Reinstatement Pending Appeal: Waiting for the Pendulum to Swing

(Published in Personnel Management Association of the Philippines [PMAP] IR Focus, Issue No. 6)

In many warm mornings on my way to the National Labor Relations Commission (NLRC), I would sometimes daydream of lounging on a beach somewhere, rather than confronting another labor-management conflict. As sure as the sun rises, however, sparks in the constant tug-of-war between labor and management are bound to arise. I have worked with both camps, so to speak, and I really have no problem with the bias of law in favor of labor. However, as the Supreme Court itself noted, this bias is not an excuse to kill the goose that lays the golden egg. Justice should always be for the deserving.

For instance, a company has a patently irresponsible and incompetent employee. He sleeps on his job, complains about everything and accomplishes nothing. Yet, when the company terminated the employee, the company forgot to give him notices. When the employee filed a case for illegal dismissal, the Labor Arbiter sustained the employee and ordered his reinstatement. The employee appealed the Labor Arbiter’s decision.

There are two basic issues in the foregoing scenario. The first issue relates to the employer’s violation of statutory due process, which is the subject of flip-flopping Supreme Court decisions. In the Serrano case (2000), the Supreme Court ruled that where the employer had a valid reason to dismiss an employee but did not follow the twin requirements of due process, i.e., notice and hearing, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. Fortunately, this is no longer the controlling doctrine. On 17 November 2004, the Supreme Court promulgated its decision in Agabon reversing this rule. Now, where the dismissal is for a just cause, the lack of due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer is liable for damages, the amount of which is subject to the discretion of the court, for violating the employee’s right to due process. This is a reversion to the pre-Serrano doctrine enunciated in the Wenphil case. Indeed, it is only fair that when the dismissal is for cause, the failure to comply with the twin-notice rule should not invalidate the dismissal.

The second issue relates to reinstatement pending appeal. In the cases of Pioneer Texturizing Corp. vs. NLRC and International Container Terminal Services, Inc. vs. NLRC, the Supreme Court ruled that an award or order for reinstatement is self-executory and, hence, does not require a writ of execution. After receipt of the decision or resolution ordering the employee’s reinstatement, the employer must between two options, in accordance with Article 223 of the Labor Code, to wit:

(1) re-admit the employee to work under the same terms and conditions prevailing prior to his dismissal; or

(2) reinstate the employee in the payroll.

In both instances, the employer has to notify the employee about the chosen option. Moreover, the employer must give the employee reasonable time to wind up his current preoccupation or at least to explain why he could not return to work at once. In a recent case, the Supreme Court frowned upon a companys act of giving the employees only five days to report to their posts and immediately terminating said employees when they failed to do so. The Supreme Court emphasized that Article 223 of the Labor Code is intended for the benefit of the employee and cannot be used to defeat their own interest. In short, Article 223 cannot be interpreted to give the employer the right to remove an employee who fails to immediately comply with the reinstatement order, especially when there is reasonable explanation for the failure.

Article 223 of the Labor Code, as amended by Republic Act No. 6715 which took effect on 21 March 1989, provides:

Art. 223. Appeal.  Decisions, awards or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: xxx In any event, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall immediately be executory, even pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to his dismissal or separation or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay the execution for reinstatement provided herein.

The constitutionality of Section 223 was upheld in Aris (Phil.), Inc. vs. NLRC, which case is cited both in the Pioneer and Maranaw Hotel cases – with divergent results. In the earlier case of Maranaw Hotel, the Supreme Court ruled that reinstatement pending appeal is not immediately executory, which simply means that until a writ of execution is issued by the proper tribunal, the employee is not entitled to reinstatement  whether actual or in payroll. In the later case, the Supreme Court explained that Article 224 of the Labor Code, adverted to in the Maranaw case, applies only to final and executory decisions which are not within the coverage of Article 223.

On one hand, this doctrine is grossly unfair to the employer. In case the appellate court rules that the dismissal was for cause, why would the employer pay for the employees salaries from the time the reinstatement was ordered until the reversal of such decision? Worse, considering that the cause for the dismissal might be the gross incompetence of the employee, the employer may opt for payroll reinstatement and hire someone else to do the job. This is definitely a double whammy for the employer.

Balancing this interest is the State’s concern for the workers, thus:

xxx Then, by and pursuant to the same power (police power), the State may authorize an immediate implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant, a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his family.

The foregoing is another illustration of the conflict of interests between labor and management. For this issue and at this point in time, labor has the upper hand. However, as shown in the case of Wenphil, Serrano and Agabon, jurisprudence is not cast in stone and may yet swing the other way.


2 thoughts on “Reinstatement Pending Appeal: Waiting for the Pendulum to Swing

  1. Pingback: Illegal dismissal and damages at Atty-at-Work

  2. Pingback: Management and HR Tools | Philippine e-Legal Forum

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