Reinstatement During Appeal: Employer Must Pay Wages Until Final Reversal

The rule is straightforward but often misunderstood: when a Labor Arbiter orders the reinstatement of a dismissed employee, the employer must actually reinstate the employee or pay the corresponding wages — even while the case is on appeal. This obligation continues until the appellate ruling that reverses the reinstatement order becomes final and executory. The Supreme Court reaffirmed this principle in Smart Communications, Inc. v. Solidum (G.R. No. 204646, April 15, 2015), clarifying exactly when the employer's obligation to pay ends.

The Facts of the Case

Jose Leni Z. Solidum was hired by Smart Communications, Inc. in April 2004 as Department Head for Smart Buddy Activation. In September 2005, he was placed under preventive suspension and later terminated for alleged dishonesty-related offenses. Solidum filed a complaint for illegal dismissal.

The Labor Arbiter ruled in Solidum's favor in July 2006, declaring his dismissal illegal and ordering Smart to reinstate him immediately — either physically or through payroll reinstatement — with payment of accrued salaries and benefits. Smart appealed to the National Labor Relations Commission (NLRC).

While the appeal was pending, the Labor Arbiter issued several writs of execution to collect Solidum's accrued salaries and benefits. In January 2009, the NLRC reversed the Labor Arbiter's decision and dismissed Solidum's complaint. Solidum's motion for reconsideration was denied on May 29, 2009. The NLRC's decision became final and executory on August 10, 2009.

The dispute centered on whether Solidum was entitled to reinstatement wages for the period from January to July 2009 — after the NLRC had reversed the Labor Arbiter's order but before that reversal became final.

The Issue

Was Solidum entitled to accrued salaries, allowances, benefits, and bonuses from January 21 to July 20, 2009 — a period covering the time after the NLRC reversed the Labor Arbiter's reinstatement order but before that reversal became final and executory?

The Court's Ruling

The Supreme Court answered yes. Solidum was entitled to the full amount of P2,881,335.86 representing his accrued salaries and benefits for that period.

The Court relied on Article 223 of the Labor Code, which provides that the employer's obligation to reinstate a dismissed employee — or to pay the employee's wages — continues during the period of appeal. The Court also cited the earlier case of Bago v. NLRC (549 Phil. 414 [2007]), which established that employees are entitled to accrued salaries and benefits until the NLRC's reversal of the reinstatement order becomes final and executory, as shown on the entry of judgment.

The key point: the NLRC's May 29, 2009 decision became final and executory on August 10, 2009. Therefore, Solidum's entitlement to reinstatement wages ran until that date. The Court rejected Smart's argument that the obligation ended when the NLRC issued its reversal, holding that a reversal only takes effect upon finality.

Why the Date of Finality Matters

The Court emphasized that the date of finality — not the date of the reversal itself — is the controlling factor. This is because under the NLRC rules, a decision becomes final and executory only after the lapse of the prescribed period, which may be extended by delays in mail service. In this case, the NLRC certified that the decision became final 60 calendar days from the date of mailing, in the absence of return cards.

The Court also noted that a petition for certiorari with the Court of Appeals or the Supreme Court does not stay the execution of the assailed decision unless a temporary restraining order is issued.

Practical Takeaways

• Reinstatement is immediately executory. A Labor Arbiter's reinstatement order must be complied with even if the employer appeals. The employer must either physically reinstate the employee or place the employee on payroll reinstatement.

• The obligation continues through the appeal. The employer must pay reinstatement wages from the date it received the Labor Arbiter's decision until the appellate reversal becomes final and executory.

• Check the entry of judgment. The date of finality is determined by the NLRC's entry of judgment, which may reflect a later date than the date of the decision itself due to mail delays or other rules.

• No refund of wages already paid. If the employer paid reinstatement wages during the appeal period, it cannot demand a refund even if the dismissal is later found legal, provided the payments covered the period before the reversal became final.

• Filing a certiorari petition does not stop execution. An employer seeking to challenge an NLRC ruling must obtain a temporary restraining order to suspend the obligation to pay.

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