G.R. No. 164772 ; June 8, 2006
EQUITABLE BANKING CORPORATION (now EQUITABLE-PCI BANK), petitioner, vs. RICARDO SADAC, respondent.

FACTS

Ricardo Sadac was the Vice President and General Counsel of Equitable Banking Corporation. In 1989, following accusations from subordinates, the bank, citing a loss of confidence under the client-lawyer relationship, instructed him to turn over his cases and subsequently terminated his services. Sadac filed a complaint for illegal dismissal. The Labor Arbiter initially dismissed the complaint, but the NLRC reversed this, declaring the dismissal illegal, a ruling affirmed with modifications by the Supreme Court in a prior decision (G.R. No. 102467) which became final and executory in 1997. The Court had held that an employer-employee relationship existed, placing the case under the Labor Code, and found the dismissal substantively and procedurally defective.
The present petition arose from the execution phase concerning the computation of backwages. Sadac computed his backwages to include not only his last salary but also the projected annual salary increases (general increases) he would have received had he not been illegally dismissed, totaling over P6 million. The Labor Arbiter and NLRC approved this computation. The bank contested this before the Court of Appeals, which dismissed the bank’s petition. The bank then elevated the case to the Supreme Court, also filing a motion to refer the petition to the Court En Banc.

ISSUE

Whether the computation of backwages for an illegally dismissed employee should include projected salary increases and general wage adjustments.

RULING

The Supreme Court DENIED the petition and AFFIRMED the Court of Appeals. The legal logic is anchored on the statutory remedy for illegal dismissal under Article 279 of the Labor Code, which mandates reinstatement with full backwages, inclusive of allowances and other benefits or their monetary equivalent. The Court explained that “full backwages” means the employee is to be paid the compensation he should have earned from the date of dismissal until actual reinstatement. This encompasses all financial increments the employee would have been normally entitled to receive, such as general and merit increases granted to employees in the regular course of business. To exclude such projected increases would be to ignore the reality of wage progression and would not make the employee whole, which is the very purpose of the backwages award. The computation is not speculative but is based on the employee’s established salary history and the company’s regular compensation practice. The Court also DENIED the motion for referral to the Court En Banc, finding that the case did not involve any novel constitutional question or a situation requiring the modification of a doctrine laid down en banc or in division; it merely involved the application of settled jurisprudence on the computation of backwages.