Payroll reinstatement meaning
There is payroll reinstatement when the employer, instead of physically reinstating the employee to his former or substantially equivalent position, chooses to reinstate the employee in the payroll only by paying him wages and other benefits without however allowing or requiring him to actually report for work.
Instances when payroll reinstatement may be allowed
There are two instances when the employer may exercise the option of payroll reinstatement:
1. In case of preventive suspension pending termination/disciplinary proceeding under Sections 9, Department Order No. 9, Series of 1997.
Section 9. Period of suspension. No preventive suspension shall last longer than thirty (30) days. The employer shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer may extend the period of suspension provided that during the period of extension, he pays the wages and other benefits due to the worker. In such case, the worker shall not be bound to reimburse the amount paid to him during the extension if the employer decides, after completion of the hearing, to dismiss the worker.
2. Another instance of payroll reinstatement is found in Article 223 of the Labor Code, after the Labor Arbiter ordered the reinstatement of the employee pending appeal to NLRC, employer has the option to reinstate the employee concerned only on payroll. The provision states:
Article 223. Appeal.
x x x
“In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.”
x x x
Instances when payroll reinstatement is not allowed
In assumption or certification cases under Article 263 (g), Labor Code, the employer is not given the option to reinstate the employee in the payroll only. Actual reinstatement is required.
Article 263 (g). When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. x x x
Under the said provision, all workers must immediately return to work and all employers must readmit all of them under the same terms and conditions prevailing before the strike or lockout. See Manila Diamond Hotel case , compare with University of Santo Tomas case.
Effect of failure of employer to exercise the option
Under Article 223, the option whether to actually reinstate the employee, or to reinstate him only in the payroll belongs to the employer. Thus, the employer may either re-admit the employee to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate him in the payroll. Failing to exercise the options in the alternative, employer must pay the employeeâ€™s salaries.
Refund/reimbursement of salary paid
In payroll reinstatement pending termination/disciplinary proceedings against employee, the rule is explicit that the employee is not bound to reimbursed the salary already paid to him by reason of the exercise by employer of the option. The salary paid to the employee during the period of suspension serves as the price that employer must pay for opting for payroll reinstatement instead of actual reinstatement.
The same thing may be said in payroll reinstatement under Article 223, although the article does not expressly so states.
However, there was an authority supporting the opposite view that the employee may be required to refund the employer for salary paid. This view was articulated in Genuino v. National Labor Relations Commission as follows:
If the decision of the labor arbiter is later reversed on appeal upon the finding that the ground for dismissal is valid, then the employer has the right to require the dismissed employee on payroll reinstatement to refund the salaries s/he received while the case was pending appeal, or it can be deducted from the accrued benefits that the dismissed employee was entitled to receive from his/her employer under existing laws, collective bargaining agreement provisions, and company practices. However, if the employee was reinstated to work during the pendency of the appeal, then the employee is entitled to the compensation received for actual services rendered without need of refund.
The above view, however, does not appear to be the prevailing principle on the matter, and was played down as a mere stray posture in a subsequent case (See Garcia vs. Philippine Airlines).
- Manila Diamond Hotel vs. Court of Appeals, G.R. No. 140518, December 16, 2004.
- University of Santo Tomas (UST) vs. NLRC, G.R. No. 89920, October 18, 1990.
- Genuino v. NLRC, G.R. Nos. 142732-33, December 4, 2007.
- Garcia vs. Philippine Airlines, G.R. No. 164856, January 20, 2009.
Last Edited: Friday, August 19, 2011