Garcia vs. Philippine Airlines, January 20, 2009

Facts:
The case stemmed from the administrative charge filed by PAL against its employees-herein petitioners after they were allegedly caught in the act of sniffing shabu. PAL dismissed petitioners, prompting them to file a complaint for illegal dismissal and damages which was resolved by the Labor Arbiter in their favor, thus ordering PAL to, inter alia, immediately comply with the reinstatement aspect of the decision. Prior to the promulgation of the Labor Arbiter’s decision, the Securities and Exchange Commission (SEC) placed PAL (hereafter referred to as respondent), which was suffering from severe financial losses, under an Interim Rehabilitation Receiver, who was subsequently replaced by a Permanent Rehabilitation Receiver. Respondent appealed to the NLRC which reversed said decision and dismissed petitioners’ complaint for lack of merit. Subsequently, the Labor Arbiter issued a Writ of Execution (Writ) respecting the reinstatement aspect and issued a Notice of Garnishment (Notice). Respondent thereupon moved to quash the Writ and to lift the Notice while petitioners moved to release the garnished amount. Respondent filed an Urgent Petition for Injunction with the NLRC which affirmed the validity of the Writ and the Notice issued by the Labor Arbiter but suspended and referred the action to the Rehabilitation Receiver for appropriate action. Respondent elevated the matter to the appellate court which issued the herein challenged Decision and Resolution nullifying the NLRC Resolutions on two grounds, essentially espousing that: (1) a subsequent finding of a valid dismissal removes the basis for implementing the reinstatement aspect of a labor arbiter’s decision (the first ground), and (2) the impossibility to comply with the reinstatement order due to corporate rehabilitation provides a reasonable justification for the failure to exercise the options under Article 223 of the Labor Code (the second ground).
 
 Issue:
Whether petitioners may collect their wages during the period between the Labor Arbiter’s order of reinstatement pending appeal and the NLRC decision overturning that of the Labor Arbiter, now that respondent has exited from rehabilitation proceedings.

​Held:
Yes. The Court reaffirms the prevailing principle that even if the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court. It settles the view that the Labor Arbiter's order of reinstatement is immediately executory and the employer has to either re-admit them to work under the same terms and conditions prevailing prior to their dismissal, or to reinstate them in the payroll, and that failing to exercise the options in the alternative, employer must pay the employee’s salaries.
 
After the labor arbiter’s decision is reversed by a higher tribunal, the employee may be barred from collecting the accrued wages, if it is shown that the delay in enforcing the reinstatement pending appeal was without fault on the part of the employer. The test is two-fold: (1) there must be actual delay or the fact that the order of reinstatement pending appeal was not executed prior to its reversal; and (2) the delay must not be due to the employer’s unjustified act or omission. If the delay is due to the employer’s unjustified refusal, the employer may still be required to pay the salaries notwithstanding the reversal of the Labor Arbiter’s decision.
It is settled that upon appointment by the SEC of a rehabilitation receiver, all actions for claims before any court, tribunal or board against the corporation shall ipso jure be suspended. As stated early on, during the pendency of petitioners’ complaint before the Labor Arbiter, the SEC placed respondent under an Interim Rehabilitation Receiver. After the Labor Arbiter rendered his decision, the SEC replaced the Interim Rehabilitation Receiver with a Permanent Rehabilitation Receiver.
 
Case law recognizes that unless there is a restraining order, the implementation of the order of reinstatement is ministerial and mandatory. This injunction or suspension of claims by legislative fiat33 partakes of the nature of a restraining order that constitutes a legal justification for respondent’s non-compliance with the reinstatement order. Respondent’s failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified. Such being the case, respondent’s obligation to pay the salaries pending appeal, as the normal effect of the non-exercise of the options, did not attach.