G.R. No. 152991 ; July 21, 2008
Alberto P. Oxales, Petitioner, vs. United Laboratories, Inc., Respondent.

FACTS

Petitioner Alberto P. Oxales was compulsorily retired by respondent United Laboratories, Inc. (UNILAB) upon reaching age 60 after over 25 years of service. His retirement benefits were computed under the company’s United Retirement Plan (URP), a contributory plan funded by both employer (Trust Fund A) and employee (Trust Fund B) contributions. The URP provided a lump sum of 1½ month’s pay per year of service based on the employee’s last basic monthly salary, expressly excluding commissions, overtime, bonuses, or extra compensations. UNILAB computed Oxales’ benefits using only his basic salary, excluding permanent bonuses, food allowances, prorated 13th month pay, and service incentive leave cash equivalent.
Oxales claimed his retirement pay should have been higher, computed under Republic Act No. 7641 (The Retirement Pay Law), which defines “one-half month salary” to include allowances and the cash equivalent of benefits. He filed a complaint for additional retirement benefits, recovery of the cash equivalent of unused sick leaves, damages, and attorney’s fees. The Labor Arbiter, NLRC, and Court of Appeals dismissed his complaint, upholding the URP computation.

ISSUE

Whether the retirement benefits of an employee under a private company’s retirement plan should be computed based on the plan’s provisions or pursuant to the salary base definition under R.A. No. 7641 .

RULING

The Supreme Court denied the petition and upheld the URP computation. The legal logic is anchored on the primacy of a company retirement plan that is more beneficial than the statutory minimum under R.A. No. 7641 . The law applies subsidiarily; it only governs in the absence of a retirement plan or when the plan’s benefits are lower than the statutory minimum. The URP provided a higher benefit multiplier (1½ months per year of service) compared to the law’s ½ month, and the total monetary value received by Oxales under the URP was significantly greater than what he would have received under the statutory formula.
The Court ruled that when a company plan exists and grants benefits superior to the law, the specific provisions of that plan, including its definition of salary base for computation, control. To impose R.A. No. 7641 ’s broader salary definition on the more generous URP formula would create an absurdity, granting a double benefit not intended by the plan and potentially jeopardizing its actuarial soundness and tax-qualified status. The employer and employee voluntarily entered into the URP scheme, and its terms, being more favorable, must prevail.