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This controversy is an offshoot of an illegal dismissal case filed by Ma. Veronica Perez against the CICM et.al. In its June 16, 2008 Decision, the Labor Arbiter recognized Perez right to receive from CICM backwages and separation pay in lieu of reinstatement. Thus, it ordered the petitioners to pay respondent the aggregate amount of P286, 670.58. The LA decision was affirmed by the NLRC, by the CA and by the SC in G.R. No. 200490.
The Decision became final and executory on October 4, 2012, as evidenced by the Entry of Judgment. Consequently, Perez moved for the issuance of a writ of execution. CICM et.al. opposed and moved for the issuance of a certificate of satisfaction of judgment, alleging that their obligation had been satisfied by the release of the cash bond in the amount of P272, 337.05 to respondent.
In its July 10, 2014 Order, the LA ruled that the cash bond posted by the petitioners was insufficient to satisfy their obligation. LA ordered them to award respondent a total amount of P1, 847, 088.89, from this amount should be deducted the amount received at P272, 337.05. Thus, the additional backwages and separation pay due is P1, 575, 751.84. The petitioners elevated an appeal before NLRC, but the LA ruling was affirmed. A petition for certiorari was filed with the CA, but the said petition was dismissed.
What should be the legal basis for the computation of the backwages and separation pay of an illegally dismissed employee in a case where reinstatement was not ordered despite appeals made by said employee which [delayed] the final resolution of the issue on reinstatement.
The decision of the CA is based on long standing jurisprudence that in the event the aspect of reinstatement is disputed, backwages, including separation pay, shall be computed from the time of dismissal until the finality of the decision ordering the separation pay. In this case, respondent remained an employee of the petitioners pending her partial appeal.
When there is an order of separation pay (in lieu of reinstatement or when the reinstatement aspect is waived or subsequently ordered in light of a supervening event making the award of reinstatement no longer possible), the employment relationship is terminated only upon the finality of the decision ordering the separation pay. The finality of the decision cuts off the employment relationship and represents the final settlement of the rights and obligations of the parties against each other. Hence, back wages no longer accumulate upon the finality of the decision ordering the payment of separation pay because the employee is no longer entitled to any compensation from the employer by reason of the severance of his employment.