ZENAIDA PAZ, PETITIONER, VS. NORTHERN TOBACCO REDRYING CO., INC., AND/OR ANGELO ANG, RESPONDENTS.

Zenaida Paz versus Northern Tobacco Redrying

The Case

This is a labor case about a seasonal worker who was told she was retired before she reached the compulsory retirement age. Zenaida Paz had sorted tobacco leaves for Northern Tobacco Redrying Company for twenty-nine seasons when the company informed her, at sixty-three, that she was retired under a company policy. She asked the courts to correct the computation of her retirement pay, which the company had pegged at a little over twelve thousand pesos. The case matters because it settles two questions every labor lawyer must know: when a seasonal worker becomes a regular seasonal employee, and how retirement pay and backwages are computed when there is no valid retirement plan.

Procedural History

Paz first filed a complaint for illegal dismissal before the Labor Arbiter, later amending it into a claim for retirement benefits, damages, and attorney's fees. The Labor Arbiter confirmed that her correct retirement pay was twelve thousand four hundred eighty-seven pesos and fifty centavos. On appeal, the National Labor Relations Commission modified the ruling. It held that her retirement pay should be computed under Republic Act Number 7641, adding all the months she was engaged over the last twenty-eight years and dividing by six, since a fraction of six months counts as one whole year. The Commission also ruled on the claims of a co-complainant, Teresa Lopez.

Paz went up to the Court of Appeals, which dismissed her petition but modified the Commission's decision by awarding her financial assistance of sixty thousand three hundred fifty-six pesos and twenty-five centavos. The Court of Appeals reasoned that the strict application of the law yielded an amount so meager it could hardly support a woman now weak and old. Paz then came to the Supreme Court by petition for review, seeking to reinstate the Commission's computation.

Facts

Northern Tobacco Redrying Company is engaged in flue-curing and redrying tobacco leaves. It hired Zenaida Paz sometime in 1974 as a seasonal sorter at a daily wage of one hundred eighty-five pesos. She signed a seasonal job contract at the start of her employment and a pro-forma application letter prepared by the company to qualify for the next season. She was regularly rehired every tobacco season, which ran from March to September, for twenty-nine years.

On May 18, 2003, when Paz was sixty-three years old, the company informed her that she was considered retired under company policy. A year later, the company told her she would receive twelve thousand pesos as retirement pay. Finding this inadequate for twenty-nine years of service, Paz filed a complaint for illegal dismissal, later amended into a claim for retirement benefits.

The company countered that no collective bargaining agreement existed between it and its workers, so it computed retirement pay under Article 287 of the Labor Code. It claimed that Paz worked at least six months only in 1995, 1999, and 2000 out of her twenty-nine years, and multiplied her daily salary by twenty-two and a half working days for three years to arrive at twelve thousand four hundred eighty-seven pesos and fifty centavos.

Issues

• Whether or not Zenaida Paz was a regular seasonal employee entitled to security of tenure.
• Whether or not Paz was illegally dismissed when the company retired her at sixty-three, before the compulsory retirement age of sixty-five.
• Whether or not Paz is entitled to full backwages and nominal damages for the violation of her rights.
• Whether or not the computation of her retirement pay should follow Article 287 of the Labor Code, as amended, counting all her years of service.

Applicable Provisions

Article 279 of the Labor Code provides:

Art. 279. Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

This is the basis for Paz's claim that her forced retirement was an illegal dismissal entitling her to backwages.

Article 287 of the Labor Code, as amended by Republic Act Number 7641, provides:

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year.

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 leaves.

This governs the computation of retirement pay because the company failed to prove any valid retirement plan or agreement.

Section 2 of the Omnibus Rules Implementing the Labor Code provides:

Section 2. Standard of due process: requirements of notice. – In all cases of termination of employment, the following standards of due process shall be substantially observed.

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice [of] termination served on the employee indicating that upon due consideration of all the circumstance, grounds have been established to justify his termination.

This establishes the procedural due process the company failed to observe, justifying an award of nominal damages.

Ruling

On the first issue, the Court held that Paz was a regular seasonal employee. The test is whether the work performed is usually necessary or desirable in the usual business or trade of the employer. Paz sorted tobacco leaves, work necessary and indispensable to the company's business, and she was rehired every season for twenty-nine years. Seasonal workers called to work from time to time and temporarily laid off during off-season are not separated from service but merely on leave until re-employed.

On the second issue, the Court held that Paz was illegally dismissed. Retirement is a bilateral act, a voluntary agreement between employer and employee. If the intent to retire is not clearly established, or if the retirement is involuntary, it is treated as a discharge. The company retired Paz at sixty-three, before the compulsory age of sixty-five, and failed to prove a valid company retirement policy. Her amendment of her complaint did not amount to abandonment of her claim, since she consistently maintained she had not reached the compulsory retirement age.

On the third issue, the Court awarded full backwages from May 18, 2003 until she reached sixty-five in 2005. Since the exact number of days could not be determined, the Court computed backwages at twenty-two thousand two hundred pesos, multiplying one hundred eighty-five pesos by twenty days, by three months, by two years. The Court also awarded thirty thousand pesos as nominal damages, because the company violated procedural due process. The case falls under the third situation in Agabon: dismissal without just or authorized cause and without due process.

On the fourth issue, the Court held that Article 287, as amended, governs the computation of retirement pay because no valid retirement plan existed. The company's reliance on the six-month rule for seasonal workers was rejected. The Court affirmed the Court of Appeals' decision with modification, applying the correct computation under the law.

Doctrine

A regular seasonal employee is one who performs work necessary and indispensable to the employer's business and is rehired season after season. Such an employee does not lose regular status during the off-season; the worker is merely on leave until re-employed. Retirement is a bilateral act requiring the employee's voluntary agreement. If the intent to retire is not clearly established, or the retirement is involuntary, it is treated as an illegal discharge. In the absence of a valid retirement plan or collective bargaining agreement, Article 287 of the Labor Code, as amended, governs, entitling the employee to at least one-half month salary for every year of service, with a fraction of at least six months counted as one whole year. An illegal dismissal without just or authorized cause and without due process entitles the employee to full backwages and nominal damages.

Disposition

The Supreme Court affirmed the Court of Appeals' decision with modification, declaring Paz a regular seasonal employee who was illegally dismissed and entitled to backwages, nominal damages, and retirement pay computed under Article 287.

Remember This

Memorize this line: a seasonal worker rehired season after season for work necessary to the business is a regular seasonal employee, and retiring her before sixty-five without a valid plan is illegal dismissal. Examiners use this case to test the computation of retirement pay under Article 287 and the distinction between voluntary retirement and illegal discharge.