Strained relations

The normal consequences of illegal dismissal are reinstatement without loss of seniority rights and award of back-wages from the time the salary is withheld up to actual reinstatement. But can separation pay be also awarded aside from back-wages? This is the issue raised once more in this case of Mang Pepe.

In 1990 Mang Pepe was hired as carpenter by Arnie to work in his construction company (GAB) with a daily wage of P220. In 1999, Arnie stopped giving work assignments to Mang Pepe allegedly because GAB no longer had any construction projects available. Believing that he was already a regular employee and that his services were terminated without just cause, Mang Pepe filed a complaint for illegal dismissal against GAB and Arnie. For its defense, GAB and Arnie contended that Mang Pepe was a project employee and so his employment was validly terminated because of unavailability of construction projects.

On January 10, 2001, the Labor Arbiter (LA) ruled in favor of Mang Pepe finding that he was a regular employee who was dismissed without cause. So the LA ordered his immediate reinstatement without loss of seniority rights and other privileges, with payment of full back-wages.

GAB and Arnie appealed this ruling to the NLRC. But pending their appeal and in compliance with the LA’s decision, they advised Mang Pepe to report back to work in the construction site within 10 days. On May 15, 2001, Mang Pepe manifested to the LA that actual animosities existed between him and Arnie and there had been threats to his life and his family’s safety. Hence he just asked that his separation pay be paid instead of reinstatement.

Meanwhile the NLRC upheld the LA decision in favor of Mang Pepe on April 22, 2002. This ruling was affirmed by the Court of Appeals (CA) and attained finality on September 15, 2004.

Controversy again arose when GAB and Arnie found as exorbitant the recomputed amount due to Mang Pepe then already amounting to P562,804.69 subject of a writ of execution issued by the LA. They asked the NLRC to reconsider this re-computation contending that since Pepe refused to get back to work, the re-computation of the wages and benefits due him should not be beyond May 15, 2001 the date when he manifested his refusal to be reinstated.

On March 9, 2006 the NLRC granted GAB and Arnie’s motion. It held that since Mang Pepe did not appeal the LA’s decision granting him only reinstatement and back wages, not separation pay, and since he refused to go back to work, he may recover back wages only up to May 20, 2001, the day he was supposed to return to the job site. Was the NLRC correct?

No. The basis for the payment of back wages is different from the basis for the payment of separation pay. Back wages represent compensation that should have been earned but were not collected because of the unjust dismissal. Separation pay is granted where reinstatement is no longer advisable because of strained relation between employer and employee. Separation pay may avail in lieu of reinstatement if reinstatement is no longer practical or in the best interest of the parties. It may likewise be awarded if the employee decides not be reinstated.

Under the doctrine of strained relations, the award of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable. Such payment liberates the employee from what could be a highly oppressive work environment, in much the same way that it releases the employer from the grossly unpalatable obligation of maintaining in its employ, a worker it could no longer trust.

In this case, actual animosity already existed between Arnie and Mang Pepe as a result of the filing of the illegal dismissal case. Clearly then Mang Pepe is entitled to back wages and separation pay as his reinstatement has been rendered impossible due to strained relations. He should thus be awarded back wages of P562,804.69 computed from the time he was unjustly dismissed in February 1999 until June 30, 2005 when his reinstatement was rendered impossible without fault on his part. On the other hand, Mang Pepe’s separation pay should be computed from the time he was hired in 1990 until not only in 1999 when he was unjustly dismissed but until June 30, 2005 when his reinstatement was rendered impossible which is the day when he is deemed to have been actually separated or a total of 15 years. At one month pay for every year of service, he should receive P85,800 separation pay (Golden Ace Builders and Azul vs. Talde, G.R. 187200, May 5, 2010).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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