pay.
• Non-deduction of Gratuity Pay: Respondent argued that the gratuity pay should not be deducted from her retirement benefits.

• Crediting of Prior Service: Whether the period of service from 1955 to 1970 should be included in the computation of Tercero's retirement benefits.
• Deduction of Gratuity Pay: Whether the ₱12,000.00 gratuity pay should be deducted from the retirement benefits due.

• Crediting of Prior Service: The period from 1955 to 1970 cannot be credited toward Tercero's retirement benefits. Abandonment of employment was indubitably manifest when she failed to return or request an extension after her leave expired in 1971, and subsequently worked elsewhere. Abandonment being a just cause for termination under the prevailing law at the time (Republic Act No. 1052, as amended by Republic Act No. 1787), the school was not obligated to serve a written notice of dismissal. The Court of Appeals erred in applying the notice requirement of the Omnibus Rules Implementing the Labor Code, which was not the law in force in 1971. The award of a Plaque of Appreciation and gratuity pay merely acknowledged her total discontinuous years of service and generosity, and did not negate the fact of abandonment. Re-employment in 1982 rendered her a new employee, entitling her to retirement benefits computed only from 1982 to 1997.
• Deduction of Gratuity Pay: The gratuity pay cannot be deducted from the retirement benefits. Gratuity pay is separate and distinct from retirement benefits; it is paid purely out of generosity to reward satisfactory service, whereas retirement benefits are intended to help the employee enjoy remaining years and serve as a reward for loyalty.

• Abandonment of Employment — For a valid finding of abandonment, two factors must concur: (1) the failure to report for work, or absence without valid or justifiable reason; and (2) a clear intention to sever the employer-employee relationship, with the second element being the more determinative factor, manifested by some overt acts. In this case, the failure to return from leave, the failure to request an extension, and the subsequent employment elsewhere constituted overt acts manifesting an intention to sever the relationship.
• Gratuity Pay vs. Retirement Benefits — Gratuity pay is paid to the beneficiary for past services or favors rendered purely out of the generosity of the giver, not intended to pay for actual services rendered. Retirement benefits are intended to help the employee enjoy the remaining years of his life, releasing him from the burden of worrying for financial support, and are a form of reward for his loyalty to the employer. They are separate and distinct; gratuity pay cannot be deducted from retirement pay.

• "For a valid finding of abandonment, two factors must be present: (1) the failure to report for work, or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second element as the more determinative factor, being manifested by some overt acts."
• "Gratuity pay x x x is paid to the beneficiary for the past services or favor rendered purely out of the generosity of the giver or grantor. Gratuity, therefore, is not intended to pay a worker for actual services rendered or for actual performance. It is a money benefit or bounty given to the worker, the purpose of which is to reward employees who have rendered satisfactory service to the company."
• "While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every labor dispute will be automatically decided in favor of labor. Management also has its own rights which, as such, are entitled to respect and enforcement in the interest of simple fair play."

• Carandang v. Dulay, 188 SCRA 793 (1990) — Distinguished. Petitioners relied on this case to argue that separation pay should be computed based on the last continuous period of service. The Court clarified that Carandang involved separation pay, not retirement pay, and that the therein petitioner was considered to have resigned, not abandoned her post.
• Mapua Institute of Technology v. Manalo, 108 Phil. 628 (1960) — Followed. Applied the principle that in the absence of a special law governing the dismissal of professors from colleges and universities, Republic Act No. 1052, as amended by Republic Act No. 1787 (the Termination Pay Law), applies.
• JAM Transportation Co., Inc. v. Flores, 220 SCRA 114 (1993) — Followed. Held that re-employment as a new employee means previous years of service are considered non-existent for the purpose of computing retirement benefits.
• Republic Planters Bank v. NLRC, 266 SCRA 142 (1997) — Followed. Defined gratuity pay as separate and distinct from retirement benefits, paid purely out of generosity.

• Article 287, Labor Code, as amended by Republic Act No. 7641 — Provides the minimum retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year, for employees reaching the age of 60 to 65 with at least 5 years of service. Applied to compute Tercero's retirement benefits based on her 15 years of service from 1982 to 1997.
• Section 3.3, Rule II, Rules Implementing R.A. 7641 — Provides that where both employer and employee contribute to a retirement fund, the employer's total contribution shall not be less than the total retirement benefits; if less, the employer pays the difference. Applied to deduct the PERAA contributions already received by Tercero from the total retirement pay due.
• Section 1, Republic Act No. 1052 (Termination Pay Law), as amended by Republic Act No. 1787 — Allows an employer or employee to terminate employment with just cause at any time without the written notice requirement applicable to terminations without just cause. Applied to justify the lack of notice of dismissal when Tercero abandoned her post in 1971, the law in force at the time.

Vitug (Chairman), Sandoval-Gutierrez, and Corona, JJ.