But “Backwages” Is Awarded Only to an Illegally Dismissed Employee

An electric cooperative holding a franchise for the retail distribution of electricity for the province of Albay had a labor organization, which also served as the collective bargaining agent of the electric cooperative’s employees.

The electric cooperative suffered from financial distress. Thus, efforts were undertaken to rehabilitate it. A strategy that the electric cooperative pushed for was that of Private Sector Participation. Under such strategy, the current employees of the electric cooperative shall be required to tender their courtesy resignation to give flexibility to the incoming private sector concessionaire, but they shall receive separation pay based on the existing collective bargaining agreement with the labor organization and shall have priority in rehiring based on the standards set by the concessionaire.

The labor organization expressed grievance over the conditions set under the Private Sector Participation strategy, which was why it sought preventive mediation for unfair labor practices before the regional branch of the National Conciliation and Mediation Board. The electric cooperative and the labor organization, however, failed to settle their differences, and this constrained the latter to decide to strike.

Subsequently, the Private Sector Participation strategy was eventually chosen as the appropriate rehabilitation measure and a concession was awarded to a certain company.

Still, the labor organization went on strike. Thereafter, notices of retrenchment were served on the labor organization’s employees.

As the labor dispute continued, the electric cooperative and the labor organization formally requested the Secretary of the Department of Labor and Employment to assume jurisdiction over the controversy.

The Secretary of the Department of Labor and Employment assumed jurisdiction on January 10, 2014 and correspondingly issued a Return-to-Work Order of even date.

In a Resolution dated April 29, 2016, the Secretary of the Department of Labor and Employment upheld the validity of the retrenchment of the employees of the electric cooperative and ordered it to pay the retrenched employees their separation benefits in accordance with the collective bargaining agreement. It also ordered the electric cooperative to pay them backwages and other benefits computed from January 10, 2014 until the finality of the said Resolution.

The Court of Appeals modified the said Resolution dated April 29, 2016 and fixed the period for computation of the backwages awarded by the Secretary of the Department of Labor and Employment from the date of the Return-to-Work Order on January 10, 2014 up to the issuance of the Resolution dated April 29, 2016.

The electric cooperative argued before the Supreme Court that the Court of Appeals erred in sustaining the award of backwages because:

• it complied with the Assumption Order as early as January 14, 2014;
• “backwages” is awarded only to an illegally dismissed employee; and
• if backwages were to be awarded, the same should accrue only until February 26, 2014, the date when the returning employees last reported for work, and not until April 29, 2016, or the date of the Secretary of the Department of Labor and Employment’s Resolution.

Was the award of backwages proper?

If proper, was the limit to the period of computing backwages until April 29, 2016 correct?

The Court set forth relevant principles as follows:

The effects of an assumption order issued by the Secretary of the Department of Labor and Employment under Article 278¹Formerly Article 263. The provision states: Art. 278. Strikes, picketing, and lockouts. — x x x (g) When, in his opinion, there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interest, the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration. Such assumption or certification shall have the effect of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order. If one has already taken place at the time of assumption or certification, all striking or locked out employees shall immediately return to work and the employer shall immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike or lockout. The Secretary of Labor and Employment or the Commission may seek the assistance of law enforcement agencies to ensure compliance with this provision as well as with such orders as he may issue to enforce the same. x x x (Emphasis supplied.) (g) of the Labor Code of the Philippines are two-fold:

• it enjoins an impending strike on the part of the employees, and
• it orders the employer to maintain the status quo.²Digital Telecommunications Philippines, Inc. v. Digitel Employees Union, G.R. Nos. 184903-04, October 10, 2012.

In cases where a strike has already taken place, the assumption order shall have the effect of:

• directing all striking workers to immediately return to work; and
• mandating the employer to immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike.

The status quo to be maintained under law refers to that which was prevailing the day before the strike. Furthermore, this obligation on the part of the employer generally requires actual reinstatement.

Jurisprudence³San Fernando Coca-Cola Rank-and-File Union v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 200499, October 4, 2017. teaches that the purpose of maintaining the status quo is to avoid any disruption to the economy while the labor dispute is being resolved in the proper forum. The objective is to minimize, if not totally avert, any damage that such labor dispute might cause upon the national interest by occasion of any work stoppage or slow-down. The directive to maintain the status quo extends only until the labor dispute has been resolved.

1)

In the present case, the Supreme Court ruled that the award of backwages was proper.

The Court found that the Secretary of the Department of Labor and Employment assumed jurisdiction over the labor dispute between the parties on January 10, 2014 and issued a return-to-work order on even date under Article 278 (g) of the Labor Code of the Philippines.

Although the electric cooperative claimed that it admitted the striking employees to its premises on January 14, 2014, the Court found that no actual work was given to the said employees. Instead, the Court discovered that the electric cooperative confined these employees in a room for over three weeks.

Furthermore, although the electric cooperative claimed that it tendered the salaries of the employees who actually reported back for work, it also admitted that the employees refused to receive the amounts it supposedly tendered because of disagreement on the figures. The Court took this to mean that the affected employees were still not paid their wages and benefits for the period they were supposed to be reinstated.

The Court thus affirmed the Secretary of the Department of Labor and Employment’s award of backwages.

However, the Court clarified that backwages were not imposed as a penalty for non-compliance with the Assumption Order, but as satisfaction of the electric cooperative’s obligation towards the employees as contemplated under the Assumption Order. In other words, said backwages corresponded to the amount ought to have been received by the affected employees if only they had been reinstated following the Assumption Order.

The Court further stated that an award of backwages outside illegal dismissal cases is not prohibited. According to the Court, even in the absence of illegal dismissal in this case, the Secretary of the Department of Labor and Employment had the authority to award and was not mistaken in awarding backwages.

2)

In this regard, the limitation of the computation of backwages until April 29, 2016 by the Court of Appeals was affirmed. The Supreme Court ruled that the status quo mandated by the Assumption Order extended from the date of its issuance until the Secretary of the Department of Labor and Employment’s resolution of the dispute between the parties on the said date of April 29, 2016.

Further reading:

• Albay Electric Cooperative, Inc. v. ALECO Labor Employees Organization, G.R. No. 241437, September 14, 2020.