In University of Pangasinan, Inc. v. Florentino Fernandez, the Supreme Court addressed the proper computation of monetary awards in illegal dismissal cases, emphasizing that re-computation of backwages and separation pay is a necessary consequence of illegal dismissal, extending to the finality of the decision, and that such re-computation does not violate the principle of immutability of judgments. This ruling ensures that illegally dismissed employees receive full compensation, accounting for delays caused by employers pursuing legal recourses, reinforcing the protection afforded by labor laws.

Dismissal, Delay, and Dollars: How the Supreme Court Ensures Full Compensation in Labor Disputes

The case stemmed from a complaint for illegal dismissal filed by Florentino Fernandez and his now-deceased wife, Nilda Fernandez, against the University of Pangasinan, Inc. (UPI) and its officials. Labor Arbiter Rolando D. Gambito ruled in favor of the Fernandezes, finding that they were illegally dismissed and ordering UPI to pay backwages, separation pay, and attorney’s fees. UPI appealed to the National Labor Relations Commission (NLRC), which initially affirmed the Labor Arbiter’s decision but later reversed it, dismissing the complaint. The Court of Appeals (CA) then reinstated the Labor Arbiter’s decision, a ruling upheld by the Supreme Court, which became final and executory on July 11, 2005. What followed was the motion for recomputation of the award by Florentino and Nilda Fernandez, and a series of appeals by the petitioner to question the recomputation.

The core legal question was whether the computation of backwages and separation pay should be updated to include the period after the Labor Arbiter’s initial decision until its finality, and whether such updating violated the principle of immutability of final judgments. The Supreme Court, siding with the illegally dismissed employees, clarified that updating the computation of awards is not a violation of the principle of immutability of a final and executory judgment. The Court emphasized that such re-computation is a necessary consequence that flows from the nature of the illegality of dismissal.

The Supreme Court anchored its decision on the principle that in illegal dismissal cases, the reliefs continue to accrue until full satisfaction, as expressed in Article 279 of the Labor Code. According to the law, an employee unjustly dismissed shall be entitled to reinstatement without loss of seniority rights and other privileges and to his 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 quoted its ruling in Session Delights Ice Cream and Fast Foods v. Court of Appeals (Sixth Division), stating that:

[N]o essential change is made by a re-computation as this step is a necessary consequence that flows from the nature of the illegality of dismissal declared in that decision. A re-computation (or an original computation, if no previous computation has been made) is a part of the law—specifically, Article 279 of the Labor Code and the established jurisprudence on this provision—that is read into the decision. By the nature of an illegal dismissal case, the reliefs continue to add on until full satisfaction, as expressed under Article 279 of the Labor Code. The re-computation of the consequences of illegal dismissal upon execution of the decision does not constitute an alteration or amendment of the final decision being implemented. The illegal dismissal ruling stands; only the computation of monetary consequences of this dismissal is affected and this is not a violation of the principle of immutability of final judgments.

Building on this principle, the Court found no reversible error committed by the CA when it affirmed the Labor Arbiter’s Order, which allowed the updating of the computation of backwages and separation pay awarded to the respondents beyond November 6, 2000. The Court also addressed the issue of the 13th-month pay, noting that while the CA decision did not explicitly mention it, its inclusion in the computation was proper under Presidential Decree No. 851, which mandates the payment of 13th-month pay to employees. The Court cited Gonzales v. Solid Cement Corporation, emphasizing that entitlement to the 13th-month pay is a right granted by law.

The petitioners argued that the computation of backwages and benefits should not include the period when the NLRC reversed the Labor Arbiter’s finding of illegal dismissal. The Court rejected this argument, citing Gonzales, which stated that the increase in the amount that the corporation had to pay is a consequence that it cannot avoid, as it is the risk it ran when it continued to seek recourses against the Labor Arbiter’s decision. This underscores the employer’s responsibility for the financial implications of prolonging legal battles in labor disputes.

The Supreme Court upheld the CA’s imposition of legal interest upon the total monetary award from the Entry of Judgment on July 11, 2005, until full satisfaction. However, it modified the interest rate to conform to the guidelines in Nacar v. Gallery Frames. The Court clarified that the interest rate should be 12% per annum from July 11, 2005, to June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction. This adjustment reflects the evolving legal standards for interest rates on monetary judgments.

The petitioners contended that since Florentino and Nilda reached the optional retirement age of 60 in 2002, backwages and separation pay should only be computed up to those dates. The Court disagreed, clarifying that 60 is merely an optional retirement age and that there was no proof that UPI’s faculty members were required to retire at 60. Moreover, the Court noted that Florentino and Nilda filed claims for retirement pay in 2005 when they were 63, indicating that 60 was not necessarily the mandatory retirement age for UPI’s faculty members.

FAQs

What was the key issue in this case?	The key issue was whether the computation of backwages and separation pay in an illegal dismissal case should be updated to include the period after the Labor Arbiter’s initial decision until its finality, and whether such updating violated the principle of immutability of final judgments.
Did the Supreme Court allow the re-computation of monetary awards?	Yes, the Supreme Court allowed the re-computation, clarifying that updating the computation of awards is not a violation of the principle of immutability of a final and executory judgment. It is a necessary consequence of the illegal dismissal.
What is the basis for computing backwages and separation pay?	The basis for computing backwages and separation pay is Article 279 of the Labor Code, which provides that an illegally dismissed employee is entitled to full backwages and other benefits from the time compensation was withheld until actual reinstatement or until the finality of the decision if reinstatement is no longer feasible.
Was the 13th-month pay included in the computation of awards?	Yes, the 13th-month pay was included in the computation, even though it was not explicitly mentioned in the initial decision. The Supreme Court clarified that entitlement to the 13th-month pay is a right granted by Presidential Decree No. 851.
What is the legal interest rate imposed on the monetary awards?	The legal interest rate imposed on the monetary awards is 12% per annum from July 11, 2005, to June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction, in accordance with the guidelines in Nacar v. Gallery Frames.
Did the optional retirement age affect the computation of backwages and separation pay?	No, the optional retirement age of 60 did not affect the computation. The Court clarified that 60 is merely an optional retirement age and that there was no proof that UPI’s faculty members were required to retire at 60.
What happens if the employer delays the payment of awards by appealing?	If the employer delays the payment of awards by appealing, the monetary awards will continue to accrue until full satisfaction, and the employer bears the risk of increased liability due to the delay. The Supreme Court emphasizes that the amount the employer shall now pay has greatly increased is a consequence that it cannot avoid as it is the risk that it ran when it continued to seek recourses against the labor arbiter’s decision
What is the significance of the Supreme Court’s ruling in this case?	The Supreme Court’s ruling ensures that illegally dismissed employees receive full compensation, accounting for delays caused by employers pursuing legal recourses, and reinforces the protection afforded by labor laws. It clarifies that re-computation of backwages and separation pay is a necessary consequence of illegal dismissal and does not violate the principle of immutability of judgments.

The Supreme Court’s decision in University of Pangasinan, Inc. v. Florentino Fernandez underscores the importance of ensuring full compensation for illegally dismissed employees, even amidst prolonged legal battles. By clarifying the proper computation of monetary awards and emphasizing the employer’s responsibility for delays, the Court reinforces the protection afforded by labor laws and promotes fairness in labor disputes.

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: UNIVERSITY OF PANGASINAN, INC. VS. FLORENTINO FERNANDEZ, G.R. No. 211228, November 12, 2014