PAL vs. Paz, November 26, 2014

Facts:
Reynaldo V. Paz (respondent) was a former commercial pilot of PAL and a member of the Airlines Pilots Association of the Philippines (ALPAP), the sole and exclusive bargaining representative of all the pilots in PAL.
 
On December 9, 1997, ALPAP filed a notice of strike with the National Conciliation and Mediation Board of the Department of Labor and Employment (DOLE). Pursuant to Article 263(g) of the Labor Code, the DOLE Secretary assumed jurisdiction over the labor dispute and enjoined the parties from committing acts which will further exacerbate the situation.
 
Notwithstanding the directive of the DOLE Secretary, the ALPAP officers and members staged a strike and picketed at the PAL’s premises. To control the situation, the DOLE Secretary issued a return-to-work order on June 7, 1998, directing all the striking officers and members of ALPAP to return to work within 24 hours from notice of the order. The said order was served upon the officers of ALPAP on June 8, 1998 by the DOLE Secretary himself. Even then, the striking members of ALPAP did not report for work.
 
On June 25, 1998, Atty. Joji Antonio, the counsel for ALPAP, informed the members of the union that she has just received a copy of the return-to-work order and that they have until the following day within which to comply. When the striking members of the ALPAP reported for work on the following day, the security guards of PAL denied them entry.
 
 PAL filed a petition for approval of rehabilitation plan and for appointment of a rehabilitation receiver with the Securities and Exchange Commission (SEC), claiming serious financial distress brought about by the strike. Subsequently, the SEC appointed a rehabilitation receiver for PAL and declared the suspension of all claims against it.
 
The DOLE Secretary resolved the motions for reconsideration filed by both parties and declared the strike staged by ALPAP illegal and that the participants thereof are deemed to have lost their employment.
 
The Labor Arbiter (LA) rendered a Decision holding that the respondent Reynaldo V. Paz was illegally dismissed and ordered that he be reinstated to his former position without loss of seniority rights and other privileges and paid his full backwages inclusive of allowances and other benefits. PAL appealed the foregoing decision to the National Labor Relations Commission (NLRC). Pending appeal, the respondent Reynaldo Paz filed a motion for partial execution of the reinstatement aspect of the decision. The LA granted the said motion and issued a partial writ of execution.
 
 The NLRC rendered a Resolution reversing the LA decision.
 
Notwithstanding the reversal of the LA decision, the respondent pursued his move for the issuance of a writ of execution, claiming that he was entitled to reinstatement salaries which he supposedly earned during the pendency of the appeal to the NLRC.
 
PAL appealed the LA order arguing that the writ of execution lacked factual and legal basis considering that the NLRC reversed and set aside the LA decision and categorically declared the order of reinstatement as totally devoid of merit. It contended that entitlement to salaries pending appeal presupposes a finding that the employee is entitled to reinstatement.
 
PAL filed a petition for certiorari with the CA. Subsequently, in a Decision the CA affirmed with modification the NLRC Resolution, ruling that, in lieu of reinstatement salaries, petitioner Philippine Airlines, Inc. is ordered to pay respondent Paz separation pay equivalent to one month salary for every year of service, to be computed from the time respondent commenced employment with petitioner PAL until the time the Labor Arbiter issued the writ ordering respondent’s reinstatement.
 
​Issue:
Whether or not the respondent Reynaldo Paz was entitled to reinstatement salaries and full backwages which he is supposed to have received from the time PAL received the LA decision, ordering his reinstatement, until the same was overturned by the NLRC.
 
 Held:
No. The delay in reinstating the respondent was not due to the unjustified refusal of PAL to abide by the order but because of the constraints of corporate rehabilitation. It bears noting that a year before the respondent filed his complaint for illegal dismissal, PAL filed a petition for approval of rehabilitation plan and for appointment of a rehabilitation receiver with the SEC. Thereafter, the SEC issued an Order suspending all claims for payment against PAL. The inopportune event of PAL’s entering rehabilitation receivership justifies the delay or failure to comply with the reinstatement order of the LA. PAL’s failure to exercise the alternative options of actual reinstatement and payroll reinstatement was thus justified.
 
In light of the fact that PAL’s failure to comply with the reinstatement order was justified by the exigencies of corporation rehabilitation, the respondent Reynaldo Paz may no longer claim salaries which he should have received during the period that the LA decision ordering his reinstatement is still pending appeal until it was overturned by the NLRC.