C. Alcantara & Sons, Inc. vs. NAMAAL-SPFL

Employees validly dismissed for committing prohibited acts during an illegal strike are not entitled to separation pay as financial assistance, because such acts constitute serious misconduct reflecting on moral character; however, accrued wages arising from the employer's failure to comply with the immediately executory reinstatement order of the Labor Arbiter under Article 223 of the Labor Code must be paid regardless of the eventual reversal of that order on appeal.

C. Alcantara & Sons, Inc. (CASI) is an employer party to a Collective Bargaining Agreement (CBA) with the Nagkahiusang Mamumuo sa Alsons-SPFL (the Union), whose provisions include a no-strike, no-lockout clause requiring both parties to resort to voluntary arbitration rather than economic weapons in settling disputes. The Union's membership includes officers and rank-and-file members whose respective liabilities differ under Article 264(a) of the Labor Code depending on whether they knowingly participated in an illegal strike or knowingly committed illegal acts during a strike. The proceedings before the Court consolidated three petitions — G.R. Nos. 155109, 155135, and 179220 — arising from the same labor dispute but raising distinct questions on the illegality of the strike, the validity of the dismissals, the entitlement to reinstatement pending appeal, and the propriety of monetary awards.

C. Alcantara & Sons, Inc. (CASI) and the Nagkahiusang Mamumuo sa Alsons-SPFL (the Union) were parties to a Collective Bargaining Agreement (CBA) that included a no-strike, no-lockout provision, requiring both parties to resort to voluntary arbitration rather than economic weapons in settling their disputes. Negotiations on the economic provisions of the CBA ended in a deadlock, prompting the Union to stage a strike. The Labor Arbiter declared the strike illegal for having been staged in violation of the CBA's no-strike, no-lockout provision. The Labor Arbiter consequently deemed the Union officers to have forfeited their employment and held them liable for actual damages plus interest and attorney's fees, while ordering the reinstatement of the Union members without backwages, there being no proof that they had actually committed illegal acts during the strike.

On appeal, the NLRC affirmed the finding that the strike was illegal and the dismissal of the Union officers, but modified the decision by declaring the Union members to have been validly dismissed for committing prohibited and illegal acts during the strike. The Court of Appeals subsequently annulled the NLRC decision and reinstated that of the Labor Arbiter. Both CASI and the Union, its officers, and its members elevated the matter to the Supreme Court, where the cases were docketed as G.R. Nos. 155109 and 155135. During the pendency of these cases, the affected Union members — who had been ordered reinstated by the Labor Arbiter — filed a motion for reinstatement pending appeal and a computation of backwages. The Labor Arbiter, instead of reinstating them, awarded separation pay and other benefits. The NLRC denied the Union members' claim for separation pay, accrued wages, and other benefits. The Court of Appeals held that reinstatement pending appeal applied only to illegal dismissal cases under Article 223 of the Labor Code and not to cases under Article 263, prompting the Union and its members to file a separate petition docketed as G.R. No. 179220.

The three petitions were consolidated. On September 29, 2010, the Court rendered a decision denying the Union's petition in G.R. No. 155135, granting CASI's petition in G.R. No. 155109 and reinstating the NLRC decision, and partly granting the Union's petition in G.R. No. 179220 by ordering CASI to pay the terminated Union members backwages for four months and nine days and separation pay equivalent to one-half month salary for every year of service, with 12% interest per annum. The Court agreed with the Court of Appeals on the illegality of the strike and the termination of the Union officers, but disagreed with the Court of Appeals insofar as it affirmed the reinstatement of the Union members, sustaining instead the dismissal of both Union officers and members who committed prohibited acts during the illegal strike. The Court found that the striking Union members had threatened, coerced, and intimidated non-striking employees, officers, suppliers, and customers; obstructed free ingress to and egress from the company premises; and resisted and defied the implementation of a writ of preliminary injunction issued against the strikers. The Court further held that the terminated Union members should have been immediately reinstated due to the immediately executory nature of the reinstatement aspect of the Labor Arbiter's decision, and that CASI's failure to reinstate rendered it liable for accrued backwages from the date of the Labor Arbiter's decision until the NLRC's reversal of the reinstatement order.

Both parties filed motions for reconsideration. CASI questioned the propriety of the award of backwages and separation pay, while the Union, its officers, and its members sought the reversal of the Court's conclusions on the illegality of the strike, the validity of the terminations, and the award of actual damages and attorney's fees, as well as the denial of their counterclaims against CASI.

• Application of Escario vs. NLRC: CASI argued that the ruling in Escario vs. NLRC (G.R. No. 160302, September 27, 2010) — particularly on the proper application of Articles 264 and 279 of the Labor Code — supported the affirmation rather than the reversal of the Court of Appeals' findings and negated the entitlement to accrued wages of the Union members who committed illegal acts during the illegal strike, notwithstanding that the Labor Arbiter had awarded the same.
• Impropriety of Separation Pay: CASI argued that the Court erred in granting separation pay to the Union members who committed illegal acts during the illegal strike, considering that the jurisprudence cited to justify the grant of separation pay did not apply to the present case, as it applied only to dismissals for a just cause.
• Illegality of the Strike and Validity of Dismissal (Union's position): The Union, its officers, and members argued that the strike was not illegal, that the Union officers and shop stewards did not automatically forfeit their employment status when they participated in the strike, and that the Union members did not commit illegal acts during the strike and therefore did not lose their employment status.
• Damages and Counterclaims (Union's position): The Union, its officers, and members faulted the Court for not finding CASI and its officers guilty of unfair labor practice under Article 248 of the Labor Code, for not declaring the lockout illegal, for not finding acts of discrimination, for not finding a violation of Article 254 of the Labor Code, and for not holding CASI liable for actual, moral, and exemplary damages. They likewise contested the award of actual damages and attorney's fees in favor of CASI.

• Illegality of the Strike: Whether the strike staged by the Union was illegal.
• Liability of Union Officers: Whether the Union officers were validly dismissed for knowingly participating in the illegal strike.
• Liability of Union Members: Whether the Union members were validly dismissed for committing prohibited acts during the illegal strike.
• Entitlement to Accrued Backwages: Whether the terminated Union members were entitled to accrued backwages for four months and nine days, notwithstanding the eventual reversal of the Labor Arbiter's reinstatement order by the NLRC.
• Entitlement to Separation Pay: Whether the terminated Union members were entitled to separation pay as financial assistance.

• Illegality of the Strike: Yes. The strike was illegal for violating the no-strike, no-lockout provision of the CBA, a conclusion unanimously reached by the Labor Arbiter, the NLRC, the Court of Appeals, and the Supreme Court.
• Liability of Union Officers: Yes. Union officers who knowingly participated in the illegal strike were validly dismissed pursuant to Article 264(a) of the Labor Code.
• Liability of Union Members: Yes. Union members who knowingly committed prohibited acts during the illegal strike — threatening and intimidating non-striking employees, obstructing ingress and egress, and defying a writ of preliminary injunction — were validly dismissed.
• Entitlement to Accrued Backwages: Yes. The four-month and nine-day accrued backwages were sustained as the employer's liability for failure to comply with the immediately executory reinstatement order of the Labor Arbiter under Article 223 of the Labor Code, not as wages during the strike period.
• Entitlement to Separation Pay: No. The award of separation pay as financial assistance was deleted, the Union members' commission of prohibited acts during the illegal strike constituting serious misconduct that precluded the grant of financial assistance under prevailing jurisprudence.

• Illegality of the Strike: The Labor Arbiter, the NLRC, the Court of Appeals, and the Supreme Court were unanimous in declaring the strike illegal, as it was staged in violation of the CBA's no-strike, no-lockout provision, which enjoined both the Union and the company from resorting to economic weapons and required them to take recourse to voluntary arbitration in settling their disputes. The Court found no reason to depart from this conclusion.

• Liability of Union Officers: Article 264(a) of the Labor Code provides that any Union officer who knowingly participates in an illegal strike may be declared to have lost his employment status. The Union officers were in clear breach of this provision when they knowingly participated in the illegal strike, warranting their dismissal from employment.

• Liability of Union Members: Article 264(a) likewise provides that any worker or Union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. CASI presented substantial evidence showing that the striking Union members committed the following prohibited acts: (a) they threatened, coerced, and intimidated non-striking employees, officers, suppliers, and customers; (b) they obstructed the free ingress to and egress from the company premises; and (c) they resisted and defied the implementation of the writ of preliminary injunction issued against the strikers. The commission of these prohibited acts warranted the dismissal of the Union members.

• Entitlement to Accrued Backwages: Pursuant to Article 223 of the Labor Code and well-established jurisprudence, the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, is immediately executory even pending appeal. The employer is obligated to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. If the employer fails to exercise the option of actual reinstatement or payroll reinstatement, the employer must pay the employee's salaries during the period between the Labor Arbiter's order of reinstatement pending appeal and the resolution of the higher court overturning that order. In this case, the four-month and nine-day accrued salaries were not wages during the strike period as contemplated in Escario vs. NLRC; rather, they constituted the employer's liability for its failure to comply with the self-executory reinstatement order of the Labor Arbiter under Article 223. The award was therefore sustained.

• Entitlement to Separation Pay: As a general rule, when just causes for terminating the services of an employee exist, the employee is not entitled to separation pay because lawbreakers should not benefit from their illegal acts. The Court in Philippine Long Distance Telephone Co. vs. NLRC laid down the guideline that separation pay as financial assistance shall be allowed only in instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on moral character. In Toyota Motor Phils. Corp. Workers Association (TMPCWA) vs. NLRC, the Court held that the commission of illegal acts during an illegal strike constituted serious misconduct, and accordingly disallowed the award of separation pay. While the Court had applied social justice and equity considerations in certain cases — such as Piñero vs. NLRC, Aparente, Sr. vs. NLRC, and Salavarria vs. Letran College — to justify financial assistance where the infraction was not so reprehensible as to warrant complete disregard of long years of service or did not amount to serious misconduct, in a number of cases including Pilipino Telephone Corporation vs. PILTEA, Sukhotai Cuisine and Restaurant vs. Court of Appeals, Manila Diamond Hotel vs. Manila Diamond Hotel Employees Union, Telefunken Semiconductors Employees Union vs. Court of Appeals, and Chua vs. NLRC, the Court refrained from awarding separation pay to Union officers and members separated for participation in or commission of illegal acts during a strike. In this case, not only was the strike declared illegal, but the Union officers knowingly participated in it and the Union members committed prohibited acts. Following Toyota, Telefunken, Chua, and the other cited cases, the Court deleted the award of separation pay as financial assistance.

• Immediately Executory Nature of Reinstatement Orders — Under Article 223 of the Labor Code, 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 employer is obligated to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. If the employer fails to exercise the option of actual reinstatement or payroll reinstatement, the employer must pay the employee's salaries during the period between the Labor Arbiter's order of reinstatement and the resolution of the higher court overturning that order. The Court applied this doctrine to hold CASI liable for accrued backwages for four months and nine days, representing the period from the Labor Arbiter's reinstatement order until its reversal by the NLRC.

• Separation Pay as Financial Assistance — The PLDT Guidelines — As laid down in Philippine Long Distance Telephone Co. vs. NLRC, separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on moral character. Where the reason for valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, the employer may not be required to give separation pay. A contrary rule would have the effect of rewarding rather than punishing the erring employee. The Court applied this guideline to delete the award of separation pay, having concluded that the Union members' commission of prohibited acts during the illegal strike constituted serious misconduct.

• Liability of Union Officers and Members in Illegal Strikes — Article 264(a) — Under Article 264(a) of the Labor Code, any Union officer who knowingly participates in an illegal strike and any worker or Union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. Mere participation of a worker in a lawful strike does not constitute sufficient ground for termination. The Court applied this provision to sustain the dismissal of both Union officers (for knowingly participating in the illegal strike) and Union members (for knowingly committing prohibited acts during the illegal strike).

• "The four-month accrued salaries awarded to the Union members are not the backwages referred to in Escario. To be sure, the awards were not given as their salaries during the period of the strike. Rather, they constitute the employer's liability to the employees for its failure to exercise the option of actual reinstatement or payroll reinstatement following the LA's decision to reinstate the Union members as mandated by Article 223 of the Labor Code adequately discussed earlier." — This passage distinguishes accrued wages arising from an employer's failure to comply with an immediately executory reinstatement order from wages during a strike, resolving CASI's argument based on Escario vs. NLRC.

• "We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character." — This is the canonical formulation from Philippine Long Distance Telephone Co. vs. NLRC as quoted by the Court, establishing the controlling guideline for when financial assistance may be granted to validly dismissed employees.

• "As a general rule, when just causes for terminating the services of an employee exist, the employee is not entitled to separation pay because lawbreakers should not benefit from their illegal acts." — This passage articulates the general rule against awarding separation pay to employees dismissed for just cause, which the Court applied to delete the separation pay award in this case.

• Toyota Motor Phils. Corp. Workers Association (TMPCWA) vs. NLRC, G.R. Nos. 158786 & 158789, October 19, 2007, 537 SCRA 171 — Controlling precedent followed. The Court held that the commission of illegal acts during an illegal strike constituted serious misconduct, and accordingly disallowed the award of separation pay to Union officers and members. The Court relied on this case to delete the separation pay award in the present case.

• Philippine Long Distance Telephone Co. vs. NLRC, 247 Phil. 641 (1988) — Foundational precedent followed. This case established the guideline that separation pay as financial assistance shall be allowed only where the employee is validly dismissed for causes other than serious misconduct or those reflecting on moral character. The Court quoted this guideline as the controlling standard.

• Escario vs. NLRC, G.R. No. 160302, September 27, 2010, 631 SCRA 261 — Distinguished. CASI cited this case to argue that strikers are not entitled to wages during the period of the strike. The Court distinguished it, holding that the accrued backwages awarded here were not wages during the strike but the employer's liability for failure to comply with the immediately executory reinstatement order.

• Piñero vs. NLRC, 480 Phil. 534 (2004) — Cited as an exception to the general rule. Financial assistance was granted to a Union president dismissed for participating in an illegal strike, because his infraction was not so reprehensible as to warrant disregard of his long years of service and he had no previous derogatory records. The Court noted this case but found it inapplicable given the prohibited acts committed by the Union members here.

• Telefunken Semiconductors Employees Union vs. Court of Appeals, 401 Phil. 776 (2000) — Followed. The Court held that strikers' open and willful defiance of the Secretary of Labor's assumption order constituted serious misconduct reflective of moral character, precluding financial assistance. The Court applied the same reasoning to the Union members' prohibited acts in this case.

• Chua vs. NLRC, G.R. No. 105775, February 8, 1993, 218 SCRA 545 — Followed. Financial assistance was disallowed for dismissed employees who participated in an unlawful and violent strike resulting in multiple deaths and extensive property damage, constituting serious misconduct. The Court cited this case as support for deleting the separation pay award.

• Garcia vs. Philippine Airlines, Inc., G.R. No. 164856, January 20, 2009, 576 SCRA 479 — Cited for the doctrine on the immediately executory nature of reinstatement orders under Article 223 of the Labor Code.

• Islriz Trading/Victor Hugo Lu vs. Capada, G.R. No. 168501, January 31, 2011, 641 SCRA 9 — Cited for the proposition that accrued wages are the employer's liability for failure to reinstate despite the immediately executory nature of the Labor Arbiter's reinstatement order.

• Article 264(a), Labor Code — Provides that any Union officer who knowingly participates in an illegal strike and any worker or Union officer who knowingly participates in the commission of illegal acts during a strike may be declared to have lost his employment status. The Court applied this provision to sustain the dismissal of Union officers for knowingly participating in the illegal strike and the dismissal of Union members for knowingly committing prohibited acts during the strike.

• Article 223, Labor Code — Provides that 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, and that the employee shall either be admitted back to work or reinstated in the payroll at the option of the employer. The Court applied this provision to hold CASI liable for accrued backwages for four months and nine days, representing the period from the Labor Arbiter's reinstatement order until its reversal by the NLRC.

• Article 248, Labor Code — Cited by the Union, its officers, and members in their motion for reconsideration as the basis for their claim that CASI and its officers committed acts of unfair labor practice. The Court denied this claim by denying the Union's motion for reconsideration.

• Article 254, Labor Code — Cited by the Union, its officers, and members in their motion for reconsideration as the basis for their claim that CASI and its officers violated this provision. The Court denied this claim by denying the Union's motion for reconsideration.

Antonio T. Carpio (Chairperson), Presbitero J. Velasco, Jr., Jose Catral Mendoza, and Bienvenido L. Reyes concurred.