SEPARATION PAY

RESPONDENTS Tomas Quitoy, Raul Sabang, and Diego Morales were hired as security guards by petitioner Leopard Security and Investigation Agency (LSIA). They later filed a complaint for illegal dismissal and money claims against LSIA.

The National Labor Relations Commission (NLRC) reversed the finding of illegal dismissal by the labor arbiter. It, however, upheld the award of separation pay on the theory that reinstatement was no longer viable.

The Court of Appeals (CA) affirmed the NLRC decision and justified the award of separation pay. Did the CA err?

Ruling: Yes.

Having correctly ruled out illegal dismissal of respondents, the CA reversibly erred, however, when it sustained the NLRC’s award of separation pay on the ground that the parties’ relationship had already been strained, the Supreme Court ruled.

For one, liability for the payment of separa- tion pay is a legal consequence of illegal dismissal where reinstatement is no longer viable or feasible. Under Article 279 of the Labor Code, an illegally dismissed employee is entitled to the twin reliefs of full back wages and reinstatement without loss of seniority rights.

Aside from the instances provided under Articles 283 and 284 of the Labor Code, separation pay is, however, granted when reinstatement is no longer feasible because of strained relations between the employer and the employee. In cases of illegal dismissal, the accepted doctrine is that separation pay is available in lieu of reinstatement when the latter recourse is no longer practical or in the best interest of the parties.

As a relief granted in lieu of reinstatement, however, it consequently goes without saying that an award of separation pay is inconsistent with a finding that there was no illegal dismissal. Standing alone, the doctrine of strained relations will not justify an award of separation pay, a relief granted in instances where the common denominator is the fact that the employee was dismissed by the employer.

Even in cases of illegal dismissal, the doctrine of strained relations is not applied indiscriminately as to bar reinstatement, especially when the employee has not indicated an aversion to returning to work or does not occupy a position of trust and confidence in or has no say in the operation of the employer’s business. Although litigation may also engender a certain degree of hostility, it has

Wlikewise been ruled that the understandable strain in the parties’ relations would not necessarily rule out reinstatement which would, otherwise, become the rule rather than the exception in illegal dismissal cases.

Our perusal of the position paper they filed a quo shows that, despite erroneously believing themselves to have been illegally dismissed, respondents had alleged no circumstance indicat- ing the strained relations between them and LSIA and had even alternatively prayed for reinstatement alongside the payment of separation pay. Since application of the doctrine of strained relations presupposes a question of fact which must be demonstrated and adequately supported by evidence, the CA clearly erred in ruling that the parties’ relations had already soured and that an award of separation pay in favor of respondents is proper (Leopard Security and Investigation Agency vs. Tomas Quitoy, et. al., G.R. No. 186344, Feb. 20, 2013).