ENRIQUEZ SECURITY SERVICES, INC., PETITIONER, VICTOR A. CABOTAJE, RESPONDENT.

Enriquez Security Services versus Cabotaje

The Case

This is a labor case about a security guard who retired at sixty and then discovered that his employer wanted to shrink both the length of his service and the size of his retirement pay. Victor Cabotaje, the guard, sued Enriquez Security Services, Incorporated for retirement benefits under the Retirement Pay Law. The employer, in turn, insisted that the law could not reach back to the years before it took effect, that only a fraction of his service incentive leave counted, and that his years with the predecessor agency should be ignored. The case matters because the Supreme Court uses it to fix three examinable rules: the retroactive reach of the Retirement Pay Law, the exact components of one-half month salary, and the piercing of the corporate veil to prevent an employer from evading a statutory obligation.

Procedural History

Cabotaje filed a complaint with the National Labor Relations Commission, and the case was assigned to Labor Arbiter Eduardo Carpio. The labor arbiter ruled in Cabotaje's favor, ordering the employer to pay a grand total of 228,581 pesos, computed from January 1979 up to July 1997. On appeal, the National Labor Relations Commission set aside the award of one month salary for every year of service as excessive and entered a new award of 76,710 pesos, based on one-half month salary for every year of service. The Commission denied the employer's motion for reconsideration. The employer then filed a special civil action for certiorari with the Court of Appeals, which affirmed the Commission's decision and later denied reconsideration. The employer came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

Sometime in January 1979, Victor Cabotaje was employed as a security guard by Enriquez Security and Investigation Agency. On November 13, 1985, Enriquez Security Services, Incorporated was incorporated, and Cabotaje simply continued working as a security guard, now in the corporation's agency. His service was continuous and uninterrupted.

In July 1997, Cabotaje reached the age of sixty and applied for retirement. The employer acknowledged that he was entitled to retirement benefits, but disputed the reckoning. It argued that the computation should run only from November 13, 1985, when the corporation was incorporated, and not from January 1979, when he began with the agency.

Cabotaje then filed a complaint seeking retirement benefits under the Retirement Pay Law. The records showed that both security agencies were owned by the Enriquez family and that the corporation maintained its office in the same place where the agency had previously held office.

Issues

• Whether or not the Retirement Pay Law has retroactive effect, so that service rendered before its effectivity counts in computing retirement pay.
• Whether or not the whole five days of service incentive leave, rather than a portion equivalent to one-twelfth, should be included in the one-half month salary used to compute retirement pay.
• Whether or not the length of service of a retired employee in a dissolved company, his former employer, should be included in his length of service with his last employer for purposes of computing retirement pay.

Applicable Provisions

Section 1 of the Retirement Pay Law provides:

Unless the parties provide for broader inclusions, the term one-half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leave.

This is the provision that fixes the components of the retirement benefit and settles whether the whole five days of service incentive leave enter the computation.

Section 5.2, Rule II of the Implementing Rules of Book VI of the Labor Code provides:

5.2 Components of One-half (1/2) Month Salary. - For the purpose of determining the minimum retirement pay due an employee under this Rule, the term "one-half month salary" shall include all the following: (a) Fifteen (15) days salary of the employee based on his latest salary rate. x x x; (b) The cash equivalent of not more than five (5) days of service incentive leave; (c) One-twelfth of the 13th month pay due an employee; (d) All other benefits that the employer and employee may agree upon that should be included in the computation of the employee's retirement pay.

This rule clarifies the statutory formula and confirms that the whole five days of service incentive leave are included.

Paragraph B of the Guidelines for Effective Implementation of the Retirement Pay Law, issued by the Department of Labor and Employment, provides:

In reckoning the length of service, the period of employment with the same employer before the effectivity date of the law on January 7, 1993 should be included.

This guideline answers the retroactivity question by expressly counting pre-effectivity service.

Ruling

On the first issue, the Court held that the Retirement Pay Law applies retroactively. The employer's contention had long been settled by the implementing guidelines, which direct that the period of employment before the law's effectivity be included in reckoning length of service. The Court quoted its earlier ruling that the law is social legislation and a curative statute, and that its benefits may be reckoned not only from the date of enactment but retroactively to the time the employment contracts started.

On the second issue, the Court held that the whole five days of service incentive leave are included, not merely one-twelfth. Both the statute and the implementing rules are clear on this point, and the employer's insistence on a fractional inclusion had no basis.

On the third issue, the Court held that the length of service with the predecessor agency must be counted. It recalled the well-entrenched doctrine that the Supreme Court does not pass upon questions of fact in an appeal by certiorari under Rule 45, especially where the findings of the labor arbiter, the Commission, and the appellate court coincide. Those consistent findings rested on uncontroverted facts: Cabotaje worked with both agencies; his employment with both was continuous and uninterrupted; both agencies were owned by the Enriquez family; and the corporation kept its office in the same place where the agency had held office. The Court held that the attempt to make the agencies appear as two separate entities, when in reality they were but one, was a device to defeat the law and should not be permitted. Although respect for corporate personality is the general rule, the veil may be pierced when it is used to perpetrate a social injustice or as a vehicle to evade obligations. The employer was therefore correctly ordered to pay retirement benefits computed from January 1979 up to July 1997.

Doctrine

First, the Retirement Pay Law is social legislation and a curative statute; absent a retirement plan, an agreement, or a voluntary grant, it applies to labor contracts still existing at the time it took effect, and its benefits are reckoned retroactively to the start of the employment. This flows from the implementing guideline that pre-effectivity service with the same employer is included.

Second, one-half month salary means fifteen days salary plus one-twelfth of the thirteenth month pay plus the cash equivalent of not more than five days of service incentive leave. The whole five days are counted, not a fraction.

Third, the veil of corporate fiction may be pierced when it is used to perpetrate a social injustice or as a vehicle to evade obligations. Where two entities are in reality one, the successor cannot escape the length of service earned with the predecessor.

Fourth, the Supreme Court does not reassess evidence in a petition for review on certiorari under Rule 45, and respects concurrent findings of the labor arbiter, the labor commission, and the appellate court.

Disposition

The petition was denied, and the decision and resolution of the Court of Appeals were affirmed, with costs against the petitioner. Cabotaje won.

Remember This

Memorize this line: the Retirement Pay Law reaches back to the first day of service, and the corporate veil is pierced where it is used to evade that obligation. Examiners use this case for the retroactivity of the Retirement Pay Law, the exact components of one-half month salary, and piercing the corporate veil in labor cases.