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Snakes and Ladders: Separation Pay in lieu of Reinstatement (Effects of Illegal Termination Part 2)

Christian Andrew Labitoria Gallardo[1]

Consider this scenario. A boss, while eating on a restaurant with his staff, suddenly and forcefully kissed one of them who was celebrating her birthday, thereafter saying “Ang sarap pala ng labi ni Maila”. The boss then held her hand, further saying “Sige na Maila”, but the employee resisted. An administrative case was then filed against the Boss.

Believe it or not, such an incident happened in real life and it involved two lawyers working for a government instrumentality.[2] While the case is administrative in nature, imagine if it would be a case for constructive dismissal against a private employer. Assuming that the Court would rule that her dismissal was forced upon her by the circumstance, would the employee still want to work with her boss who obviously had a sexual desire for her?

In the article weeks ago, we discussed the concept of reinstatement in cases of illegal dismissal. In certain cases however, the Court allowed the payment of separation pay in lieu of reinstatement.

Separation Pay in liue of Reinstatement

First it must be noted that nothing in the labor code provides for separation pay instead of reinstatement. However, case law recognizes this in view of equity, precisely because there are some situations when the continued employment of the employee with the employer is not feasible anymore. This is called the doctrine of strained relations, as the existing antagonism between the employer and the employee shows that reinstatement is not practical or warranted.[3] The application of doctrine of strained relations depends largely on the circumstance in place. In short, there is no hard and fast rule for its application.

Separation pay in lieu of reinstatement is likewise awarded when the employee had already been replaced permanently, as when his position was taken over by a regular employee and there is no substantially equivalent position to which he may be reinstated.[4] This is especially true when the position being occupied by the illegally dismissed employee is considered crucial, such that it cannot be left vacant for a substantial amount of time without prejudice to the company. Similarly, the Court awards separation pay in in lieu of reinstatement when there has been a long passage of time from the time of dismissal to the final resolution of the case.[5] In the Philippines where labor cases can drag on for years especially when both parties are eager to prove their point, this is not really far from happening.

Aside from the existing animosity between the employer and the employee and the long passage of time from the dismissal, the Court also awards separation pay in lieu of reinstatement where it is logical to do so. A good example of this is when the employee has already reached the retirement age according to the existing Retirement Plan at the time of the resolution of the case[6], or when the company has already closed at the time of decision[7], or the employee has already died at that time.[8] Certainly, the Court would not reinstate a ghost and have him roaming around the premises of the employer’s office, although indeed there are allegedly “ghost” employees in the government service, or employees in the private sector who “ghosts” their employers by leaving without any notice. But that is a different matter altogether.

Components of Separation Pay

Since the Labor Code is silent as to giving separation pay in lieu of reinstatement, the Code is likewise silent as to the formula for computing the same. Jurisprudence however provides that it should at least be the sum of the amount equivalent to at least one (1) month salary for every year of service, with a fraction of six (6) months considered as one year, plus the allowances that the employee has been receiving on a regular basis.[9] Similar to backwages, if the employee illegally terminated has worked for only less than a year, he must be awarded a separation pay equivalent to one (1) year of service at the very least, and not a fraction thereof.[10]

They say some relationships are not worth saving. Apparently, this relationship advice from love gurus applies as well to employer-employee relations. Truly, when the trust is gone, the very foundation of the relationship crumbles, and there is nothing more left to save than the broken pieces of it. I hope you trust me though when I say that our free facebook group is really helpful. To join, click the link below.

Cover Photo by Alesia Kazantceva on Unsplash

[1]Christian Andrew Labitoria Gallardo is a recent graduate of the Ateneo School of Law with a Juris Doctor degree, and is currently an associate of the Sangalang and Gaerlan, Business Lawyers, a law firm specializing in labor, corporate and business law. You may reach him via phone (09157042132) or email ( [2] Gonzales v Serrano, G.R. No. 175433 (2015). [3] Aliling v Feliciano, G.R. No. 185829 (2012). [4] San Miguel Corporation v Teodosio, G.R. No. 163033 (2009). [5] Blue Sky Trading Company inc v Elias, G.R. No. 190559 (2012). [6] Torres v NLRC, G.R. No. 172584 (2008). [7] Price v Innocada Phils Inc, G.R. No. 178505 (2008). [8] Intercontinental Broadcasting Corp v Benedicto, G.R. No. 152843 (2006). [9] South East International Rattan Inc v Corning, G.R. No. 186621 (2014). [10] Pico Resources Inc v Taneca, G.R. No. 160828 (2010).


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