G.R. No. 111651 - Bustamante vs. National Labor Relations Commission

Petitioners (Osmalik S. Bustamante, Paulino A. Bantayan, Fernando L. Bustamante, Mario D. Sumonod, and Sabu J. Lamaran) filed an illegal dismissal case against the National Labor Relations Commission, Fifth Division, and Evergreen Farms, Inc.
Their dismissal occurred on 25 June 1990, and they alleged that the termination was unlawful.
The Labor Arbiter initially rendered a decision on 26 April 1991, awarding separation pay and back wages, although the NLRC later deleted the back wages award in its resolution dated 3 May 1993.

On 15 March 1996, the Court (First Division) issued a decision restoring the back wages award and affirming the Labor Arbiter’s decision—with modification—to pay back wages from the time of dismissal up to the date of reinstatement.
In circumstances where reinstatement is no longer feasible, the award was modified to grant separation pay in lieu of reinstatement.
The petitioners ultimately sought full back wages and reinstatement, whereas the respondents (private respondent) moved for reconsideration on two grounds:

Arguing that the petitioners were not entitled to back wages because their status was that of probationary employees whose employment had not been converted to regular.
Asserting that even if entitled to back wages, the computation should deduct any earnings obtained from alternative employment during the period of illegal dismissal.

Under Republic Act No. 875 (the Industrial Peace Act), back wages could be awarded subject to the discretion of the Court of Industrial Relations (CIR), which could mitigate or reduce the award based on circumstances (e.g., employee’s earnings elsewhere).
The “Mercury Drug rule” later established a fixed back wages award meant to expedite the resolution of illegal dismissal cases.

Historical precedents (e.g., Itogon-Suyoc Mines, Inc. v. SaAgilo-Itogon Workers’ Union, Pines City Educational Center case, Medado v. Court of Appeals) reflected various approaches on whether back wages should be reduced by concurrent earnings.
Legislative amendments, notably Presidential Decree No. 442 (the Labor Code) and its subsequent amendment through Republic Act No. 6715, redefined the computation of back wages:

PD No. 442 mandated that back wages be computed from the time compensation was withheld to the time of reinstatement.
RA No. 6715 clearly provided for “full back wages,” inclusive of allowances and benefits, without deductions for earnings during the period of illegal dismissal.

The Court clarified that petitioners are entitled to full back wages computed from the time their wages were withheld (i.e., from the illegal dismissal date on 25 June 1990) up to the time of finality of the decision since reinstatement was no longer feasible.
In addition to this, petitioners are granted separation pay equivalent to one month’s salary as originally ordered by the Labor Arbiter.
The motion for reconsideration filed by the private respondent was DENIED.

Whether the petitioners, who were on a probationary status and not yet regular employees, could be legally considered as being unlawfully dismissed.
Whether petitioners are entitled to recover back wages beyond the deductions for any earnings obtained from alternative employment during the period from dismissal to reinstatement/finality.
Whether the computation of back wages should follow the earlier Mercury Drug rule that allowed deductions for earnings elsewhere or strictly adhere to the legislative intent under RA No. 6715 for full back wages.
Whether the modification in favor of separation pay instead of reinstatement was justified given the circumstances (i.e., petitioners being overage and reinstatement being no longer feasible).