Grace Christian High School v. Lavandera
REITERATIONFacts
The Antecedents: Respondent Filipinas A. Lavandera (Filipinas) was employed as a high school teacher by petitioner Grace Christian High School (GCHS) since June 1977. On May 11, 2001, she was informed that her services would be terminated effective May 31, 2001, pursuant to GCHS' retirement plan which allows retirement after 20 years of service, regardless of age. Filipinas, aged 58 and physically fit, alleged constructive dismissal, asserting that her termination violated Republic Act No. (RA) 7641, the Retirement Pay Law. GCHS denied illegal dismissal, stating Filipinas was considered retired on May 31, 1997, after 20 years of service, and retained on a yearly basis until her contract was not renewed on May 11, 2001. Procedural History: The Labor Arbiter (LA) dismissed the illegal dismissal complaint for lack of merit, finding that Filipinas was considered retired as per GCHS' retirement plan. However, the LA found the retirement benefits under GCHS' plan deficient compared to RA 7641 and awarded differentials based on Filipinas' latest salary, using a 22.5-day multiplier. The National Labor Relations Commission (NLRC) set aside the LA's award, ruling that retirement pay should be based on her salary at the time of retirement in 1997 and that the package under Article 287 of the Labor Code, as amended by RA 7641, consists of 15 days salary plus pro-rated 13th month pay and SIL pay. The Court of Appeals (CA) affirmed the NLRC with modification, applying the 22.5-day multiplier (equating "one-half month salary" to 15 days plus 2.5 days for 13th month pay and 5 days for SIL) and imposing legal interest from the filing of the complaint. The Petition: GCHS assailed the CA's decision, primarily questioning the use of the 22.5-day multiplier in computing retirement pay differentials.
Issue(s)
Whether the Court of Appeals committed reversible error in using the multiplier "22.5 days" in computing the retirement pay differentials of respondent Filipinas A. Lavandera. Whether legal interest should be reckoned from the filing of the complaint or from the rendition of the Labor Arbiter's Decision.
Ruling
The petition is bereft of merit. The Court affirmed the Court of Appeals' Decision with modification regarding the reckoning date of legal interest.
Ratio Decidendi
On the use of the 22.5-day multiplier for retirement pay: The Court reiterated that RA 7641 amended Article 287 of the Labor Code to provide for retirement pay in the absence of a retirement plan or when the existing plan provides lesser benefits. The law mandates that retirement benefits shall not be less than one-half (1/2) month salary for every year of service. The term "one-half (1/2) month salary" has been clarified by jurisprudence and the Implementing Rules of Book VI of the Labor Code. Specifically, Section 5.2 of Rule II of the Implementing Rules clarifies that "one-half month salary" includes fifteen (15) days salary, the cash equivalent of not more than five (5) days of service incentive leave, and one-twelfth (1/12) of the 13th month pay. This interpretation, equating to 22.5 days (15 days + 5 days SIL + 1/12 of 13th month pay), was affirmed in previous cases, including Elegir v. Philippine Airlines, Inc. The Court found no reason to depart from this established interpretation. Therefore, GCHS' argument that the 5 days SIL should also be pro-rated to their 1/12 equivalent must fail, as the law and rules clearly include the whole 5 days of SIL in the computation. The CA correctly applied this standard in computing Filipinas' retirement benefits differential. On the reckoning date of legal interest: The Court modified the CA's ruling on the imposition of legal interest. While the CA ordered legal interest to be reckoned from the filing date of the illegal dismissal complaint, the Supreme Court, applying Eastern Shipping Lines, Inc. v. CA, held that legal interest on damages awarded for a breached obligation, where the claim is not a loan or forbearance of money, should be reckoned from the date the judgment of the court is made, if the claim cannot be established with reasonable certainty at the time of the demand. In this case, Filipinas' complaint was for illegal dismissal, and the obligation to pay retirement pay differentials was only determined upon the rendition of the LA's Decision. Therefore, GCHS' obligation to pay the differentials was reasonably ascertained and legally adjudged only from the date of the LA's Decision on March 26, 2002. Consequently, the 6% legal interest on the ₱68,150.00 retirement pay differential should be reckoned from March 26, 2002, until full payment, not from the filing of the complaint.
Main Doctrine
The term "one-half (1/2) month salary" in computing retirement pay under RA 7641 includes 15 days salary, the cash equivalent of not more than five (5) days of service incentive leave, and one-twelfth (1/12) of the 13th month pay. Legal interest on retirement pay differentials, when the obligation is determined by a judgment, shall be reckoned from the date of the Labor Arbiter's Decision.