In Pepito Velasco v. National Labor Relations Commission, the Supreme Court affirmed that employees Ernesto, Antonio, and Rodolfo Tayag were illegally dismissed and are entitled to backwages, clarifying the employer’s burden of proof in abandonment cases. The Court underscored that employers must prove unequivocal intent of employees to abandon their jobs and that failing to provide work for piece-rate workers constitutes illegal dismissal. This decision reinforces employees’ rights to security of tenure and fair compensation, even when separation pay is granted.

When Silence Isn’t Golden: Did Lack of Work Equal Illegal Dismissal?

The case revolves around Ernesto, Antonio, and Rodolfo Tayag, who were carpenters at Modern Furniture Manufacturing, owned by Pepito Velasco. The Tayags claimed they were laid off due to business losses, while Velasco argued they abandoned their work. The central legal question is whether the Tayags were illegally dismissed or had voluntarily abandoned their employment.

The Labor Arbiter initially dismissed the Tayags’ complaints, stating they failed to prove they were terminated. However, the NLRC reversed this decision, finding that Velasco failed to show the Tayags abandoned their work. The NLRC noted that the Tayags were paid on a per-piece basis and were only required to report when new job orders came in. Since Velasco did not call them for work, the NLRC concluded that they were effectively dismissed.

Velasco appealed to the Court of Appeals, which affirmed the NLRC’s decision. The appellate court emphasized that Velasco, as the employer, had the burden to prove that the termination was for just or authorized causes, a burden he failed to meet. This legal principle aligns with Article 279 of the Labor Code, which protects employees from unjust dismissal.

Before the Supreme Court, Velasco argued that the NLRC had contradicted itself by stating that there was no illegal dismissal. He pointed to a specific sentence in the NLRC Resolution:

Viewed in this light, the relief available to complainants-appellants is reinstatement without backwages there being no showing also that there was illegal dismissal.

However, the Supreme Court clarified that this statement was inconsistent with the rest of the NLRC’s findings. The Court emphasized that the NLRC’s overall conclusion supported the premise that the Tayags were illegally dismissed.

The Supreme Court analyzed the NLRC’s Resolution in its entirety, noting that the NLRC had concluded that Velasco failed to establish that the Tayags had abandoned their employment. The Court stated, “Given the context of the preceding discussion, which illustrated that the Tayags were not guilty of abandonment, there is no legal basis whatsoever for the conclusion that ‘there was no showing x x x that there was illegal dismissal.’” This clarification is crucial because abandonment is a recognized just cause for dismissal under Article 282 of the Labor Code.

The dispositive portion of the NLRC’s Resolution, which awarded separation pay in lieu of reinstatement, further supported the finding of illegal dismissal. The Supreme Court explained that under Article 279 of the Labor Code, an employee unjustly dismissed is entitled to reinstatement and backwages. However, if reinstatement is no longer possible, the employer may be required to pay separation pay. The award of separation pay indicated that the NLRC recognized the illegal dismissal but deemed reinstatement impractical.

Velasco also argued that the payment of separation pay was misplaced because no evidence of its necessity was presented. The Supreme Court rejected this argument, citing the doctrine that separation pay may be awarded if reinstatement is no longer practical or in the best interest of the parties. The Court noted that Modern Furniture had experienced financial hardship, and the Tayags had opted for separation pay instead of reinstatement.

The Tayags, in their Memorandum, argued that the NLRC and Court of Appeals erred in not awarding them full backwages. The Supreme Court agreed, citing the landmark case of Santos v. NLRC:

The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual reinstatement.

The Court emphasized that reinstatement and backwages are distinct remedies. Separation pay is a substitute for reinstatement, while backwages compensate for lost earnings during the period of illegal dismissal. The Court held that the Tayags were entitled to both separation pay and backwages.

However, the Court acknowledged the difficulty in ascertaining the proper amount of backwages, given that the Tayags were paid on a piece-rate basis. The Court cited Labor Congress of the Philippines v. NLRC, where a similar situation arose with piece-rate workers. The Court remanded the case to the NLRC to determine the appropriate amount of backwages due to each of the Tayags, considering their varying degrees of production and days worked.

This decision clarifies the rights of piece-rate workers who are effectively terminated by being denied work. It reinforces the employer’s burden to prove abandonment and ensures that illegally dismissed employees receive full compensation, including both separation pay and backwages.

FAQs

What was the key issue in this case?	The key issue was whether the Tayags were illegally dismissed or had voluntarily abandoned their employment, and whether they were entitled to both separation pay and backwages.
What is the employer’s burden of proof in abandonment cases?	The employer must prove an unequivocal intent on the part of the employee to discontinue employment, as abandonment is considered a form of neglect of duty.
What is the difference between separation pay and backwages?	Separation pay is a substitute for reinstatement when it is no longer practical, while backwages compensate for lost earnings during the period of illegal dismissal.
What happens when an employee is paid on a piece-rate basis?	When employees are paid per piece and are not given work, it can be considered constructive dismissal if the employer does not have a valid reason for withholding work.
What did the Supreme Court decide about the NLRC’s statement on illegal dismissal?	The Supreme Court clarified that the NLRC’s statement that there was “no showing of illegal dismissal” was inconsistent with the rest of the findings and the dispositive portion of the decision.
Why was the case remanded to the NLRC?	The case was remanded to the NLRC to determine the appropriate amount of backwages due to each of the Tayags, considering they were paid on a piece-rate basis.
What is the significance of the Santos v. NLRC case?	Santos v. NLRC established that illegally dismissed employees are entitled to both reinstatement (or separation pay) and backwages, as these are distinct remedies.
Can an employee receive both separation pay and backwages?	Yes, an employee who is illegally dismissed is entitled to both separation pay in lieu of reinstatement and backwages to compensate for lost earnings.

This case serves as a reminder of the importance of due process in employment termination and the rights of employees to fair compensation. Employers must ensure they have just or authorized causes for dismissal and must be prepared to substantiate these claims. Employees, especially those paid on a piece-rate basis, should be aware of their rights and seek legal counsel if they believe they have been unjustly dismissed.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: PEPITO VELASCO VS. NATIONAL LABOR RELATIONS COMMISSION, ANTONIO TAYAG, ERNESTO TAYAG AND RODOLFO TAYAG, G.R. NO. 161694, June 26, 2006