Panay Railways, Inc. v. National Labor Relations Commission
REITERATIONFacts
The Antecedents: On November 7, 1963, the Labor Arbiter of Iloilo City ordered petitioner Panay Railways, Inc., as successor in interest of FIVIDEC Railways, Inc., to reinstate complainant Bertie Palu-ay to his former position with full back wages from January 1, 1977, at P1,000.00 per month up to the date of actual reinstatement. Procedural History: No appeal was filed. On motion of respondent Palu-ay, a writ of execution was issued, and the sheriff garnished P83,000.00 deposited by petitioner. Palu-ay moved for the delivery of the garnished amount. Petitioner moved to stop execution and to set a hearing for computation of back wages, or alternatively, to fix the award to three years' salaries without deduction. The Petition: The Labor Arbiter denied petitioner's motion. The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter's decision. The NLRC denied petitioner's motion for reconsideration. Hence, this petition for certiorari.
Issue(s)
Whether the three-year back wages rule should be applied in the execution of the judgment; and whether the NLRC committed grave abuse of discretion in affirming the Labor Arbiter's denial of petitioner's motion to limit back wages to three years.
Ruling
The petition is granted. The resolution of the respondent NLRC dated July 27, 1984, is set aside. Petitioner Panay Railways, Inc. is ordered to satisfy the award for back wages by paying an amount equivalent to three (3) years, at the rate of P1,000.00 a month.
Ratio Decidendi
On the application of the three-year back wages rule and the NLRC's alleged grave abuse of discretion: The Court reiterated its policy, first laid down in Insular Life Assurance Co., Ltd. Employees Association v. Insular Life Assurance Co., Ltd., to fix the amount of back wages to a just and reasonable level without qualifications or deduction, equivalent to three years. The rationale behind this policy is to relieve employees from proving earnings during lay-off and employers from submitting counter-proofs, thereby obviating protracted delays and unconscionable settlements. This formula prevents idleness on the part of the employee and attrition on the part of the employer. The Court has consistently awarded back wages to the maximum of only three (3) years based on this policy. The Court found no reason why this established policy should not apply in the case at bar. Therefore, the petitioner is ordered to satisfy the award for back wages by paying an amount equivalent to three (3) years at the rate of P1,000.00 a month.
Main Doctrine
The policy of awarding back wages to a just and reasonable level, limited to a maximum of three (3) years without deduction or qualification, applies in the execution of labor judgments.