Gaco vs. The Hon. NLRC G. R. No. 104690, Feb. 23, 1994

 CASE DIGEST

Gaco vs. The Hon. NLRC

G. R. No. 104690, Feb. 23, 1994

SECOND, NOCON, J.

 

Separation pay awarded due to impossibility of reinstatenent 

Unjustified demotion, in effect, constitutes constructive dismissal, which is illegal, and which would entitle complainant to reinstatement and payment of backwages. However, where reinstatement is no longer viable due to strained relations, separation pay shall be granted in lieu of reinstatement, computed at one (1) month salary for every year of service.

 

Petitioner Zenaida Gaco was hired by Orient Leaf Tobacco Corporation in 1974 as a Picker and was later promoted to Production Recorder in 1975. She held this position for 14 years until the end of the 1989 working season. When she reported back to work in April 1990, she discovered that her position had been given to another employee, and she was demoted to a Picker without due process. 

Believing that her demotion was constructive dismissal, she refused the position and filed a complaint seeking separation pay. The Labor Arbiter ruled in her favor, declaring her demotion unjustified and awarding backwages and separation pay. However, on appeal, the NLRC modified the ruling, removing backwages and reducing separation pay to one-half month’s pay per year of service instead of the one-month rate awarded by the Labor Arbiter. 

Gaco challenged the NLRC ruling before the Supreme Court.

 

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

Yes. The Supreme Court ruled in favor of Gaco, ordering full separation pay and backwages, affirming that when reinstatement is no longer possible, separation pay must be computed at the standard rate of one month per year of service. 

The Supreme Court reinstated the Labor Arbiter’s decision, ruling that:

1. Gaco was constructively dismissed – The demotion was unjustified and amounted to a forced resignation, making reinstatement no longer a viable option.
2. Separation pay was properly awarded – Since reinstatement was impossible due to strained relations, separation pay must be granted instead of reinstatement.
3. Computation of separation pay – The NLRC’s reduction of separation pay to one-half month’s pay per year of service was incorrect. The Court reinstated the Labor Arbiter’s ruling, granting one (1) month’s pay per year of service, which is the standard computation in cases of illegal dismissal.
4. Backwages entitlement – The Court held that Gaco was entitled to backwages from April 1990 until the finality of the decision, since she was illegally terminated through unjust demotion.

 

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