When an employee is illegally dismissed and wins their case, the employer must reinstate them, even while appealing the decision. This means the employee is entitled to their salary from the moment the reinstatement order is issued until it’s actually implemented, or until the decision is reversed. Even if the court later reverses the initial ruling, the employee doesn’t have to pay back the wages they received during the appeal period. This case clarifies an employer’s responsibility to continue paying wages during the appeal process, highlighting the importance of immediate compliance with reinstatement orders.

From Professor to Presidential Aide: Does a Quitclaim Waive Rights to Accrued Salaries?

Crisanto F. Castro, Jr., a faculty member at Ateneo de Naga University, was allegedly dismissed, prompting him to file an illegal dismissal case. The Labor Arbiter (LA) ruled in Castro’s favor, ordering his reinstatement and payment of backwages. However, the University appealed. During the appeal, Castro accepted a position as a Presidential Assistant while also receiving retirement benefits from the University and signing a receipt and quitclaim. The National Labor Relations Commission (NLRC) later reversed the LA’s decision, dismissing Castro’s complaint, arguing that the quitclaim estopped him from further claims. The Court of Appeals (CA) then dismissed Castro’s petition for certiorari, deeming it moot due to the NLRC’s decision. Castro appealed to the Supreme Court, questioning if his receipt of retirement benefits and the NLRC’s decision nullified his claim for accrued salaries during the period he was not reinstated. The core legal question is whether the execution of a quitclaim for retirement benefits and a subsequent reversal of a labor arbiter’s decision negates an employee’s right to accrued salaries during the appeal period when reinstatement was not implemented.

The Supreme Court reversed the CA’s decision, emphasizing that the receipt and quitclaim Castro signed specifically pertained to his retirement benefits, not to claims arising from his illegal dismissal. Retirement benefits are considered a reward for an employee’s service, distinct from remedies granted for illegal dismissal, which address the unjustified termination of the employment relationship. According to the Court, conflating these two would undermine the purpose of each.

Building on this principle, the Court referenced Article 279 of the Labor Code, which guarantees reinstatement for illegally dismissed employees. Additionally, Article 223 mandates that reinstatement orders are immediately executory, pending appeal. Citing Roquero v. Philippine Airlines, Inc., the Court reiterated that an employer’s refusal to reinstate an employee entitles the latter to salaries from the date of non-compliance. Therefore, the labor arbiter has a ministerial duty to enforce the reinstatement order.

The Court also highlighted the self-executory nature of reinstatement orders, emphasizing that the employer must promptly decide whether to re-admit the employee under previous terms or reinstate them on payroll. Notification of this choice is essential. Furthermore, all doubts in interpreting and implementing labor laws must favor the employee.

To underscore this point, the Court quoted Pioneer Texturizing Corporation v. National Labor Relations Commission, emphasizing the legislative intent behind immediate reinstatement, which aims to avoid delays that could frustrate the employee’s rights:

x x x The provision of Article 223 is clear that an award for reinstatement shall be immediately executory even pending appeal and the posting of a bond by the employer shall not stay the execution for reinstatement. The legislative intent is quite obvious, i.e., to make an award of reinstatement immediately enforceable, even pending appeal.

The Court clarified that even if the LA’s decision was later reversed, Castro remained entitled to accrued salaries from the date of the reinstatement order until its reversal. This principle is supported by Islriz Trading v. Capada, which specifies that an employee can only be barred from claiming accrued salaries if the failure to reinstate was not the employer’s fault.

In this case, the University’s failure to reinstate Castro until November 2002, without a valid reason, obligated them to pay his salaries from the date of the LA’s decision (September 3, 2001) until his eventual reinstatement. The Court concluded that the University’s liability persisted because the reinstatement order was immediately executory upon issuance.

FAQs

What was the key issue in this case?	The central issue was whether an employee’s claim for accrued salaries and benefits during a period of non-reinstatement was rendered moot by both the employee’s receipt of retirement benefits via a quitclaim and a subsequent dismissal of the illegal dismissal complaint by the NLRC.
What did the receipt and quitclaim cover?	The receipt and quitclaim specifically covered the employee’s retirement benefits, not any claims related to the illegal dismissal case. The Supreme Court emphasized that retirement benefits are distinct from remedies for illegal dismissal.
What does Article 223 of the Labor Code say about reinstatement?	Article 223 of the Labor Code mandates that a reinstatement order is immediately executory, even while an appeal is pending. This means the employer must reinstate the employee without delay, unless the appellate court suspends or enjoins the order.
What is the employer’s responsibility upon receiving a reinstatement order?	Upon receiving a reinstatement order, the employer must promptly choose whether to re-admit the employee to work under the same terms and conditions or reinstate the employee on the payroll. They also must inform the employee of their choice.
What happens if the employer fails to reinstate the employee?	If the employer fails to reinstate the employee, they are obligated to pay the employee’s accrued backwages and other benefits, which continue to accumulate. This obligation lasts until the employer complies with the reinstatement order.
What if the initial decision ordering reinstatement is later reversed?	Even if the initial decision is later reversed, the employee is still entitled to accrued salaries from the date of the reinstatement order until the date of its reversal. However, the employee can be barred from claiming accrued salaries if the failure to reinstate was not the employer’s fault.
Did the employee’s new job affect the Supreme Court’s decision?	The employee obtaining another job did not excuse the former employer of the obligation to follow the reinstatement order. Had the employer followed the order, then they would have complied with the reinstatement aspect of the decision of the LA, the employer’s obligation to the employee for his accrued backwages and other benefits would not continue to accumulate.
What was the final ruling of the Supreme Court?	The Supreme Court reversed the CA’s decision and remanded the case to the Labor Arbiter for the correct computation of the employee’s accrued salaries. The employer was ordered to pay these salaries, covering the period from the receipt of the Labor Arbiter’s decision until the employee’s actual reinstatement.

In conclusion, this case underscores the importance of employers complying with reinstatement orders promptly, even while pursuing appeals. Failure to do so results in the accumulation of accrued salaries and benefits, regardless of any subsequent reversal of the initial decision. It also clarifies that signing a quitclaim for retirement benefits does not waive an employee’s rights to other claims arising from illegal dismissal.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Castro vs. Ateneo de Naga University, G.R. No. 175293, July 23, 2014