Dear Atty. Gab,

Musta Atty! I hope you can shed some light on my situation. I’m Rafael Aquino, and I recently retired from my job of 25 years at Fil-Tech Solutions Inc. in Cebu City. I was expecting my final retirement package to include not just my basic pay computation but also the annual ‘Productivity Enhancement Bonus’ (PEB) averaged over my last year, similar to how they compute other incentives for retirement.

While the PEB policy technically requires meeting certain department-wide efficiency targets, I know for a fact that at least two colleagues who retired in the last 5 years, Mr. Santos in 2021 and Mrs. Reyes in 2019, received their PEB as part of their retirement pay even though our department didn’t hit the targets those years. It became common knowledge among senior staff that the PEB was generally included, regardless of the strict target achievement, as a form of goodwill for long-serving employees retiring.

However, HR is now telling me that because our department missed the target last year (by a small margin, I might add!), I am not entitled to the PEB in my retirement calculation. They claim the previous instances were ‘isolated exceptions’ or possibly ‘oversights’ by previous HR management. This feels unfair, as I based my retirement financial planning partly on the expectation of receiving that PEB, given the precedent. Is the company allowed to just stop this practice? Don’t I have a right to it if they’ve given it consistently before, even against their own written policy? I’m confused about my rights here. Any guidance would be greatly appreciated.

Salamat po,
Rafael Aquino

Dear Rafael,

Thank you for reaching out, and congratulations on your retirement after 25 years of service. I understand your confusion and frustration regarding the Productivity Enhancement Bonus (PEB) not being included in your retirement package, especially given your knowledge of past instances where it was granted.

The core issue here revolves around the legal principle of non-diminution of benefits and whether the granting of the PEB, despite unmet targets, had ripened into an established company practice. While company policies provide the general rules, consistent actions by the employer over time can sometimes create rights for employees beyond the strict text of those policies. However, establishing this requires careful consideration of the facts and specific legal standards.

When Company Habit Becomes a Protected Benefit

Under Philippine labor law, specifically Article 100 of the Labor Code, employers are generally prohibited from reducing or eliminating benefits already enjoyed by their employees. This is known as the principle of non-diminution of benefits. It protects employee rights and promotes fairness in the workplace. The key question in your situation is whether the PEB, despite the unmet targets, qualifies as such a benefit through established practice.

Employees generally acquire a vested right over benefits voluntarily granted by their employer over a significant period. This means the benefit becomes part of the terms and conditions of employment, even if not explicitly written in the contract or policy under all circumstances.

“Generally, employees have a vested right over existing benefits voluntarily granted to them by their employer. Thus, any benefit and supplement being enjoyed by the employees cannot be reduced, diminished, discontinued or eliminated by the employer.”

However, for this principle to apply, especially when arguing based on company practice rather than explicit policy, certain conditions must be met. The mere granting of a benefit in one or two instances does not automatically transform it into an established practice that the company cannot withdraw.

The law sets specific requirements to determine if a benefit has been diminished unlawfully, particularly when relying on company practice:

“There is diminution of benefits when the following requisites are present: (1) the grant or benefit is founded on a policy or has ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a doubtful or difficult question of law; and (4) the diminution or discontinuance is done unilaterally by the employer.”

This highlights several crucial points for your case. First, the practice must have occurred over a ‘long period.’ Jurisprudence doesn’t define a specific number of years, but isolated or infrequent instances are usually insufficient. Second, the practice must be consistent and deliberate. This implies a conscious intention by the employer to grant the benefit under those specific circumstances (e.g., granting the PEB despite unmet targets upon retirement). If the previous grants were indeed errors or isolated acts of discretion by specific managers, as HR now claims, it would weaken the argument for an established, deliberate practice.

Crucially, the burden of proving that the benefit has ripened into a company practice falls on the employee – in this case, you. You need to provide substantial evidence to show that the granting of the PEB to retirees, regardless of target achievement, was a regular, intentional act by the company over a significant time.

“To be considered as a regular company practice, the employee must 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… It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring payment thereof.”

Simply hearing about Mr. Santos and Mrs. Reyes receiving the benefit might not be enough. You would ideally need documentation or testimonies demonstrating a pattern beyond just those two instances, and evidence suggesting the company knowingly and intentionally disregarded the target requirement for retirees over time. A mere habit or custom isn’t automatically legally enforceable.

“A practice or custom is, as a general rule, not a source of a legally demandable or enforceable right. 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.”

Therefore, while you feel it’s unfair based on precedent, the legal test is stringent. You need to demonstrate that the company’s actions were more than just isolated exceptions or mistakes, but rather a consistent, deliberate pattern amounting to an established practice modifying the original policy for retiring employees.

Practical Advice for Your Situation

• Gather Evidence: Try to collect concrete proof beyond hearsay. This could include copies of retirement computations of past employees (if accessible and permissible), emails, memos, or written statements (affidavits) from former colleagues (like Mr. Santos or Mrs. Reyes) or HR personnel familiar with the past practices.
• Document Everything: Keep records of all communications with HR regarding this issue, including dates, times, names of people you spoke with, and what was discussed.
• Review Company Policies: Obtain copies of the official PEB policy and any retirement plan documents. Check if there’s any language regarding discretion or exceptions, or any amendments made over the years.
• Assess Consistency: Be honest about how consistent the practice really was. Were there other retirees who didn’t receive the PEB when targets weren’t met? Two instances over several years might be legally viewed as isolated. More examples strengthen your case.
• Inquire About the ‘Why’: Ask HR (politely but firmly, perhaps in writing) to explain the specific basis for granting the PEB to Mr. Santos and Mrs. Reyes if it was against policy. Their explanation (or lack thereof) could be relevant. Were these negotiated concessions, or truly standard practice?
• Understand the Burden of Proof: Realize that legally, the responsibility is on you to prove the existence of a consistent, deliberate company practice. Hearsay or assumptions are generally not sufficient.
• Formal Consultation: Given the complexities and the need for strong evidence, consider a formal legal consultation to thoroughly assess the strength of your claim based on the specific evidence you can gather.

Navigating disputes over benefits established through practice can be challenging because it requires proving the employer’s consistent and deliberate intent over time, often against written policies. While the principle of non-diminution protects employees, its application depends heavily on the specific facts and the evidence presented.

Hope this helps!

Sincerely,
Atty. Gabriel Ablola

For more specific legal assistance related to your situation, please contact me through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This correspondence is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please schedule a formal consultation.