The Law on Separation Pay

The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement may likewise be awarded if the employee decides not to be reinstated. (G.R. No. 187200)

By jurisprudence derived from this provision, separation pay may be awarded to an illegally dismissed employee in lieu of reinstatement. Recourse to the payment of separation pay is made when continued employment is no longer possible, in cases where the dismissed employee's position is no longer available, or the continued relationship between the employer and the employee is no longer viable due to the strained relations between them, or when the dismissed employee opted not to be reinstated, or payment of separation benefits will be for the best interest of the parties involved. (G.R. No. 172149)
The basis for the payment of backwages is different from that for 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 backwages is usually the length of the employee's service while that for separation pay is the actual period when the employee was unlawfully prevented from working. (G.R. No. 187200)

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