Separation Pay and Backwages

 

CONSEQUENCES OF TERMINATION

 

SEPARATION PAY – FOUR CONTEXT

SEPARATION PAY FOR AUTHORIZED CAUSES UNDER ARTS. 283-284.

Separation Pay. An employee lawfully dismissed for a just cause is not entitled to any separation pay; while an employee separated for an authorized cause is entitled to separation pay in accordance with the rates prescribed by law. (Chan. The Labor Code of the Philippines Annotated – Volume II).

Art. 298. [283] Closure of Establishment and Reduction of Personnel. – The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year.

In case the CBA or company policy provides for a higher separation pay, the same must be followed instead of the one provided in Article 283. (Chan. The Labor Code of the Philippines Annotated – Volume II).

Art. 299. [284] Disease as a Ground of Termination – An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.

 

 

SEPARATION PAY AS FINANCIAL ASSISTANCE IN LEGAL DISMISSAL UNDER ART. 282

The basis of the grant of financial assistance is equity. (Chan. The Labor Code of the Philippines Annotated – Volume II).

An employee who is dismissed for just cause is generally not entitled to separation pay. A reading of Art. 279 in relation to Art. 282 of the Labor Code, reveals that an employee who is dismissed for cause after appropriate proceedings in compliance with due process requirements is not entitled to an award of separation pay. In some cases however, the SC awarded separation pay to a legally dismissed employee on the grounds of equity and social justice. This is not allowed though when the employee has been dismissed for serious misconduct or some other causes reflecting on his moral character or personal integrity. (Etcuban, Jr. v. Sulpicio Lines, Inc. G.R. No. 148410, Jan. 17, 2005, among others).

 

SEPARATION PAY IN LIEU OF REINSTATEMENT

If reinstatement is no longer possible, the employer has the alternative of paying the employee his separation pay in lieu of reinstatement. (Manila Water Co, Inc. v. Pena, G.R. No. 158255, Jul. 8, 2004).

Reinstatement cannot be awarded when what is prayed for is separation pay. As pronounced in Dela Cruz v. NLRC, [G.R. No. 121288, November 20, 1998], the petitioner therein would have been entitled to reinstatement as a consequence of his illegal dismissal from employment. However, by expressly asking for separation pay, he is deemed to have opted for separation pay in lieu of reinstatement.

In Deguzman v. NLRC, [G.R. No. 167701, Dec. 12, 2007], and in several other earlier cases, where the employee explicitly prayed for an award of separation pay in lieu of reinstatement, it was held that by so praying, he forecloses reinstatement as a relief by implication. Consequently, he is entitled to separation pay equivalent to one month pay for every year of services, computed from the time of his illegal dismissal up to the finality of the judgement, as an alternative to reinstatement.

The amount of separation pay that should be paid in lieu of reinstatement is not provided in the Labor Code or its implementing rules. Jurisprudence, however, dictates that the following should be included in its computation:

  1. The amount equivalent to at least one (1) month salary or to one (1) month salary for every year of services, whichever is higher, a fraction of at least six (6) months being considered as one (1) whole year. (Sec. 4[b], Rule I, Book VI, Rules to Implement the Labor Code).
  2. Allowances that the employee has been receiving on a regular basis. (Planters Products, Inc. v. NLRC, G.R. No. 78524, Jan. 20, 1989).

 

SEPARATION PAY AS AN EMPLOYEE BENEFIT

Employers may lawfully and effectively reduce their personnel by offering resignation benefits through a Voluntary Resignation Program where employees are afforded the right to voluntarily terminate the employment relationship. If made in good faith, such as scheme should be considered a valid form of terminating employment. Consequently, the employer need not comply with the requirement under Article 283 of the Labor Code that notice be sent to the Department of Labor and Employment at least a month prior to the effectivity of the termination of employment. The reason is that by applying to voluntarily resign, the employee thereby acknowledges the existence of a valid cause for terminating his employment. (Dole Philippines Inc. v. NLRC, G.R. No. 120009, Sept. 13, 2001; International Hardware, Inc. v. NLRC, G.R. No. 80770, Aug. 10, 1989).

 

BACKWAGES

DISTINGUISH FROM SEPARATION PAY

Separation pay in lieu of reinstatement and backwages are two different things. Payment of separation pay is not inconsistent with payment of backwages. (Cabatulan v. Buat, G.R. No. 147142, Feb. 14, 2005).

Separation pay is paid when reinstatement is not possible; while backwages are paid for the compensation which otherwise the employee should have earned had he not been illegally dismissed. (Equitable Banking Corp. v. Sadac, G.R. No. 164772, June 8, 2006).

Separation pay is computed on the basis of employee’s length of service; while backwages are based on the actual period when he was unlawfully prevented from working. (Lim v. NLRC, G.R. Nos. 79907 and 79975, Mar. 16, 1989).

Separation pay is paid where a wherewithal during the period that an employee is looking for another employment; while backwages are paid for the loss of earnings during the period between illegal dismissal and reinstatement. (Quebec, Sr. v. NLRC, G.R. No. 123184, Jan. 22, 1999).

Separation pay is oriented towards the immediate future; while backwages involve the restoration of the past income lost. (Lopez, Jr. v. NLRC, G.R. No. 109166, Jul. 6, 1995).

Separation pay cannot be paid in lieu of backwages. (Torillo v. Leogardo, G.R. No. 77205, May 27, 1991).

 

FULL BACKWAGES

MERCURY DRUG RULE (PRIOR TO R.A. 6715)

MERCURY DRUG VS. CIR 56 SCRA 694

MAKASIAR, J.:p

Procedural History:

Petitioner Mercury Drug Co., Inc. seeked the reversal of the decision of respondent Court of Industrial Relations dated January 17, 1964 and its order dated February 25, 1964 denying petitioners’ motion for reconsideration of the said decision.

Statement of Facts:

Private respondent Dayao was employed on February 13, 1956 by the petitioners originally as driver, later assigned as delivery man, then as checker and was last promoted to the position of assistant chief checker in the checking department until his separation on April 10, 1961.

Days before April 10, 1961, Dayao urged petitioners to pay them overtime pay, criticized their employees’ association for failing to protect the welfare of the employees by not securing such additional compensation for overtime, and campaigned among his co-employees to organize another labor union. Hearing of Dayao’s union activities, petitioner called for Dayao on April 10, 1961, told him to resign and persuaded him to accept the amount of P562.50 as termination pay and to sign a clearance stating to the effect that he has no claims whatsoever of any kind and nature against herein petitioners.

On April 25, 1963, exactly two years and fifteen days from his separation on April 10, 1961, Dayao filed a complaint for unfair labor practice against petitioners for dismissing him because of his having campaigned among his co-employees to become members of a new labor union that he was then organizing.

In their answer to the ULP complaint, petitioners interposed as their only defense that Dayao “was separated from the service … for cause because of creating trouble with another employee who was also dismissed and that even if the said complainant was separated for cause, he received compensation pay and hereby relieved respondent from whatever claim or claims that he had against respondents.” They also relied on laches, aside from estoppel, to defeat Dayao’s ULP charge.

SC held that the petitioners were guilty of unfair labor practices. There was no sufficient basis for discharging Dayao from employment. Acceptance of termination pay does not divest a laborer the right to prosecute his employer for unfair labor practice acts, much less for signing the clearance paper. Acceptance of those benefits would not amount to estoppel. SC stated that there was clear interference with the union activity and that his dismissal from employment was discriminatory. And since there was illegal dismissal, Dayao was entitled to backwages.

Issue:

How much backwages shall be allowed private respondent Dayao.

Answer:

Dayao should be paid backwages equivalent to one year, eleven months, and fifteen days without further disqualifications, which is computed from 4 years prescriptive period less the period of delay in instituting the ULP charge (2 years and 15 days).

Reasoning:

While this case was submitted for decision on March 29, 1965, the delay in its resolution is not due to the parties. However, it should be noted that private respondent Dayao filed his ULP charge with reinstatement and back wages about two years and fifteen days after his separation on April 10, 1961. As aforestated, the shortest prescriptive period for the filing of all other actions for which the statute of limitations does not fix a period, is four years. The period of delay in instituting this ULP charge with claim for reinstatement and back wages, although within the prescriptive period, should be deducted from the liability of the employer to him for back wages. In order that the employee however should be relieved from proving his income during the period he was out of the service and the employer from submitting counter-proofs, which may delay the execution of the decision, the employer in the case at bar should be directed to pay private respondent Dayao backwages equivalent to one year, eleven months, and fifteen days without further disqualifications.

Holding:

WHEREFORE, THE PETITION IS HEREBY DISMISSED AND PETITIONERS ARE HEREBY DIRECTED: (1) TO PAY PRIVATE RESPONDENT NARDO DAYAO BACK WAGES EQUIVALENT TO ONE YEAR, ELEVEN MONTHS, AND FIFTEEN DAYS; (2) TO REINSTATE HIM AFTER CERTIFICATION OF HIS PHYSICAL FITNESS BY A GOVERNMENT PHYSICIAN; AND (3) TO PAY THE COSTS.

Justice Teehankee’s Dissent:

Justice Teehankee dissented from the specific result in the judgement, awarding respondent backwages only in an amount equivalent to 1 year, 11 months and 15 days. Such delay in filing the complaint should in no manner prejudice the amount of the back wages award justly due respondent — particularly, when it is considered that he pursued with vigor his complaint after its filing on April 25, 1963 and obtained favorable judgment in the industrial court within a year as per said court’s decision of January 17, 1964 and its en banc resolution of February 25, 1964 denying petitioner’s motion for reconsideration.

Hence, an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or dilatory appeals) on the employer’s part. He submitted that the minimum award to which respondent is entitled should be at the very least the equivalent of the proposed base figure of three years pay. Employers should be put on notice as a deterrent that if they pursue manifestly dilatory and unmeritorious appeals and thus delay satisfaction of the judgment justly due their employee(s), they run the risk of exemplary and punitive damages being assessed against them by way of an increased award of back wages to the wrongfully discharged employee(s) commensurate to the delay caused by the appeal process.

 

RULE AFTER R.A. 6715 (DATE TO RECKON – MARCH 21, 1989)

ALEX FERRER VS. NLRC

JULY 5, 1993

MELO, J.:

Procedural History:

The petition for certiorari seeks to annul and set aside: (a) the decision dated June 20, 1991 of the Second Division of the National Labor Relations Commission (NLRC) which affirmed in toto the decision of April 5, 1990 of Labor Arbiter dismissing the complaint for illegal dismissal and unfair labor practice on the ground that both the company and the union merely complied with the collective bargaining agreement provision sanctioning the termination of any employee who fails to retain membership in good standing with the union; and (b) the NLRC resolution denying the motion for the reconsideration of said decision.

Statement of Facts:

Petitioners were regular and permanent employees of the Occidental Foundry Corporation (OFC) which was under the management of Hui Kam Chang. As piece workers, petitioners’ earnings ranged from P110 to P140 a day. They had been in the employ of OFC for about ten years at the time of their dismissal in 1989.

On January 5, 1989, the Samahang Manggagawa ng Occidental Foundry Corporation-FFW (SAMAHAN) and the OFC entered into a collective bargaining agreement (CBA) which would be effective for the three-year period between October 1, 1988 and September 30, 1991. It included a union security clause saying that failure to retain membership in good standing with the UNION shall be ground for the operation of paragraph 1 hereof and the dismissal by the company of the aforesaid employee upon written request by the union.

Several intraunion squabbles took place as to the election of the officers due to their alleged inattentiveness to the economic demands of the members. This prompted the union to send a letter to Hui Kam Chang, requesting for the dismissal of several people, including petitioners Ferrer et. al. The petitioners professed their innocence to the chages levelled against them by SAMAHAN and FFW, but received no reply. As such, they filed a complained for illegal dismissal and unfair labor practice before the NLRC against Hui Kam Chang, OFC, SAMAHAN, and FFW.

Labor Arbiter dismissed the complaint, saying that OFC was merely complying with the mandatory provisions of the CBA, and that SAMAHAN and FFW cannot be charged with illegal dismissal as there was no employer-employee relationship between them and the petitioners. NLRC affirmed the decision of Labor Arbiter. Hence the appeal.

SC held that the petitioners were illegally dismissed because while the CBA’s union security clause was valid, both parties thereto should see to it that no right is violated or impaired during its implementation. There was an absence of notice and hearing when the petitioners were illegally dismissed. Due process was inexistent.

Issue:

Whether or not the petitioners, who were illegally dismissed, were entitled to backwages.

Answer:

Yes. The petitioners can receive their full back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement.

Reasoning:

With the passage of Republic Act No. 6715 which took effect on March 21, 1989, Article 279 of the Labor Code was amended to read as follows:

Security of Tenure. — In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

and as implemented by Section 3, Rule 8 of the 1990 New Rules of Procedure of the National Labor Relations Commission, it would seem that the Mercury Drug Rule (Mercury Drug Co., Inc. vs. Court of Industrial Relations, 56 SCRA 694 [1974]) which limited the award of back wages of illegally dismissed workers to three (3) years “without deduction or qualification” to obviate the need for further proceedings in the course of execution, is no longer applicable.

A legally dismissed employee may now be paid his back wages, allowances, and other benefits for the entire period he was out of work subject to the rule enunciated before the Mercury Drug Rule, which is that the employer may, however, deduct any amount which the employee may have earned during the period of his illegal termination. Computation of full back wages and presentation of proof as to income earned elsewhere by the illegally dismissed employee after his termination and before actual reinstatement should be ventilated in the execution proceedings before the Labor Arbiter concordant with Section 3, Rule 8 of the 1990 new Rules of Procedure of the National Labor Relations Commission.

The petitioners can receive their back wages computed from the moment their compensation was withheld after their dismissal in 1989 up to the date of actual reinstatement. In such a scenario, the award of back wages can extend beyond the 3-year period fixed by the Mercury Drug Rule depending, of course, on when the employer will reinstate the employees.

Holding:

WHEREFORE, the decision appealed from is hereby SET ASIDE and private respondents are hereby ordered to reinstate petitioners to their former or equivalent positions without loss of seniority rights and with full back wages, inclusive of allowances and other benefits or their monetary equivalent, pursuant to Article 279 of the Labor Code, as amended by Republic Act No. 6715.

 

PINES CITY VS. NLRC

NOV. 10, 1993

NOCON, J.:

Procedural History:

This a petition for certiorari seeking the reversal of the resolution of public respondent National Labor Relations Commission dated November 29, 1990, in NLRC Case No. 01-04-0056-89, which affirmed in toto the decision of the Labor Arbiter dated February 28,1990.

Statement of Facts:

Private respondents Bentrez et. al., were all employed as teachers on probationary basis by petitioner Pines City Educational Center. All the private respondents, except Roland Picart and Lucia Chan, signed contracts of employment with petitioner for a fixed duration. On March 31, 1989, due to the expiration of private respondents’ contracts and their poor performance as teachers, they were notified of petitioners’ decision not to renew their contracts anymore.

On April 10, 1989, private respondents filed a complaint for illegal dismissal before the Labor Arbiter, alleging that their dismissals were without cause and in violation of due process. Except for private respondent Leila Dominguez who worked with petitioners for one semester, all other private respondents were employed for one to two years. They were never informed in writing by petitioners regarding the standards or criteria of evaluation so as to enable them to meet the requirements for appointment as regular employees.

For their part, petitioners contended that private respondents’ separation from employment, apart from their poor performance, was due to the expiration of the periods stipulated in their respective contracts. In the case of private respondent Dangwa Bentrez, the duration of his employment contract was for one year, or beginning June, 1988 to March 1989 whereas in the case of the other private respondents, the duration of their employment contracts was for one semester, or beginning November, 1988 to March 1989.

On February 28, 1990, the Labor Arbiter rendered judgment in favor of private respondents, ordering their reinstatement and the payment of their full backwages and other benefits and privileges without qualification and deduction from the time they were dismissed up to their actual reinstatement. The computation of backwages covered only the period private respondents were terminated up to January 31, 1990 or 10 months and does not include backwages from January 31, 1990 up to their actual reinstatement. In support of this decision, the Labor Arbiter rationalized that the teacher’s contracts were vague and did not include the specific description of duties and assignments of private respondents.

NLRC affirmed the decision of Labor Arbiter. Hence, the appeal.

SC held that insofar as the private respondents who knowingly and voluntarily agreed upon fixed periods of employment are concerned, their services were lawfully terminated by reason of the expiration of the periods of their respective contracts. With respect to the remaining private respondents Roland Picart and Lucia Chan, both of whom did not sign any contract fixing the periods of their employment nor to have knowingly and voluntarily agreed upon fixed periods of employment, petitioners had the burden of proving that the termination of their services was legal. As probationary employees, they are likewise protected by the security of tenure provision of the Constitution. Consequently, they cannot be removed from their positions unless for cause.

Issue:

Whether or not private respondents Picart and Chan, who were illegally dismissed, were entitled to payment of backwages.

Answer:

Yes. Private respondents Picart and Chan were entitled to payment of backwages. However, in the computation of the backwages, the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom.

Reasoning:

The order for their reinstatement and payment of full backwages and other benefits and privileges from the time they were dismissed up to their actual reinstatement was proper, conformably with Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, 14 which took effect on March 21, 1989. It should be noted that private respondents Roland Picart and Lucia Chan were dismissed illegally on March 31, 1989, or after the effectivity of said amendatory law.

However, in ascertaining the total amount of backwages payable to them, SC went back to the rule prior to the Mercury Drug Rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom. SC restated the underlying reason that employees should not be permitted to enrich themselves at the expense of their employer. In addition, the law abhors double compensation. To this extent, SC’s ruling in Alex Ferrer, et al., v. NLRC, et al., G.R. No. 100898, promulgated on July 5, 1993, was hereby modified.

Holding:

WHEREFORE, the resolution of public respondent National Labor Relations Commission dated November 29, 1990 is hereby MODIFIED. Private respondents Roland Picart and Lucia Chan are ordered reinstated without loss of seniority rights and other privileges and their backwages paid in full inclusive of allowances, and to their other benefits or their monetary equivalent pursuant to Article 279 of the Labor Code, as amended by Section 34 of Republic Act No. 6715, subject to deduction of income earned elsewhere during the period of dismissal, if any, to be computed from the time they were dismissed up to the time of their actual reinstatement. The rest of the Labor Arbiter’s decision dated February 28, 1990, as affirmed by the NLRC is set aside.

 

PINES CITY RULING ABANDONED

BUSTAMANTE VS. NLRC

Nov. 28, 1996

PADILLA, J.

Procedural History:

This is a Motion for Reconsideration filed for a previous decision issued by SC.

Statement of Facts:

On 15 March 1996, SC First Division promulgated a decision, stating that backwages shall be paid to petitioners from the time of their illegal dismissal on 25 June 1990 up to the date of their reinstatement. If reinstatement is no longer feasible, a one-month salary shall be paid the petitioners as ordered in the Labor Arbiter’s decision, in addition to the adjudged backwages.

Private respondent moved to reconsider the decision on grounds that assuming that petitioners were entitled to backwages, computation thereof should not start from cessation of work up to actual reinstatement, and that salary earned elsewhere (during the period of illegal dismissal) should be deducted from the award of such backwages.

From here, SC stated that over the years, it applied different methods in the computation of backwages:

  1. The first labor relations law governing the award of backwages was Republic Act No. 875, the Industrial Peace Act, approved on 17 June 1953. Sections 5 and 15 thereof provided that backpay (the same as backwages) could be awarded where, in the opinion of the Court of Industrial Relations (CIR) such was necessary to effectuate the policies of the Industrial Peace Act. As the CIR was given wide discretion to grant or disallow payment of backpay (backwages) to an employee, it also had the implied power of mitigating (reducing) the backpay where backpay was allowed. Thus, in the exercise of its jurisdiction, the CIR increased or diminished the award of backpay, depending on several circumstances, among them, the employee’s employment in other establishments during the period of illegal dismissal. The same was enunciated in the case of Itogon-Suyoc Mines, Inc. v. Sagilo-Itogon Workers’ Union.
  2. SC found occasion in the case of Mercury Drug Co., Inc., et al. v. CIR, et al. to rule that a fixed amount of backwages without further qualifications should be awarded to an illegally dismissed employee (hereinafter the Mercury Drug rule). However, Justice Teehankee dissented from the majority and opined that an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. oppression or dilatory appeals) on the employer’s part.”
  3. The proposal on the three-year backwages was subsequently adopted in later cases.
  4. Then came Presidential Decree No. 442 (the Labor Code of the Philippines) which was signed into law on 1 May 1974 and which took effect on 1 November 1974. The law specifically declared that the award of backwages was to be computed from the time compensation was withheld from the employee up to the time of his reinstatement. This nothwithstanding, the rule generally applied by the Court after the promulgation of the Mercury Drug case, and during the effectivity of P.D. No. 442 was still the Mercury Drug rule. A survey of cases from 1974 until 1989, when the amendatory law to P.D. No. 442, namely, R.A. No. 6715 took effect, supports this conclusion.
  5. In the case of New Manila Candy Workers Union (Naconwa-Paflu) v. CIR (1978), or after the Labor Code (P.D. No. 442) had taken effect, the Court still followed the Mercury Drug rule to avoid the necessity of a hearing on earnings obtained elsewhere by the employee during the period of illegal dismissal. In an even later case (1987) the Court declared that the general principle is that an employee is entitled to receive as backwages all the amounts he may have received from the date of his dismissal up to the time of his reinstatement. However, in compliance with the jurisprudential policy of fixing the amount of backwages to a just and reasonable level, the award of backwages equivalent to three (3) years, without qualification or deduction, was nonetheless followed.
  6. In a more direct approach to the rule on the award of backwages, this Court declared in the 1990 case of Medado v. Court of Appeals that “any decision or order granting backwages in excess of three (3) years is null and void as to the excess”. In sum, during the effectivity of P.D. 442, the Court enforced the Mercury Drug rule and, in effect, qualified the provision under P.D. No. 442 by limiting the award of backwages to three (3) years.
  7. On 21 march 1989, Republic Act No. 6715 took effect, amending the Labor Code. In here, an illegally dismissed employee is entitled to his full backwages from the time his compensation was withheld from him (which, as a rule, is from the time of his illegal dismissal) up to the time of his actual reinstatement. It was true that SC had ruled in the case of Pines City Educational Center vs. NLRC (G.R. No. 96779, 10 November 1993, 227 SCRA 655) that “in ascertaining the total amount of backwages payable to them (employees), SC went back to the rule prior to the Mercury Drug rule that the total amount derived from employment elsewhere by the employee from the date of dismissal up to the date of reinstatement, if any, should be deducted therefrom.” The rationale for such ruling was that, the earning derived elsewhere by the dismissed employee while litigating the legality of his dismissal, should be deducted from the full amount of backwages which the law grants him upon reinstatement, so as not to unduly or unjustly enrich the employee at the expense of the employer.

Issue:

Whether or not the ruling in Pines City v NLRC must still be observed.

Answer:

No. SC categorically concluded the final computation of the backwages after reconsidering the ruling mentioned in Pines City v. NLRC case. Those who were illegally dismissed are entitled to the payment of full backwages.

Reasoning:

With the evident legislative intent as expressed in Rep. Act No. 6715, above-quoted, backwages to be awarded to an illegally dismissed employee, should not, as a general rule, be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason for this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while full backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee.

The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the “deduction of earnings elsewhere” rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to “full backwages” as meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal.

Therefore, in accordance with R.A No. 6715, petitioners were entitled to their full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld from them up to the time of their actual reinstatement. As to reinstatement of petitioners, SC has already ruled that since reinstatement is no longer feasible, because the company would be unjustly prejudiced by the continued employment of petitioners who at present are overage, a separation pay equal to one-month salary granted to them in the Labor Arbiter’s decision was in order and, therefore, affirmed in the Court’s decision of 15 March 1996. Furthermore, since reinstatement in this case is no longer feasible, the amount of backwages shall be computed from the time of their illegal termination on 25 June 1990 up to the time of finality of this decision.

Holding:

ACCORDINGLY, private respondent’s Motion for Reconsideration, dated 10 April 1996, is DENIED.

 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s