G.R. No. 178699 & G.R. No. 178735, September 21, 2011
BPI EMPLOYEES UNION METRO MANILA and ZENAIDA UY, Petitioners, vs. BANK OF THE PHILIPPINE ISLANDS, Respondent.

(Consolidated Cases)

FACTS

Zenaida Uy, a bank teller at BPI’s Escolta Branch, was dismissed on December 14, 1995, for gross disrespect, insubordination, and absence without leave. She and her union filed an illegal dismissal case. The Voluntary Arbitrator found the dismissal illegal in a December 31, 1997 Decision, ordering her reinstatement and payment of full back wages, including all benefits under the Collective Bargaining Agreement (CBA), and attorney’s fees. The Court of Appeals (CA) modified this on October 28, 1998, ordering separation pay instead of reinstatement and limiting back wages to three years. The Supreme Court, in its final and executory Decision dated March 31, 2005 (G.R. No. 137863), modified the CA ruling and directed BPI to: 1) pay Uy back wages from the time of illegal dismissal until actual reinstatement, and 2) reinstate Uy to her former position or a substantially equivalent one.
Upon execution, a dispute arose over the computation of back wages. Uy and the Union computed her back wages based on the current wage level, including all wage and benefit increases granted under the CBA during the entire period of her illegal dismissal (e.g., Cost of Living Allowance, Financial Assistance, Quarterly Bonus, CBA Signing Bonus, various allowances, leave conversions, holiday pay). The Voluntary Arbitrator, in an Order dated December 6, 2005, largely agreed with this computation (awarding ₱3,897,197.89), opining that the Supreme Court’s 2005 Decision reinstated his 1997 award of “full back wages…including all benefits under the CBA,” though he excluded items like uniform allowance for lack of basis.
BPI challenged this computation before the CA via a Petition for Certiorari, arguing it amended the final Supreme Court Decision. BPI contended that back wages should be based on Uy’s wage rate at the time of dismissal in December 1995, not on subsequent increases, and that several awarded benefits lacked basis. The CA, in an Amended Decision dated July 4, 2007, ruled in favor of BPI’s position on computation. It held that the base figure for computing back wages is the employee’s basic salary at the time of dismissal plus regular allowances received at that time, exclusive of any wage increases or new benefits granted thereafter. The CA directed recomputation using Uy’s December 1995 basic salary of ₱10,895.00. Both parties sought review of this Amended Decision, leading to these consolidated petitions.

ISSUE

What is the correct legal basis for computing the back wages awarded to an illegally dismissed employee should it be based on the salary rate and benefits at the time of dismissal, or should it include all salary increases and new benefits granted during the period of illegal dismissal?

RULING

The Supreme Court DENIED the petition in G.R. No. 178699 (filed by the Union and Uy) and GRANTED the petition in G.R. No. 178735 (filed by BPI). The Court AFFIRMED the assailed Amended Decision of the Court of Appeals dated July 4, 2007.
The Court held that the correct base figure for computing the award of back wages to an illegally dismissed employee is the employee’s basic salary at the time of dismissal, plus the regular allowances and benefits she was receiving at that time. This base figure is unqualified by any wage increases or new benefits granted during the period of dismissal (the interim period).
The Court clarified that “full back wages” under Republic Act No. 6715 means “the salary or wage the employee was receiving at the time of dismissal.” Jurisprudence consistently holds that back wages should be computed on the basis of the wage rate at the time of dismissal. Any increase in salary or benefits given after the dismissal, which the employee would not have received had she not been illegally dismissed, should not be included in the computation. The purpose of back wages is to restore the income lost due to the illegal dismissal, not to grant the employee a windfall from increases she did not actually earn.
Consequently, the Court of Appeals correctly ordered the recomputation of Uy’s back wages using her basic salary of ₱10,895.00 as of December 14, 1995, plus the regular allowances she was receiving at that time (such as Cost of Living Allowance, Financial Assistance, and Quarterly Bonus, provided these were being received at the time of dismissal). Benefits granted only after her dismissal were correctly excluded.