Bani Rural Bank Inc. v. De Guzman G.R. No.170904, November 13, 2013

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Bani Rural Bank Inc. v. De Guzman

G.R. No.170904, November 13, 2013

SECOND, NOCON, J.

 

Separation pay awarded due to impossibility of reinstatement

 By jurisprudence derived from this provision, separation pay may [also] be awarded to an illegally dismissed employee in lieu of reinstatement." Section 4(b), Rule I of the Rules Implementing Book VI of the Labor Code provides the following instances when the award of separation pay, in lieu of reinstatement to an illegally dismissed employee, is proper: (a) when reinstatement is no longer possible, in cases where the dismissed employee’s position is no longer available; (b) the continued relationship between the employer and the employee is no longer viable due to the strained relations between them; and (c) when the dismissed employee opted not to be reinstated, or the payment of separation benefits would be for the best interest of the parties involved.

 

Respondents Teresa De Guzman and Edgar C. Tan were employees of Bani Rural Bank, Inc. and ENOC Theatre I and II. They were dismissed from their employment and subsequently filed a complaint for illegal dismissal. Initially, the Labor Arbiter dismissed their complaint, but the National Labor Relations Commission (NLRC) reversed the ruling, finding that they were illegally dismissed. 

In its March 17, 1995 decision, the NLRC ordered their reinstatement with backwages. However, during the execution phase, neither party took active steps to implement the reinstatement order. The NLRC Sheriff reported that respondents, through a representative, indicated that they were only interested in the monetary award and not reinstatement. In a July 31, 1998 decision, the NLRC modified its ruling, awarding separation pay in lieu of reinstatement, citing strained relations between the parties. This decision became final and executory on January 29, 1999. 

Despite this, the petitioners challenged the computation of backwages, arguing that it should only be computed until August 25, 1995, when the respondents allegedly waived reinstatement. The NLRC ruled otherwise, holding that backwages should be computed until January 29, 1999, the finality of the decision awarding separation pay. The Court of Appeals affirmed the NLRC’s ruling, prompting petitioners to elevate the case to the Supreme Court.

 

 

Whether separation pay is warranted when reinstatement is impossible due to strained relations, and how it should be computed. 

Yes. The Supreme Court upheld the CA and NLRC’s ruling, affirming that respondents were entitled to separation pay, as their termination was involuntary and not due to their fault. The Court emphasized:

1. Reinstatement was no longer feasible due to strained relations – The prolonged delay in execution and the lack of efforts from both parties to enforce reinstatement indicated that resuming employment would be impractical and detrimental to both sides.
2. Separation pay was properly awarded – Since reinstatement was no longer viable, separation pay must be granted instead. The Court ruled that the computation should follow the standard rate of one (1) month’s salary per year of service, as awarded by the NLRC in its final decision.
3. Backwages must be computed until the finality of the decision awarding separation pay – The petitioners’ claim that backwages should stop at August 25, 1995, when respondents allegedly waived reinstatement, was rejected. The Court held that since reinstatement was replaced with separation pay, backwages continued to accrue until January 29, 1999, when the decision granting separation pay became final.
4. Legal interest applies – The total monetary award, including backwages and separation pay, shall accrue a 6% legal interest per annum from January 29, 1999, until fully satisfied.

 

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