Citytrust Banking Corporation vs. NLRC

In cases of illegal dismissal, an employee is entitled to reinstatement without loss of seniority rights and backwages computed from the time compensation was withheld up to actual reinstatement; however, where the employer fails to reinstate the employee to the former position or a substantially equivalent one, and the employee subsequently retires, the employer remains liable for salary differentials from the date of actual reinstatement to the date of retirement, in addition to backwages limited to three years without qualification or deduction.

• Private respondent Maria Anita Ruiz was employed by petitioner Citytrust Banking Corporation as internal auditor.
• On November 1, 1974, she was designated manager of the Quiapo branch but refused the appointment on the ground that it constituted a demotion.
• As a consequence of her refusal, she was suspended and, upon clearance from the Department of Labor, was terminated on November 8, 1974.
• She filed a complaint for illegal dismissal, and after various appeals, the Office of the President ordered petitioner to reinstate her to a substantially equivalent position without loss of seniority rights and to pay backwages.
• On August 14, 1978, petitioner reinstated private respondent as manager of the Auditing Department, which she accepted but subsequently contested as not being substantially equivalent to the position of resident inspector (the position created to replace internal auditor).
• On February 26, 1979, the Labor Arbiter ruled that the position of manager of the Auditing Department was not substantially equivalent to that of resident inspector and ordered her reinstatement as resident inspector or relocation to a substantially equivalent position.
• The NLRC affirmed this order on October 14, 1980, with modifications regarding benefits.
• Private respondent retired from the bank on March 1, 1991, making actual reinstatement to the proper position academic.
• The dispute centered on the computation of monetary awards, specifically whether private respondent was entitled only to three years of backwages or also to salary differentials from the date of her reinstatement to the lower position up to her retirement.

• The alias writ of execution did not conform to the Supreme Court's resolution of July 21, 1986 in G.R. No. 72589, which limited the award of backwages to three years without qualification or deduction.
• Private respondent is entitled to only three years of backwages and no further monetary awards.
• The order dated August 20, 1987 granting the alias writ of execution should have been appealed to the NLRC instead of being challenged through a petition for injunction.
• The computation of P1,339,888.05 erroneously included salary differentials beyond the three-year limitation on backwages.

• The order of execution was not appealable as it merely implemented the final and executory judgment.
• Backwages and salary differentials are distinct reliefs; backwages cover the period from illegal dismissal to actual reinstatement, while salary differentials cover the period from reinstatement to the date when the employer finally complies with the order to reinstate to a substantially equivalent position.
• The employer's failure to reinstate her to the proper position persisted until her retirement on March 1, 1991, and she remained entitled to the difference in pay between the resident inspector position and the auditing manager position during this entire period.
• Retirement does not extinguish the employer's liability for salary differentials accrued during the period of non-compliance with the reinstatement order.

• Procedural Issues:
  • Whether petitioner should have appealed the Labor Arbiter's order dated August 20, 1987 granting the alias writ of execution instead of filing a petition for injunction with the NLRC.
• Substantive Issues:
  • Whether the award of backwages should be limited to three years without qualification or deduction as provided in the Supreme Court's resolution of July 21, 1986.
  • Whether private respondent is entitled to salary differentials from August 14, 1978 (date of actual reinstatement to lower position) to March 1, 1991 (date of retirement) in addition to the limited backwages.
  • Whether reinstatement remains a viable remedy where the employee has already retired.

• Procedural:

  • An order of execution of a final and executory judgment is not appealable; otherwise, litigation would never end.
  • Where the writ of execution allegedly varies the terms of the judgment, the proper remedy is a petition for injunction pursuant to Rule XIV, §1 of the 1986 NLRC Rules of Procedure and Article 218(e) of the Labor Code, not an appeal.
  • Petitioner correctly questioned the writ by filing a petition for injunction with the NLRC.

• Substantive:

  • Backwages are limited to three years without qualification or deduction as provided in the July 21, 1986 resolution of the Supreme Court in G.R. No. 72589, covering the period from November 8, 1974 (date of dismissal) to August 13, 1978 (date of actual reinstatement).
  • Backwages are distinct from salary differentials; backwages compensate for earnings lost during the period of illegal dismissal, while salary differentials compensate for the difference in pay between the position to which the employee should have been reinstated and the lower position to which she was actually assigned.
  • The order to reinstate an employee to a former position or substantially equivalent position is a positive mandate of the law requiring strict compliance to ensure the employer does not profit from its misdeeds.
  • Reinstatement contemplates restoration to the position from which the employee was removed so she may resume the functions of that position.
  • Since private respondent retired on March 1, 1991, reinstatement is now academic; however, she is entitled to the salary differentials representing the difference between the pay of a resident inspector and that of a manager of the Auditing Department from August 14, 1978 to March 1, 1991.
  • The case is remanded for computation of the amount due consisting of: (1) backwages for three years conformably to the July 21, 1986 resolution, and (2) salary differentials from August 14, 1978 to March 1, 1991.

• Illegal Dismissal — Defined as termination of employment without just cause or without authorization by law; under Article 280 (now Article 279) of the Labor Code, an employee who is unjustly dismissed is entitled to reinstatement without loss of seniority rights and to backwages computed from the time compensation was withheld up to the time of reinstatement.
• Reinstatement — Contemplates a restoration to a position from which one has been removed or separated so that the employee may resume the functions of the position already held; if the former position is abolished, reinstatement means appointment to a substantially equivalent position without loss of seniority rights and privileges.
• Effect of Retirement on Reinstatement — Actual reinstatement becomes academic when the employee retires from service; however, the employer remains liable for salary differentials from the date of actual reinstatement to the date of retirement if the employee was not reinstated to the proper position or its equivalent as ordered.
• Backwages vs. Salary Differentials — Backwages compensate for earnings lost during the period of illegal dismissal (from dismissal to reinstatement), while salary differentials compensate for the difference in compensation between the position to which the employee should have been reinstated and the lower position actually assigned, computed from the date of actual reinstatement until compliance with the reinstatement order or until retirement, whichever comes first.

• "Backwages are for earnings which a worker has lost due to his illegal dismissal."
• "Reinstatement contemplates a restoration to a position from which one has been removed or separated so that the employee concerned may resume the functions of the position he already held."
• "The order to reinstate an employee to a former position or to a substantially equivalent position is a positive mandate of the law with which strict compliance is required. This is an affirmation that those deprived of a recognized and protected interest should be made whole so that the employer will not profit from his misdeeds."
• "Litigation must come to an end. In labor cases, the cause of an illegally dismissed employee must always be a concern of everyone if we are to give effect to the constitutional policy of protecting labor and the duty of this Court to see to it that justice is served not only fairly but also swiftly."

• Panay Railways v. NLRC, 137 SCRA 480 (1985) — Cited by petitioner regarding limitation of backwages; the Court noted its prior resolution modifying the application of this doctrine in this specific case.
• Paulino v. Court of Appeals, 230 SCRA 469 (1994) — Cited for the rule that an order of execution of a final and executory judgment is not appealable.
• Indophil Acrylic Manufacturing Corp. v. NLRC, 226 SCRA 723 (1993) — Cited for the definition that backwages are earnings lost due to illegal dismissal.
• PNOC-EDC v. Leogardo, 175 SCRA 26 (1989); Mariners Polytechnic School v. Leogardo, 171 SCRA 595 (1989); FEATI University Faculty Club v. FEATI University, 58 SCRA 395 (1974); Mercury Drug Co., Inc. v. CIR, 56 SCRA 694 (1974) — Cited as precedents for limiting backwages to avoid delays in determining earnings and deductions.
• Union of Supervisors (RB) NATU v. Secretary of Labor, 128 SCRA 443 (1984); Phil. Engineering Corp. v. CIR, 41 SCRA 89 (1971); San Miguel Brewery, Inc. v. CIR, 112 Phil. 979 (1961) — Cited for the principle that reinstatement means restoration to the former position or its equivalent.

• Article 280 (now Article 279) of the Labor Code — Provides for security of tenure and the remedies of reinstatement without loss of seniority rights and backwages for employees unjustly dismissed.
• Article 218(e) of the Labor Code — Grants the NLRC the power to issue injunctions in labor disputes.
• Rule XIV, §1 of the 1986 NLRC Rules of Procedure — Governs petitions for injunction to restrain implementation of writs of execution that allegedly vary the terms of the judgment.