G.R. No.

76721 September 21, 1987

FELICIANO, J.:
The present petition for certiorari is directed at: (1) the decision of the National Labor
Relations Commission (NLRC) dated 29 August 1985 in NLRC Case No. RB-IV-20056-78-T,
entitled "Lydia Santos, complainant-appellee, versus Security Bank and Trust Company,
respondent-appellant;" and (2) the Resolution issued by the NLRC on 7 November 1986
denying petitioner Lydia Santos's Motion for Reconsideration of the mentioned Decision.
The background facts are not disputed:
1. Petitioner was employed by the private respondent Bank from 10 December 1951 until 30
April 1976, when her services were terminated. Her last position was that of Branch
Manager, with a monthly basic salary of P1,750.00 plus a monthly lining allowance of
P650.00 and a monthly transportation allowance of P250.00, or a total of P2,650.00 per
month. In addition, she also enjoyed a mid-year bonus equivalent to one (1) month's salary;
a christmas bonus equivalent to two (2) months' salary; and vacation and sick leave with pay.
2. On 10 January 1978, petitioner filed a complaint for illegal dismissal. On 16 October 1978,
Labor Arbiter Bienvenido S. Fernandez rendered a decision finding petitioner's dismissal to
be illegal and ordering private respondent Bank to reinstate her with backwages and other
accrued benefits. The dispositive portion of the Labor Arbiter's decision reads as follows:
IN VIEW OF ALL THE FOREGOING, respondent is ordered to immediately reinstate
complainant to her position as Branch Manager without loss of rights and with
backwages from May 1976 at P2,650.00 per month, plus other accrued benefits. The
Socio-Economic Analyst of the Commission is directed to make the proper
computation for execution of this decision. (Emphasis supplied.)
3. On appeal by private respondent Bank from the Labor Arbiter's decision, the First Division
of the NLRC promulgated a decision modifying the decision of the Labor Arbiter. In its
decision dated 28 December 1979, the NLRC (First Division) said:
After a close scrutiny of the record of this case and consideration of the issues raised
in the appeal we find no sufficient justification to disturb the appealed decision,
except that portion which orders the reinstatement of the complainant with full
backwages. The complaint, being a branch manager of the respondent bank, is
undisputedly a managerial employee as defined in Article 212 of the Labor Code. If
the complainant is to be reinstated, then this would mean forcing unto the respondent
a manager upon whom it has lost its trust and confidence. Furthermore, considering
that the relationship between the complainant and the respondent bank has become

strained as a result of the firing of this case, the remedy of reinstatement with full
backwages would not be appropriate and conducive to smooth employee relationship
within the company. Because of this, we order the respondent to pay to the
complainant her separation pay, equivalent to one-half month pay for every year of
service, in lieu of reinstatement.
WHEREFORE, the appealed decision is hereby MODIFIED as explained above,
(Emphasis supplied.)
4. Dissatisfied with the decision of the NLRC (First Division), private respondent Bank filed a
Motion for Reconsideration while petitioner Lydia Santos moved for the reinstate. Judgment
of the original decision of the Labor Arbiter or, in the alternative, for a certification as to how
the separation pay should be computed. The NLRC (First Division) denied both private
respondent Bank's Motion for Reconsideration as well as petitioner's Motion. 1
Petitioner Lydia Santos then filed with the NLRC an Urgent Motion seeking clarification of the
meaning of the decision of the NLRC (First Division) of 28 December 1979. In a Resolution
dated 18 February 1982, the NLRC (First Division) declared that the modification of the
decision of the Labor Arbiter referred only to the reinstatement of the petitioner with fun
backwages, and that in lieu thereof, payment of separation pay equivalent to one-half (1/2)
month's salary for every year of service was ordered. The same Resolution emphasized that
the award of "other accrued benefits" was not affected in any way as that was a separate
award.
5. The decision of the NLRC (First Division) became final and the petitioner moved for
execution. The Socio-Economic Analyst submitted a report dated 15 July 1982
recommending payment to petitioner of the total amount of P353,295.89. This amount
included backwages of P122,202.00 and provident fund benefits of P25,844.61.
6. On 9 August 1982, private respondent Bank questioned the correctness of the
computation of the Analyst. On 19 April 1983, the First Division of the NLRC issued a
resolution which held:
In resume, we rule that the complainant is only entitled to separation pay, equivalent
to one-half month pay for every year of service computed on the basic pay of the
employee. While we ruled that complainant is entitled to "other accrued benefits" it,
however appears from the record that no such benefits are actually accruing to the
complainant at the time of her separation from the company. (Emphasis supplied.)
7. Acting on a motion for reconsideration filed by petitioner Lydia Santos, the NLRC, this time
sitting en banc,rendered the disputed decision on 29 August 1985, the dispositive portion of
which reads:
WHEREFORE, let the Resolution of the First Division dated 19 April 1983 be, as it is
hereby, SET ASIDE. The respondent is hereby ordered to pay the complainant
the total sum of One Hundred Fifteen Thousand Six Hundred Eighty-Five Pesos and
Fifty Centavos (P115,685.50), representing the totality of the benefits to which she is
entitled. (Emphasis supplied.)

Under the above decision, the NLRC would limit the benefits recoverable by petitioner Lydia
Santos to: (1) herseparation pay (i.e., P24,500.00), in lieu of reinstatement and backwages;
and (2) gratuities which accrued in her favor during the period from her illegal dismissal on
30 April 1976 until 28 December 1979, when the NLRC (First Division) declared that
reinstatement with full backwages would not be appropriate and ordered in lieu thereof
payment of separation pay (i.e., P91,185.50), making a total award of P15,685.50.
The only issue raised in the present petition is whether or not petitioner is entitled to an
award for backwages, in addition to: (1) her separation pay,-and (2) gratuities accruing
before the Labor Arbiter's order for reinstatement was modified. That petitioner's dismissal
was unlawful, is not in issue.
The normal consequences of a finding that an employee has been illegally dismissed are,
firstly, that the employee becomes entitled to reinstatement to his former position without loss
of seniority rights and, secondly, the payment of backwages corresponding to the period from
his legal dismissal up to actual reinstatement. 2 The statutory intent on this matter is clearly
discernible. Reinstatement restores the employee who was unjustly dismissed to the position
from which he was removed, that is, to his status quo ante dismissal, while the grant of
backwages allows the same employee to recover from the employer that which he had lost by
way of wages as a result of his dismissal. 3 These twin remedies reinstatement and payment of
backwages make the dismissed employee whole who can then look forward to continued
employment. Thus do these two remedies give meaning and substance to the constitutional right
of labor to security of tenure. 4 The two forms of relief are distinct and separate, one from the
other. Though the grant of reinstatement commonly carries with it an award of backwages, the
inappropriateness or non-availability of one does not carry with it the inappropriateness or nonavailability of the other. Separation pay was awarded in favor of petitioner Lydia Santos because
the NLRC found that her reinstatement was no longer feasible or appropriate. As the term
suggests, separation pay is the amount that an employee receives at the time of his severance
from the service and, as correctly noted by the Solicitor General in his Comment, is designed to
provide the employee with "the wherewithal during the period that he is looking for another
employment." 5 In the instant case, the grant of separation pay was a substitute for immediate
and continued re-employment with the private respondent Bank. The grant of separation pay did
not redress the injury that is intended to be relieved by the second remedy of backwages, that is,
the loss of earnings that would have accrued to the dismissed employee during the period
between dismissal and reinstatement. Put a little differently, payment of backwages is a form of
relief that restores the income that was lost by reason of unlawful dismissal; separation pay, in
contrast, is oriented towards the immediate future, the transitional period the dismissed employee
must undergo before locating a replacement job. It was grievous error amounting to grave abuse
of discretion on the part of the NLRC to have considered an award of separation pay as
equivalent to the aggregate relief constituted by reinstatement plus payment of backwages under
Article 280 of the Labor Code. The grant of separation pay was a proper substitute only for
reinstatement; it could not be an adequate substitute both for reinstatement and for backwages.
In effect, the NLRC in its assailed decision failed to give to petitioner the full relief to which she
was entitled under the statute.
We conclude that petitioner Lydia Santos is entitled to receive, and private respondent Bank
is obligated to pay, (1) the benefits which had accrued in petitioner's favor during the period
from her illegal dismissal and until reinstatement was declared non-available; (2) separation
pay equivalent to one-half (1/2) month's pay for every year of service, in lieu of
reinstatement; and (3) backwages for three (3) years without qualification and deduction. The

monetary value of the above items is to be computed in accordance with the following
guidelines: (a) in the computation of accrued benefits and separation pay, the appropriate
cut-off date is 28 December 1979, when the NLRC declared that reinstatement of petitioner
Lydia Santos had become non-feasible and inappropriate; and (b) in the computation of
backwages and separation pay, account must be taken not only of the basic salary of
petitioner but also of her transportation and emergency living allowances, 6 as was correctly
done by the Labor Arbiter.
Petitioner was unjustly dismissed in 1976. Eleven years later, she has yet to receive a single
centavo. In the interest of expeditious justice and to avoid any further ambiguities, we hold
that the total amount due petitioner Lydia Santos is P223,685.50, computed as follows:
A. Accrued Benefits (l May l976 to 28 December l979)
1. Mid-Year and Christmas Bonuses:
1976 Mid-year bonus 1.0 mos..............................P1,750.00
Christmas bonus 2 mos............................................3,500.00
1977 Mid-year bonus 1.0 mo...................................1,750.00
Christmas bonus 2 mos............................................3,500.00
1978 Mid-year bonus 1.0 mo....................................1,750.00
Christmas bonus 2 mos............................................3,600.00
1979 Mid-year bonus 1.0 mo....................................1,750.00
Christmas bonus 2 mos............................................ 3,500.00
Sub-Total................................................P21,000.00
2. Vacation and Sick Leaves (1 5/15 days per year):
a) 1 May to 31 December 1976 (2/3)
(20 days x P69.30)....................................... 1,386.00
b) 1977 (30 days x P69.30)................................2,079.00
c) 1978 (30 days x P69.30)................................2,079.00
d) 1979 (30 days x P69.30.................................2,079.00
Sub-Total....................................................P7,623.00

3. Gratuity pay:
a) First 10 years
(10 December 1951 to
December 1961 x
1 mo. salary per year................................ P17,500.00
b) Next 5 yrs.
(11 December 1961 to
December 1966) x
1.25 mos. salary per year........................ P10,937.50
c) Next succeeding yrs.
(11December 1966 to
December 1979)
1.5 mos. salary x 13 years.......................... 34,125.00
SubTotal....................................P62,562.5
0
Total Accrued Benefits..............................P91,185.50
B. Separation Pay (10 December 1951 to 28 December 1979)
Monthly salary ..........................................................P1,750.00
Living allowance.............................................................. 650.00
Transpo. allowance.......................................................... 250.00
Salary base...........................................................50.00
P2,650.00 x 28 years P37,100.00
C. Back wages (3 years without qualification and deduction)
P2,650.00 x 3 year P95,400.00

GRAND TOTAL P223,685.50