CASE DIGEST: Bani Rural Bank v. Guzman

G.R. No.170904 November 13, 2013

BANI RURAL BANK INC. ENOC THEATER I AND II and/or RAFAEL DE GUZMAN, Petitioners, v. TERESA DE GUZMAN, EDGAR C. TAN and TERESA G. TAN, Respondents.

BRION,J.:


FACTS:

The respondents were employees of Bani Rural Bank, Inc. and ENOC Theatre I and II who filed a complaint for illegal dismissal against the petitioners. The complaint was initially dismissed by the LA but the NLRC reversed LAs decision. The NLRC, in its resolution dated March 17, 1995, ordered that respondents be reinstated with payment of backwages from the time of their dismissal until their actual reinstatement. Such decision has become final and executory. Computation of backwages was referred to Labor Arbiter Gambito.

Petitioners appealed the computation of the backwages with the NLRC. In a decision dated July 31, 1998, the NLRC modified the terms of the March 17, 1995 resolution insofar as it clarified the phrase less earnings elsewhere. The NLRC additionally awarded the payment of separation pay, in lieu of reinstatement on account of the strained relations between the parties.

As explained in the assailed Decision, what is controlling for purposes of the backwages is the NLRC s Resolution dated 17 March 1995 which decreed that private respondents are entitled to backwages from the time of their dismissal (constructive) until their actual reinstatement; and considering that the award of reinstatement was set aside by the NLRC in its final and executory Decision dated 3 July 1998 which ordered the payment of separation pay in lieu of reinstatement to be computed up to the finality on 29 January 1999 of said Decision dated 3 July 1998, then the computation of the backwages should also end on said date, which is 29 January 1999

ISSUE: Whether or not NLRC erred in ruling how the backwages are to be computed

HELD: No. CA decision affirming NLRC ruling sustained.

Labor Law - The computation of backwages depends on the final awards adjudged as a consequence of illegal dismissal.


First, when reinstatement is ordered, the general concept under Article 279 of the Labor Code, as amended, computes the backwages from the time of dismissal until the employees reinstatement. The computation of backwages (and similar benefits considered part of the backwages) can even continue beyond the decision of the labor arbiter or NLRC and ends only when the employee is actually reinstated.

Second, when separation pay is ordered in lieu of reinstatement (in the event that this aspect of the case is disputed) or reinstatement is waived by the employee (in the event that the payment of separation pay, in lieu, is not disputed), backwages is computed from the time of dismissal until the finality of the decision ordering separation pay.

Third, when separation pay is ordered after the finality of the decision ordering the reinstatement by reason of a supervening event that makes the award of reinstatement no longer possible (as in the case), backwages is computed from the time of dismissal until the finality of the decision ordering separation pay.

As the records show, the contending parties did not dispute the NLRC s order of separation pay that replaced the award of reinstatement on the ground of the supervening event arising from the newly-discovered strained relations between the parties. The parties allowed the NLRC s July 31, 1998 decision to lapse into finality and recognized, by their active participation in the second computation of the awards, the validity and binding effect on them of the terms of the July 31, 1998 decision.

Under these circumstances, while there was no express modification on the period for computing backwages stated in the dispositive portion of the July 31, 1998 decision of the NLRC, it is nevertheless clear that the award of reinstatement under the March 17, 1995 resolution (to which the respondents backwages was initially supposed to have been computed) was substituted by an award of separation pay. As earlier stated, the awards of reinstatement and separation pay are exclusive remedies; the change of awards (from reinstatement to separation pay) under the NLRC s July 31, 1998 not only modified the awards granted, but also changed the manner the respondents backwages is to be computed. The respondents backwages can no longer be computed up to the point of reinstatement as there is no longer any award of reinstatement to speak of.

Thus, the computation of the respondents' backwages must be from the time of the illegal dismissal from employment until the finality of the decision ordering the payment of separation pay. It is only when the NLRC rendered its July 31, 1998 decision ordering the payment of separation pay (which both parties no longer questioned and which thereafter became final) that the issue of the respondents' employment with the petitioners was decided with finality, effectively terminating it. The respondents' backwages, therefore, must be computed from the time of their illegal dismissal until January 29, 1999, the date of finality of the NLRC's July 31, 1998 Decision.

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