Supreme Court: Forced retirement before age 65 illegal
The Supreme Court en banc on January 10, 2018 issued a new legal doctrine on hiring and firing people. The case is entitled Alfredo F Laya Jr. versus Philippine Veterans Bank (GR 205813) written by Justice Lucas Bersamin. The decision declared that an employee in the private sector who did not agree to a management-mandated early retirement plan cannot be forced to retire before he reaches 65 years old. With such a separation considered illegal, the employee shall be entitled to immediate reinstatement, with full backwages, without loss of all benefits and seniority rights.
As a Law professor since 1977, I consider this ruling a landmark decision first because it clarifies that management cannot retire an employee before 65. The employee must agree because he has security of tenure until compulsory retirement age. Even if the company has an existing retirement plan, if the employee did not agree, it will not bind him. Retirement plans need the written consent of the employees. They cannot simply be issued by management.
Many company owners believe they have the power and prerogative to separate older and more senior personnel even if they are vice presidents or very senior managers. Management cannot force executives to leave before 65 because to do so violates the law, Article 302. The only exceptions to the retirement age of 65 are underground miners who can be compulsorily retired at 60, and professional racehorse jockeys who can be compulsorily retired at 55. The dangerous part of the law is that any employer violating these provisions can be criminally liable. The penalties are three months to three years in prison or a fine of P1,000 to P10,000, or both.
Under current jurisprudence, aside from reinstatement (effective immediately even pending appeal), the employee shall be paid all salaries and benefits and if he reaches retirement age while the appeal is pending, he should be given retirement pay under the company policy or separation pay under the law, whichever is higher. In addition, he may be paid moral and exemplary damages if there was bad faith on the part of management, and if his dismissal was done in an oppressive and wanton manner. Also, all monetary awards are entitled to earn interests from finality of judgment up to satisfaction thereof. Finally, the employee is entitled to attorney’s fees equal to 10 percent of the monetary award. This is thus a windfall to the employee and bad news to the employer.
Management needs a very good labor lawyer. Its actions should be guided by a competent HR and legal expert. Any error may cost millions in damages and awards to the employee. Ignorance of labor laws may cause the closure of the company and bankruptcy of many businesses.
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