Reinstatement Pending Appeal: Employers Must Pay Wages Despite Later Reversal

G.R. No. 174833, December 15, 2010

Imagine being wrongfully terminated from your job. You fight back, and the labor arbiter orders your reinstatement. But your employer appeals, delaying your return. Are you entitled to wages during this appeal period, even if the higher court eventually reverses the reinstatement order? This is the critical question addressed in the Supreme Court case of Myrna P. Magana vs. Medicard Philippines, Inc., a case that clarifies an employer’s responsibilities under Article 223 of the Labor Code.

This case revolves around the legal principle that an order of reinstatement from a labor arbiter is immediately executory, even pending appeal. This means the employer must either re-admit the employee to work or reinstate them on the payroll. The central issue is whether an employer must continue paying wages during the appeal period, even if the reinstatement order is later reversed.

The Legal Foundation: Article 223 of the Labor Code

The legal backbone of this case is Article 223 of the Labor Code, which mandates immediate execution of reinstatement orders pending appeal. This provision serves a crucial social purpose, protecting employees from the economic hardship of prolonged unemployment during legal battles.

Article 223. Appeal. – x x x x

In any event, 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 provided herein.

The law gives employers two choices: actual reinstatement or payroll reinstatement. Either way, the employer must act promptly upon filing an appeal. This requirement is not merely procedural; it’s an exercise of police power by the State, prioritizing the welfare of employees over corporate profits.

The Story of Myrna Magana: A Case of Constructive Dismissal

Myrna Magana was a company nurse employed by Medicard Philippines, Inc. and assigned to the Manila Pavilion Hotel. After being summarily replaced, she was offered a different position she deemed unacceptable. This led her to file an illegal dismissal suit.

• Labor Arbiter’s Decision: The labor arbiter ruled in Magana’s favor, finding her dismissal illegal and ordering the Hotel (as the de facto employer) and Medicard to reinstate her and pay backwages, damages, and attorney’s fees.
• NLRC’s Decision: The NLRC affirmed the arbiter’s ruling but identified Medicard as Magana’s employer, holding them liable for constructive illegal dismissal and reinstatement wages.
• Court of Appeals’ Decision: The CA partially granted Medicard’s appeal, deleting the award of reinstatement wages, arguing that Magana’s dismissal was for cause.

The Supreme Court, however, took a different view, emphasizing the mandatory nature of Article 223. The Court highlighted that even if the reinstatement order is later reversed, the employer is still obligated to pay wages during the appeal period. As the Supreme Court stated:

“[E]ven 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.”

Furthermore, the Supreme Court stressed that the employer cannot recover the wages paid during the appeal period, even if the dismissal is ultimately deemed valid.

Practical Implications for Employers and Employees

This ruling reinforces the immediate and mandatory nature of reinstatement orders. Employers must understand that appealing a reinstatement order does not suspend their obligation to pay wages. They must choose between actual reinstatement or payroll reinstatement while the appeal is pending.

For employees, this case provides assurance that they are entitled to wages during the appeal process, even if the initial reinstatement order is eventually overturned. This financial security helps them sustain themselves while pursuing their legal rights.

Key Lessons

• Immediate Execution: Reinstatement orders are immediately executory, regardless of any pending appeal.
• Wage Obligation: Employers must pay wages during the appeal period, even if the reinstatement order is later reversed.
• No Recovery: Employers cannot recover wages paid during the appeal period if the dismissal is ultimately deemed valid.

Frequently Asked Questions

Q: What does “immediately executory” mean in the context of a reinstatement order?

A: It means the employer must act on the reinstatement order as soon as it is issued, even if they plan to appeal. They must either re-admit the employee to work or reinstate them on the payroll.

Q: Can an employer avoid reinstating an employee by posting a bond?

A: No. The posting of a bond does not stay the execution of a reinstatement order.

Q: What happens if the reinstatement order is reversed on appeal? Does the employee have to pay back the wages they received?

A: No. The employee is not required to reimburse the wages received during the appeal period.

Q: What is the purpose of Article 223 of the Labor Code?

A: The purpose is to protect employees from the economic hardship of being unemployed during a lengthy legal battle. It ensures they have financial support while pursuing their rights.

Q: What should an employee do if their employer refuses to comply with a reinstatement order?

A: The employee should seek legal advice immediately and consider filing a motion for execution of the reinstatement order.

Q: Can an employer choose to reinstate an employee on the payroll instead of actually re-admitting them to work?

A: Yes, the employer has the option to reinstate the employee on the payroll, which means paying their wages without requiring them to report to work.

ASG Law specializes in labor law and employment disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.