United Coconut Chemicals, Inc. vs. Valmores

Full backwages are computed using the salary rate at the time of illegal dismissal as the base figure, plus the allowances and CBA benefits the employee was regularly receiving at that time; post-dismissal wage increases and subsequently granted benefits are excluded, but CBA benefits enjoyed prior to dismissal must be included upon proof of entitlement — which proof the employer cannot frustrate by withholding documents within its exclusive custody.

United Coconut Chemicals, Inc. (UCCI) employed Victoriano B. Valmores as Senior Utilities Inspector with a monthly salary of ₱11,194.00. Valmores was a member of the United Coconut Chemicals, Inc. Employees' Labor Organization (UELO), the certified bargaining agent. The Collective Bargaining Agreement (CBA) between UCCI and UELO contained a union security clause pursuant to which UELO could demand the termination of any employee expelled from the union. Valmores was expelled from UELO sometime in 1995, and UELO thereafter formally demanded that UCCI terminate his services under that clause.

United Coconut Chemicals, Inc. (UCCI) hired Victoriano B. Valmores as its Senior Utilities Inspector at a monthly salary of ₱11,194.00. Valmores became a member of the United Coconut Chemicals, Inc. Employees' Labor Organization (UELO), the bargaining agent under a Collective Bargaining Agreement (CBA) that contained a union security clause. Sometime in 1995, Valmores was expelled from UELO. Relying on the union security clause of the CBA, UELO formally demanded that UCCI terminate Valmores' employment. UCCI complied and dismissed him on February 22, 1996.

Valmores filed a complaint for illegal dismissal before the NLRC. The Labor Arbiter initially dismissed the complaint for lack of merit. On appeal, the NLRC reversed the Labor Arbiter and found UCCI and UELO liable for illegal dismissal, ordering reinstatement without loss of seniority rights and with full backwages from February 22, 1996 to the date of actual reinstatement. The NLRC's dispositive portion referred to "respondents" in the plural, suggesting both UCCI and UELO were liable. After the parties moved for reconsideration, the NLRC partially granted UCCI's motion by exempting it from paying backwages, but the CA later struck down that exemption and affirmed the original NLRC decision. UCCI's further appeal to the Supreme Court was denied on November 17, 2003, and the denial became final and executory on February 26, 2004.

Valmores then moved for execution of the judgment. On January 18, 2010, Labor Arbiter Michaela A. Lontoc issued a writ of execution and computed the backwages using the base figure of ₱11,194.00 multiplied by 148.26 months (February 22, 1996 to June 30, 2008, when Valmores was reinstated), yielding ₱1,659,622.44, plus 13th month pay and service incentive leave pay, for a total of ₱1,820,974.62. The Labor Arbiter excluded the CBA benefits Valmores claimed — meal subsidy, safety incentive pay, SOFA, financial grant, medical assistance, built-in overtime and night shift differential, rice subsidy, uniform allowance, Christmas package, and vacation and sick leave — on the ground that Valmores had not proven his entitlement to them. The Labor Arbiter noted that Valmores had filed a motion for issuance of subpoena duces tecum to compel UCCI's personnel manager or payroll officer to produce the CBA and related salary documents, but that motion was never resolved. UCCI's own personnel action form, dated July 1, 2008, admitted Valmores' reinstatement salary as ₱26,614.00 per month — a stark disparity from the ₱11,194.00 salary at the time of dismissal.

The NLRC, acting on Valmores' appeal from the Labor Arbiter's computation, observed that the disparity between the dismissal salary and the reinstatement salary should have prompted the Labor Arbiter to probe deeper into Valmores' claim of entitlement to CBA benefits. The NLRC noted that UCCI had failed to submit the documents providing details of benefits granted to its employees from the time of Valmores' dismissal until his reinstatement, and that the presumption that evidence willfully suppressed would be adverse if produced applied. The NLRC remanded the case to the Labor Arbiter for recomputation of full backwages using the CBA as basis. The CA upheld the NLRC, citing Fulache vs. ABS-CBN Broadcasting Corporation for the proposition that illegally dismissed employees are entitled to CBA benefits. UCCI then elevated the matter to the Supreme Court via petition for review on certiorari. During the pendency of the appeal, Valmores died, and his parents, Spouses Isaias A. Valmores, Sr. and Leonarda B. Valmores, moved for substitution as his heirs.

• Base Figure for Backwages: UCCI argued, citing BPI Employees' Union-Metro Manila vs. Bank of the Philippine Islands, that the base figure for computing backwages must be pegged at the wage rate at the time of the employee's dismissal, unqualified by deductions, increases, or modifications granted in the interim; that prospective increases in wages and CBA-provided benefits should therefore be excluded; and that the CA and NLRC's ruling to include CBA-granted benefits was without legal basis and contrary to prevailing jurisprudence.
• Failure of Proof of CBA Benefits: UCCI contended that at any rate, Valmores had not established that he was enjoying the claimed CBA benefits at the time of his dismissal.
• Joint Liability with UELO: UCCI argued that it could not be solely held liable for backwages because the NLRC's November 29, 2000 decision — already upheld by the CA and affirmed by the Supreme Court — declared both UCCI and UELO liable for illegal dismissal; and that the matter of sole liability could not be belatedly raised during execution proceedings, as it should have been properly raised while the NLRC's decision was still on appeal.

• Acceptance of Base Figure with Conditions: Valmores manifested that he would not oppose computation of backwages in accordance with the BPI Employees' Union-Metro Manila ruling, provided that: (1) the 12% interest per annum imposed from the time the decision became final until full payment, as applied in BPI Employees' Union-Metro Manila, should be applied; and (2) all CBA benefits being received by him at the time of his dismissal should be added to his basic salary.
• Sole Liability of UCCI: Valmores maintained that UCCI, as the employer, should alone be held liable for the payment of backwages instead of being held jointly liable with UELO.

• Computation of Backwages: Whether the correct basis for computing backwages is the salary rate at the time of dismissal alone, or whether CBA benefits regularly received at the time of dismissal should be included, and whether post-dismissal increases and benefits should be excluded.
• Employer Liability: Whether UCCI is solely liable for the payment of full backwages, or whether UELO should be held jointly liable.
• Interest Rate: Whether 12% interest per annum should be imposed on the monetary award, and from what date it should be reckoned.

• Computation of Backwages: Yes, the base figure is the salary rate at the time of dismissal (₱11,194.00), but CBA benefits and allowances regularly received by the employee as of the date of illegal dismissal must be added; post-dismissal increases and subsequently granted benefits are excluded. The remand for recomputation was proper because the employer withheld the CBA and related documents in its exclusive custody, and the Labor Arbiter erroneously failed to resolve the motion for subpoena duces tecum.
• Employer Liability: UCCI is solely liable. Although the NLRC dispositive portion referred to "respondents" in the plural, the body of the decision demonstrated that only UCCI was at fault — for dismissing Valmores without cause and without conducting its own investigation of the circumstances behind his union expulsion — making the exception to the fallo rule applicable.
• Interest Rate: Yes, 12% per annum is imposed on the total monetary award, reckoned from the finality of the illegal dismissal ruling on November 17, 2003 until full satisfaction, pursuant to Article 2209 of the Civil Code and Eastern Shipping Lines, Inc. vs. Court of Appeals.

• Computation of Backwages: Article 279 (now Article 294) of the Labor Code provides that an unjustly dismissed employee is entitled to full backwages "inclusive of allowances, and to his other benefits or their monetary equivalent." The settled rule, as articulated in Evangelista vs. NLRC and Paramount Vinyl Products Corp. vs. NLRC, is that full backwages are pegged at the wage rate at the time of dismissal, unqualified by any deductions or increases; salary differentials are not allowed, and illegally dismissed employees are not entitled to wage increases or benefits received by co-workers who were not dismissed. The purpose is to compensate the worker for what was lost due to dismissal and to penalize the employer. However, the base figure must include not only basic salary but also regular allowances being received at the time of dismissal, such as emergency living allowances and 13th month pay. Because Article 279 does not distinguish between employer-granted benefits and CBA-granted benefits, CBA allowances and benefits that the employee was regularly receiving before the illegal dismissal must be added to the base figure. The Court agreed with UCCI that post-dismissal increases and benefits — including the claimed increases in salary, meal subsidy, safety incentive pay, SOFA, financial grant, and medical assistance from 1997 to 2007 — should be excluded, because "time stood still" for the employee at the moment of termination. Nonetheless, the employee still bore the burden of proving entitlement to the CBA benefits by submitting evidence of receiving them at the time of dismissal. The Court found that the Labor Arbiter committed patent error in declaring that Valmores had not proved his entitlement, because the relevant documents, including the CBA, were in UCCI's exclusive possession and custody, and the Labor Arbiter had failed to resolve Valmores' motion to compel production by subpoena duces tecum. The NLRC and CA correctly applied the presumption that evidence willfully suppressed would be adverse if produced. The disparity between the ₱11,194.00 dismissal salary and the ₱26,614.00 reinstatement salary should have prompted the Labor Arbiter to investigate further. The remand was therefore proper and necessary to determine which CBA benefits Valmores had been receiving as of February 22, 1996.

• Employer Liability: UCCI contended that the NLRC's November 29, 2000 decision, which had become final and executory, declared both UCCI and UELO liable, and that no modification could be allowed without violating the rule on immutability of final judgments. The Court found a conflict between the body of the NLRC decision and its dispositive portion (fallo). As a general rule, the fallo controls because it is the final order while the body is a mere statement ordering nothing. However, where the inevitable conclusion from the body of the decision is so clear as to show a mistake in the dispositive portion, the body should prevail. The body of the NLRC decision faulted only UCCI — for dismissing Valmores without cause and for non-observance of procedural due process — and explained UELO's wrongful expulsion only to highlight UCCI's failure to conduct its own investigation. Relying on General Milling Corporation vs. Casio, the Court held that the employer bears the obligation to accord substantive and procedural due process before complying with a union's demand to dismiss an expelled member under a union security clause; the employer's failure to do so makes it solely liable for illegal dismissal. The exception to the fallo rule therefore applied, and UCCI was declared solely liable for the backwages.

• Interest Rate: Pursuant to Article 2209 of the Civil Code, legal interest should be imposed on monetary awards in labor cases where the employer incurs delay in discharging its obligation. In BPI Employees' Union-Metro Manila, conformably with Eastern Shipping Lines, Inc. vs. Court of Appeals, the Court imposed 12% interest per annum on the monetary award from the finality of the decision until full satisfaction "for the delay caused." Because the NLRC decision in Valmores' favor became final and executory on November 17, 2003, and Eastern Shipping Lines was the prevailing rule on the legal rate of interest at that time, 12% per annum was the proper rate, reckoned from November 17, 2003 until full satisfaction.

• Base Figure for Full Backwages — Full backwages are pegged at the wage rate at the time of the employee's illegal dismissal, unqualified by any deductions or increases. The base figure includes not only basic salary but also the regular allowances and benefits — whether mandated by law or granted under the CBA — that the employee was regularly receiving at the time of dismissal. Post-dismissal wage increases and subsequently granted benefits are excluded because "time stood still" for the employee at the moment of termination. The Court applied this by fixing the base figure at ₱11,194.00 (Valmores' salary at dismissal) and ordering the addition of CBA benefits regularly received as of February 22, 1996, while excluding all increases and new benefits granted from 1997 onward.

• Burden of Proof and the Presumption on Suppressed Evidence — Although the employee bears the burden of proving entitlement to CBA benefits, when the relevant documents are in the employer's exclusive possession and the employer fails to produce them despite demand, the presumption that evidence willfully suppressed would be adverse if produced applies. The Labor Arbiter's failure to resolve the motion for subpoena duces tecum constituted patent error, justifying remand for proper determination of the CBA benefits.

• Exception to the Fallo Rule — As a general rule, the dispositive portion (fallo) of a decision controls over the body where there is a conflict, because the fallo is the final order while the body is a mere statement. However, where the inevitable conclusion from the body of the decision is so clear as to show a mistake in the dispositive portion, the body should prevail. The Court applied this exception because the NLRC decision's body demonstrated that only UCCI was at fault, despite the fallo's use of the plural "respondents."

• Employer's Sole Liability in Union Security Clause Dismissals — Notwithstanding a union security clause in the CBA and a union's demand for termination of an expelled member, the employer bears the obligation to accord the employee substantive and procedural due process before complying. The employer's failure to conduct its own investigation makes it solely liable for illegal dismissal. (Derived from General Milling Corporation vs. Casio and Malayang Samahan ng mga Manggagawa sa M. Greenfield.)

• Legal Interest on Monetary Awards in Labor Cases — Pursuant to Article 2209 of the Civil Code and Eastern Shipping Lines, Inc. vs. Court of Appeals, 12% interest per annum is imposed on monetary awards in labor cases from the finality of the decision until full satisfaction, for the delay caused by the employer in discharging its legal obligation.

• "The base figure in the determination of full backwages is fixed at the salary rate received by the employee at the time he was illegally dismissed. The award shall include the benefits and allowances regularly received by the employee as of the time of the illegal dismissal, as well as those granted under the Collective Bargaining Agreement (CBA), if any." — This is the opening statement of the decision, articulating the core ruling on backwages computation and synthesizing the interplay between the base salary figure and CBA-granted benefits.

• "The base figure to be used in reckoning full backwages is the salary rate of the employee at the time of his dismissal. The amount does not include the increases or benefits granted during the period of his dismissal because time stood still for him at the precise moment of his termination, and move forward only upon his reinstatement." — This passage defines the temporal boundary of backwages entitlement and is the canonical formulation of the "time stood still" principle in Philippine labor jurisprudence.

• "As a rule, the fallo controls in such a situation on the theory that the fallo is the final order, while the opinion stated in the body is a mere statement ordering nothing. However, where the inevitable conclusion from the body of the decision is so clear as to show that there was a mistake in the dispositive portion, the body of the decision should prevail." — This states the exception to the fallo rule, which the Court applied to hold UCCI solely liable despite the plural "respondents" in the NLRC dispositive.

• "Considering that the law does not distinguish between the benefits granted by the employer and those granted under the CBA, he should not be denied the latter benefits." — This passage clarifies that Article 279 of the Labor Code's reference to "other benefits or their monetary equivalent" encompasses CBA-granted benefits, not only employer-granted ones, and is frequently cited on the scope of backwages.

• BPI Employees' Union-Metro Manila vs. Bank of the Philippine Islands, G.R. Nos. 178699 and 178735, September 21, 2011, 658 SCRA 127 — Cited by both parties as the controlling authority on backwages computation. The Court agreed with UCCI's reliance on this case for the proposition that the base figure is the wage rate at the time of dismissal, but also applied its ruling that CBA benefits must be proven by the employee, and its imposition of 12% interest per annum from finality until full satisfaction.

• Fulache vs. ABS-CBN Broadcasting Corporation, G.R. No. 183810, January 21, 2010, 610 SCRA 567 — Cited by the CA in holding that illegally dismissed employees are entitled to CBA benefits; affirmed by the Supreme Court.

• Evangelista vs. National Labor Relations Commission, G.R. No. 93915, October 11, 1995, 248 SCRA 194 — Cited for the settled rule that full backwages are pegged at the wage rate at the time of dismissal, unqualified by deductions or increases, and that salary differentials are not allowed.

• Paramount Vinyl Products Corp. vs. National Labor Relations Commission, G.R. No. 81200, October 17, 1990, 190 SCRA 525 — Cited for the proposition that the base figure for backwages includes not only basic salary but also regular allowances being received, such as emergency living allowances and 13th month pay.

• General Milling Corporation vs. Casio, G.R. No. 149552, March 10, 2010, 615 SCRA 13 — Controlling authority for the doctrine that the employer is solely liable for illegal dismissal when it fails to accord due process before complying with a union's demand under a union security clause.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78 — Controlling authority for the imposition of 12% legal interest per annum on monetary awards from finality of judgment until full satisfaction; applied as the prevailing rule because the NLRC decision became final on November 17, 2003.

• Florentino vs. Rivera, G.R. No. 167968, January 23, 2006, 479 SCRA 522 — Cited for the general rule that the fallo controls over the body of a decision.

• Asian Center for Career and Employment System and Services, Inc. (ACCESS) vs. NLRC, G.R. No. 131656, October 12, 1998, 297 SCRA 727 — Cited for both the general fallo rule and its exception where the body of the decision clearly shows a mistake in the dispositive portion.

• Article 279 (now Article 294), Labor Code — Provides that an employee unjustly dismissed is entitled to reinstatement without loss of seniority rights and other privileges and to full backwages, "inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement." The Court relied on this provision to hold that CBA benefits regularly received at the time of dismissal must be included in the backwages computation, since the law does not distinguish between employer-granted and CBA-granted benefits.

• Article 2209, Civil Code — Provides that if the obligation consists in the payment of a sum of money and the debtor incurs delay, the indemnity for damages shall be the payment of interest agreed upon, and in the absence of stipulation, the legal interest. The Court applied this provision to impose 12% interest per annum on the monetary award from the finality of the illegal dismissal ruling on November 17, 2003 until full satisfaction.

Presbitero J. Velasco, Jr. (On Wellness Leave), Mariano C. Del Castillo, Samuel R. Martires, and Noel Gimenez Tijam. No separate concurring opinions were written.