[ G.R. No. 204060, September 15, 2020 ]
MORENO DUMAPIS, FRANCISCO LIAGAO AND ELMO TUNDAGUI, PETITIONERS, VS. LEPANTO CONSOLIDATED MINING COMPANY, RESPONDENT.
CONCURRING OPINION
CAGUIOA,J.:
I concur with the ponencia to grant the Petition. The amount of backwages and separation pay awarded in cases of illegal dismissal should include the salary increases which the employee would have received had he not been illegally dismissed. However, the increases should be limited only to mandatory and unconditional increases such as those mandated under a collective bargaining agreement (CBA), established company policy and practice, and government mandated wage increases. Increases based on merit or contingency should not be included.
Article 294 of the Labor Code1 provides that an employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalentcomputed from the time his compensation was withheld from him up to the time of his actual reinstatement.
Backwages are awarded as remuneration for the employee's lost income from the erring employer due to illegal dismissal. Applying the established doctrine enunciated in Article 4 of the Labor Code, that labor laws shall be constructed in favor of labor, I believe that the phrase "full backwages" in Article 294 should be interpreted to include guaranteed salary increases.
The inclusion of increases in backwages has jurisprudential basis. In Fernandez, Jr. v. Manila Electric Company (MERALCO),2 the Supreme Court upheld the decision of the Court of Appeals (CA) that Lino A. Fernandez, Jr. (Fernandez) was illegally dismissed. In the execution proceedings before the Labor Arbiter (LA), one of the issues was whether Fernandez was entitled to additional backwages consisting of CBA salary increases implemented after his dismissal. The LA ruled in favor of Fernandez and granted him the CBA salary increases. Both parties filed petitions questioning the writ of execution which were dismissed on procedural grounds. The case eventually reached the Supreme Court.
The Court held that the National Labor Relations Commission Rules of Procedure must be liberally applied to prevent injustice and grave irreparable injury to an illegally dismissed employee and remanded the case to the LA. Without prejudice to the findings of the labor tribunals, the Court discussed the relevant laws and jurisprudence applicable to the case for the guidance of the labor tribunals, the Court noted:
Backwages shall include the whole amount of salaries, plus all other benefits and bonuses, and general increases, to which Fernandez would have been normally entitled had he not been illegally dismissed.3 (Emphasis supplied)
In Paguio v. Philippine Long Distance Telephone Co., Inc.,4 (Paguio) the Court explained the ratio for the award of backwages:
In several cases, the Court had the opportunity to elucidate on the reason for the grant of backwages. Backwages are granted on grounds of equity to workers for earnings lost due to their illegal dismissal from work. They are a reparation for the illegal dismissal of an employee based on earnings which the employee would have obtained, either by virtue of a lawful decree or order, as in the case of a wage increase under a wage order, or by rightful expectation, as in the case of one's salary or wage. The outstanding feature of backwages is thus the degree of assuredness to an employee that he would have had them as earnings had he not been illegally terminated from his employment.5 (Emphasis supplied)
However, in Paguio, the employee's claim for inclusion of salary increases was denied. The Court ruled that he was not able to prove entitlement to them as he anchored his claim on previous grants of increases based on consistent evaluations of good performance. In contrast to the present case, the employees' entitlement to salary increases has clear and concrete basis under the CBA and is not merely an expectation based on merit or contingency.
I hasten to add that the computation of the backwages based on the increased salary should be reckoned only from the time the increase was implemented, i.e., from the time the employee would have been entitled thereto. Thus, the employee must not only prove his entitlement to the salary increases but also the applicable periods therefor. I agree however, that the computation should be reckoned only until the finality of the Court's Decision in G.R. No. 163210,6 in which the Court affirmed the CA Decision finding that herein petitioners were illegally dismissed.
I also agree that the separation pay awarded in lieu of reinstatement should include salary increases. Separation pay is generally granted when the cause for termination is not due to the employee's fault or wrongdoing, such as when the employment relationship is terminated due to authorized causes including installation of labor-saving devices, redundancy, retrenchment, and disease under Articles 2987 and 2998 of the Labor Code.
There is no provision in the Labor Code which specifically grants separation pay to an illegally dismissed employee; Article 294 only mentions reinstatement and backwages. However, jurisprudence has settled that when reinstatement is no longer practicable or feasible, separation pay may be exceptionally awarded as an alternative. Separation pay is different from backwages although the two can be awarded together.
In Wenphil Corporation v. Abing9 the Court distinguished between backwages and separation pay:
We emphasize that the basis for the payment of backwages is different from that of the award of separation pay. Separation pay is granted where reinstatement is no longer advisable because of strained relations between the employee and the employer. Backwages represent compensation that should have been earned but were not collected because of the unjust dismissal. The basis for computing separation pay is usually the length of the employee's past service, while that for backwages is the actual period when the employee was unlawfully prevented from working.10 (Emphasis in the original)
The computation of separation pay in case of illegal dismissal is patterned after the computation in Article 298 for separation pay due to redundancy which is computed at one-month salary for every year of service.
In payment of separation pay due to redundancy, the basis for the amount is the salary of the employee, including regular allowances, that he had been receiving at the time of dismissal. Salary increases are not considered because the employer-employee relationship is severed upon the implementation of a valid redundancy.
However, in the grant of separation pay due to a finding of illegal dismissal where reinstatement is no longer feasible, the employer-employee relationship is severed only upon the finality of the Court's decision holding that the employee was illegally dismissed.11 Thus, the basis for the separation pay should be the employee's salary at the end of the imputed service. In Masagana Concrete Products v. NLRC,12 the Court held:
xxx Separation pay, equivalent to one month's salary for every year of service, is awarded as an alternative to reinstatement when the latter is no longer an option. Separation pay is computed from the commencement of employment up to the time of termination, including the imputed service for which the employee is entitled to backwages, with the salary rate prevailing at the end of the period of putative service being the basis for computation.13 (Emphasis supplied)
Hence, herein petitioners-employees are entitled to their backwages and separation pay including the mandatory salary increases guaranteed and established under the CBA. I join in the ponencia that the Court abandon the rulings which exclude increases from the computation of backwages and separation and adopt a more pro-labor stance, provided that the employees are able to sufficiently prove their entitlement to the increases under a CBA, established company policy, or government wage order.
(Sgd.) ALFREDO BENJAMIN S. CAGUIOA
Associate Justice
Footnotes
1 Department of Labor and Employment, Department Advisory No. 01, Series of 2015, entitled "RENUMBERING OF LABOR CODE OF THE PHILIPPINES, AS AMENDED" dated July 21, 2015.
2 G.R. No. 226002, June 25, 2018, 868 SCRA 156.
3 Id. at 171.
4 G.R. No. 154072, December 3, 2002, 393 SCRA 379.
5 Id. at 386-387.
6 Lepanto Consolidated Mining Company v. Dumapis, August 13, 2008, 562 SCRA 103.
7 ART. 298. 283 Closure of Establishment and Reduction of Personnel. - The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
8 ART. 299. 284 Disease as Ground for Termination. - An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co- employees: Provided, That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month salary for every year of service, whichever is greater, a fraction of at least six (6) months being considered as one (1) whole year.
9 G.R. No. 207983, April 7, 2014, 721 SCRA 126.
10 Id. at 141.
11 When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently ordered in light of a supervening event making the award of reinstatement no longer possible), the employment relationship is terminated only upon the finality of the decision ordering the separation pay. The finality of the decision cuts-off the employment relationship and represents the final settlement of the rights and obligations of the parties against each other. Hence, backwages no longer accumulate upon the finality of the decision ordering the payment of separation pay since the employee is no longer entitled to any compensation from the employer by reason of the severance of his employment. Bani Rural Bank, Inc. v. De Guzman, G.R. No. 170904, November 13 2013, 709 SCRA 330, 351-352.
12 G.R. No. 106916, Septembers, 1999,313 SCRA 576.
13 Id. at 596.
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