ZUELLIG PHARMA CORPORATION, PETITIONER, VS. ALICE M. SIBAL, MA. TERESA J. BARISO, PRESCILLANO L. GONZALES, LAURA B. BERNARDO, MAMERTA R. ZITA, JOSEPHINE JUDY C. GARCIA, MENDOZA,…

Zuellig Pharma versus Sibal

The Case

This is a labor case about whether employees who lost their jobs through redundancy may collect retirement gratuity and the cash value of unused sick leave on top of the separation pay they already received. Zuellig Pharma Corporation, the employer, closed its Syntex Division after another company took over the distribution of Syntex products, and it paid the affected employees redundancy pay under the collective bargaining agreement. Thirty-six of those employees later sued for retirement gratuity and sick leave conversion, and the Supreme Court had to decide whether the collective bargaining agreement and the retirement plan allow them to keep both sets of benefits. The case matters because it draws the line between the rule in Aquino, where double recovery was allowed for want of any prohibition, and a contract that expressly forbids it.

Procedural History

The employees filed separate complaints before the Arbitration Branch of the National Labor Relations Commission, which were later consolidated. The Labor Arbiter dismissed the claims, holding that gratuity pay belongs to employees separated by sickness, death, compulsory or optional retirement, or resignation, and not to those separated by redundancy. On appeal, the National Labor Relations Commission affirmed the Labor Arbiter. The employees then went to the Court of Appeals on certiorari. The Court of Appeals granted the petition, set aside both lower rulings, relied on Aquino versus National Labor Relations Commission, and ordered Zuellig to pay retirement gratuity and unused sick leave pay, directing the Commission to compute the amounts. Zuellig's motion for reconsideration was denied. Zuellig then came to the Supreme Court by petition for review on certiorari, and the Court issued a temporary restraining order enjoining implementation of the appellate decision.

Facts

Zuellig Pharma Corporation manufactures and distributes pharmaceutical products, and it also distributed products made by Syntex Pharmaceuticals through its Syntex Division. In 1995, Roche Philippines purchased Syntex and took over from Zuellig the distribution of Syntex products. Zuellig therefore closed its Syntex Division and terminated the services of the respondents on the ground of redundancy.

The employees were duly notified of their termination and were paid separation pay in accordance with the collective bargaining agreement dated March 21, 1995. Each of them signed a Release and Quitclaim in full settlement of all claims arising from employment.

Controversy arose when the employees filed complaints for retirement gratuity and the monetary equivalent of unused sick leave on top of the separation pay already given, claiming that receipt of separation pay and execution of the quitclaims did not bar them. The Labor Arbiter and the National Labor Relations Commission denied the claims, but the Court of Appeals reversed and awarded both benefits, prompting Zuellig's petition to the Supreme Court.

Issues

• Whether or not employees separated from service by reason of redundancy may recover retirement gratuity in addition to the separation pay they already received and accepted under the collective bargaining agreement.
• Whether or not the respondents are entitled to the monetary equivalent of their unused sick leave credits.
• Whether or not the Release and Quitclaim executed by the respondents bars them from claiming anything more than what they lawfully received.

Applicable Provisions

Section 2 of Article XIV of the collective bargaining agreement on retirement gratuity provides:

Any payment under this provision shall be chargeable against separation pay (other than the Social Security System benefits) which may be demandable under an applicable law.

This is the provision the Court reads as an express prohibition against double recovery, since the same fund cannot pay both benefits.

Section 2 of Article VII of the Retirement Gratuity Plan on other laws and government awards provides:

Except only as provided in the next preceding Section hereof, in the event that the Company is required under the laws or by lawful order of competent authority to give to its employees any separation pay, or other benefits or emoluments similar or analogous to those herein already provided, the employees concerned shall not be entitled to both what the law or the lawful order of competent authority requires the company to give and the benefits herein provided, but shall be entitled only to the benefit of his choice.

This reinforces the rule of choice, allowing the employee only one benefit and not both.

Section 5 of Article V of the Retirement Gratuity Plan, relied upon by the Court of Appeals, provides:

An employee, executive or supervisory personnel, who may be separated from the service of the Company for any cause not attributable to his own fault or misconduct shall be entitled to full benefits as provided for under Article V, Sections 1 and 2 above, provided, however, that any employee, executive or supervisory personnel separated for cause shall not be entitled to any benefit as provided for under said Article V, Sections 1, 2 and 3.

The Court held this provision was superseded by the later collective bargaining agreement and cannot override its express prohibition.

Ruling

On the first issue, the Court ruled for Zuellig. It distinguished Aquino, where no specific prohibition existed in the retirement plan or the collective bargaining agreement. Here, Section 2 of Article XIV expressly makes any retirement gratuity chargeable against separation pay. The Court explained that there is only one fund from which the benefits are taken, so an employee who has received separation pay can no longer claim gratuity. The Court also noted that Sections 1 and 3 of Article XIV separately treat retired employees and those terminated by retrenchment, closure, merger, redundancy, or installation of labor-saving device, and that this separate treatment shows the parties' intention to exclude one from the other. Following Suarez versus National Steel Corporation and Salomon versus Associate of International Shipping Lines, the Court held that the employees had chosen redundancy pay and were barred from claiming gratuity. It added that none of the respondents appeared qualified for optional retirement, since the agreement requires reaching sixty years of age, resignation, illness, or at least twenty-five years of service.

On the second issue, the Court also ruled for Zuellig. Article VIII of the agreement allows encashment of unused sick leave only for employees due for compulsory retirement and those who retire early, and the Court refused to read redundancy into a list that does not include it, since doing so would put something into the contract that is not written in it.

On the third issue, since the employees had already chosen and accepted redundancy pay and signed the corresponding Release and Quitclaim, they were barred from claiming retirement gratuity.

Doctrine

Retirement gratuity and separation pay are not mutually exclusive where the retirement plan or collective bargaining agreement contains no specific prohibition, as in Aquino. But where the agreement expressly provides that any payment of retirement gratuity shall be chargeable against separation pay, or that the employee shall be entitled only to the benefit of his choice, the employee may receive only one, and acceptance of separation pay with a quitclaim bars recovery of gratuity. The Court will not read into a contract a benefit the parties did not stipulate, and a later collective bargaining agreement supersedes an earlier retirement plan provision inconsistent with it.

Disposition

The Supreme Court granted Zuellig's petition, set aside the Court of Appeals decision, and reinstated the rulings of the Labor Arbiter and the National Labor Relations Commission denying the claims.

Remember This

The one line to memorize: separation pay and retirement gratuity may be recovered together only when the contract contains no express prohibition, and a chargeable-against clause is such a prohibition. Examiners use this case to test the exception to Aquino and the rule that contracts cannot be enlarged by judicial interpretation.