What Are the Implications of Backwages?

Excerpts from CAMPOL v. BALAO-AS. (G.R. No. 197634, November 28, 2016)

Old rule:

Ginson and Regis also involved the question of the proper fixing of backwages. Both cases awarded backwages but limited it to a period of five years. Ginson does not provide for an exhaustive explanation for this five­year cap. Regis, on the other hand, cites Cristobal v. Melchor, Balquidra v. CFI of Capiz, Branch II, Laganapan v. Asedillo, Antiporda v. Ticao, and San Luis v. Court of Appeals, in support of its ruling. We note that these cases also do not clearly explain why there must be a cap for the award of backwages, with the exception of Cristobal. In Cristobal, a 1977 case, we held that the award of backwages should be for a fixed period of five years, applying by analogy the then prevailing doctrine in labor law involving employees who suffered unfair labor practice. We highlight that this rule has been rendered obsolete by virtue of Republic Act No. 6175 which amended the Labor Code. Under the Labor Code, employees illegally dismissed are entitled to the payment of backwages from the time his or her compensation was withheld up to the time of his or her actual reinstatement.

New rule:

We note that even in labor law, this is now the prevailing rule. In Bustamante v. National Labor Relations Commission, we reversed the prior doctrine that an employee illegally dismissed is entitled to backwages less the salary he or she received from his or her employment during the pendency of the case. In cases prior to Bustamante, we limited the right of an illegally dismissed employee to backwages less earnings from employment elsewhere on the premise that this doctrine will avoid unjust enrichment on the part of the employee at the expense of the employer. We reversed this, however, in Bustamante and grounded our ruling first, on an employee's right to earn a living and second, on the duty of an employer to pay backwages as a penalty for the illegal dismissal. In the later case Equitable Banking Corporation v. Sadac, we added that in arriving at the doctrine in Bustamante, this Court ceased to consider equity as the determining factor in ascertaining the amount of backwages that should be awarded in cases where the illegally dismissed employee obtains employment during the pendency of his or her case. What is determinative is the employer's obligation to pay full backwages. We said, "[i]t is an obligation of the employer because it is 'the price or penalty the employer has to pay for illegally dismissing his employee.


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