Durabuilt Recapping Plant & Company vs. NLRC

Backwages awarded to an illegally dismissed employee must be computed based on the number of days the employer's business was actually in operation, excluding shutdown days caused by brownouts, machine repairs, and lack of raw materials, where the employer's failure to operate was not due to its own fault. The "without qualification or deduction" policy means that backwages are not reduced by the employee's earnings elsewhere during the lay-off and are not qualified by wage increases received by co-workers, but it does not require payment for days when no work was performed or could be performed.

Durabuilt Recapping Plant & Company is a tire recapping business managed by petitioner Eduardo Lao. Private respondent Reynaldo Bodegas was employed by Durabuilt and was dismissed, leading to an illegal dismissal complaint filed on July 11, 1983. During the relevant period, the Philippines experienced a chronic energy crisis in 1983, prompting the Ministry of Trade and Industry to implement a Voluntary Loan Curtailment Plan (VLCP) under which electrical power interruptions were scheduled by area. Durabuilt participated in the VLCP beginning March 21, 1983, shutting down operations every Wednesday. The Ministry of Labor and Employment had also issued Policy Instruction No. 36 (May 1978) addressing treatment of brownouts as hours worked.

On July 11, 1983, Reynaldo Bodegas filed a complaint for illegal dismissal against Durabuilt Recapping Plant & Company, a tire recapping business. The Labor Arbiter rendered a decision on February 13, 1984, ordering Bodegas reinstated to his former position with full backwages from the time of his termination up to the time of actual reinstatement, without loss of seniority rights and benefits. Petitioners failed to file a seasonable appeal, and entry of final judgment was made on July 8, 1985.

On August 8, 1985, the Acting Chief of Research and Information and the Corporation Auditing Examiner of the then Ministry of Labor and Employment submitted a computation of backwages, ECOLA, 13th month pay, and sick and vacation leave benefits in favor of Bodegas, totaling P24,316.38. The computation was based on a straight schedule of twenty-six (26) working days per month. Petitioners opposed the computation, contending that the period covered was intermittently interrupted due to frequent brownouts and machine trouble, and that Bodegas had only 250.75 days of attendance in 1982 due to absences. According to petitioners, Bodegas was entitled only to P3,834.05, broken down as salaries (P1,993.00), ECOLA (P1,433.50), and 13th month pay (P407.55).

The Labor Arbiter denied the opposition on October 23, 1985, and the NLRC affirmed that order on May 16, 1986, dismissing the appeal. Durabuilt then filed the instant petition before the Supreme Court, claiming grave abuse of discretion on the part of the public respondents. The illegal dismissal was conceded by petitioners, who expressed willingness to pay backwages; the dispute was confined to the proper basis of computation. The Court noted that beginning March 21, 1983, Durabuilt's business was not in actual operation every Wednesday due to participation in the government's VLCP, and that in December 1983 the company had retrenched workers owing to economic crisis and lack of raw materials, reducing working days from six to four per week. Petitioners had reinstated Bodegas while the illegal dismissal case was still pending.

• Proper Computation of Backwages: Petitioner argued that the backwages computation should exclude days when no work was required or could be done, since the business was not in actual operation due to brownouts, machine trouble, and retrenchment. A straight computation of 26 working days per month was unrealistic and failed to account for actual operating days.
• Mitigated Liability: Petitioner contended that its evident good faith—manifested by reinstating Bodegas while the case was still pending and its willingness to pay backwages—warranted mitigated liability, citing jurisprudence where employers were absolved from backwages liability when good faith was evident.
• No Work, No Wage: Petitioner maintained that for days where no work was required and could be done by its employees, no wages could have been earned and thereafter lost by the employee, following the principle of "a fair day's wage for a fair day's labor."

• Without Qualification or Deduction: Respondents centered their argument on the Court's established policy of fixing backwages "without qualification or deduction," contending that the deductions sought by petitioners for brownouts, machine trouble, and retrenchment could not be made under that policy.

• Proper Basis for Backwages Computation: Whether backwages for an illegally dismissed employee should be computed on a straight monthly basis (26 working days per month) or adjusted to exclude days when the employer's business was not in actual operation due to brownouts, machine repairs, and lack of raw materials.
• Scope of "Without Qualification or Deduction" Policy: Whether the policy of awarding backwages "without qualification or deduction" precludes excluding days when no work was performed or could be performed due to causes not attributable to the employer's fault.

• Proper Basis for Backwages Computation: No. The straight monthly computation was incorrect; backwages must be computed on the basis of the number of days the employer's business was actually in operation, excluding shutdown days caused by brownouts, machine repairs, and lack of raw materials, capped at three years.
• Scope of "Without Qualification or Deduction" Policy: No. The "without qualification or deduction" policy means no deduction for the employee's earnings elsewhere during the lay-off and no qualification by wage increases received by co-workers; it does not require payment for days when no work was performed or could be performed.

• Proper Basis for Backwages Computation: The age-old rule of "a fair day's wage for a fair day's labor" remains the basic factor in determining wages and backwages. If no work was performed by the employee, there can be no wage or pay, unless the laborer was able, willing, and ready to work but was illegally locked out or suspended. Durabuilt's business was not in actual operation on certain days due to government-mandated brownouts under the VLCP (every Wednesday beginning March 21, 1983), machine trouble, and retrenchment for lack of raw materials. These shutdowns were not due to the employer's fault. Where the failure of workers to work was not due to the employer's fault, the burden of economic loss should not be shifted to the employer; each party must bear its own loss. The computation of backwages should be based on daily rather than monthly pay schedules where such basis is more realistic and accurate. Allowing Bodegas to recover for days he could not have worked would be unconscionable and grossly unfair to other employees who were not paid when the business was not in operation.

• Scope of "Without Qualification or Deduction" Policy: The Court clarified that fixing backwages "without qualification or deduction" simply means that workers are paid their backwages as fixed at the time of dismissal, without deduction for earnings elsewhere during the lay-off, and without qualification by wage increases or benefits received by co-workers who were not dismissed. The policy was designed as a realistic, reasonable, and mutually beneficial solution to relieve employees from proving earnings during lay-offs and employers from submitting counter-proofs, and to obviate idleness on the part of employees and attrition and undue delay in satisfying awards. It was never intended to establish an inflexible rule requiring payment for all calendar days regardless of whether work was available. The respondents' reliance on the underlined phrase overlooked the rationale behind the policy. Petitioners' good faith—evidenced by reinstating Bodegas during the pendency of the case and willingness to pay backwages—further supported mitigated liability, as the Court has absolved employers from backwages liability where good faith is evident.

• Fair Day's Wage for a Fair Day's Labor — The basic principle governing the relationship between labor and capital: if there is no work performed by the employee, there can be no wage or pay, unless the laborer was able, willing, and ready to work but was illegally locked out or suspended. Applied in this case to exclude shutdown days from backwages computation, since Bodegas could not have worked on days the business was not operating due to brownouts, machine repairs, and lack of raw materials.

• Backwages Without Qualification or Deduction — The policy of fixing backwages without qualification or deduction means: (a) no deduction for the employee's earnings elsewhere during the lay-off period, and (b) no qualification of backwages as fixed at the time of dismissal by any wage increases or benefits received by co-workers who were not dismissed or did not go on strike. The policy was meant to relieve employees from proving earnings during lay-offs and employers from submitting counter-proofs, and to obviate idleness and attrition. It does not establish an inflexible rule requiring payment for all calendar days regardless of whether work was available.

• Allocation of Economic Loss — Where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer; each party must bear its own loss.

• "The age-old rule governing the relation between labor and capital, or management and employee of a 'fair day's wage for a fair day's labor' remains as the basic factor in determining employees' wages, and for that matter backwages. If there is no work performed by the employee there can be no wage or pay unless, of course, the laborer was able, willing and ready to work but was illegally locked out, or suspended." — This passage articulates the foundational principle underlying the Court's ruling that backwages cannot include days when no work was possible.

• "to fix the amount of backwages without qualification or deduction simply means that the workers are to be paid their backwages fixed as of the time of their dismissal or strike without deduction for their earnings elsewhere during their law-off and without qualification of their backwages as thus fixed; i.e. unqualified by any wage increases or other benefits that may have been received by their co-workers who were not dismissed or did not go on strike." — This defines the canonical formulation of the "without qualification or deduction" doctrine, clarifying its scope and distinguishing it from a blanket requirement to pay for all days regardless of operations.

• "where the failure of workers to work was not due to the employer's fault, the burden of economic loss suffered by the employees should not be shifted to the employer. Each party must bear his own loss." — This states the principle of allocation of economic loss, applied to exclude shutdown days from the backwages computation.

• New Manila Candy Workers Union (NACONWA-PAFLU) vs. CIR, 86 SCRA 37 — Cited for the definition of backwages as granted on grounds of equity for earnings lost due to dismissal, and for the rationale of the "without qualification or deduction" policy as obviating idleness and attrition.
• Capital Garment Corporation vs. Ople, 117 SCRA 473 — Cited for the general principle that an employee is entitled to backwages from the date of dismissal up to the time of reinstatement.
• Insular Life Assurance Co., Ltd. Employees' Association-NATU vs. Insular Life Assurance Co., Ltd., 76 SCRA 501 — Cited for the canonical definition of "without qualification or deduction" in backwages computation, which the Court relied upon to clarify that the policy does not require payment for non-working days.
• SSS vs. SSS Supervisors Union-CUGCO, 117 SCRA 746 — Cited for the "fair day's wage for a fair day's labor" principle and the rule that economic loss should not be shifted to the employer where the failure to work was not due to the employer's fault.
• Pan-American World Airways, Inc. vs. CIR, 17 SCRA 813 — Cited for the principle that each party must bear its own loss where the failure to work was not due to the employer's fault.
• Compania Maritima vs. United Seamen's Union of the Philippines, 65 SCRA 393 — Cited for the proposition that backwages computation should be based on daily rather than monthly pay schedules where such basis is more realistic and accurate.
• Findlay Millar Timber Co. vs. PLASLU, 6 SCRA 26 — Cited (along with others) for the doctrine that employers may be absolved from backwages liability where good faith is evident.

• Policy Instruction No. 36, Ministry of Labor and Employment (May 1978) — Provided that brownouts running for more than twenty minutes may not be treated as hours worked provided that: (a) the employees can leave their workplace or go elsewhere, or (b) the employees can use the time effectively for their own interest. Applied to support the exclusion of brownout days from backwages computation.
• Article 280, Labor Code — Cited for the general rule that an order of reinstatement carries with it an award of backwages, while noting that the Court has mitigated or absolved employers from backwages liability where good faith is evident.

Justices Fernan (Chairman), Feliciano, Bidin, and Cortes concurred.