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August 9, 2005 | Carpio, J. | Certiorari | Voluntary Retirement
PETITIONERS: Roberto Ariola et al (Members of Philex Mines Supervisory Employees Union)
RESPONDENTS: Philex Mining Corporation and Voluntary arbitrator Norma b. Advincula
SUMMARY: Petitioners are former supervisors of Philex. Citing financial losses, Philex implemented measures to reduce
personnel via voluntary retirement and retrenchment. In the case of supervisory employees, the union, signed a MOA
prescribing the criteria for retrenchment. They received notices of retrenchment and separation pay. However, they filed for
illegal dismissal.
DOCTRINE: Retirement results from a voluntary agreement between the employer and the employee where the latter,
after reaching a certain age, agrees to sever his employment with the former. IF the intent to retire is not clearly established
or if retirement is involuntary, it is to be treated as a discharge.
1. Petitioners are former supervisors of respondent Philex
Mining Corporation. In 1992, Philex sustained financial
losses in its operations. To save costs, Philex adopted several
measures including reducing personnel through early
voluntary retirement and retrenchment programs. Some of the
employees who are in redundant positions were re-assigned
and some took early retirement.
2. There were two MOA in this case prescribing the criteria
for retrenchment: (1) between Philex and the Labor Union of
the rank-and-file employees, (2) between Philex and the Union
representing the supervisory employees.
3. Philex informed DOLE of its plan to retrench 241
employees. And then 6 supervisory and 49 rank-and-file
employees received notice of termination from Philex
effective 30 days after receipt. All of them signed Deeds of
Release and Quitclaim in Philexs favor.
4. Both the supervisory and rank-and-file employees claim
that Philex dismissed them illegally and submitted the case to
voluntary arbitration.
5. In the case of the rank-and-file employees: Arbitrator
Valdex declared that they were illegally dismissed and that
Philex failed to prove its financial losses and the criteria for
retrenchment in the MOA were arbitrary and inconsistent with
the CBA then in force. CA reversed the Arbitrators findings
and that there is valid reason for the retrenchment, however
Philex is liable for illegal dismissal because the criteria for
retrenchment in the rank-and-files MOA were inequitable.
The decision became final on 27 April 1998.
6. In the case of the Supervisory employees: Arbitrator
Advincula ordered the reinstatement of the employees.
However, upon Philex motion, Advincula reversed his
decision and held that there is sufficient basis or just cause for
Philex to undertake a retrenchment. He also held that the
petitioners were barred from questioning their separation from
service because they availed of the early retirement program
and executed the Deeds of Release and Quitclaim releasing
Philex from further liability. The Arbitrator added that there
no indication that the retirement was forced since the
complainants are not ordinary laborers but they are
supervisors, hence there is every reason to believe that they
know their basic rights and that they would not allow
themselves to be coerced into signing away these rights. CA
affirmed the decision of the Arbiter.
1. WoN petitioners retired or Philex dismissed them from

services DISMISSED for Retrenchment

2. WoN the dismissal was illegal YES
1. The Arbitrator and CA based their decisions on the fact that
the petitioners availed and acquired the retirement gratuity
as evidenced by the quitclaims and receipts. HOWEVER, the
court held that the retirement gratuity regarged by Philex is
actually a separation pay as it was paid because of the
petitioners retrenchment. The letter of notice delivered to
Benjamin Biete (one of the petitioners) states: You will be
retiring from service due to separation at the instance of
Philex Mining Corporation as a result of its retrenchment
program. Since your separation is for cause beyond your
control, you will be entitled to payment of retirement gratuity
under the Retirement Gratuity Plan. CLEARLY, Philex
treated the retirement gratuity as petitioners basic separation
pay. Significantly, Philex paid petitioners such separation pay
after notifying them of their retrenchment.
2. FURTHERMORE, Philex failed to submit other documents
proving petitioners retirement, such as their application for
retirement under Philexs early retirement program and their
clearance slips, undermines its claim. Submission of these
documents would have put to rest any doubt on the cause of
the separation. Vouchers of payment do not suffice to prove
petitioners retirement from Philex (SEE DOCTRINE). Since
the payment is for the reason of retrenchment, the petitioners
are dismissed for retrenchment as well.
3. Even as an action for retrenchment, the dismissal is still
illegal. The requirements for retrenchment are (1) it is
undertaken to prevent losses, which are not merely
deminimis, but substantial, serious, actual, and real, or if only
expected, are reasonably imminent as perceived
objectivelyand in good faith by the employer, (2) the employer
serves written notice both to the DOLE and employees, 30
days prior to the intended date of retrenchmentl and (3) the
employer pays the retrenched employees separation pay
equivalent to 1 month pay or at least month pay for every
year of service, whichever is higher. (4) employer must use
fair and reasonable criteria in ascertaining who would be
dismissed and who would be retained among the employees,
and that (5) the retrenchment must be undertaken in good
faith. An independent auditor confirmed Philexs claim for
financial losses and that the suffered and projected loss is
substantial. HOWEVER, Philex failed to implement its

retrenchment program in a just and proper manner. One of the

criteria for the retrenchment of supervisory employees
contravenes with the CBA then in force. The criteria evaluates
ones disciplinary record oever a 3 year period regardless of
the penalty involved, however the CBA stipulates that
offenses punishable by reprimands and warnings of
separation will be stricken-off the record every 1st February
of each year. Since the Union did not ratify the MOA, the
MOA cannot prevail over the CBA. Failure to use a
reasonable and fair standard in the computation of the
supervisors demerits points is not merely a procedural but a
substantive defect which invalidates petitioners dismissal. If
the CBA governs instead of the MOA, petitioners may not fall
under those to be retrenched. FURTHERMORE, Philex did
not explain why it retrenched the petitioners Biete who got the
highest rating in his unit and Petitioner Mamayson even

though he got the third highest rating in his unit. The criteria
for retrenchment were arbitrarily applied. THe petitioners are
thus entitled to reinstatement will full backwages,
HOWEVER, the amounts received as net separation pay
should be deducted from their back wages.
5. LASTLY, the Court held that the petitioners are not
estopped to file a complaint for illegal dismissal despite
signing a Deeds or Release and Quitclaims. Even though the
petitioners are supervisors and not rank-and-fuled employees,
it does not make them less susceptible to financial offers,
faced as they were with the prospect of unemployment.
Petitioners claim that economic necessity constrained them to
accept Philexs monetary offer and sign the Deeds of Release
and Quitclaims..