Diminution of retirement benefits

When a person retires from work after long years of service, he looks forward to receiving as soon as possible the full measure of the retirement benefits that may have been earlier promised him by his employer.

Thus, it’s heartbreaking, after the toasts have been raised and good wishes made, if the anticipated cushion for future financial needs falls short of expectations.

This was the situation Ricardo Vergara Jr. found himself in when he retired from Coca Bottlers Philippines Inc. in 2002, after 34 years of service, as district sales supervisor.

At that time, the company’s retirement plan stated that the annual performance incentive pay of sales supervisors shall be considered in the computation of retirement benefits using the following formula:

Basic monthly salary + monthly average performance incentive (which is the total performance incentives earned during the year immediately preceding + 12 months) x number of years in service.

Unsatisfied with the retirement pay he got, Vergara filed a complaint against the company with the National Labor Relations Commission for payment of the sum of P474,600 representing unpaid sales management incentives (SMI), and the recovery of the P496,016.67 that the company deducted from his pay to cover for the unpaid accounts of two dealers within his sales territory.

Diminution

After going through the NLRC mill, the parties entered into a compromise agreement with the company reimbursing Vergara the P496,016.67 it deducted for the earlier mentioned unpaid accounts.

His plea for the payment of the SMI was, unfortunately, denied by the NLRC and, later, by the Court of Appeals. From these turndowns, Vergara sought relief from the Supreme Court.

He asked the tribunal to resolve the issue of whether the SMI should be included in the computation of his retirement benefits on the ground of consistent company practice.

The tribunal stated that “generally, employees have a vested right over existing benefits voluntarily granted to them by their employer.”

Citing the constitutional mandate to protect the rights of workers and promote their welfare, the justices said “any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or eliminated by the employer.”

Benefits are considered diminished if the following requisites are present: a) the grant or benefit is founded on a policy or has ripened into a practice over a long period of time; b) the practice is consistent and deliberate; c) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and d) the diminution or discontinuance is done unilaterally by the employer.

Regularity

For a practice to be characterized as regular, it is essential that the employee is able to prove by substantial evidence that “the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately.”

Although there is no hard-and-fast rule on the length of time a company practice has been exercised to constitute voluntary employer practice, the tribunal, citing earlier decisions, considers regularity and deliberateness of the grant of benefits over a significant period of time as key elements in making such determination.

To support his claim, Vergara submitted the sworn statements of two retired sales supervisors who said the SMI was included in their retirement package even if they did not meet the sales and collection qualifiers.

Against these testimonies, the company presented the counter-affidavits of witnesses who stated that the inclusion of the SMI in one of the retiree’s pay was made to achieve industrial peace in the plant when it was going through some labor problems, and that the other retiree has, in reality, met his sales and collection quota as to qualify him for the SMI.

After weighing the merits of these statements, the justices ruled that Vergara failed to prove that the grant of the SMI to all retired sales supervisors, regardless of whether or not they qualify for that benefit, had ripened into company practice.

Contentions

Company practice, “just like any other fact, habits, customs, usage or patterns of conduct, must be proven by the offering party who must allege and establish specific, repetitive conduct that might constitute evidence of habit or company practice.”

Thus, for failure to prove that the SMI was an employment benefit the company granted to its sales supervisors as a matter of practice, whether or not they meet their sales and collection quotas, Vergara’s petition for payment of the SMI was turned down.

To aggravate matters, the tribunal pointed out that he was unable to present evidence to controvert the company’s claim that he did not meet the sales and collection targets that would have qualified him for the SMI.

This issue was repeatedly raised by the company in its filings as the case went through the NLRC and the judicial mill. Through all these proceedings, Vergara kept silent and did not bother to present contrary evidence.

That deliberate inaction on an issue that was critical in the determination of his entitlement to the SMI further doomed his cause.

(The instant case is docketed as “Ricardo F. Vergara Jr. vs. Coca-Cola Bottlers Philippines Inc., GR No. 176985, dated April 1, 2013.)

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