TL;DR

The Supreme Court ruled that an employee who voluntarily resigns may still be entitled to separation pay if it is an established company practice, even if not stipulated in the employment contract or collective bargaining agreement. In this case, Hinatuan Mining Corporation was compelled to grant separation pay to a resigning employee because it had a history of providing such benefits to similarly situated employees, demonstrating a consistent company policy. This decision underscores the importance of consistent employer practices in determining employee entitlements upon separation, irrespective of the reason for leaving the company.

Resignation Isn’t Always a Farewell to Benefits: When Company Precedent Matters

Margot Batister, a chief chemist at Hinatuan Mining Corporation, resigned after over a decade of service, citing family reasons. Despite her voluntary departure, she sought separation pay, pointing to the company’s past practice of granting such benefits to resigning managerial employees. The company, however, denied her request, arguing that voluntary resignation does not warrant separation pay and that she was obligated to stay longer due to a training grant she had received. This case explores whether an employer’s established practice can create an entitlement to separation pay, even in the absence of a contractual obligation or legal mandate.

The legal framework governing separation pay in the Philippines generally dictates that employees who voluntarily resign are not entitled to such benefits. The Labor Code specifies instances where separation pay is warranted, such as retrenchment, redundancy, or the installation of labor-saving devices. However, an exception arises when separation pay is stipulated in the employment contract or collective bargaining agreement (CBA), or when it is sanctioned by an established employer practice or policy.

In Batister’s case, the central question revolved around whether Hinatuan Mining Corporation had an established practice of granting separation pay to voluntarily resigning employees, particularly those in managerial positions. The National Labor Relations Commission (NLRC) found that such a practice existed, citing the case of Rizalino Alcantara, a former property officer who was awarded separation pay upon his voluntary resignation. The NLRC reasoned that denying Batister separation pay would unduly discriminate against her, given the precedent set by Alcantara’s case and other instances where resigning officers received similar benefits. It is a well-settled principle that equal treatment and non-discrimination are cornerstones of labor law. This ensures fairness and prevents employers from arbitrarily denying benefits to similarly situated employees.

The Supreme Court affirmed the NLRC’s decision, albeit with a modification regarding the computation of separation pay. The Court emphasized that while the Labor Code does not generally mandate separation pay for voluntary resignations, an established company practice can create an exception to this rule. The Court found that Hinatuan Mining Corporation had consistently granted separation pay to resigning managerial employees, including those who had received training grants. This established practice effectively created an implied policy, giving rise to a legitimate expectation on the part of employees like Batister.

The company argued that Batister’s case was different because she had received a training grant shortly before her resignation. However, the Court rejected this argument, noting that another employee, Engineer Bayutas, had also received a training grant and was granted separation pay despite resigning shortly after. The Court also emphasized that Batister had not signed any contract obligating her to stay with the company for a specific period after the training. Therefore, the company’s attempt to distinguish Batister’s case from previous instances of granting separation pay was deemed unpersuasive. The Supreme Court recognized that company policies and practices, even if unwritten, can create binding obligations on employers. When an employer consistently acts in a certain way, it can give rise to a legitimate expectation on the part of employees that such practice will continue.

However, the Supreme Court modified the NLRC’s decision regarding the amount of separation pay. The NLRC had computed the separation pay at the rate of one month’s salary for every year of service. The Court noted that the separation pay granted to previously resigned employees was only one-half month’s salary per year of service. Therefore, the Court reduced Batister’s separation pay to one-half month’s salary for every year of service, aligning it with the company’s established practice. This highlights the importance of consistency in applying company policies. While an employer may be bound by its established practices, the extent of that obligation is determined by the specifics of those practices.

The Supreme Court upheld the award of damages to Batister, finding that the company had unduly withheld her separation pay without just and valid cause. This underscores the principle that employers should not arbitrarily deny benefits to employees when there is an established practice of granting such benefits. This decision serves as a reminder to employers to be mindful of their past practices and policies, as these can create binding obligations and give rise to legitimate expectations on the part of employees. Moving forward, businesses must carefully consider the potential implications of their actions and ensure that their policies are consistently applied to avoid claims of discrimination or unfair treatment.

FAQs

This case highlights the importance of consistent employer practices in determining employee entitlements upon separation. Employers should be mindful of their past actions and policies, as these can create binding obligations and give rise to legitimate expectations on the part of employees.

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Hinatuan Mining Corporation vs. NLRC, G.R. No. 117394, February 21, 1997