OXALES VS UNITED LABORATORIES (UniLab)

G.R No. 152991, July 21,2008

Facts:

A company retirement plan partakes the nature of a contract between the employer
and employee. There arises a contractual obligation where the payment of retirement benefits
is in consideration of continued faithful service tot eh employer for a required time. The parties
may establish applicable terms and conditions which have the force of law between them, to be
complied with in good faith. But this right is not absolute. The limiation of law is that such
terms and conditions should not be contrary to law, morals, good customs, public order, or
public policy. Existing laws are deemed written in every contract, and when the provision of
the party is lacking, the provision of the law supplies it.

Law and jurisprudence state that if the terms of a contract are clear and leave no doubt
upon the intention of the contracting parties, its literal meaning shall control.There is no basis
for nullifying the URP, since it is not contrary to law, morals, good customs, public order, or
public policy. The benefits received by Oxales are way above the entitlement he could have
received under the New Retirement Law.

The company URP (United Retirement Plan) states that "basic monthly salary" for purposes of
computing the retirement pay refers to the basic rate of pay converted to basic monthly salary
of the employee excluding commissions, overtime, bonuses, or extra compensations."

Issue:

Whether or not Oxales is entitle to any benefits granted by RA.7641 (Retirement Plan)

Held:

R.A. No. 7641 does not apply, URP gives the retiring employee more than what the law
requires. R.A. No. 7641, The Retirement Pay Law," only applies when:

(1) there is no collective bargaining agreement or other applicable employment contract

providing for retirement benefits for an employee. This is to prevent the situation where a
deserving employeeis denied retirement benefits becauser the employers in not providing for
retirement benefits for their employees; or

(2) there is a collective bargaining agreement or other applicable employment contract but the
retirement benefits are below the requirements by law. This is because Private contracts
cannot derogate from the public law. Five (5) reasons support this conclusion.
1.The Retirement Pay Law says so.

2.legislative history of the Retirement Pay Law. It may be recalled that R.A. No. 7641 traces
back to Llora Motors, Inc. v. Drilon, where the Court held that then Article 287 of the Labor
Code and its IRR may not be the source of an employee's entitlement to retirement pay absent
the presence of a collective bargaining agreement or voluntary company policy that provides
for retirement benefits for the employee.

3. legislative intent of the Retirement Pay Law to compel employers

4. the title of the Retirement Pay Law says it is "An Act Amending Article 287 of Presidential
Decree No. 442, As Amended, Otherwise Known as the Labor Code of the Philippines, By
Providing for Retirement Pay to Qualified Private Sector in the Absence of Any Retirement Plan
in the Establishment."

5. jurisprudence.

Rivera vs. Solidbank

[G.R. No. 163269. April 19, 2006]

Facts:

Rivera applied for retirement under the Special Retirement Program. Solidbank
approved the application and Rivera was entitled to receive the net amount of P_____

However in 1995 Solidbank discovered that Equitable Bank employed Rivera as Manager of its
Credit Investigation and Appraisal Division of its Consumers Banking Group. Solidbank then
informed Rivera that he had violated the Undertaking and demanded the return of all the
monetary benefits he received. When Rivera refused to return the amount demanded within
the given period, Solidbank filed a complaint for recovery of sum of money. 963,619.28. He
signed an undated Release, Waiver and Quitclaim, which was notarized on March 1, 1995.
Rivera acknowledged receipt of the net proceeds of his separation and retirement benefits and
promised that "[he] would not, at any time, in any manner whatsoever, directly or indirectly
engage in any unlawful activity prejudicial to the interest of Solidbank, its parent, affiliate or
subsidiary companies, their stockholders, officers, directors, agents or employees, and their
successors-in-interest and will not disclose any information concerning the business of
Solidbank, its manner or operation, its plans, processes, or data of any kind.
Issue:

whether the employment ban incorporated in the Undertaking which petitioner

executed upon his retirement is unreasonable, oppressive, hence, contrary to public policy

Held:

In determining whether the contract is reasonable or not, the trial court should consider
the following factors:

(a) whether the covenant protects a legitimate business interest of the employer;

(b) whether the covenant creates an undue burden on the employee;

(c) whether the covenant is injurious to the public welfare;

(d) whether the time and territorial limitations contained in the covenant are reasonable; and

(e) whether the restraint is reasonable from the standpoint of public policy.

At first glance, the post-retirement competitive employment ban is unreasonable because it

has no geographical limits; respondent is barred from accepting any kind of employment in any
competitive bank within the proscribed period. Although the period of one year may appear
reasonable, the matter of whether the restriction is reasonable or unreasonable cannot be
ascertained with finality solely from the terms and conditions of the Undertaking, or even in
tandem with the Release, Waiver and Quitclaim.

However, a distinction must be made between restrictive covenants barring an

employee to accept a post-employment competitive employment (restraint on trade) and
restraints on post-retirement competitive employment in pension and retirement plans. A
restriction in the contract which does not preclude the employee from engaging in competitive
activity, but simply provides for the loss of rights or privileges if he does so is not in restraint of
trade.

The strong weight of authority is that forfeitures for engaging in subsequent competitive
employment included in pension and retirement plans are valid even though unrestricted in
time or geography. The reasoning behind this conclusion is that the forfeiture, unlike the
restraint included in the employment contract, is not a prohibition on the employees engaging
in competitive work but is merely a denial of the right to participate in the retirement plan if he
does so engage.
 A post-retirement competitive employment restriction is designed to protect the
employer against competition by former employees who may retire and obtain retirement or
pension benefits and, at the same time, engage in competitive employment.

Moreover, the Undertaking and the Release, Waiver and Quitclaim do not provide for
the automatic forfeiture of the benefits petitioner received under the SRP upon his breach of
said deeds. Thus, the post-retirement competitive employment ban incorporated in the
Undertaking of respondent does not, on its face, appear to be unreasonable. The terms of the
Undertaking merely states that any breach by petitioner of his promise would entitle
respondent to a cause of action for protection in the courts of law

Daisy Tiu vs Platinum Plans

G.R No. 163512, Feb. 28, 2007

FACTS:

Respondent Platinum Plans Philippines, Inc. is a domestic corporation engaged in the

pre-need industry. From 1987 to 1989, petitioner Daisy B. Tiu was its Division Marketing
Director. On January 1, 1993, respondent re-hired petitioner as Senior Assistant Vice-President
and Territorial Operations Head in charge of its Hongkong and Asean operations. The parties
executed a contract of employment valid for five years. 4 On September 16, 1995, petitioner
stopped reporting for work. In November 1995, she became the Vice-President for Sales of
Professional Pension Plans, Inc., a corporation engaged also in the pre-need industry.
Consequently, respondent sued petitioner for damages before the RTC of Pasig City, Branch
261. Respondent alleged, among others, that petitioners employment with Professional
Pension Plans, Inc. violated the non-involvement clause in her contract of employment, which
prohibits the employee for two years in case of separation, whether voluntary or for cause, to
engage in or be involve with any pre-need corporation.

In upholding the validity of the non-involvement clause, the trial court ruled that a
contract in restraint of trade is valid provided that there is a limitation upon either time or
place. In the case of the pre-need industry, the trial court found the two-year restriction to be
valid and reasonable. On appeal, the Court of Appeals affirmed the trial courts ruling. It
reasoned that petitioner entered into the contract on her own will and volition. Thus, she
bound herself to fulfill not only what was expressly stipulated in the contract, but also all its
consequences that were not against good faith, usage, and law. The appellate court also ruled
that the stipulation prohibiting non-employment for two years was valid and enforceable
considering the nature of respondents business. Petitioner moved for reconsideration but was
denied.
ISSUE:

Plainly stated, the core issue is whether the non-involvement clause is valid.

HELD:

YES. Conformably then with the aforementioned pronouncements, a non-involvement

clause is not necessarily void for being in restraint of trade as long as there are reasonable
limitations as to time, trade, and place. In this case, the non-involvement clause has a time
limit: two years from the time petitioners employment with respondent ends. It is also limited
as to trade, since it only prohibits petitioner from engaging in any pre-need business akin to
respondents. More significantly, since petitioner was the Senior Assistant Vice-President and
Territorial Operations Head in charge of respondents Hongkong and Asean operations, she had
been privy to confidential and highly sensitive marketing strategies of respondents business.
To allow her to engage in a rival business soon after she leaves would make respondents trade
secrets vulnerable especially in a highly competitive marketing environment.

In sum, we find the non-involvement clause not contrary to public welfare and not
greater than is necessary to afford a fair and reasonable protection to respondent. In any event,
Article 1306 of the Civil Code provides that parties to a contract may establish such stipulations,
clauses, terms and conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy. Article 1159 of the same Code also
provides that obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith. Courts cannot stipulate for the parties nor
amend their agreement where the same does not contravene law, morals, good customs,
public order or public policy, for to do so would be to alter the real intent of the parties, and
would run contrary to the function of the courts to give force and effect thereto. Not being
contrary to public policy, the non-involvement clause, which petitioner and respondent freely
agreed upon, has the force of law between them, and thus, should be complied with in good
faith. Thus, as held by the trial court and the Court of Appeals, petitioner is bound to pay
respondent P100,000 as liquidated damages. While we have equitably reduced liquidated
damages in certain cases, we cannot do so in this case, since it appears that even from the
start, petitioner had not shown the least intention to fulfill the non-involvement clause in good
faith. WHEREFORE, the petition is DENIED for lack of merit. The Decision dated January 20,
2004, and the Resolution dated May 4, 2004, of the Court of Appeals in CA-G.R. CV No. 74972,
are AFFIRMED. Costs against petitioner. SO ORDERED.