In general, an illegally dismissed employee is entitled to one or more of the following reliefs:
- Payment of Backwages;
- Separation Pay;
- Payment of Damages; and
- Award of Attorney’s Fees.
Right to Reinstatement.
An employee who is unjustly dismissed from work is entitled to reinstatement without loss of seniority rights and other privileges. (Article 279, Labor Code.)
Reinstatement is a relief granted to an illegally dismissed employee which restores him to the position from which he was removed, that is, to his status quo ante dismissal. Reinstatement should be without loss of seniority rights and other privileges.
Remedy when Reinstatement is no Longer Possible.
As a necessary consequence of the finding of illegal dismissal, the illegally dismissed employee becomes entitled to reinstatement as a matter or right. The employer must reinstate him to the position he was holding prior to his dismissal. Ideally, this should be the case.
However, in some instances, although the dismissal of the employee is determined to be illegal, reinstatement may no longer possible for a number of reasons. In such case, separation pay in lieu of reinstatement may be awarded.
Following are some of the instances where payment of separation pay is allowed in lieu of reinstatement:
- When the relationship between the employer and the employee had become strained as to preclude a harmonious working relationship;
- When reinstatement becomes a legal impossibility;
- When the employee no longer wish to be reinstated;
- When prudence and fair play so dictates; and
- When reinstatement is not practicable due to loss of confidence.
Doctrine of “Strained Relations” Concept.
Under the doctrine of strained relations, the payment of separation pay has been considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable. On the one hand, such payment liberates the employee from what could be a highly oppressive work environment. On the other, the payment releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. (Coca-Cola Bottlers Phils. vs. De Leon, G.R. No. 156893, June 21, 2005.)
Nevertheless, the principle of strained relations should not be used so indiscriminately as to bar the reinstatement of illegally dismissed workers, especially when they themselves have not indicated any aversion to returning to work, as in this case. It is only normal to expect a certain degree of antipathy and hostility to arise from a litigation between parties, but not in every instance does such an atmosphere of antagonism exist as to adversely affect the efficiency and productivity of the employee concerned. (Ibid.)
The doctrine of strained relations may be invoked only against employees whose positions demand trust and confidence, or whose differences with their employer are of such nature or degree as to preclude reinstatement.
In Maranaw Hotels vs. NLRC, G.R. No. 123880, February 23, 1999, the Court refused to apply the doctrine of strained relations on the ground that the position of a room boy is not such a sensitive position that demands complete trust and confidence.
Right to Backwages.
An employee who is unjustly dismissed from work shall be entitled 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.
Backwages is the restitution of earnings unduly withheld from the employee because of illegal termination. It partakes the nature of a penalty the employer has to pay for illegally dismissing an employee.
Computation of Backwages.
Inclusive period. Full backwages is to be computed from the time compensation was withheld from the employee up to the time of his actual reinstatement.
Base figure. The based figure to be used in the computation shall include not just the basic salary, but also regular allowances and other benefits or their monetary equivalent, i.e., transportation, emergency living allowance, 13th-month pay, etc.
Wage rate. The computation of backwages may be based either on the current wage rate or the wage rate at the time of the dismissal. If current wage rate is awarded, it must be expressly stated in the decision. If not expressly stated (award is unqualified), the wage rate at the time of the dismissal should be used. (Paramount Vinyl vs. NLRC, G.R. No. 81200, October 17, 1990.)
Methods of Computing Backwages.
“Deduction of earnings elsewhere” rule. Under this rule, the award of backwages to an employee could be reduced by subtracting the wages actually earned by him from employment during the period of his separation, or the wages which he could have earned had he been diligent enough to find a job. The employer would be allowed to adduce evidence on these matters. This rule was abandoned in Mercury drug case primarily because the deduction of evidence was found to only delay execution process.
“Mercury Drug” rule. To remedy the delay brought about by the first rule, and to speed up execution process, the Supreme Court in Mercury Drug case, 1974, adopted the policy of granting to employee backwages for a maximum period of three years without qualification and deduction.
Method used under RA 6715. With the passage of RA 6715, both the rules above were abandoned. The rule now is that the employees are entitled to full backwages without deduction or qualification.
Illegal Dismissal without Backwages.
As a general rule, an employee who is dismissed due to the unlawful act of the employer or to the latter’s bad faith is entitled to backwages as a matter of right, backwages being a direct and necessary consequence of finding of illegal dismissal.
However, there are instances where despite illegal dismissal, the illegally dismissed employee is not entitled to backwages. This happens in cases where good faith is evident on the part of the employer in dismissing the employee, i.e., there is just cause to dismiss employee, but the dismissal is found by the court to be too harsh a penalty.
Effect of Failure to Claim Backwages.
The award of backwages resulting from illegal dismissal of employee is a substantive right. Thus, it has been held that the employee does not forfeit his right to claim backwages even if he failed to claim for the same in his complaint.
As stated above, separation pay is the relief awarded to employee when reinstatement is no longer feasible or practicable, or when reinstatement is no longer desirable or will not serve the best interest of the parties.
Amount of Separation Pay: Formula.
The amount of separation pay in lieu of reinstatement is not fixed by the Labor Code. But the trend in recent cases is to compute the same using the formula – one month pay, or one month pay per year of service. (This formula was used in the 2005 case P. J. Lhuillier vs. NLRC.)
In other older cases, the court used one half month pay per year of service.
- Separation pay and backwages are distinct and separate from each other. A Labor Arbiter cannot order that the separation pay be deducted from the backwages. (Solis vs. NLRC, G.R. No. 116175, October 28, 1996.)
- The NLRC reverses the decision of the Labor Arbiter and ordered the employees’ reinstatement, but failed to award backwages. On appeal filed by the employer, the Court of Appeals (CA) awarded backwages although the employee did not appeal the decision. The Supreme Court ruled that the award made by the CA is proper. Backwages is a mere consequence of finding of illegal dismissal. (St. Michael’s Institute vs. Santos, G.R. No. 145280, December 4, 2001.)
- Backwages was not granted to the employee because the employer was in good faith when it dismissed the employee who received P7,000.00 from an applicant for illegal installation of power line. (Meralco vs. NLRC, G.R. No. 78763, July 12,1989.)
Last Edited: Sunday, March 20, 2011