G.R. No. 172199 February 27, 2009
ELIZABETH D. PALTENG, Petitioner, vs. UNITED COCONUT PLANTERS BANK, Respondent.

FACTS

Petitioner Elizabeth D. Palteng was the Senior Assistant Manager/Branch Operations Officer of respondent United Coconut Planters Bank. On April 15, 1996, it was reported that a bank client, Clariza L. Mercado-The Red Shop, had incurred Past Due Domestic Bills Purchased (BP) of ₱34,260,000. An audit found Palteng committed several offenses under the Employee Discipline Code in connection with this account. She was required to explain allegations of gross negligence and abuse of discretion, including granting BP accommodations against personal checks (prohibited by policy) and approving accommodations beyond her authority and the client’s sublimit. In her response, Palteng explained she was unaware the client’s Omnibus Line had been reduced and contained a ₱5 Million sublimit on BP. She admitted granting the BP accommodation against personal checks beyond her authority, accepted full responsibility, and stated it was an “honest mistake,” acknowledging it was a major offense that may cause dismissal. After investigation, she was dismissed on October 25, 1996. Palteng filed a complaint for illegal dismissal. The Labor Arbiter declared the dismissal illegal, ordering separation pay, full backwages from dismissal until finality of judgment, moral and exemplary damages, and attorney’s fees. The NLRC affirmed the decision but deleted the moral and exemplary damages. The Court of Appeals modified the NLRC decision, limiting the award of backwages to the period from Palteng’s dismissal (October 25, 1996) until the promulgation of the Labor Arbiter’s decision (December 6, 1999), as a penalty for her admitted offense.

ISSUE

Whether the award of backwages to an illegally dismissed employee, who was not entirely faultless, should be computed from the time of dismissal until the finality of the decision or limited to a shorter period.

RULING

The Supreme Court affirmed the Court of Appeals decision with modification. It held that while Palteng was illegally dismissed, she was not entirely faultless as she admitted committing a major offense—granting BP accommodations against personal checks beyond and outside her authority, which the tribunals characterized as an “error of judgment” and “honest mistake.” Citing settled jurisprudence, the Court ruled that where an employee has committed an infraction, backwages may be denied as a penalty for the misconduct, even if reinstatement or separation pay is ordered. Consequently, the award of backwages was deleted entirely. Petitioner Elizabeth D. Palteng was declared entitled only to separation pay in lieu of reinstatement, computed at one month pay for every year of service from her employment up to her dismissal.