b. Backwages

BACKWAGES

Backwages are earnings lost by a worker due to his illegal dismissal; a form of relief that restores the income lost by reason of such unlawful dismissal; it is not private compensation or damages; nor is it a redress of a private right but, rather, in the nature of a command to the employer to make a public reparation for illegally dismissing an employee. (St. Theresa's School of Novaliches Foundation v. NLRC, G.R. No. 122955, 1998)

Backwages and reinstatement are two reliefs that should be given to an illegally dismissed employee. They are separate and distinct from each other. (Aurora Land Projects v. NLRC, G.R. No. 114733, 1997)

Effect of self-executing order of reinstatement on back wages

The law intends the award of backwages and similar benefits to accumulate past the date of the LA’s decision until the dismissed employee is actually reinstated. (Siemens Philippines v. Domingo, G.R. No. 150488, 2008)

However, if reinstatement is no longer possible, backwages shall be computed from the time of illegal dismissal until the date the decision becomes final. (Javellana v. Belen, G.R. No. 181913 and 182158, 2010)

Note: If there was implementation of reinstatement pending appeal, either through actual or payroll reinstatement, and the employee received his/her salary for the period of such reinstatement, the said amount received shall be deducted from the total amount of backwages due the employee, assuming the final decision of the case awarded backwages to the employee.

An employee who was dismissed on the ground of AWOL due to incarceration, is entitled to reinstatement and under the principle of “no work, no pay”, his full backwages shall only commence from the time he is refused work after acquittal. (Standard Electric v. Standard Electric employees Union, G.R. No. 166111, 2005)

Note: In contrast, the Supreme Court ruled in Tomas Claudio Memorial College that an employee’s imprisonment will not affect entitlement to backwages. The award of backwages is not conditioned on the employee's ability or inability to, in the interim, earn any income. (Tomas Claudio Memorial College v. CA, G.R. 152568, February 16, 2004)

Determination of Employer’s Liability After Finality of the Case

After finality of the case, the records will have to be remanded to the LA to determine the actual liability of the employer to each and every employee. Both parties will have a chance to submit further proof and argument in support of their respective proposed computations.

For the guidance of the LA, as well as the parties, jurisprudence had laid down the following yardsticks in the computation of the final amount of liability:

• Employees who have been re – employed without loss of seniority rights shall be paid backwages but only up to actual reinstatement;
• Employees who have been re – employed as new hires shall be restored their seniority and other preferential rights. However, their backwages shall be computed only to date of actual re-hiring;
• Employees who shall have reached compulsory age of retirement shall receive backwages up to their retirement only. The same is true as regards the heirs of those who have passed away;
• Employees who have not been reemployed plus those who have executed quitclaims and received separation pay of financial assistance shall be reinstated without loss of seniority rights and paid full backwages, after deduction of whatever amounts already received; and
• Employees who had obtained substantially equivalent or even more lucrative employment elsewhere in 1998 or thereafter are deemed to have severed their employment with their previous employer, and shall be entitled to full backwages from the date of their retrenchment only up to the date they found gainful employment elsewhere. (FASAP v. PAL, G.R. No. 172013, October 2, 2009)

Failure to order backwages

A “plain error” which may be rectified, even if employee did not bring an appeal regarding the matter (Aurora Land Projects v. NLRC, G.R. No. 114733, 1997)

Full backwages

Full backwages means exactly that, i.e., without deducting from backwages the earnings derived elsewhere by the concerned employee during the period of his illegal dismissal. (Bustamante v. NLRC, G.R. No. 111651, 1996)

Awards including salary differentials are not allowed (Insular Life Assurance Co., v. NLRC, G.R. No. L-74191, 1987)

Emergency cost of living allowances (ECOLA), transportation allowances, and 13th month pay should be included. (Paramount Vinyl Product Corp. v. NLRC, G.R No. 81200, 1990)

The effects of extraordinary inflation are not to be applied without an official declaration by competent authorities (Lantion v. NLRC, G.R. No. 82028, 1990)

Limited Backwages

General Rule: Illegally dismissed employee is entitled to full backwages

Exceptions:

• The Court awarded limited backwages where the employee was illegally dismissed but the employer was found to be in good faith. (San Miguel Corporation v. Javate, Jr., G.R. No. L-54244, 1992)
• Mercury Drug Co., v. CIR, G.R. No. L-23357, 1974, applied a historical fixed-backwages approach; delay in filing is not, by itself, a general exception to the current full-backwages rule under Labor Code, Art. 294 [279].

Deduction of earnings elsewhere rule

There is no deduction from backwages the earnings which the employee has derived from another employment during the time of his illegal dismissal (Bustamante v. NLRC, G.R. No. 111651, 1996)

Note: The Bustamante doctrine must be read in light of R.A. No. 6715 (21 March 1989). Prior to that date, backwages are limited to three years without deduction or qualification (Azucena, The Labor Code with Comments and Cases Volume II, 918, 2013)

Components of the amount of backwages (Azucena, The Labor Code with Comments and Cases Volume II-B, 976, 2016)

• Salaries at the wage rate level at the time of dismissal, not current wage level.
• Allowances or other benefits regularly granted

Example: ECOLA, 13th month pay, fringe benefits, transportation allowances, holiday pay, SIL, VL, just share in service charges, and any other regular allowances or benefits or their monetary equivalents

Computation of backwages

Backwages is computed from the time of illegal dismissal up to time of actual reinstatement.

Salary rate to be used is the salary rate at the time of dismissal. General salary increases are not part of backwages as these are not allowances or benefits. To extend the coverage of an allowance or a benefit to include salary increases would be to strain both the imagination of the Court and the language of law. (Equitable Banking v Sadac, G.R. No. 164772, June 8, 2006)

If reinstatement is no longer possible, backwages should be computed from the time the employee was terminated until the finality of the decision, finding the dismissal unlawful. (Bustamante v. NLRC, G.R. No. 111651, 1996)

January 2000 – October 2004 (Serrano Doctrine)

Historical Serrano doctrine (January 2000 – October 2004), subsequently abandoned by Agabon v. NLRC, G.R. No. 158693:

• Dismissal is Ineffectual
• Employer’s liability: Full backwages up to reinstatement / finality of decision

These statements no longer govern a dismissal for a valid cause where the employer failed to observe statutory notice requirements. The dismissal remains effective; the procedural defect warrants nominal damages, not full backwages on that ground alone. See Agabon v. NLRC, G.R. No. 158693, and Jaka Food Processing Corp. v. Pacot, G.R. No. 151378.

Jurisprudence

If despite several writs of execution, the employer still refuses to reinstate the employee, the remedy is not the grant of additional backwages to serve as damages but to file a motion to cite the employer for contempt. (Christian Literature Crusade v. NLRC, G.R. No. 79106, 1989)

An order for reinstatement entitles an employee to receive wages accruing under the immediately executory reinstatement order pending appeal from the moment the reinstatement order was issued up to the date when the same was reversed by a higher court, subject to the applicable rules on implementation; wages received under the order generally need not be refunded merely because of that reversal. (Garcia v. Philippine Airlines, Inc., G.R. No.164856, 2009)

Entitlement to Backwages

In an economic strike, the strikers are not entitled to backwages on the principle that a “fair’s day wage” accrues only for a “fair day’s labor.” (Heilbronn v. NLU, G.R. L-6454, 1954) In a ULP strike, if the strike was voluntary, strikers are not entitled to backwages. In the case of involuntary strike, strikers are entitled to backwages.

Exception: Voluntary strikers who subsequently applied for reinstatement but were denied are entitled to backwages provided the ff. requisites concur:

• The strike was legal
• There was an unconditional offer to return to work
• The strikers were refused reinstatement

However, backwages are not granted to employees participating in an illegal strike they do not render work for the employer during the period of the illegal strike. The principle of a "fair day’s wage for a fair day’s labor" is applicable. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, suspended or dismissed or otherwise illegally prevented from working. For this exception to apply, it is required that the strike be legal, a situation that does not obtain in the case at bar (Escario v. NLRC, G.R. No. 160302, 2010)