G.R. No. 201018, July 12, 2017
United Coconut Chemicals, Inc. vs. Victoriano B. Valmores

FACTS

Respondent Victoriano B. Valmores was illegally dismissed by petitioner United Coconut Chemicals, Inc. (UCCI) on February 22, 1996, following a demand from the union under a union security clause. The National Labor Relations Commission (NLRC) ultimately found the dismissal illegal and ordered his reinstatement with full backwages. This decision became final and executory. During execution proceedings, Labor Arbiter Michaela Lontoc computed the backwages based solely on Valmores’s basic monthly salary of P11,194.00 at the time of dismissal, plus legally mandated benefits like 13th-month pay and service incentive leave pay. The Labor Arbiter excluded various other benefits and allowances (e.g., meal subsidy, safety incentive pay, medical assistance) that Valmores claimed were granted under the Collective Bargaining Agreement (CBA) or company practice, ruling they were not proven.
Valmores appealed the computation to the NLRC, which set aside the Labor Arbiter’s order and directed a recomputation to include all benefits and allowances he was receiving at the time of his illegal dismissal. The Court of Appeals affirmed the NLRC’s order for a proper recomputation. UCCI elevated the case to the Supreme Court, arguing that the base figure for backwages should remain fixed at the basic salary rate at the time of dismissal.

ISSUE

Whether the computation of full backwages for an illegally dismissed employee should be limited to the basic salary rate at the time of dismissal, excluding other benefits and allowances.

RULING

The Supreme Court denied UCCI’s petition and affirmed the orders for recomputation. The Court clarified that the award of full backwages under Article 279 of the Labor Code is not confined to the basic salary alone. The legal logic is that the purpose of full backwages is to restore the employee to the position he would have been in had he not been illegally dismissed. This restoration must be full and actual, not merely partial.
Consequently, the base figure for computation is the total compensation package, which includes not only the basic salary but also all regular allowances and benefits the employee was receiving at the time of illegal termination. These encompass benefits prescribed by law, those derived from company practice, and those granted under a CBA. The Court emphasized that these components are integral parts of the employee’s earnings. To exclude them would unjustly diminish the indemnity owed and would be contrary to the constitutional mandate to afford full protection to labor. The case was thus remanded to the Labor Arbiter for a proper recomputation inclusive of these benefits and allowances.