Accrued Wages and Reinstatement: Employer's Obligation Despite Appeal

When a Labor Arbiter finds an employee illegally dismissed, the reinstatement order is immediately executory — even while the employer appeals. This means the employer must either physically reinstate the worker or place them on payroll, regardless of the appeal's outcome. The Supreme Court case of Bergonio v. South East Asian Airlines (G.R. No. 195227, April 21, 2014) clarifies what happens when an employer refuses to comply with this duty, and whether the employee can still collect accrued wages if the dismissal is later declared valid.

The Facts of the Case

In 2004, ten employees of South East Asian Airlines (SEAIR) filed a complaint for illegal dismissal. On May 31, 2005, the Labor Arbiter ruled in their favor, ordering immediate reinstatement with full backwages. SEAIR received the decision on July 8, 2005, but did not reinstate the employees.

Instead, the company filed multiple pleadings to delay execution — an opposition to the writ of execution, a motion to quash, and a motion to suspend the reinstatement order. When the Labor Arbiter issued an alias writ of execution in February 2006, SEAIR finally issued a return-to-work memorandum. However, the company delivered the memorandum only to one employee, in the afternoon of February 23, 2006, requiring all workers to report by February 24, 2006 — an unreasonably short notice.

Meanwhile, SEAIR appealed the illegal dismissal ruling. The Court of Appeals eventually reversed the Labor Arbiter's decision on December 18, 2007, declaring the dismissal valid but awarding nominal damages.

The Legal Issue

The central question: Can the employees still collect accrued wages for the period between the Labor Arbiter's reinstatement order and the appellate court's reversal, even though the dismissal was ultimately upheld?

The Supreme Court's Ruling

The Supreme Court ruled in favor of the employees, holding that SEAIR must pay accrued wages until the Court of Appeals reversed the Labor Arbiter's decision.

The reinstatement order is immediately executory. Under Article 223 (now Article 229) of the Labor Code, a reinstatement order is immediately executory pending appeal. The employer must either admit the employee back under the same terms and conditions, or, at the employer's option, merely reinstate the employee in the payroll. The posting of an appeal bond does not stay execution.

The reinstatement order is self-executory. The employee need not even apply for a writ of execution. As the Court emphasized in Pioneer Texturizing Corp. v. NLRC, requiring a writ of execution as a prerequisite would betray the very purpose of Article 223 — the immediate execution of reinstatement orders.

The two-fold test for accrued wages. When a higher tribunal reverses a finding of illegal dismissal, the employer's duty to reinstate ends. However, the employee may still recover accrued wages up to the date of reversal. An employer can only avoid this liability if two tests are satisfied: (1) there was actual delay in executing the reinstatement order, and (2) the delay was not due to the employer's unjustified act or omission.

Applying the test to SEAIR. The Court found that SEAIR failed both tests. The company filed multiple pleadings to suspend execution, demonstrating a determined effort to prevent reinstatement. It gave insufficient notice of the return-to-work directive — delivering the memorandum to only one employee, one day before the deadline. Under the 2005 NLRC Rules, employers must also submit a compliance report within ten days of receiving a reinstatement order; SEAIR's noncompliance showed a clear refusal to reinstate.

Practical Takeaways

• Reinstatement orders are immediately executory. An employer cannot delay reinstatement by appealing. The employee must be admitted back or placed on payroll without delay.

• Payroll reinstatement is an option, not an obligation. The employer may choose to reinstate the employee in the payroll instead of physically admitting them. But the employer must actually exercise this option — mere intention is insufficient.

• Accrued wages continue until reversal. If an employer refuses to reinstate, it remains liable for the employee's salaries until a higher tribunal reverses the Labor Arbiter's decision.

• Delay must be without employer fault. An employer can avoid paying accrued wages only if it proves the delay was not due to its unjustified acts. Filing motions to delay execution will not help.

• Comply with NLRC reporting rules. Under the 2005 NLRC Rules, employers must submit a compliance report within ten days of receiving a reinstatement order. Failure to do so signals a clear refusal to reinstate.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.