Bergonio, Jr. vs. South East Asian Airlines

An employer who fails to reinstate an employee found illegally dismissed by the Labor Arbiter, despite the immediate and self-executory nature of the reinstatement order under Article 223 (now Article 229) of the Labor Code, remains liable for the employee's accrued wages until the decision is reversed by a higher tribunal, unless the employer proves that the delay in execution was without fault on its part.

The petitioners were employees of South East Asian Airlines (SEAIR), whose President was respondent Irene Dornier. On April 30, 2004, the petitioners filed a complaint for illegal dismissal and illegal suspension against the respondents before the Labor Arbiter. The dispute centered on whether the petitioners were entitled to accrued wages during the period between the Labor Arbiter's finding of illegal dismissal and the Court of Appeals' reversal of that finding, and whether the employer's conduct during that interval discharged or preserved its obligation to pay those wages.

On April 30, 2004, the petitioners — Froilan M. Bergonio, Jr., Dean G. Pelaez, Crisanto O. Geongo, Warlito O. Janaya, Salvador Villar, Jr., Ronaldo Cafirma, Randy Lucar, Alberto Albuera, Dennis Nopuente, and Allan Salvacion — filed before the Labor Arbiter a complaint for illegal dismissal and illegal suspension with prayer for reinstatement against their employer, South East Asian Airlines (SEAIR), and its President, Irene Dornier. The Labor Arbiter, in a decision dated May 31, 2005, found the petitioners illegally dismissed and ordered the respondents to immediately reinstate them with full backwages. The respondents received their copy of this decision on July 8, 2005.

On August 20, 2005, the petitioners filed a motion for issuance of a writ of execution for their immediate reinstatement. At a pre-execution conference on September 14, 2005, the respondents manifested their option to reinstate the petitioners in the payroll, but this payroll reinstatement never materialized. The petitioners filed a manifestation for immediate reinstatement on September 22, 2005. On October 3, 2005, the respondents opposed the motion for execution, claiming that the relationship between them and the petitioners had been strained due to threatening text messages from the petitioners, precluding reinstatement. The Labor Arbiter granted the motion and issued a writ of execution on October 7, 2005. The respondents moved to quash the writ, again invoking strained relationship.

The October 7, 2005 writ was returned unsatisfied. The petitioners filed a motion for re-computation of accrued wages and, on January 25, 2006, a motion for execution of the re-computed amount. The Labor Arbiter granted this on February 16, 2006, issuing an alias writ of execution. On February 21, 2006, the respondents issued a Memorandum directing the petitioners to report for work on February 24, 2006, but the petitioners did not report. The respondents then moved on February 28, 2006 to suspend the reinstatement order. Meanwhile, the respondents had appealed the illegal dismissal ruling to the NLRC, which dismissed the appeal for non-perfection on August 15, 2006 and denied reconsideration on November 29, 2006. The NLRC issued an Entry of Judgment on February 6, 2007.

The petitioners filed another motion for issuance of a writ of execution, which the Labor Arbiter granted on April 24, 2007. A Notice of Garnishment was issued to the respondents' depositary bank, Metrobank-San Lorenzo Village Branch, Makati City, in the amount of ₱1,900,000.00 on June 6, 2007. On December 18, 2007, the Court of Appeals rendered its decision on the illegal dismissal ruling, partly granting the respondents' petition by declaring the dismissal valid and awarding ₱30,000.00 as nominal damages for failure to observe due process. The petitioners appealed to the Supreme Court, which denied the petition on August 4, 2008 and issued an Entry of Judgment on March 9, 2009.

On January 31, 2008, the petitioners filed an urgent ex-parte motion for the immediate release of the garnished amount. The Labor Arbiter granted this on March 13, 2008, directing Metrobank to release the ₱1,900,000.00, finding accrued wages of ₱3,078,366.33 as of December 18, 2007. The NLRC affirmed this in toto on July 16, 2008. The respondents elevated the case to the Court of Appeals via certiorari, which granted the petition on September 30, 2010, reversing the NLRC and remanding for recomputation of accrued wages only up to February 24, 2006 — the date the petitioners were supposed to report for work under the February 21, 2006 Memorandum. The CA found that the delay in execution was not due to the respondents' fault but to the petitioners' refusal to comply with the return-to-work directive.

• Proper Computation Period: Petitioner argued that the CA gravely erred in ruling, contrary to Article 223, paragraph 3 of the Labor Code, that the computation of accrued wages stopped when they failed to report for work on February 24, 2006, maintaining that the February 21, 2006 Memorandum was merely an afterthought issued more than four months after the first writ of execution and only after the alias writ was issued.
• Employer's Lack of Intent to Reinstate: Petitioner pointed to the several pleadings the respondents filed to prevent execution — the opposition to the writ, the motion to quash, and the motion to suspend reinstatement — all invoking strained relationship, confirming the respondents' lack of intention to reinstate.
• Invalid Return-to-Work Directive: Petitioner argued that the February 21, 2006 Memorandum directed them to report at Clark Field, Angeles, Pampanga instead of at NAIA-Domestic Airport in Pasay City where they had been assigned, violating Article 223's requirement of reinstatement under the same terms and conditions prevailing prior to dismissal. They also noted that the Memorandum was delivered only to Pelaez, who did not represent the other petitioners, and only in the afternoon of February 23, 2006.

• Factual Issues Already Resolved: Respondent countered that the issues raised were all factual in nature and had already been considered and explained in the CA decision.
• Compliance with Reinstatement Order: Respondent maintained that the petitioners were validly dismissed and that they complied with the LA's reinstatement order by directing the petitioners to report back to work, which directive the petitioners did not heed.
• Employer's Right to Oppose Reinstatement: Respondent argued that while reinstatement is immediately executory, the employer is not prohibited from questioning this rule, especially when there are valid and legal reasons to oppose reinstatement, such as the strained relationship between the parties.
• Petitioners' Refusal to Report: Respondent claimed that despite the strained relationship, they still required the petitioners to report back to work to comply with the LA's order, but the petitioners insisted on payroll reinstatement — an option that belongs to the employer. Respondent also clarified that the Clark Field directive was only for re-orientation of duties and responsibilities.

• Entitlement to Accrued Wages: Whether the petitioners may recover accrued wages prior to the CA's reversal of the LA's May 31, 2005 decision finding them illegally dismissed.
• Two-Fold Test for Barring Accrued Wages: Whether the delay in the execution of the reinstatement order pending appeal was due to the respondents' unjustified act or omission, such that the exception barring collection of accrued wages should not apply.

• Entitlement to Accrued Wages: Yes. The petitioners are entitled to accrued wages until December 18, 2007, when the CA reversed the LA's finding of illegal dismissal, because the reinstatement aspect of the LA's decision is immediately executory and self-executory under Article 223 of the Labor Code.
• Two-Fold Test for Barring Accrued Wages: No, the exception does not apply. The delay in execution was due to the respondents' unjustified acts, not to the petitioners' fault, as the respondents filed multiple pleadings to suspend execution, issued a return-to-work memorandum with insufficient notice, and failed to submit the required compliance report under the 2005 NLRC Rules.

• Entitlement to Accrued Wages: Under Article 223, paragraph 3 of the Labor Code, the LA's order reinstating a dismissed employee is immediately executory pending appeal. The employer must reinstate the employee — either physically under the same terms and conditions prevailing prior to dismissal, or at the employer's option, in the payroll. The order is self-executory, meaning no writ of execution is necessary to trigger the employer's duty. Failure to comply renders the employer liable for the employee's salaries. The general rule is that an employee may recover accrued wages up to and despite the reversal by the higher tribunal, because this entitlement proceeds from the immediate and self-executory nature of the reinstatement order. The petitioners here were never reinstated, either physically or in the payroll, from the time the respondents received the LA's decision on July 8, 2005 until the CA reversed it on December 18, 2007. Accordingly, the respondents are liable for the petitioners' accrued wages for that entire period.

• Two-Fold Test for Barring Accrued Wages: The exception to the general rule — that an employee may be barred from collecting accrued wages if the delay in enforcing reinstatement pending appeal was without the employer's fault — requires satisfaction of two tests: (1) actual delay, i.e., the reinstatement order was not executed prior to reversal; and (2) the delay was not due to the employer's unjustified act or omission. The first test was satisfied: from receipt of the LA's decision through the issuance of writs of execution, the respondents never reinstated the petitioners. The second test was not satisfied, as the delay was attributable to the respondents' fault. The respondents filed multiple pleadings to suspend execution (opposition to the motion for execution, motion to quash the writ, and motion to suspend reinstatement), demonstrating a determined effort to prevent execution. The February 21, 2006 Memorandum was delivered only in the afternoon of February 23, 2006 — the day before the required reporting date — and only to one petitioner, Pelaez, who did not represent the others, making compliance unreasonable. The respondents also failed to submit the compliance report required under the 2005 NLRC Rules after the alias writ and subsequent writ were issued, signifying a clear refusal to reinstate. The petitioners, for their part, actively pursued execution through multiple motions. These facts collectively showed the respondents' insincerity and willful disregard of the immediate and self-executory nature of the reinstatement order.

• Immediate and Self-Executory Nature of Reinstatement Orders — The reinstatement aspect of a Labor Arbiter's decision finding illegal dismissal is immediately executory pending appeal under Article 223 (now Article 229) of the Labor Code. The order is self-executory: the dismissed employee need not apply for, and the LA need not issue, a writ of execution to trigger the employer's duty to reinstate. The employer must either physically admit the employee back under the same terms and conditions prevailing prior to dismissal, or at the employer's option, reinstate the employee in the payroll. Failure to exercise either option renders the employer liable for the employee's accrued salaries.

• Two-Fold Test for Barring Accrued Wages After Reversal — The general rule is that an employee may recover accrued wages up to and despite the reversal of the LA's decision by a higher tribunal. By exception, an employee may be barred from collecting accrued wages if shown that the delay in enforcing the reinstatement pending appeal was without fault on the employer's part. Two tests must be satisfied: (1) actual delay — the reinstatement order was not executed prior to its reversal; and (2) the delay must not be due to the employer's unjustified act or omission. If the delay is due to the employer's unjustified refusal, the employer remains liable for accrued wages notwithstanding the reversal.

• Employer's Compliance Report Under the 2005 NLRC Rules — Under the 2005 Revised Rules of Procedure of the NLRC, employers are required to submit a report of compliance within ten (10) calendar days from receipt of the LA's decision; noncompliance signifies a clear refusal to reinstate. While this rule took effect on January 7, 2006 and could not retroactively apply to the LA's 2005 decision, it was already in effect when the alias writ (February 16, 2006) and subsequent writ (April 24, 2007) were issued, making the respondents duty-bound to submit the compliance report.

• "In short, therefore, with respect to decisions reinstating employees, the law itself has determined a sufficiently overwhelming reason for its immediate and automatic execution even pending appeal." — This passage articulates the rationale for the self-executory nature of reinstatement orders, grounding the doctrine in the statutory design of Article 223 of the Labor Code.

• "By way of exception to the above rule, an employee may be barred from collecting the accrued wages if shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. To determine whether an employee is thus barred, two tests must be satisfied: (1) actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer's unjustified act or omission." — This is the canonical formulation of the two-fold test governing when accrued wages may be barred after reversal of the LA's illegal dismissal finding.

• "These facts altogether show that the respondents were not at all sincere in reinstating the petitioners. These facts – when taken together with the fact of delay – reveal the respondents' obstinate resolve and willful disregard of the immediate and self-executory nature of the reinstatement aspect of the LA's decision." — This passage summarizes the Court's factual conclusion applying the two-fold test, finding the employer's conduct constituted unjustified delay.

• Pioneer Texturizing Corp. vs. NLRC, 345 Phil. 1056 (1997) — Controlling precedent on the self-executory nature of reinstatement orders. The Court traced the various rulings interpreting the amendments introduced by Republic Act No. 6715 and concluded that requiring a writ of execution as a prerequisite would betray the object of Article 223, i.e., immediate execution of reinstatement.
• Roquero vs. Philippine Airlines, Inc., 449 Phil. 437 (2003) — Followed for the proposition that a dismissed employee whose case was favorably decided by the LA is entitled to receive wages pending appeal upon reinstatement, and that the employee is not required to return wages received prior to reversal.
• Garcia vs. Philippine Airlines, Inc., 596 Phil. 510 (2009) — Followed for the two-fold test governing when an employee may be barred from collecting accrued wages after reversal of the LA's decision.
• Medina vs. Consolidated Broadcasting System (CBS)-DZWX, G.R. No. 99054-56, May 28, 1993, 222 SCRA 707 — Followed for the rule that the employer is obliged to pay the dismissed employee's salary if it refuses to reinstate until actual reinstatement or reversal by a higher tribunal.
• International Container Terminal Services, Inc. vs. NLRC, G.R. No. 115452, December 21, 1998, 360 Phil. 527 — Followed in support of the self-executory nature of reinstatement orders and the employer's liability for accrued wages pending appeal.

• Article 223 (now Article 229), Labor Code — Governs appeals from and execution of the LA's decisions. Paragraph 3 provides that the decision of the Labor Arbiter reinstating a dismissed employee, insofar as the reinstatement aspect is concerned, shall immediately be executory pending appeal. The employee shall either be admitted back to work under the same terms and conditions prevailing prior to dismissal or, at the option of the employer, merely reinstated in the payroll. The posting of a bond by the employer shall not stay execution for reinstatement. The Court applied this provision to hold the respondents liable for accrued wages for failing to exercise either reinstatement option.
• Section 14, Rule V and Section 6, Rule XI, 2005 Revised Rules of Procedure of the NLRC — Requires employers to submit a report of compliance within ten (10) calendar days from receipt of the LA's decision, noncompliance with which signifies a clear refusal to reinstate. The Court applied this provision to reinforce its finding that the respondents' failure to submit the compliance report after the 2005 NLRC Rules took effect demonstrated a determined refusal to reinstate.

Carpio, A.T. (Chairperson); Del Castillo, M.C.; Perez, J.P.; Perlas-Bernabe, E.M.