Atty. Gregorio B. Austral, CPA

Effect of a gap in service on retirement benefits

There are employees who resign from their previous employers to seek a greener pasture in another company. As fate would have it, the previous employer turns out to be better than the new employer. After working shortly with the new employer, the employee later on decides to reapply for a job in his previous employer. When this employee retires, a question is often asked: Should the length of service be reckoned from the very first day he worked at the company or should it be counted only from the time he re-applied at the company up to the date of his retirement?

This issue was already addressed by the Supreme Court in Sta. Catalina College and Sister Lorena Oranza vs. NLRC, G.R. No. 144483, November 19, 2003.

In June 1955, Hilaria G. Tercero (Hilaria) was hired as an elementary school teacher at the Sta. Catalina College in San Antonio, Bian, Laguna. In 1970, she applied for and was granted a one year leave of absence without pay on account of the illness of her mother. After the expiration in 1971 of her leave of absence, she had not been heard from by the school. In the meantime, she was employed as a teacher at the San Pedro Parochial School during school year 1980-1981 and at the Liceo de San Pedro, Bian, Laguna during school year 1981-1982. In 1982, she applied anew at Sta. Catalina. On May 31, 1997, Hilaria reached the compulsory retirement age of 65. Sta. Catalina computed her retirement benefits on the basis of fifteen years of service from 1982 to 1997. Her service from 1955 to 1970 was excluded in the computation, since Sta. Catalina asserted that she had, in 1971, abandoned her employment.

The Supreme Court ruled in this wise:

x x x Hilaria cannot be credited for her services in 1955-1970 in the determination of her retirement benefits. For, after her one year leave of absence expired in 1971 without her requesting for extension thereof as in fact she had not been heard from until she resurfaced in 1982 when she reapplied with petitioner school, she abandoned her teaching position as in fact she was employed elsewhere in the interim and effectively relinquished the retirement benefits accumulated during the said period.

In a fairly recent case of Melchor A. Cuadra, et.al. vs. San Miguel Corporation, G.R. No. 194467, promulgated on July 13, 2020, the Supreme Court reiterated the above rule as follows:

When there is no evidence to the contrary, an employee’s period of service is presumed continuous and its reckoning point shall be the day the employee first came under the employ of the employer. However, if in the interim, the employer-employee relationship was validly severed, returning to the same employer for work shall be considered rehiring, and the length of service shall be reckoned from the day the employee was rehired.