G.R. No. 148848 ; August 5, 2003
JACINTO RETUYA, PRISCILA B. VALE, BALTAZAR QUILAT, ABDON DAYSON and ELEUTERIO ENSALADA, petitioners, vs. HON. SALIC B. DUMARPA, (Presiding Commissioner); Hon. OSCAR N. ABELLA and Hon. LEON G. GONZAGA JR. (Commissioners); NATIONAL LABOR RELATIONS COMMISSION (Fifth Division), Cagayan de Oro City; INSULAR BUILDERS, INC./ANTONIO MURILLO, President and General Manager; and RODOLFO MURILLO, respondents.

FACTS

Petitioners were workers for corporations managed by respondents Antonio Murillo and his son, Rodolfo. In early 1993, following a feud, Antonio dismissed Rodolfo from his position as manager of Insular Builders, Inc. and assumed control. Petitioners were told to stop working and were formally dismissed by Antonio Murillo on July 26, 1993. However, they continued performing the same work at the same location but under Queen City Builders, Inc., which was managed by Rodolfo Murillo. Petitioners filed a complaint for illegal dismissal against Insular Builders, Inc. and Antonio Murillo.
The Labor Arbiter found the dismissal illegal. The NLRC initially affirmed but later reversed on reconsideration, ruling petitioners were not illegally dismissed. The Court of Appeals reinstated the Labor Arbiter’s decision, declaring Antonio Murillo and Insular Builders, Inc. liable for illegal dismissal but absolving Rodolfo Murillo due to a lack of employer-employee relationship. The CA, however, affirmed the Labor Arbiter’s reduction of separation pay and deletion of back wages from the monetary award.

ISSUE

The core issues were: (1) Whether petitioners were illegally dismissed; (2) The propriety of deleting the award of back wages; and (3) The correctness of reducing the separation pay.

RULING

The Supreme Court affirmed the CA’s finding of illegal dismissal. Antonio Murillo exercised control over petitioners, including the power to dismiss, as evidenced by his submission of a Dismissal Report to the DOLE. He failed to prove any just or authorized cause for termination, rendering the dismissal illegal.
However, the Court modified the monetary awards. It held that the CA and Labor Arbiter erred in deleting the award of back wages. Under settled jurisprudence, illegally dismissed employees are entitled to full back wages from dismissal until finality of the decision, without deduction for earnings elsewhere during the period of illegal dismissal. This is a statutory right intended to restore the employee’s lost income. The reduction of separation pay was also erroneous. The Labor Arbiter improperly applied Article 283 of the Labor Code (authorized causes for termination) to a case of illegal dismissal under Article 279. For illegal dismissal, separation pay in lieu of reinstatement is computed at one month’s salary per year of service, without reduction.
The Court further upheld the CA’s finding that Rodolfo Murillo was not liable, as no employer-employee relationship with petitioners was established, and he himself had been dismissed. The corporate veil between Insular Builders and Queen City Builders was correctly not pierced, as there was no evidence it was used for fraud or wrong.