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Reinstatement or Separation Pay In Lieu of Reinstatement

Reinstatement or Separation Pay In Lieu of Reinstatement in Cases Where neither Illegal Dismissal nor Abandonment Was Determined

By: Joshua R. Polido

After the resolution of an illegal dismissal dispute between the management and the employee/s, different scenarios may arise. The Labor Arbiter, National Labor Relations Commission, Court of Appeals (CA) or the Supreme Court may uphold the validity of the dismissal, in case of finding that the employee/s were illegally dismissed, order the reinstatement of the employee/s with payment of back wages and without loss of seniority rights, or order the payment of separation pay in lieu of reinstatement by reason of strained relations.

However, what will be the resulting scenario/s if in an illegal dismissal case, the Court has ruled that there is neither illegal dismissal, nor the employee did not abandon work?

The answer can be found in a case decided by the Supreme Court. Here is a short narration of facts:

Ms. R was hired by Company S as a Sales Coordinator. The Company received an invitation letter for a factory visit with training from its supplier in Texas, USA. Ms. R attended as a representative of the Company, and upon her return, her relationship with the Company started to sour.

Events and other incidents occurred after the said factory visit and training. Both parties had different versions as to what transpired, but the end result was an illegal dismissal conflict between them.

Ms. R claimed that she was illegally dismissed, and thus claims for separation pay in lieu of reinstatement with back wages by reason of strained relations. On the other hand, Company S contended that Ms. R abandoned her work, and thus, was regularly dismissed by the Company.

As the final arbiter, the Supreme Court on this case ruled that neither illegal dismissal nor abandonment was present.

The Court discussed the effect of the decision as follows:

“In the present case, Rodriguez prays for the payment of separation pay in lieu of reinstatement, evidently relying on the alleged strained relations between her and SSI. Under the doctrine of strained relations, such payment of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable. On the one hand it liberates the employee from what could be a highly oppressive work environment. On the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its employ a worker it could no longer trust. However, as discussed, the doctrine presupposes that the employee was dismissed. This factor is clearly absent in Rodriguez's case.

Besides, the doctrine of strained relations cannot be applied indiscriminately since every labor dispute almost invariably results in "strained relations;" otherwise, reinstatement can never be possible simply because some hostility is engendered between the parties as a result of their disagreement. That is human nature. Strained relations must be demonstrated as a fact. The doctrine should not be used recklessly or loosely applied, nor be based on impression alone.

In the present case, there is no compelling evidence to support the conclusion that the parties' relationship has gone so sour so as to render reinstatement impracticable. The CA, which was the only tribunal here to have declared the presence of strained relations, failed to discuss its basis in supporting this conclusion. Instead, in a brief and sweeping statement, it just merely declared the existence of strained relations, to wit:

Under these circumstances, when taken together, the lack of evidence of illegal dismissal and the lack of intent on the part of Rodriguez to abandon her work, the remedy is reinstatement but without back wages. However, considering that reinstatement is no longer applicable due to the strained relationship between the parties, each party must bear his or her own loss, thus placing them on equal footing.

As regards the prayer for payment of back wages, the same must likewise be denied because there was no dismissal. Article 279 (now 294) provides for the payment of full back wages, among others, to unjustly dismissed employees. The grant of back wages allows the employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. Moreover, the Court has held that where the employee's failure to work was occasioned neither by his abandonment nor by a termination, the burden of economic loss is not rightfully shifted to the employer. Each party must bear his own loss.

In sum, the Court affirms the factual findings of the lower tribunals that Rodriguez failed to substantiate her claim that she was dismissed by SSI, constructively or otherwise. SSI likewise failed to prove by substantial evidence that Rodriguez had abandoned her work. Moreover, the doctrine of strained relations does not apply in the present case and may not excuse the parties from resuming their employment relationship or justify the award of separation pay. This being the case, SSI must be ordered to reinstate Rodriguez to her former position without payment of back wages. If Rodriguez voluntarily chooses not to return to work, she must then be considered as having resigned from employment. This is, however, without prejudice to the parties willingly continuing with their former contract of employment or entering into a new one.”

Photo from:


Rodessa Quitevis Rodriguez vs. Sintron Systems, Inc. and/or Joselito Capaque. G.R. No. 240254 July 24, 2019

Disclaimer: The events, names, facts and other circumstances are all based on the case cited above. Some details have been deliberately or intentionally omitted by the author to focus on the topic at hand.

About the Author: Joshua R. Polido is a graduate of Far Eastern University Institute of Law with a Bachelor of Laws Degree, and is currently an underbar associate of Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him at


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