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G.R. No. 207983 April 7, 2014 - WENPHIL CORPORATION, Petitioner, v. ALMER R. ABING and ANABELLE M. TUAZON, Respondents.

G.R. No. 207983 April 7, 2014 - WENPHIL CORPORATION, Petitioner, v. ALMER R. ABING and ANABELLE M. TUAZON, Respondents.

PHILIPPINE SUPREME COURT DECISIONS

Baguio City

SECOND DIVISION

G.R. No. 207983 April 7, 2014

WENPHIL CORPORATION, Petitioner, v. ALMER R. ABING and ANABELLE M. TUAZON, Respondents.

D E C I S I O N

BRION, J.:

We resolve this petition for review on certiorari1 under Rule 45 of the Rules of Court, challenging the August 31, 2012 decision2 and the June 20, 2013 resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No. 117366.

These assailed CA rulings annulled and set aside the March 26, 2010 Decision4 and September 15, 20105 resolution (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC CA No. 02-8233-01 (Rl-08).

The NLRC rulings, in turn, fully affirmed the November 16, 2007 Order6 of the Labor Arbiter (LA) in NLRC-NCR Case Nos. 30-03-00993-00 and 30-03-01020-00. The LA’s order found that an illegal dismissal took place. Thus, the LA directed petitioner Wenphil Corporation (Wenphil) to pay respondents Almer Abing and Anabelle Tuazon (respondents) their backwages for the period from February 15, 2002 to November 8, 2002, pursuant to the rule that an order of reinstatement is immediately executory even pending appeal.7

Factual Antecedents

This case stemmed from a complaint for illegal dismissal filed by the respondents against Wenphil, docketed as NLRC NCR Case No. 30-03-00993-00.

On December 8, 2000, LA Geobel A. Bartolabac ruled8 that the respondents had been illegally dismissed by Wenphil. According to the LA, the allegation of serious misconduct against the respondents had no factual and legal basis.9 Consequently, LA Bartolabac ordered Wenphil to immediately reinstate the respondents to their respective positions or to equivalent ones, whether actuall or in the payroll. Also, the LA ordered Wenphil to pay the respondents their backwages from February 3, 2000 until the date of their actual reinstatement.10

Because of the unfavorable LA decision, Wenphil appealed to the NLRC on April 16, 200111. In the meantime, the respondents moved for the immediate execution of the LA’s December 8, 2000 decision.12

On October 29, 2001, Wenphil and the respondents entered into a compromise agreement13 before LA Bartolabac. They agreed to the respondents’ payroll reinstatement while Wenphil’s appeal with the NLRC was ongoing. Wenphil also agreed to pay the accumulated salaries of the respondents for the payroll period from April 5, 2001 until October 15, 2001.14 As for the remaining payroll period starting October 16, 2001, Wenphil committed itself to credit the respective salaries of the respondents to their ATM payroll accounts until such time that the questioned decision of LA Bartolabac is either modified, amended or reversed by the Honorable National Labor Relations Commission.15

On January 30, 2002, the NLRC issued a resolution16 affirming LA Bartolabac’s decision with modifications. Instead of ordering the respondents’ reinstatement, the NLRC directed Wenphil to pay the respondents their respective separation pay at the rate of one (1) month salary for every year of service. Also, the NLRC found that while the respondents had been illegally dismissed, they had not been illegally suspended. Thus, the period from February 3 to February 28, 2000 during which the respondents were on preventive suspension – was excluded by the NLRC in the computation of the respondents’ backwages.17

Subsequently, Wenphil moved for the reconsideration18 of the NLRC’s January 30, 2002 resolution, but the NLRC denied the motion in another resolution dated September 24, 2002.19

Wenphil thereafter went up to the CA via a petition for certiorari to question the NLRC’s January 30, 2002 and September 24, 2002 resolutions.20 On August 27, 2003, the CA rendered its decision21 reversing the NLRC’s finding that the respondents had been illegally dismissed. According to the CA, there was enough evidence to show that the respondents had been guilty of serious misconduct; thus, their dismissal was for a valid cause.22 The respondents moved for the reconsideration of the CA’s decision.23 In a resolution24 dated February 23, 2004, the CA denied the respondents’ motion.

On appeal to the Supreme Court (SC) via Rule 45 (docketed as G.R. No. 16244725 and dated December 27, 2006), the SC denied the respondents petition for review on certiorari26 and affirmed the CA’s August 27, 2003 decision and February 23, 2004 resolution. The respondents did not file any motion for reconsideration to question the SC’s decision; thus, the decision became final and executory on February 15, 2007.27

The Labor Arbitration Rulings

Sometime after the SC’s decision in G.R. No. 162447 became final and executory, the respondents filed with LA Bartolabac a motion for computation and issuance of writ of execution.28 The respondents asserted in this motion that although the CA’s ruling on the absence of illegal dismissal (as affirmed by the SC) was adverse to them, under the law and settled jurisprudence, they were still entitled to backwages from the time of their dismissal until the NLRC’s decision finding them to be illegally dismissed was reversed with finality.29

LA Bartolabac granted the respondents’ motion and, in an order dated November 16, 2007,30 directed Wenphil to pay each complainant their salaries on reinstatement covering the period from February 15, 2002 (the date Wenphil last paid the respondents’ respective salaries) to November 8, 2002 (since the NLRC’s decision finding the respondents illegally dismissed became final and executory on February 28, 2002).

Both parties appealed to the NLRC to question LA Bartolabac’s November 16, 2007 order.31 Wenphil argued that the respondents were no longer entitled to payment of backwages in view of the compromise agreement they executed on October 29, 2001. According to Wenphil, the compromise agreement provided that Wenphil’s obligation to pay the respondents’ backwages should cease as soon as LA Bartolabac’s decision was "modified, amended or reversed" by the NLRC. Since the NLRC modified the LA’s ruling by ordering the payment of separation pay in lieu of reinstatement, then the respondents, under the terms of the compromise agreement, were entitled to backwages only up to the finality of the NLRC decision.32

The respondents questioned in their appeal the determined period for the computation of their backwages; they posited that the period for payment should end, not on November 8, 2002, but on February 14, 2007, since the SC’s decision which upheld the CA’s ruling became final and executory on February 15, 2007.33

The NLRC denied the parties’ respective appeals in its decision dated March 26, 201034 and affirmed in toto the LA’s order. Both parties moved for the reconsideration of the NLRC’s decision but the NLRC denied their respective motions in the resolution of September 15, 2010.35

The CA’s Ruling

In its decision dated August 31, 2012,36 the CA reversed the NLRC rulings and prescribed a different computation period.

The CA ruled that the NLRC committed grave abuse of discretion when it affirmed the LA’s computed period which was from February 15, 2002 to November 8, 2002. In arriving at this conclusion, the CA cited the case of Pfizer v. Velasco37 where this Court ruled that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the dismissed employee’s wages during the period of appeal until reversal by the higher court.38 The CA construed this "higher court" to be the CA, not the SC.

The CA reasoned out that it was a "higher court" than the NLRC when it reversed the NLRC’s rulings; thus, the period for computation should end when it promulgated its decision reversing that of the NLRC, and not on the date when the SC affirmed its decision.

The CA likewise held that the compromise agreement did not contain any waiver of rights for any award the respondents might have received when the NLRC changed or modified the LA’s award.39

The Petition

In its petition for review with this Court, Wenphil maintained that the respondents were no longer entitled to payment of backwages in view of the modification of the LA’s ruling by the NLRC pursuant with their October 29, 2001 compromise agreement.

Wenphil argued that the CA utterly disregarded the terms of the parties’ compromise agreement whose terms were very clear; the agreement reads:

3. That for the payroll period from October 16-31 and thereafter, their [respondents] salaries (net of withholding tax, SSS, Philhealth and Pag-ibig) shall be credited every 10th and 25th of the succeeding months through their respective ATM employee’s account until such time that the questioned decision of the Honorable Labor Arbiter Geobel Bartolabac is modified, amended or reversed by the Honorable Labor Relations Commission.40 [emphasis ours]

It was Wenphil’s assertion that since the NLRC’s decision partly changed the decision of LA Bartolabac by ordering payment of separation pay in lieu of reinstatement, the NLRC decision was a "modification" that should operate to remove Wenphil’s obligation to pay the respondents’ backwages for the period of the CA’s reversal of the NLRC’s illegal dismissal ruling.41 According to Wenphil, the words of the compromise agreement left no room for interpretation as to the parties’ intentions;42 as a valid agreement between the parties, it must be given effect and respected by the court.

Wenphil also contended that the CA’s cited Pfizer case cannot apply to the present case since there was no compromise agreement in Pfizer where the dismissed employee waived her entitlement to backwages.43

Finally, Wenphil claimed that the reliefs of reinstatement and backwages are only available to illegally dismissed employees. A ruling that the respondents were still entitled to reinstatement pay notwithstanding the validity of their dismissal, would amount to the court’s tolerance of an unjust and equitable situation.44

The Court’s Ruling

We resolve to DENY the petition. An order of reinstatement is immediately executory even pending appeal. The employer has the obligation to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court.

Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation, or at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement."

The Court discussed reason behind this legal policy in Aris v. NLRC,45 where it explained:

In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy which, once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working-man. These provisions are the quintessence of the aspirations of the workingman for recognition of his role in the social and economic life of the nation, for the protection of his rights, and the promotion of his welfare… These duties and responsibilities of the State are imposed not so much to express sympathy for the workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's progress and stability. [emphasis ours]

Since the decision is immediately executory, it is the duty of the employer to comply with the order of reinstatement, which can be done either actually or through payroll reinstatement. As provided under Article 223 of the Labor Code, this immediately executory nature of an order of reinstatement is not affected by the existence of an ongoing appeal. The employer has the duty to reinstate the employee in the interim period until a reversal is decreed by a higher court or tribunal.

In the case of payroll reinstatement, even if the employer’s appeal turns the tide in its favor, the reinstated employee has no duty to return or reimburse the salary he received during the period that the lower court or tribunal’s governing decision was for the employee’s illegal dismissal.

Otherwise, the situation would run counter to the immediately executory nature of an order of reinstatement. The case of Garcia v. Philippine Airlines46 is enlightening on this point:

Even outside the theoretical trappings of the discussion and into the mundane realities of human experience, the "refund doctrine" easily demonstrates how a favorable decision by the Labor Arbiter could harm, more than help, a dismissed employee. The employee, to make both ends meet, would necessarily have to use up the salaries received during the pendency of the appeal, only to end up having to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap leading the employee to a risky cliff of insolvency.

Advisably, the sum is better left unspent. It becomes more logical and practical for the employee to refuse payroll reinstatement and simply find work elsewhere in the interim, if any is available. Notably, the option of payroll reinstatement belongs to the employer, even if the employee is able and raring to return to work.

We see the situation discussed above to be present in the case before us as Wenphil observed the mandate of Article 223 to immediately comply with the order of reinstatement by the LA. On October 29, 2001, while Wenphil’s appeal with the NLRC was pending, it entered into a compromise agreement with the respondents. In this agreement, Wenphil committed to reinstate the respondents in its payroll. However, the commitment came with a condition: Wenphil stipulated that its obligation to pay the wages due to the respondents would cease if the decision of the LA would be "modified, amended or reversed" by the NLRC.47

Thus, when the NLRC rendered its decision on the appeal affirming the LA’s finding that the respondents were illegally dismissed, but modifying the award of reinstatement to payment of separation pay, Wenphil stopped paying the respondents’ wages.

The reinstatement salaries due to the respondents were, by their nature, payment of unworked backwages. These were salaries due to the respondents because they had been prevented from working despite the LA and the NLRC findings that they had been illegally dismissed.

We point out that reinstatement and backwages are two separate reliefs available to an illegally dismissed employee. The normal consequences of a finding that an employee has been illegally dismissed are: first, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights; and second, the payment of backwages covers the period running from his illegal dismissal up to his actual reinstatement.48 These two reliefs are not inconsistent with one another and the labor arbiter can award both simultaneously.

Moreover, the relief of separation pay may be granted in lieu of reinstatement but it cannot be a substitute for the payment of backwages. In instances where reinstatement is no longer feasible because of strained relations between the employee and the employer, separation pay should be granted. In effect, an illegally dismissed employee should be entitled to either reinstatement – if viable, or separation pay if reinstatement is no longer be viable, plus backwages in either instance.49 The rationale for such policy of distinction was vividly explained in Santos v. NLRC under these terms:50

Though the grant of reinstatement commonly carries with it an award of backwages, the inappropriateness or non-availability of one does not carry with it the inappropriateness or non-availability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because the NLRC found that her reinstatement was no longer feasible or appropriate. As the term suggests, separation pay is the amount that an employee receives at the time of his severance from the service and, as correctly noted by the Solicitor General in his Comment, is designed to provide the employee with "the wherewithal during the period that he is looking for another employment." In the instant case, the grant of separation pay was a substitute for immediate and continued re-employment with the private respondent Bank. The grant of separation pay did not redress the injury that is intended to be relieved by the second remedy of backwages, that is, the loss of earnings that would have accrued to the dismissed employee during the period between dismissal and reinstatement. Put a little differently, payment of backwages is a form of relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in contrast, is oriented towards the immediate future, the transitional period the dismissed employee must undergo before locating a replacement job. It was grievous error amounting to grave abuse of discretion on the part of the NLRC to have considered an award of separation pay as equivalent to the aggregate relief constituted by reinstatement plus payment of backwages under Article 280 of the Labor Code. The grant of separation pay was a proper substitute only for reinstatement; it could not be an adequate substitute both for reinstatement and for backwages. In effect, the NLRC in its assailed decision failed to give to petitioner the full relief to which she was entitled under the statute. [emphasis ours]

Apparently, when the NLRC changed the LA’s decision (specifically, the order to award separation pay in lieu of reinstatement), Wenphil read this to mean to be the "modification" envisioned in the compromise agreement, Wenphil likewise effectively concluded that separation pay and backwages are the same or are interchangeable reliefs. This conclusion can be deduced from Wenphil’s insistence not to pay the respondent’s remaining backwages under its erroneous reasoning that this was the effect of the NLRC’s order to Wenphil to pay separation pay in lieu of reinstatement.

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.51

Had Wenphil really wanted to put a stop to the running of the period for the payment of the respondents’ backwages, then it should have immediately complied with the NLRC’s order to award the employees their separation pay in lieu of reinstatement. This action would have immediately severed the employer-employee relationship. However, the records are bereft of any evidence that Wenphil actually paid the respondents’ separation pay. Thus, the employer-employee relationship between Wenphil and the respondents never ceased and the employment status remained pending and uncertain until the CA actually rendered its decision that the respondents had not been illegally dismissed. In the context of the parties’ agreement, it was only at this point that the payment of backwages should have stopped.

A compromise agreement should not be contrary to law, morals, good customs and public policy.

While it is true that a compromise agreement is binding between the parties and becomes the law between them,52 it is also a rule that to be valid, a compromise agreement must not be contrary to law, morals, good customs and public policy.53

In the present case, the parties’ compromise agreement simply provided that Wenphil’s obligation to pay the respondents’ backwages shall end the moment the NLRC modifies, amends or reverses the illegal dismissal decision of LA Bartolabac. On its face, there is nothing invalid with such stipulation. Indeed, had the NLRC reversed the LA, the obligation to pay backwages would have stopped. The NLRC, however, did not decree a reversal of the finding of illegal dismissal. In fact, it affirmed the illegal dismissal conclusion, confining itself merely to a modification of the consequences of the illegal dismissal – from reinstatement to the payment of separation pay.

This "modification" of course we cannot accept; the option under the legal policy is solely limited to a ruling that the respondents had not been illegally dismissed. Otherwise, we would be violating the Labor Code’s policy entitling illegally dismissed employees to their right to backwages even during the period of appeal. As we held in the case of Garcia v. Philippine Airlines:54

The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee’s salaries. [emphasis ours]

This ruling embodies a principle and policy of the law that cannot be watered down by any lesser agreement except perhaps when backwages are already earned entitlements that the employee chooses to surrender for a valuable consideration (and even then, the consideration must at least be equitable). This legal policy emphasizes, too, the rule that separation pay cannot be a substitute for backwages but only for reinstatement. The award of separation pay is not inconsistent with the payment of backwages. Thus, until a higher court’s or tribunal’s reversal of the finding that an employee had been illegally dismissed, the employee would be entitled to receive his reinstatement salary or backwages during the period of appeal until such reversal. This is in line with the Labor Code’s policy that an order of reinstatement, which can either be actual or through the payroll, is immediately executory and is not affected by the period of appeal.

Period for Computation of Backwages

The records show that the inconsistency between the labor arbitration rulings and the CA’s ruling was on the period for the computation of such backwages and not on whether the respondents were still entitled to such backwages during the period of appeal until the reversal of the finding of illegal dismissal.

According to the LA, whose ruling the NLRC affirmed, the period for computation should be from February 15, 2002 until November 8, 2002 since the NLRC’s decision which affirmed the LA’s finding of illegal dismissal became final and executory on November 8, 2002. The LA started the counting of the period on February 15, 2002 since that was the day when Wenphil last paid the respondents’ backwages.

On the other hand, the CA, in setting aside the NLRC’s rulings, relied on the case of Pfizer v. Velasco where we ruled that the backwages of the dismissed employee should be granted during the period of appeal until reversal by a higher court. Since the first CA decision which found that the respondents had not been illegally dismissed was promulgated on August 27, 2003, then the reversal by the higher court was effectively made on August 27, 2003.

As against this view, the respondents argued that the period for payment of their backwages should end on February 14, 2007 since the SC decision in G.R. No. 162447 which affirmed the CA’s findings that the respondents had not been legally dismissed became final and executory on February 15, 2007.

Among these views, the commanding one is the rule in Pfizer, which merely echoes the rulings we made in the cases of Roquero v. Philippine Airlines55 and Garcia v. Philippine Airlines56 that the period for computing the backwages due to the respondents during the period of appeal should end on the date that a higher court reversed the labor arbitration ruling of illegal dismissal. In this case, the higher court which first reversed the NLRC’s ruling was not the SC but rather the CA. In this light, the CA was correct when it found that that the period of computation should end on August 27, 2003. The date when the SC’s decision became final and executory need not matter as the rule in Roquero, Garcia and Pfizer merely referred to the date of reversal, not the date of the ultimate finality of such reversal.

As a last minor detail, we do not agree with the CA that the date of computation should start on February 15, 2002. Rather, it should be on February 16, 2002. The respondents themselves admitted in their motion for computation and issuance of writ of execution that the last date when they were paid their backwages was on February 15, 2002. To start the computation on the same date would result to a duplication of wages for this day; thus, computation should start on the following date - February 16, 2002.

WHEREFORE, in light of these considerations, we hereby DENY the petition. The Court of Appeals' decision dated August 31, 2012 and resolution dated June 20, 2013, which annulled and set aside the March 26, 2010 decision and September 15, 2010 resolution of the NLRC, are hereby AFFIRMED with MODIFICATION. The period for the computation of backwages of respondents Almer R. Abing and Anabelle M. Tuazon should be from February 16, 2002 until August 27, 2003, when the Court of Appeals promulgated its decision reversing the NLRC' s finding of illegal dismissal. No costs.

SO ORDERED

Carpio, (Chairperson), Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.

Endnotes:


1 Rollo, p. 7-22.

2 Penned by Associate Justice Marina L. Buzon, and concurred in by Associate Justices Mario L. Guariña and Santiago Javier Ranada; id. at 27-41.

3 Id. at 43-45.

4 Id. at 171-177.

5 Id. at 188-190.

6 Id. at 148-153.

7 LABOR CODE, article 223.

8 Rollo, pp. 46-67.

9 Id. at 62.

10 Id. at 67.

11 Id. at 9.

12 Id.

13 Id. at 98-100.

14 Id. at 99.

15 Id.

16 Id. at 101-108.

17 Id. at 107.

18 Id. at 10.

19 Id. at 109-110.

20 Id. at note 19.

21 Id. at 111-127.

22 Id. at 118.

23 Id. at note 19.

24 Id. at 125-127.

25 Anabelle Muaje-Tuazon and Almer R. Abing v. Wenphil Corporation, Elizabeth P. Orbita, and the Court of Appeals, G.R. No. 162447, December 27, 2006, 511 SCRA 521.

26 Id. at note 19.

27 Id. at 138.

28 Id. at 139-141; on August 16, 2007.

29 Id. at 140.

30 Id. at 148-153.

31 Id. at 154-170.

32 Id. at 160.

33 Id. at p. 168-169.

34 Id. at note 4.

35 Id. at note 5.

36 Id. at note 2.

37 G.R. No. 177467, March 9, 2011, 645 SCRA 135.

38 Id. at 152.

39 Rollo, pp. 39-40.

40 Id. at 99.

41 Id. at 14-15.

42 Id. at 16.

43 Id. at 17.

44 Id. at 19.

45 G.R. No. 90501, August 5, 1991, 200 SCRA 246.

46 G.R. No. 164856, January 20, 2009, 576 SCRA 479.

47 Id. at note 15.

48 Santos v. NLRC, G.R. No. 76721, September 21, 1987, 154 SCRA 171.

49 Macasero v. Southern Industrial Gases Philippines, 597 Phil. 494 (2009).

50 Supra note 48, at 172.

51 Golden Ace Builders v. Talde, G.R. No. 187200, May 5, 2010, 620 SCRA 288.

52 Ago v. Court of Appeals, 116 Phil. 841 (1962).

53 Magbanua v. Uy, 497 Phil. 518 (2005).

54 Supra note 46.

55 G.R. No. 152329, 449 Phil. 437 (2003).

56 Supra note 46.

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