G.R. No. 126888 April 14, 1999
J.V. ANGELES CONSTRUCTION CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ARIEL CADIENTE SANTOS and PEDRO SANTOS, respondents.

FACTS

Private respondent Pedro Santos was employed by petitioner J.V. Angeles Construction Corporation from 1969 until his retirement in February 1992 at age 62. In October 1993, he filed a complaint before the NLRC seeking payment of retirement benefits and service incentive leave pay. The Labor Arbiter ruled in Santos’ favor, directing the petitioner to pay retirement benefits equivalent to one-half month pay per year of service, applying Republic Act No. 7641 (The Retirement Pay Law), which took effect on January 7, 1993.
Petitioner corporation appealed to the NLRC, arguing that RA 7641 could not be applied retroactively to Santos, who had retired almost a year before the law’s effectivity. It contended that, pursuant to the ruling in Llora Motors, Inc. v. Drilon, an employer has no obligation to provide retirement benefits beyond the Social Security System (SSS) coverage absent a company policy, practice, or contract. The NLRC, however, affirmed the Labor Arbiter’s decision, citing Oro Enterprises v. NLRC, which allowed the retroactive application of RA 7641 since the claim was filed after the law took effect.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in affirming the award of retirement benefits to Pedro Santos by applying RA 7641 retroactively.

RULING

Yes, the NLRC committed grave abuse of discretion. The Supreme Court granted the petition and reversed the NLRC’s decision. The Court clarified the conditions for the retroactive application of RA 7641 as established in CJC Trading, Inc. v. NLRC. For the law to apply retroactively, two circumstances must concur: (1) the claimant must still be an employee of the employer at the time the statute took effect, and (2) the claimant must have complied with the eligibility requirements under the statute.
In this case, Pedro Santos retired and ceased his employment in February 1992, which was eleven months before RA 7641 became effective on January 7, 1993. Consequently, the first requisite condition was absent, as he was no longer an employee when the law took effect. The mere fact that he filed his claim after the law’s effectivity does not justify its retroactive application to his case. Therefore, the beneficial provisions of RA 7641 could not be invoked. In the absence of a retirement plan, company policy, or collective bargaining agreement granting such benefits, the petitioner had no legal obligation to provide retirement pay beyond the SSS benefits Santos had already received.