Computation of separation pay in lieu of reinstatement
"If a private employee was unlawfully laid off from his job and was granted by the Labor Arbiter separation pay because the option of reinstatement is no longer feasible, will the computation of the separation pay be only until the time of the decision of the Labor Arbiter, or should it be up to the finality of the decision?
A dismissed employee is generally granted the relief of reinstatement and back wages if it is clearly established that his dismissal was unlawful. However, our courts have accorded the relief of separation pay to an illegally dismissed employee, along with back wages, if his reinstatement is no longer viable. This is commonly known as separation pay in lieu of reinstatement.The computation of separation pay in lieu of reinstatement is calculated from the time the wages were withheld from the concerned employee up to the finality of the decision of his complaint. The rationale behind this is that the Labor Arbiter’s (LA) award for separation pay may be questioned or challenged. Correspondingly, such award may still be changed or overturned. It is only when the decision has reached finality that it can no longer be questioned and/or changed.
For a better understanding, we impart the ruling laid down by the Supreme Court in the case of CICM Mission Seminaries et al. vs Perez (GR 220506, Jan. 18, 2017, Ponente: Associate Justice Jose Mendoza):“xxx In Gaco v NLRC, it was ruled that with respect to the payment of backwages and separation pay in lieu of reinstatement of an illegally dismissed employee, the period shall be reckoned from the time compensation was withheld up to the finality of this Court’s decision. This was reiterated in Surima v NLRC and Session Delights Ice Cream and Fast Foods v CA.
“The reason for this was explained in Bani Rural Bank Inc. v De Guzman. When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently ordered in light of a supervening event making the award of reinstatement no longer possible), the employment relationship is terminated only upon the finality of the decision ordering the separation pay. The finality of the decision cuts off the employment relationship and represents the final settlement of the rights and obligations of the parties against each other. xxx“Plainly, it does not matter if the delay caused by an appeal was brought about by the employer or by the employee. The rule is, if the LA’s decision, which granted separation pay in lieu of reinstatement, is appealed by any party, the employer-employee relationship subsists and until such time when decision becomes final and executory, the employee is entitled to all the monetary awards awarded by the LA.”We hope that we were able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to "
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"Computation of separation pay in lieu of reinstatement"
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and updated on 15 September 2021