The Supreme Court ruled that an employer must pay accrued wages to an illegally dismissed employee from the time of the Labor Arbiter’s (LA) reinstatement order until its reversal by a higher court, provided the delay in reinstatement wasn’t due to the employee’s fault. This decision clarifies the employer’s responsibility to comply with reinstatement orders, reinforcing employees’ rights to receive wages during the appeal period, unless their actions impede the reinstatement process. It emphasizes the immediate executory nature of reinstatement orders, ensuring that employees are compensated while the legality of their dismissal is being contested.

When a Return-to-Work Order Falls Short: Who Bears the Cost of Delay?

This case revolves around a dispute between Froilan M. Bergonio, Jr., Dean G. Pelaez, et al. (petitioners), and South East Asian Airlines (SEAIR) and Irene Dornier (respondents). The central issue is whether the petitioners are entitled to accrued wages from the time the Labor Arbiter (LA) ordered their reinstatement until the Court of Appeals (CA) reversed the LA’s decision. This issue hinges on whether the delay in the petitioners’ reinstatement was due to the respondents’ unjustified actions. The core legal question is whether the employer fulfilled their obligation to reinstate the employees, and if not, who is responsible for the resulting delay and financial consequences.

The factual background begins with the petitioners filing a complaint for illegal dismissal and illegal suspension against SEAIR and its president. The LA ruled in favor of the petitioners, ordering their immediate reinstatement with full backwages. The respondents manifested their option to reinstate the petitioners in the payroll, but this did not materialize. The LA granted the petitioners’ motion and issued a writ of execution. The respondents moved to quash the writ, claiming strained relations with the petitioners. After the initial writ was unsatisfied, the LA issued an alias writ of execution. Subsequently, the respondents issued a memorandum directing the petitioners to report for work, which they failed to do. Meanwhile, the respondents appealed the LA’s decision to the NLRC, which dismissed the appeal.

The case then moved through various stages of appeal and execution. The NLRC issued an entry of judgment, declaring its resolution final and executory. The petitioners filed another motion for the issuance of a writ of execution, which the LA granted. A notice of garnishment was issued to the respondents’ bank. The CA partly granted the respondents’ petition, declaring the petitioners’ dismissal valid but awarding nominal damages for failure to observe due process. The petitioners appealed to the Supreme Court, which denied their petition. The petitioners filed an urgent motion for the release of the garnished amount, which the LA granted. The NLRC affirmed the LA’s order. The respondents then assailed the NLRC’s decision via a petition for certiorari filed with the CA.

The Court of Appeals (CA) reversed the NLRC’s decision and remanded the case for proper computation of the petitioners’ accrued wages, computed up to February 24, 2006. The CA stated that the reinstatement aspect of the LA’s decision is immediately executory even pending appeal, such that the employer is obliged to reinstate and pay the wages of the dismissed employee during the period of appeal until the decision is reversed by a higher court. The CA declared that the delay in the execution of the reinstatement order was not due to the respondents’ unjustified act or omission, and that the petitioners refusal to comply with the February 21, 2006 return-to-work Memorandum that the respondents issued and personally delivered to them (the petitioners) prevented the enforcement of the reinstatement order.

The petitioners argued that the CA erred in ruling that the computation of their accrued wages should stop when they failed to report for work on February 24, 2006. They maintained that the February 21, 2006 Memorandum was merely an afterthought. The petitioners also directed the Court’s attention to the several pleadings that the respondents filed to prevent the execution of the reinstatement aspect of the LA’s May 31, 2005 decision. The respondents countered that the petitioners were validly dismissed and that they complied with the LA’s reinstatement order. The respondents added that while the reinstatement of an employee found illegally dismissed is immediately executory, the employer is nevertheless not prohibited from questioning this rule.

The Supreme Court granted the petition, emphasizing the jurisdictional limitations of its Rule 45 review of the CA’s Rule 65 decision in labor cases. The Court stated that it reviews the legal errors that the CA may have committed in the assailed decision. Article 223 of the Labor Code provides that the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, pending appeal. The employer must reinstate the employee, either by physically admitting him under the conditions prevailing prior to his dismissal, and paying his wages; or, at the employer’s option, merely reinstating the employee in the payroll until the decision is reversed by the higher court.

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, 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. [Emphasis and underscoring supplied]

The Court further elaborated that an order of reinstatement issued by the LA is self-executory. The Supreme Court then discussed the circumstances that may bar an employee from receiving the accrued wages. An employee may be barred from collecting the accrued wages if shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. To determine whether an employee is thus barred, two tests must be satisfied: (1) actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission.

Applying the two-fold test, the Court found that there was actual delay in the execution of the reinstatement aspect of the LA’s decision. However, the Court also found that the delay in the execution of the reinstatement pending appeal was due to the respondents’ unjustified acts. The Court found that the respondents filed several pleadings to suspend the execution of the LA’s reinstatement order. The Court also found that the respondents did not sufficiently notify the petitioners of their intent to actually reinstate them, neither did the respondents give them ample opportunity to comply with the return-to-work directive. Lastly, the petitioners continuously and actively pursued the execution of the reinstatement aspect of the LA’s decision.

The Court concluded that the delay was due to the acts of the respondents that were unjustified. The Supreme Court emphasized that Article 223, paragraph 3, of the Labor Code mandates the employer to immediately reinstate the dismissed employee, either by actually reinstating him/her under the conditions prevailing prior to the dismissal or, at the option of the employer, in the payroll. The respondents’ failure in this case to exercise either option rendered them liable for the petitioners’ accrued salary until the LA decision was reversed by the CA on December 17, 2008. Therefore, the NLRC, in affirming the release of the garnished amount, merely implemented the mandate of Article 223; it simply recognized as immediate and self-executory the reinstatement aspect of the LA’s decision.

FAQs

What was the key issue in this case?	The key issue was whether the petitioners were entitled to accrued wages from the time of the LA’s reinstatement order until the CA’s reversal, focusing on who was responsible for the delay in reinstatement.
What does Article 223 of the Labor Code say about reinstatement?	Article 223 states that a Labor Arbiter’s reinstatement order is immediately executory pending appeal. The employer must either reinstate the employee to their former position or, at their option, reinstate them in the payroll.
When can an employee be barred from collecting accrued wages?	An employee can be barred from collecting accrued wages if the delay in enforcing the reinstatement order was not due to the employer’s unjustified actions or omissions. The delay must be without the employer’s fault.
What is the two-fold test used to determine if an employee is barred?	The two-fold test involves determining if there was actual delay in executing the reinstatement order and whether the delay was due to the employer’s unjustified act or omission. Both tests must be satisfied for an employee to be barred.
What was the CA’s ruling in this case?	The CA reversed the NLRC’s decision, stating that the petitioners’ accrued wages should only be computed until February 24, 2006, because the petitioners failed to report for work.
Why did the Supreme Court disagree with the CA?	The Supreme Court disagreed because it found that the delay in reinstatement was due to the respondents’ unjustified actions, such as filing pleadings to suspend the reinstatement order.
What is the significance of the February 21, 2006, Memorandum?	The February 21, 2006, Memorandum was the respondents’ attempt to direct the petitioners to report for work, but the Supreme Court found the notification insufficient and insincere.
What does it mean for a reinstatement order to be self-executory?	A self-executory reinstatement order means that the dismissed employee need not apply for a writ of execution to trigger the employer’s duty to reinstate them. The employer is immediately duty-bound to reinstate the employee.

In conclusion, the Supreme Court’s decision clarifies the employer’s obligations regarding reinstatement orders and accrued wages. It reinforces the principle that employers must comply with reinstatement orders unless the delay is directly attributable to the employee’s actions. This ruling provides a crucial safeguard for employees awaiting the resolution of their 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: Bergonio, Jr. vs. South East Asian Airlines, G.R. No. 195227, April 21, 2014