Key Takeaway: Guaranteed Salary Increases and Benefits Must Be Included in Backwages and Separation Pay for Illegally Dismissed Employees

Moreno Dumapis, Francisco Liagao and Elmo Tundagui v. Lepanto Consolidated Mining Company, G.R. No. 204060, September 15, 2020

Imagine being unjustly fired from your job and then struggling to make ends meet while fighting for your rights. This is the reality for many illegally dismissed employees in the Philippines. In a groundbreaking decision, the Supreme Court ruled in favor of three miners who were wrongfully terminated, setting a new precedent for how backwages and separation pay should be calculated. This case, involving Moreno Dumapis, Francisco Liagao, and Elmo Tundagui against Lepanto Consolidated Mining Company, not only highlights the plight of illegally dismissed workers but also clarifies the legal framework surrounding their compensation.

The central legal question in this case was whether salary increases and benefits, which would have been received had the employees not been dismissed, should be included in their backwages and separation pay. The Supreme Court’s decision to include these guaranteed increments marks a significant shift in labor law jurisprudence, aiming to restore illegally dismissed employees to their rightful financial position.

Legal Context: Understanding Backwages and Separation Pay in Philippine Labor Law

Backwages and separation pay are critical components of labor law designed to protect workers who have been unjustly dismissed. Under Article 294 of the Philippine Labor Code, an employee who is unjustly dismissed is entitled to full backwages, inclusive of allowances, and other benefits or their monetary equivalent from the time of dismissal until reinstatement or the finality of the decision.

Backwages are intended to compensate the employee for the earnings lost due to illegal dismissal. They represent a form of reparation, ensuring that the employee receives what they would have earned had they not been terminated. Separation pay, on the other hand, is awarded when reinstatement is no longer feasible due to strained relations or other reasons, serving as a financial cushion for the employee.

The term salary increases refers to increments in an employee’s base pay, which can be mandated by law, a collective bargaining agreement (CBA), or company policy. These increases are distinct from allowances and benefits, which are additional compensations granted apart from the salary.

For example, if an employee was illegally dismissed but would have received a mandated salary increase under a CBA, they should be entitled to that increase as part of their backwages. This principle ensures that the employee is not penalized for the employer’s wrongful act.

Case Breakdown: The Journey of Moreno Dumapis, Francisco Liagao, and Elmo Tundagui

Moreno Dumapis, Francisco Liagao, and Elmo Tundagui were miners employed by Lepanto Consolidated Mining Company. In 2000, they were dismissed on allegations of highgrading, a form of theft in mining operations. They contested their dismissal, leading to a series of legal battles that spanned nearly two decades.

Their journey began with a decision by Labor Arbiter Monroe C. Tabingan in 2001, who dismissed their complaint for illegal dismissal. However, on appeal, the National Labor Relations Commission (NLRC) reversed this decision in 2002, finding the dismissal of Dumapis, Liagao, and Tundagui to be illegal. They were awarded backwages and separation pay.

Lepanto appealed to the Court of Appeals, which affirmed the NLRC’s decision in 2003. The Supreme Court, in 2008, upheld the Court of Appeals’ ruling, adding double costs to Lepanto for its baseless accusations.

The case then moved to the execution stage, where the miners sought a recomputation of their monetary award to include salary increases under the CBA. The labor arbiter initially granted this request, but subsequent orders adjusted the computation, leading to further appeals.

The Supreme Court’s final decision in 2020 clarified that backwages and separation pay must include all guaranteed salary increases and benefits that the employees would have received had they not been dismissed. The Court stated:

“The award of backwages and/or separation pay due to illegally dismissed employees shall include all salary increases and benefits granted under the law and other government issuances, Collective Bargaining Agreements, employment contracts, established company policies and practices, and analogous sources which the employees would have been entitled to had they not been illegally dismissed.”

This ruling was based on the principle that illegally dismissed employees should be made whole again, restoring them to the financial position they would have been in had their employment not been unjustly terminated.

Practical Implications: Impact on Future Cases and Advice for Employers and Employees

This landmark decision sets a new standard for calculating backwages and separation pay in cases of illegal dismissal. Employers must now ensure that they include all guaranteed salary increases and benefits in any settlement or award calculations. This ruling underscores the importance of adhering to CBAs and company policies, as these documents now directly impact the financial obligations in cases of wrongful termination.

For employees, this decision reinforces their rights to full compensation for lost earnings. It encourages them to seek legal recourse if they believe they have been unjustly dismissed, knowing that their backwages and separation pay will reflect their true financial loss.

Key Lessons:

• Employers must include guaranteed salary increases and benefits in backwages and separation pay calculations.
• Employees should be aware of their rights under CBAs and company policies to ensure they receive full compensation.
• Legal action should be pursued promptly to avoid delays in receiving rightful compensation.

Frequently Asked Questions

What are backwages and separation pay?
Backwages are compensation for earnings lost due to illegal dismissal, while separation pay is awarded when reinstatement is no longer feasible, serving as a financial cushion for the employee.

How are backwages and separation pay calculated?
They are calculated from the time of illegal dismissal until reinstatement or the finality of the decision, including all guaranteed salary increases and benefits that would have been received.

What is the significance of the Dumapis, Liagao, and Tundagui case?
This case established that guaranteed salary increases and benefits must be included in backwages and separation pay, ensuring that illegally dismissed employees are fully compensated.

Can an employee receive both backwages and separation pay?
Yes, an employee can receive both if reinstatement is no longer feasible, as separation pay serves as an alternative to reinstatement.

What should employees do if they believe they have been illegally dismissed?
Employees should seek legal advice promptly to file a complaint for illegal dismissal and ensure they receive full compensation.

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