Case Digest: Philippine Airlines v. NLRC, G.R. No. 55159 December 22, 1989

Labor Law | No Work - No Pay

Facts: 

Armando Dolina was training as a pilot with Philippine Airlines, Inc. (PAL) but was not qualified for regular employment due to insufficient flying hours and result of his medical examination. 

In 1976, he was put under preventive suspension pending his termination. He countered with a complaint for illegal dismissal.

In 1977, the Department of Labor Regional OIC lifted the preventive suspension, and ordered petitioner to reinstate Dolina to his former position with full back wages from up to actual reinstatement. The issue on termination was referred to the Executive Labor Arbiter for compulsory arbitration. PAL and Dolina entered into an agreement stating that Dolina shall be considered in the payroll pending final resolution of the case by arbitration.

In 1979, the Labor Arbiter found the termination valid. PAL removed Dolina from its payroll effective 1 April 1979 by virtue of the decision. Dolina appealed to the NLRC. 

n 1980, the NLRC affirmed the Labor Arbiter’s decision but ordered PAL to continue paying Dolina’s salaries from 1 April 1979 until the case's final resolution.

Issue: WoN the NLRC committed grave abuse of discretion in holding that private respondent Dolina was entitled to his salaries from 1 April 1979 "until this case is finally resolved." YES

PAL contends that inasmuch as the respondent Commission acting en banc had affirmed in toto the decision of the Labor Arbiter granting petitioner the clearance for the dismissal of private respondent Dolina, it is an act of grave abuse of discretion amounting to lack of jurisdiction on its part to order petitioner to pay private respondent’s salaries from April 1979 until the case is finally terminated. PAL contends that said stipulation refers only to the resolution of the case by arbitration and said arbitration of the case was terminated when the Labor Arbiter rendered its decision dated 23 March 1979. PAL argues that the arbitration of the case is limited to and comprises merely the proceedings before the Labor Arbiter such that when the latter renders a decision, arbitration of the dispute is terminated.

Public respondent NLRC on the other hand contends that arbitration is a continuing process from the time the case is referred by the Secretary of Labor to the Arbitration Branch until the final judgment is had on appeal. Since the Labor Arbiter’s decision in favor of petitioner did not finally resolve the case in view of the timely appeal by private respondent from said decision, the case was not yet finally terminated by arbitration and Dolina is entitled to be placed in petitioner’s payroll until the complaint is finally resolved.

It is a basic rule in interpretation of contracts that the circumstances under which an instrument was made, including the situation of the subject thereof and the parties to it, may be considered so that the intention of the contracting parties may be judged correctly.

In the instant case, the stipulation in the 2 March 1977 agreement that Dolina shall be included in the payroll of PAL until final resolution of the case by arbitration was intended to supersede the order of the Regional Director which, by stipulation of the parties, was rendered moot and academic. In lieu of reinstatement and the payment of his backwages, private respondent was included in petitioner’s payroll, effective from the time he was preventively suspended until final resolution of the case by arbitration, without having to perform any work for the petitioner. In entering into the agreement, the parties could not have intended to include in the clause "final resolution of the case by arbitration" the whole adjudicatory process, including appeal. For if it were so, even proceedings on certiorari before this Court would be embraced by the term "arbitration" and private respondent will continue to receive monthly salary without rendering any service to the petitioner regardless of the outcome of the proceedings before the Labor Arbiter, for as long as one of the parties appeal to the NLRC and until the case is finally resolved by this Court. This is clearly an absurdity which could not have been contemplated by the parties.

Neither can proceedings on appeal before the NLRC en banc be considered as part of the arbitration proceeding. In its broad sense, arbitration is the reference of a dispute to an impartial third person, chosen by the parties or appointed by statutory authority to hear and decide the case in controversy. When the consent of one of the parties is enforced by statutory provisions, the proceeding is referred to as compulsory arbitration. In labor cases, compulsory arbitration is the process of settlement of labor disputes by a government agency which has the authority to investigate and to make an award which is binding on all the parties. Under the Labor Code, it is the Labor Arbiter who is clothed with the authority to conduct compulsory arbitration on cases involving termination disputes. When the Labor Arbiter renders his decision, compulsory arbitration is deemed terminated because by then the hearing and determination of the controversy has ended. Any appeal raised by an aggrieved party from the Labor Arbiter’s decision is already beyond the scope of arbitration since in the appeal stage, the NLRC en banc merely reviews the Labor Arbiter’s decision for errors of fact or law and no longer duplicates the proceedings before the Labor Arbiter. Thus, the clause "pending final resolution of the case by arbitration" should be understood to be limited only to the proceedings before the Labor Arbiter, such that when the latter rendered his decision, the case was finally resolved by arbitration.

More important, however, is the fact that the NLRC’s order for the continued payment of Dolina’s salaries is inconsistent with its affirmance of the Labor Arbiter’s decision upholding the validity of Dolina’s dismissal. In affirming the Labor Arbiter’s decision granting the termination clearance, the NLRC held that:

With respect to the issue of whether or not the complainant’s [Dolina] dismissal was sufficiently grounded, we are not persuaded that the respondent [herein petitioner PAL] is under obligation to employ him as regular employee simply because he was certified physically fit and technically proficient by the CAA.

This is understandable for it concerns the safety of its properties, and above all, the safety of the lives and properties of its passengers, which by law it is committed to transport safely. In the absence, therefore, of any showing that its standards are unreasonable and discriminatory, which we do not find here, We cannot disturb them. We can only say that for exercising extraordinary diligence in the selection of its pilots, We join the public in commending it.

x       x       x

In fine, it is Our considered view that the respondent’s application for clearance to dismiss the complainant has sufficiently surmounted the test of validity.

In view of the above finding of valid dismissal, the NLRC had no authority to order the continued payment of Dolina’s salaries from 1 April 1979 until the case is finally resolved. The NLRC’s order would result in compensating Dolina for services no longer rendered and when he is no longer in PAL’s employ. This is contrary to the age-old rule of "a fair day’s wage for a fair day’s labor" which continues to govern the relation between labor and capital and remains a basic factor in determining employees’ wage. So that, if there is no work performed by the employee there can be no wage or pay unless the laborer was able, willing and ready to work but was prevented by management or was illegally locked out, suspended or dismissed. Where the employee’s dismissal was for a just cause, it would neither be fair nor just to allow the employee to recover something he has not earned and could not have earned.

Moreover, in ordering the continued payment of Dolina’s salaries from 1 April 1979 until the case is finally resolved, the NLRC in effect ordered the payment of backwages to Dolina notwithstanding its finding of a valid dismissal.

This is clearly untenable.

In the first place, backwages in general are granted on grounds of equity for earnings which a worker or employee has lost due to his illegal dismissal. Where, as in this case, the dismissal was for a just cause, there is no factual or legal basis for ordering the payment of backwages. The order of the NLRC for the continued payment of Dolina’s salaries would allow the latter to unjustly enrich himself at the expense of the petitioner. This Court has reiterated time and again that the law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer. In this case, the NLRC chose not to adhere with fidelity to this doctrine.

Secondly, NLRC’s order for continued payment of Dolina’s salary from 1 April 1979 up to the final resolution of the case would place Dolina in a better position than those workers who were found to have been illegally dismissed by their employer. For in the latter case, the backwages that can be recovered by the worker is limited to three years while Dolina, whose dismissal was found to be valid, can recover approximately ten years backwages, which corresponds to the period from 1 April 1979 until "final resolution" of the instant case.

Considering the foregoing, the Court holds that respondent NLRC’s order for the continued payment of Dolina’s salaries from "1 April 1979 until the case is finally resolved" is contrary to law and established jurisprudence and the NLRC acted in excess of its jurisdiction in issuing the assailed order.