Rivera vs.

Solid Bank Corporation Case Digest

Rolando Rivera vs. Solid Bank Corporation

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

Facts: Petitioner Rolando Rivera had been working for Solidbank Corporation since July 1977. He
was initially employed as an Audit Clerk, then as Credit Investigator, Senior Clerk, Assistant
Accountant, and Assistant Manager. Prior to his retirement, he became the Manager of the Credit
Investigation and Appraisal Division of the Consumer’s Banking Group. In the meantime, Rivera and
his brother-in-law put up a poultry business in Cavite.

In December 1994, Solidbank offered two retirement programs to its employees: (a) the Ordinary
Retirement Program (ORP), under which an employee would receive 85% of his monthly basic
salary multiplied by the number of years in service; and (b) the Special Retirement Program (SRP),
under which a retiring employee would receive 250% of the gross monthly salary multiplied by the
number of years in service. Since Rivera was only 45 years old, he was not qualified for retirement
under the ORP. Under the SRP, he was entitled to receive P1,045,258.95 by way of benefits.

Deciding to devote his time and attention to his poultry business in Cavite, Rivera applied for
retirement under the SRP. Subsequently, Solidbank required Rivera to sign 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.”

On May 1995, the Equitable Banking Corporation employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers’ Banking Group. Upon discovering this,
Solidbank First Vice-President for Human Resources Division (HRD) wrote a letter informing Rivera
that he had violated the Undertaking and demanded the return of all the monetary benefits he
received in consideration of the SRP within five days from receipt; otherwise, appropriate legal
action would be taken against him.

When Rivera refused to return the amount demanded within the given period, Solidbank filed a
complaint. Petitioner avers that the prohibition incorporated in the Release, Waiver and Quitclaim
barring him as retiree from engaging directly or indirectly in any unlawful activity and disclosing any
information concerning the business of respondent bank, as well as the employment ban contained
in the Undertaking he executed, is oppressive, unreasonable, cruel and inhuman because of its
overbreath.

Issue: Whether or not the post-retirement competitive employment ban is reasonable.

Ruling: The post-retirement competitive employment ban is unreasonable because it has no

geographical limits. The respondent is barred from accepting any kind of employment in any
competitive bank within the proscribed period.

Retirement plans, in light of the constitutional mandate of affording full protection to labor, must be
liberally construed in favor of the employee, it being the general rule that pension or retirement plans
formulated by the employer are to be construed against it. Retirement benefits, after all, are intended
to help the employee enjoy the remaining years of his life, releasing him from the burden of worrying
for his financial support, and are a form of reward for being loyal to the employer. Respondent is
burdened to establish that a restrictive covenant barring an employee from accepting a competitive
employment after retirement or resignation is not an unreasonable or oppressive, or in undue or
unreasonable restraint of trade, thus, unenforceable for being repugnant to public policy

In cases where an employee assails a contract containing a provision prohibiting him or her from
accepting competitive employment as against public policy, the employer has to adduce evidence to
prove that the restriction is reasonable and not greater than necessary to protect the employer’s
legitimate business interests. The restraint may not be unduly harsh or oppressive in curtailing the
employee’s legitimate efforts to earn a livelihood and must be reasonable in light of sound public
policy.

Consideration must be given to the employee’s right to earn a living and to his ability to determine
with certainty the area within which his employment ban is restituted. A provision on territorial
limitation is necessary to guide an employee of what constitutes as violation of a restrictive covenant
and whether the geographic scope is co-extensive with that in which the employer is doing business.
In considering a territorial restriction, the facts and circumstances surrounding the case must be
considered.