Illegal Dismissal: Backwages and Separation Pay Computed Until Final Judgment

The Supreme Court has settled a crucial question for illegally dismissed employees: how long do backwages and separation pay continue to accrue? In C.I.C.M. Mission Seminaries v. Perez (G.R. No. 220506, January 18, 2017), the Court ruled that these monetary awards run until the judgment becomes final and executory—regardless of whether the employer or the employee caused the delay through appeals.

The Case Background

Maria Veronica Perez was illegally dismissed by C.I.C.M. Mission Seminaries. In 2008, the Labor Arbiter (LA) ruled in her favor, ordering the school to pay backwages and separation pay in lieu of reinstatement. The decision was affirmed by the National Labor Relations Commission (NLRC), the Court of Appeals (CA), and finally by the Supreme Court. It became final and executory on October 4, 2012.

When Perez moved for execution, the school argued that it had already satisfied the judgment by releasing a cash bond of P272,337.05. The LA disagreed, ordering a recomputation of the award. The recomputation extended backwages and separation pay from June 2008 until October 4, 2012—the date of finality—resulting in a total award of P1,847,088.89.

The school contested this, arguing that because Perez herself had appealed the LA's decision, she should not benefit from the delay. The computation, the school insisted, should stop at June 16, 2008, when the LA first ruled.

The Issue

The central question was whether backwages and separation pay should be computed until the finality of the decision, even when the employee's own appeal caused the delay in the case's resolution.

The Supreme Court's Ruling

The Court denied the school's petition and affirmed the recomputation. It held that the rule is clear: when a decision grants separation pay in lieu of reinstatement, the employment relationship is terminated only upon the finality of that decision. Until then, the employee remains entitled to monetary awards.

The Court cited Gaco v. NLRC and Surima v. NLRC, which established that backwages and separation pay are reckoned from the time compensation was withheld up to the finality of the Court's decision. The rationale, explained in Bani Rural Bank, Inc. v. De Guzman, is that finality cuts off the employment relationship and represents the final settlement of the parties' rights and obligations.

It does not matter who appealed. The Court emphasized that if the LA's decision granting separation pay is appealed by any party, the employer-employee relationship subsists until the decision becomes final. As the Court stated: "had they not illegally dismissed respondent, they will not be where they are today. They took the risk and must suffer the consequences."

The Court also rejected the school's argument that recomputation violated the doctrine of immutability of judgment. Recomputation does not alter the final decision; it merely updates the monetary consequences that flow from the nature of illegal dismissal.

Practical Takeaways

• Backwages and separation pay accrue until finality. In illegal dismissal cases where separation pay is awarded in lieu of reinstatement, the computation runs from dismissal until the judgment becomes final and executory.
• The appealing party's identity is irrelevant. Whether the employer or the employee appeals, the monetary awards continue to accumulate during the pendency of the appeal.
• Recomputation is not a violation of finality. Updating the monetary award to reflect the correct period does not alter the final judgment; it implements it correctly.
• Employees should not abandon reinstatement claims prematurely. The rule protects employees who pursue reinstatement, which the law prefers over severing the employment relationship.
• Employers bear the risk of delay. An employer who illegally dismisses a worker cannot complain that the award grew larger while the case was on appeal.

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