Early Retirement: Why not?

Posted by Admin | Posted in Employee Rights and Benefits, Labor Law | Posted on 03-10-2010

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Why would one reject an early retirement?

For job security? Well, finding a job can be so hard these days while being employed means having a secured source of income.  If you are a regular employee, that means you can stay in your job for as long as you like, unless you quit, retire or you are terminated for a valid cause.

How about passion for the job? This might sound dramatic to some people, but this is true to some who really love what they are doing.  They are those who consider their jobs as not merely work but as an art or passion – something they dreamed about when they were young and would love to be doing until they grow old.  They enjoy it so much that quitting, retiring or switching jobs would be too hard to do.

What does the law say about early retirement?

Under Article 287 of our Labor Code, as amended by RA 7641, “any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract”. If there is no retirement scheme or arrangement in the establishment, the compulsory retirement age is set at 65 years while the optional retirement age is 60 provided that the employee has rendered at least 5 years of service. For underground mining employees, because of the nature of their work, the compulsory retirement age is set at 60, while optional retirement is at 50 provided also that 5 years of service has been rendered.

From a reading of this law, it is clear that the compulsory and optional retirement age stated in Article 287 will apply only when there is no stipulation of retirement age in a CBA or employment contract.  If there is a CBA or an employment contract providing for a different retirement age in a establishment, that agreement will prevail. This is because parties have the freedom to contract and to stipulate terms and conditions that are mutually acceptable, as long as these will not violate any law or be contrary to public morals.  In a number of cases, the Supreme Court has declared that an employer may validly retire an employee under the terms and conditions of a CBA even if such agreement provides for a lower retirement age (Pantranco North Express vs. NLRC, GR No. 95940, July 24, 1996; PAL vs. Airline Pilots Association of the Philippines, GR No. 143686, January 15, 2002; Cainta Catholic School vs. Cainta Catholic School Employees Union, GR No. 151021, May 4, 2006).

Retirement plans are essentially mutual and voluntary agreements. Case law has described retirement as “the result of a bilateral act of the parties, a voluntary agreement between the employer and the employee whereby the latter after reaching a certain age agrees and/or consents to sever his employment with the latter” (Cainta Catholic School vs. Cainta Catholic School Employees Union, GR No. 151021, May 4, 2006). When employees, through their bargaining agent (union), enters into a CBA with their employer, they agree to abide by the terms and conditions contained in such CBA.  While parties have freedom to contract, they also have the corollary obligation to comply in good faith with the terms and conditions of such contract.

Why not a uniform retirement age for all?

Different types of jobs and professions require different skills, knowledge and physical fitness and ability.  A uniform retirement age for all would be unfair, impracticable and absurd. It would also interfere with the people’s freedom to enter into contracts relating to their employment.

While Article 287 provides for a compulsory and optional retirement age, this was not intended to apply to everyone. It only serves to protect employees in establishments where there are no retirement schemes so that they may enjoy the fruits of their labor.  According to the Supreme Court, “it was intended for those who have no more plans of employment after retirement and thus need financial assistance and reward for the years that they have rendered service” (Philippine Airlines vs. Airline Pilots Association of the Philippines, GR No. 143686, January 15, 2002). Of course, if an employee retires at 60 or 65, there is less chance of getting hired for other jobs. But for one who retires at an early age, there are still a lot of opportunities and at such age, one would still be physically able and fit for any job.