G.R. No. 174833, December 15, 2010
Myrna P. Magana, Petitioner, vs. Medicard Philippines, Inc., and Court of Appeals, Respondents.

FACTS

Petitioner Myrna Magana was hired by respondent Medicard Philippines, Inc., a health maintenance organization, and was detailed to its client, Manila Pavilion Hotel. In October 1994, the Hotel summarily replaced her. Medicard offered her a different position as a liaison officer, which she found unacceptable. With no subsequent assignment, she filed an illegal dismissal case against Medicard and the Hotel.
The Labor Arbiter ruled in Magana’s favor, ordering reinstatement and payment of backwages, holding Medicard and the Hotel jointly and severally liable. The NLRC modified the decision, finding Medicard solely liable as the employer for constructive dismissal. It awarded separation pay in lieu of reinstatement and, critically, ordered Medicard to pay “reinstatement wages” from the filing of the appeal until the resolution of the case, pursuant to Article 223 of the Labor Code. The Court of Appeals later partially granted Medicard’s petition, deleting the award of reinstatement wages.

ISSUE

Whether an employee is entitled to reinstatement wages pursuant to a Labor Arbiter’s reinstatement order that is subsequently reversed on appeal.

RULING

Yes, the Supreme Court granted the petition and reinstated the NLRC’s award of reinstatement wages. The Court explained that under Article 223, paragraph 2 of the Labor Code, a Labor Arbiter’s order of reinstatement is immediately executory, even pending appeal. The employer has two options: to actually readmit the employee to work or to reinstate the employee merely in the payroll. This mandatory rule is a police power measure intended to provide immediate economic relief to a dismissed employee pending the resolution of the appeal, as the preservation of the employee’s livelihood is paramount.
The Court emphasized that the subsequent reversal of the reinstatement order on appeal does not nullify the employer’s obligation to pay wages during the period of appeal if it opted for payroll reinstatement. The right to these wages accrues from the employer’s failure to exercise either option of actual or payroll reinstatement upon the filing of its appeal. This obligation is separate from the ultimate finding on the legality of the dismissal. The employer’s remedy, if the dismissal is later declared valid, is to seek reimbursement of the wages paid, not to avoid the initial payment. Therefore, Medicard’s liability for reinstatement wages during the appeal period remained enforceable.