Title
Sealand Service, Inc. vs. National Labor Relations Commission
Case
G.R. No. 90500
Decision Date
Oct 5, 1990
Employee dismissed for alleged dishonesty; reinstatement denied due to strained relations, backwages limited to 3 years, separation pay awarded instead.
backwages
separation pay
labor arbiter

Case Summary (G.R. No. 90500)

Antecedent NLRC Ruling and Prior Supreme Court Disposition

In NLRC-NCR Case No. 10-3532-84 dated April 3, 1986, the NLRC affirmed with modification the labor arbiter’s decision. It declared petitioners’ suspension and dismissal of private respondent illegal, ordered reinstatement to private respondent’s former position, and awarded backwages from September 26, 1984 (the date of illegal suspension and dismissal) to the date of actual reinstatement, with no loss of seniority and other privileges. The NLRC, however, deleted the awards of moral and exemplary damages.

Petitioners elevated the NLRC decision to the Supreme Court through a certiorari petition docketed as G.R. No. 75066 (Sealand Service, Inc. et al. v. Bienvenido A. Juan, et al.). On August 15, 1988, the Court dismissed the petition for failure to show grave abuse of discretion. The Court sustained the NLRC’s findings that private respondent had been invalidly dismissed after a hurried investigation where he was not given adequate opportunity to defend himself, and that preventive suspension lacked legal justification absent an imminent threat to life or property of the employer or its employees. The Court also held that petitioners’ alleged newly discovered evidence constituted belated charges and could not be raised, particularly because petitioners had earlier limited their ground for discharge to alleged dishonesty in claiming reimbursement for entertainment expenses. Petitioners’ motion for reconsideration was denied with finality on September 14, 1988.

After the NLRC decision became final and executory, the NLRC issued a computation of backwages for the period from September 26, 1984 to December 31, 1988, deducting earnings elsewhere as submitted by private respondent, resulting in a total amount of P643,388.76.

Motion for Execution and Petitioners’ Opposition

Private respondent then filed a motion for the issuance of a writ of execution, seeking enforcement of the net backwages of P643,388.76 and reinstatement. Petitioners opposed on two principal grounds: first, that the decision had become moot and academic because private respondent supposedly obtained a substantially equivalent and regular job elsewhere; and second, that the computation of backwages should be limited only up to April 1986, because private respondent was allegedly already employed by Mabuhay Brokerage, Inc. by then.

On April 26, 1989, the labor arbiter granted the motion and issued a writ of execution as prayed for.

NLRC Resolution of September 27, 1989

Petitioners appealed the labor arbiter’s order to the NLRC, maintaining that (1) private respondent’s supposed substantially equivalent and regular employment elsewhere barred reinstatement to his former position, and (2) any backwages beyond the date of such supposed employment unjustly enriched him.

On September 27, 1989, the NLRC issued a resolution affirming the order of the labor arbiter and dismissing petitioners’ appeal for lack of merit. The NLRC directed remand to the arbitration branch for execution and enforcement of the final and executory labor arbiter decision, as affirmed with modification by the NLRC decision dated April 3, 1986.

Proceedings in Execution and the Supreme Court’s Temporary Restraining Order

Petitioners came to the Supreme Court through a certiorari petition on October 26, 1989, with a request for preliminary injunction and a temporary restraining order, assailing the NLRC resolution dated September 27, 1989. On November 6, 1989, the labor arbiter issued a writ of execution ordering payment of P643,388.76 as full backwages. On December 7, 1989, private respondent moved for an alias writ of execution, alleging refusal to reinstate and stoppage of payments of the garnished amount of P432,475.64, which was intended as partial satisfaction of the unpaid balance of P617,681.82. The labor arbiter granted an alias writ on December 13, 1989.

On December 13, 1989, the Court issued a temporary restraining order, enjoining respondents from enforcing the NLRC resolution dated September 27, 1989.

Central Issue on Backwages: The Three-Year Limitation

Upon review of the records, the Court observed that, pursuant to the NLRC’s questioned resolution, the labor arbiter issued a writ of execution based on a computation by the Acting Chief of the Research and Information Unit of the NCR-Arbitration Branch that awarded full backwages beyond three (3) years, less earnings obtained elsewhere.

The Court reiterated its long-standing policy that backwages for illegally dismissed employees are awarded for three (3) years without qualification or deduction, and that this policy applies even to final decisions awarding backwages exceeding three years. It held that omission of the three-year restriction in the original decision was a clerical error, and the three-year limitation should be considered as written into the judgment.

In doing so, the Court relied on the doctrine in Mansalay Catholic High School vs. National Labor Relations Commission, et al., stating that even if the NLRC decision sought to be executed had become final and executory, implementation must be limited to a period not exceeding three years; any decision granting backwages beyond three years is null and void as to the excess, and departure constitutes grave abuse of discretion.

Accordingly, the Court ruled that the computation and writ of execution issued in excess of the three-year limit were null and void, and the writs issued pursuant thereto had to be set aside.

Statutory Non-Retroactivity: Republic Act No. 6715

The Court also addressed the possible effect of Republic Act No. 6715, which entitles an unjustly dismissed employee to full backwages inclusive of allowances and other benefits or their monetary equivalent computed from the time compensation was withheld up to actual reinstatement. The Court held that Republic Act No. 6715 had no application, because its amendment took effect on March 21, 1989, after the NLRC decision sought to be enforced had already become final and executory. It cited Lantion et al. vs. National Labor Relations Commission, et al., where the Court ruled that the amendment has no retroactive application.

Petitioners’ Claim of Substantially Equivalent Employment

Petitioners contended that backwages should be further limited to one (1) year and seven (7) months, or not beyond April 1986, when private respondent allegedly obtained substantially equivalent and regular employment. The Court rejected the contention for three reasons.

First, petitioners failed to present sufficient evidence. The claim of Atty. Sofronio Larcia, petitioners’ personnel officer, that private respondent had been employed by Mabuhay Brokerage, Inc. as early as April 1986, was based only on private respondent’s employment application in response to an anonymous advertisement. The Court held that this was not enough to establish that private respondent was actually employed in a substantially equivalent and regular position.

Second, the Court held that recognition of the asserted fact would defeat the purpose of the three-year limitation without qualification or deduction. That rule was adopted to avoid delays and the practical difficulties in determining deductible earnings during the period of layoff or wrongful dismissal. It also prevents the twin evils of idleness by employees who might otherwise do nothing while expecting a windfall, and attrition and protracted litigation by unscrupulous employers who could use prolonged proceedings to determine earnings and thereby render backwages awards practically nugatory.

Third, the Court noted that petitioners’ alleged fact existed at the time of the main case. Since it was already existing then, petitioners should have raised it before the NLRC decision awarding full backwages and ordering reinstatement became final. The Court applied settled exceptions and held that the issue was not among them; once a judgment becomes final, issues between the parties before it are deemed resolved and laid to rest.

Reinstatement and Separation Pay as Alternative Relief

While the Court modified the backwages award, it also addressed reinstatement. It did not order reinstatement at that juncture, despite the finality of the NLRC ruling on reinstatement. The Court reasoned that supervening facts and circumstances made reinstatement unjust or inequitable. It observed that the relationship between petitioners and private respondent had severely strained due to the parties’ imputations of bad faith, shown by petitioners’ consistent refusal to reinstate. The Court invoked prior cases’ rationale that reinstatement should not further delay execution or subject the employee to renewed work under antagonistic conditions, where the employer had lost confidence in the employee. For these reasons, private respondent was awarded separation pay in lieu of reinstatement.

The Court directed that separation pay be computed from the start of employment up to the tim

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