The Supreme Court held that when a judgment of illegal dismissal becomes final, the computation of backwages and separation pay should extend up to the date of finality, not just the initial judgment date. This ensures employees receive full compensation for the period they were wrongfully unemployed, balancing the principle of finality of judgments with the need for just remedies in labor disputes. This ruling clarifies that recomputation upon execution is not an alteration of the original judgment but a necessary consequence of the illegal dismissal.

Beyond the Award: Ensuring Complete Relief in Illegal Dismissal Cases

The case of Dario Nacar vs. Gallery Frames and/or Felipe Bordey, Jr. arose from a labor dispute where Dario Nacar filed a complaint for constructive dismissal against his former employer. The Labor Arbiter initially ruled in favor of Nacar, awarding him backwages and separation pay. However, a dispute emerged regarding the period for which backwages should be computed. The core legal question revolved around whether backwages should be calculated only up to the initial decision date or extended to the finality of the Supreme Court’s resolution.

The Labor Arbiter’s original decision awarded Nacar separation pay and backwages, specifying that these were computed up to the promulgation of the decision. This seemingly straightforward computation became a point of contention when Nacar sought a recomputation, arguing that his backwages should be calculated until the Supreme Court’s resolution became final. Gallery Frames, on the other hand, contended that the original computation should stand, citing the principle of immutability of judgments. This principle generally holds that a final and executory judgment can no longer be altered or amended.

The NLRC initially dismissed Gallery Frames’ appeal, but later granted it, ordering a recomputation of the judgment award. This seesawing of decisions continued as the case moved through the appellate courts. The Court of Appeals (CA) sided with Gallery Frames, stating that the Labor Arbiter’s original decision had become final and could not be modified. The CA emphasized that there was nothing left to do except to enforce the said judgment. This led Nacar to elevate the case to the Supreme Court, challenging the CA’s decision.

The Supreme Court, in its analysis, drew parallels with the case of Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division), where a similar issue of recomputation arose. The Court emphasized the distinction between the finding of illegal dismissal and the computation of monetary awards. The finding of illegal dismissal, once final, cannot be disputed. However, the computation of awards is subject to recomputation to reflect the full extent of the employee’s entitlement.

The Supreme Court stated that:

Under the terms of the decision which is sought to be executed by the petitioner, no essential change is made by a recomputation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared by the Labor Arbiter in that decision.

The Court further clarified that a recomputation is not an alteration or amendment of the final decision but rather an integral part of the relief due to an illegally dismissed employee. Article 279 of the Labor Code provides for the consequences of illegal dismissal, which include reinstatement and full backwages. When reinstatement is not feasible, separation pay is awarded, and the computation extends until the finality of the decision.

The principle of immutability of judgments, while important, should not be applied rigidly to defeat the ends of justice. The Supreme Court’s interpretation recognizes that the computation of monetary awards in illegal dismissal cases is a dynamic process that continues until the final resolution of the case. This approach contrasts with a static interpretation that would limit the employee’s recovery to the initial decision date.

The Supreme Court also addressed the issue of legal interest on the monetary awards. Citing Eastern Shipping Lines, Inc. v. Court of Appeals, the Court initially laid down the guidelines for computing legal interest. However, it acknowledged the subsequent amendment by the Bangko Sentral ng Pilipinas Monetary Board (BSP-MB), which reduced the legal interest rate from 12% to 6% per annum. The Court clarified that the new rate applies prospectively, meaning that the 12% rate applies until June 30, 2013, and the 6% rate applies from July 1, 2013, until full satisfaction of the judgment.

The Court stated:

To recapitulate and for future guidance, the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody BSP-MB Circular No. 799, as follows:

The Supreme Court ultimately reversed the Court of Appeals’ decision and ordered Gallery Frames to pay Nacar backwages computed from the date of his illegal dismissal up to the finality of the Supreme Court’s resolution, separation pay computed from his date of hire up to the same date, and legal interest on the total monetary awards. This ruling underscores the importance of ensuring complete relief for illegally dismissed employees and clarifies the application of legal interest rates in labor disputes.

FAQs

What was the key issue in this case?	The key issue was whether backwages and separation pay should be computed up to the date of the initial Labor Arbiter’s decision or up to the finality of the Supreme Court’s decision.
What did the Supreme Court decide?	The Supreme Court ruled that the computation should extend to the date the Supreme Court’s decision became final, ensuring full compensation for the employee.
What is the principle of immutability of judgments?	The principle of immutability of judgments generally means that a final and executory judgment can no longer be altered or amended, but the court clarified that recomputation isn’t an alteration.
How does Article 279 of the Labor Code relate to this case?	Article 279 provides for the consequences of illegal dismissal, including reinstatement and full backwages, which the Court interpreted to extend until final resolution.
What was the legal interest rate applied in this case?	The legal interest rate was initially 12% per annum until June 30, 2013, and then 6% per annum from July 1, 2013, until full satisfaction of the judgment.
What is the significance of the Session Delights case mentioned in the decision?	The Session Delights case provided a precedent for distinguishing between the finding of illegal dismissal and the computation of monetary awards.
What is the practical implication of this ruling for employers?	Employers should be aware that if they are found liable for illegal dismissal, their monetary obligations will continue to accrue until the finality of the court’s decision.
What is the practical implication of this ruling for employees?	Employees are entitled to receive full compensation for the period they were wrongfully unemployed, up to the final resolution of their case.

This case clarifies the scope of relief available to illegally dismissed employees and reinforces the principle that labor laws should be interpreted to protect workers’ rights. The decision provides valuable guidance for labor tribunals and appellate courts in computing monetary awards in illegal dismissal cases.

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: Dario Nacar vs. Gallery Frames and/or Felipe Bordey, Jr., G.R. No. 189871, August 13, 2013