Title
Wenphil Corp. vs. Abing
Case
G.R. No. 207983
Decision Date
Apr 7, 2014
Employees illegally dismissed sought backwages; compromise agreement upheld, but backwages awarded until appellate court reversed reinstatement order.
illegal dismissal
reinstatement
backwages

Case Summary (G.R. No. 207983)

Factual Background

The respondents filed a complaint for illegal dismissal against Wenphil. The Labor Arbiter, Geobel A. Bartolabac, found in favor of the respondents on December 8, 2000, ruling that the allegation of serious misconduct lacked factual and legal basis and ordering immediate reinstatement or payroll reinstatement and backwages from February 3, 2000 until actual reinstatement. Wenphil appealed to the NLRC on April 16, 2001, and while the appeal was pending the parties entered into a compromise agreement on October 29, 2001 providing for payroll reinstatement and stipulating that Wenphil’s obligation to credit salaries would continue until the Labor Arbiter’s decision was modified, amended, or reversed by the NLRC. The NLRC, by resolution dated January 30, 2002, affirmed the finding of illegal dismissal but modified the remedy by directing payment of separation pay in lieu of reinstatement and excluded the preventive suspension period from backwages computation. Wenphil’s motion for reconsideration before the NLRC was denied on September 24, 2002.

Subsequent Proceedings and Enforcement Motions

After the Court of Appeals reversed the NLRC on August 27, 2003 and thereafter the Supreme Court denied the respondents’ Rule 45 petition in G.R. No. 162447 on December 27, 2006 (final and executory February 15, 2007), the respondents moved before the Labor Arbiter for computation and issuance of a writ of execution. The Labor Arbiter granted the motion in an order dated November 16, 2007 and directed Wenphil to pay each respondent their salaries on reinstatement for the period from February 15, 2002 to November 8, 2002, on the ground that the NLRC decision became final and executory on February 28, 2002. Both parties appealed that order to the NLRC.

NLRC and Court of Appeals Dispositions

The NLRC, in its decision dated March 26, 2010, affirmed the Labor Arbiter’s order in toto and later denied the parties’ motions for reconsideration in its September 15, 2010 resolution. The Court of Appeals, in a decision dated August 31, 2012, reversed the NLRC rulings, holding that under the Court’s precedents the employer’s obligation to pay reinstatement wages during appeal continued until a higher court reversed the NLRC, and construing the first higher court to have been the Court of Appeals itself when it issued its August 27, 2003 decision. The CA thus prescribed that the period for computation should end on August 27, 2003 rather than on the NLRC’s finality date.

Issues Presented

The principal issues were whether the respondents remained entitled to backwages during the pendency of appeals and, if so, the proper terminal date for the computation of those backwages; and whether the parties’ October 29, 2001 compromise agreement, as modified by the NLRC’s order awarding separation pay in lieu of reinstatement, extinguished Wenphil’s obligation to continue payroll reinstatement or payment of backwages pending appeal.

Parties’ Contentions

WENPHIL CORPORATION contended that the compromise agreement unambiguously conditioned its payroll obligation on the NLRC modifying, amending, or reversing the Labor Arbiter’s decision and that the NLRC’s modification by awarding separation pay in lieu of reinstatement terminated Wenphil’s duty to pay backwages beyond the NLRC’s resolution. Wenphil argued further that the Court’s decision in Pfizer v. Velasco did not apply because no compromise agreement was present in that case. The respondents maintained that they were entitled to backwages during appeal until the finality of the ultimate reversal and that the period for computation should extend to February 14, 2007, the day before the Supreme Court’s denial of their Rule 45 petition became final.

Ruling

The Supreme Court denied the petition for review and affirmed the Court of Appeals decision dated August 31, 2012 and resolution dated June 20, 2013 with modification. The Court held that the correct period for computation of backwages is from February 16, 2002 until August 27, 2003, the date when the Court of Appeals promulgated its decision reversing the NLRC’s finding of illegal dismissal. The Court ordered no costs.

Legal Basis and Reasoning

The Court reaffirmed the immediately executory nature of an order of reinstatement under Article 223 of the Labor Code, which makes the Labor Arbiter’s reinstatement order executory even pending appeal and obliges the employer to admit the employee back to work under the same terms or to reinstate the employee in the payroll. The Court invoked its labor policy jurisprudence in Aris v. NLRC to explain the constitutional and humane objectives underlying execution pending appeal. The Court reiterated the practical and equitable reasons against a refund doctrine, citing Garcia v. Philippine Airlines, and held that a dismissed employee who receives payroll reinstatement need not refund sums received if the order is later reversed. The Court emphasized the distinction between reinstatement with backwages and separation pay, relying on Santos v. NLRC and subsequent authorities to state that separation pay may substitute for reinstatement but cannot substitute for backwages, which compensate for earnings lost during the period of unlawful prevention from work. The Court found that the NLRC’s modification ordering separation pay did not amount to a reversal of the finding of illegal dismissal and therefore did not trigger the compromise clause to terminate payroll credits. The Court observ

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