BUSTAMANTE vs.

NLRC (1996)
Padilla, J.
FACTS:
Private respondent moves to reconsider the earlier decision of the Supreme Court First
Division on grounds that (a) petitioners are not entitled to recover backwages because they
were not actually dismissed but their probationary employment was not converted to
permanent employment; and (b) assuming that petitioners are entitled to backwages,
computation thereof should not start from cessation of work up to actual reinstatement, and
that salary earned elsewhere (during the period of illegal dismissal) should be deducted from
the award of such backwages.
ISSUE: How should backwages be computed?
HELD:
- The prevailing rule is that backwages to be awarded to an illegally dismissed
employee, should not be diminished or reduced by the earnings derived by him
elsewhere during the period of his illegal dismissal. The underlying reason of this
ruling is that the employee, while litigating the legality (illegality) of his dismissal,
must still earn a living to support himself and family, while his backwages have to
be paid by the employer as part of the price or penalty he has to pay for illegally
dismissing his employee.
- Under Art. 279, as amended, the provision handling for "full backwages" to illegally
dismissed employees is clear, plain and free from ambiguity and, therefore, must be
applied without attempted or strained interpretation. Index animi sermo est.
- Therefore, petitioners are entitled on their full backwages, inclusive of allowances
and other benefits or their monetary equivalent, from the time their actual
compensation was withheld on them up to the time of their actual reinstatement.
o Then came the Mercury Drug ruling, where the Court ruled that a fixed
amount of backwages without further qualifications should be awarded
to an illegally dismissed employee, for the purposes of expediency.
o A permutation of the aforementioned rule, the 3-year rule formulated by
Teehankee was adopted, where backwages are always computed for the
fixed period of 3 years.
- Post-Labor Code
o Art. 279 provided that an unjustly dismissed employee shall be entitled
to his back wages computed from the time his compensation was
withheld from him up to the time of his reinstatement.
o Despite the express provision that it should be computed from the time
compensation was withheld up to reinstatement, the Mercury Drug rule
with the 3-year constant was still applied.
o On March 1989, Republic Act No. 6715 took effect, amending the Art. 279
of the LC. This added other benefits to the computation of backwages,
which should also be computed from the time compensation was
withheld up to reinstatement.
o In 1993, the Court in the Pines City Educational Center went back to the
pre-Mercury Drug rule, where the total amount derived from
employment elsewhere by the employee from the date of dismissal up to
the date of reinstatement, if any, should be deducted therefrom. The
rationale in allowing the deduction was to prevent unjust enrichment by
the employee at the expense of the employer.
o In the present case, the Court overrules the Pines City case, and adopts as
a general rule that employees are entitled to full backwages from the
time it was withheld up to the time of reinstatement, without any
deductions or limitatations as to period/amount.

HISTORY:

- Pre-Labor Code
o Under RA 875, the CIR was given wide discretion to determine the
amount of backwages. Thus, in the exercise of its jurisdiction, the CIR
increased or diminished the award of backpay, depending on several
circumstances, among them, the good faith of the employer, the
employee's employment in other establishments during, the period of
illegal dismissal, or the probability that the employee could have realized
net earnings from outside employment if he had exercised due diligence
to search for outside employment. In labor cases decided during the
effectivity of R.A. No. 875, the Supreme Court acknowledged and upheld
the CIR's authority to deduct any amount from the employee's
backwages, including the discretion to reduce such award of backwages
whatever earnings were obtained by the employee elsewhere during the
period of his illegal dismissal (Itogon-Suyoc ruling).
BUSTAMANTE ET AL VS.
NLRC DIGEST
DECEMBER 19, 2016 ~ VBDIAZ
G.R. No. 111651 March 15, 1996
OSMALIK S. BUSTAMANTE, PAULINO A.
BANTAYAN, FERNANDO L. BUSTAMANTE,
MARIO D. SUMONOD, and SABU J. LAMARAN
v. NATIONAL LABOR RELATIONS
COMMISSION, FIFTH DIVISION and
EVERGREEN FARMS, INC.
PADILLA, J.:
FACTS: Respondent company is engaged in the
business of producing high grade bananas in its
plantation in Davao del Norte. Petitioners Paulino
Bantayan, Fernando Bustamante, Mario Sumonod
and Osmalik Bustamante were employed as
laborers and harvesters while petitioner Sabu
Lamaran was employed as a laborer and sprayer
in respondent companys plantation. All the
petitioners signed contracts of employment for a
period of six (6) months from 2 January 1990 to 2
July 1990, but they had started working sometime
in September 1989. Previously, they were hired to
do the same work for periods lasting a month or
more, from 1985 to 1989. Before the contracts of
employment expired on 2 July 1990, petitioners
employments were terminated on 25 June 1990
on the ground of poor performance on account of
age, as not one of them was allegedly below forty
(40) years old.
Petitioners filed a complaint for illegal dismissal.
ISSUE: Whether or not private respondent
exercises its power to terminate in good faith so
as to make the award of backwages improper in
this case.
RULING: We do not sustain public respondents
theory that private respondent should not be
made to compensate petitioners for backwages
because its termination of their employment was
not made in bad faith. The act of hiring and re-
hiring the petitioners over a period of time
without considering them as regular employees

evidences bad faith on the part of private
respondent. The public respondent made a
finding to this effect when it stated that the
subsequent rehiring of petitioners on a
probationary status clearly appears to be a
convenient subterfuge on the part of
management to prevent complainants
(petitioners) from becoming regular employees.
FIRST DIVISION
[G.R. No. 111651. March 15, 1996]
OSMALIK S. BUSTAMANTE, PAULINO A.
BANTAYAN, FERNANDO L. BUSTAMANTE,
MARIO D. SUMONOD, and SABU J.
LAMARAN, petitioners, vs. NATIONAL LABOR
RELATIONS COMMISSION, FIFTH DIVISION,
and EVERGREEN FARMS, INC., respondents.
SYLLABUS
1. LABOR AND SOCIAL LEGISLATION; TERMINATION OF
EMPLOYMENT; REGULAR AND CASUAL
EMPLOYMENT; REGULAR EMPLOYEES;
DISTINGUISHED. - Article 280 of the Labor Code draws a
line between regular and casual employment, a distinction
however often abused by employers. The provision
enumerates two (2) kinds of employees, the regular
employees and the casual employees. The regular
employees consist of the following: 1) those engaged to
perform activities which are usually necessary or desirable
in the usual business or trade of the employer; and 2) those
who have rendered at least one year of service whether
such service is continuous or broken.
2. ID.; ID.; ID.; ID.; ID.; REASON. - The law distinguishes
between the two (2) kinds of employees to protect the
interests of labor. Thus, in the case of Baguio Country Club
Corporation vs. NLRC, the Court declared: Its language
evidently manifests the intent to safeguard the tenurial
interest of the worker who may be denied the rights and
benefits due a regular employee by virtue of lopsided
agreements with the economically powerful employer who
can maneuver to keep an employee on a casual status for
as long as convenient x x x.
3. ID.; ID.; ID.; ID.; ID.; EMPLOYEES IN CASE AT BAR ARE
CONSIDERED REGULAR EMPLOYEES. - In the case at
bar, petitioners were employed at various periods from 1985
to 1989 for the same kind of work they were hired to
perform in September 1989. Both the labor arbiter and the
respondent NLRC agree that petitioners were employees
engaged to perform activities necessary in the usual
business of the employer. As laborers, harvesters or
sprayers in an agricultural establishment which produces
high grade bananas, petitioners tasks are indispensable to
the year-round operations of respondent company. This
belies the theory of respondent company that the
employment of petitioners was terminated due to the
expiration of their probationary period in June 1990. If at all
significant, the contract for probationary employment was
utilized by respondent company as a chicanery to deny
petitioners their status as regular employees and to evade
paying them the benefits attached to such status. Some of
the petitioners were hired as far back as 1985, although the
hiring was not continuous. They were hired and re-hired in a
span of from two to four years to do the same type of work
which conclusively shows the necessity of petitioners
 service to the respondent companys business. Petitioners
have, therefore, become regular employees after performing
activities which are necessary in the usual business of their
employer. But, even assuming that the activities of
petitioners in respondent companys plantation were not
necessary or desirable to its business, we affirm the public
respondents finding that all of the complainants (petitioners)
have rendered non-continuous or broken service for more
than one (1) year and are consequently considered regular
employees.
4. ID.; ID.; ID.; ID.; ID.; THE ACT OF HIRING AND RE-HIRING
THE EMPLOYEES OVER A PERIOD OF TIME WITHOUT
CONSIDERING THEM AS REGULAR EMPLOYEES
EVIDENCES BAD FAITH ON THE PART OF THE
EMPLOYER. - We do not sustain public respondents theory
that private respondent should not be made to compensate
petitioners for backwages because its termination of their
employment was not made in bad faith. The act of hiring
and re-hiring the petitioners over a period of time without
considering them as regular employees evidences bad faith
on the part of private respondent. The public respondent
made a finding to this effect when it stated that the
subsequent rehiring of petitioners on a probationary status
clearly appears to be a convenient subterfuge on the part of
management to prevent complainants (petitioners) from
becoming regular employees.
5. ID.; ID.; ID.; ID.; ID.; RIGHTS OF ILLEGALLY DISMISSED
EMPLOYEES; CASE AT BAR. - Reliance by public
respondent on the case of Manila Electric Company vs.
NLRC is misplaced. In that case, the Court ordered the
reinstatement of an employee, without backwages because,
although there was a valid cause for dismissal, the penalty
was too severe for an employee who had rendered service
for an uninterrupted period of twenty (20) years with two
commendations for honesty. In the case at bar, there is no
valid cause for dismissal. The employees (petitioners) have
not performed any act to warrant termination of their
employment. Consequently, petitioners are entitled to their
full backwages and other benefits from the time their
compensation was withheld from them up to the time of their
actual reinstatement.
APPEARANCES OF COUNSEL
Lucio V. Pocot for petitioners.
The Solicitor General for public respondent.
J. V. Yap Law Office for private respondent.
DECISION
PADILLA, J.:
This petition for certiorari seeks to reverse the 3 May 1993
resolution of the National Labor Relations Commission (NLRC)
which set aside its earlier resolution dated 8 March 1993 and
deleted the award of backwages in favor of petitioners.
The focal issue therefore in this case is whether or not
petitioners are entitled to backwages after a finding by the
NLRC itself that they had become regular employees after
serving for more than one (1) year of broken or non-continuous
service as probationary employees.
The facts are not in dispute. Respondent company is
engaged in the business of producing high grade bananas in its
plantation in Davao del Norte. Petitioners Paulino Bantayan,
Fernando Bustamante, Mario Sumonod and Osmalik
Bustamante were employed as laborers and harvesters while
petitioner Sabu Lamaran was employed as a laborer and
sprayer in respondent companys plantation. All the petitioners
signed contracts of employment for a period of six (6) months
from 2 January 1990 to 2 July 1990, but they had started
working sometime in September 1989. Previously, they were
hired to do the same work for periods lasting a month or more,
from 1985 to 1989. Before the contracts of employment expired
on 2 July 1990, petitioners employment were terminated on 25
June 1990 on the ground of poor performance on account of
age, as not one of them was allegedly below forty (40) years
old.
 Petitioners filed a complaint for illegal dismissal before the
Regional Arbitration Branch, Branch XI of the NLRC in Davao
City. On 26 April 1991, the labor arbiter rendered judgment in
favor of petitioners, thus
WHEREFORE, judgment is hereby rendered:
1. Declaring the dismissal of the complainants as illegal;
2. Ordering respondent Evergreen Farms, Inc. to
immediately reinstate complainants to their former position
with six (6) months backwages computed as follows
(26.17 x P79.00 per day equals P2,067.43 x 6 months
equals P12,404.58 times 5 complainants equals Sixty Two
Thousand Four Hundred Four & 58/100 (P62,404.58)
PESOS. However, if reinstatement is no longer feasible an
additional one (1) month salary shall be awarded as a
form of separation pay;
3. The claims for underpayment of wages is hereby
dismissed for lack of merit.
SO ORDERED. [1]
On 8 March 1993, public respondent dismissed the appeal
of private respondent company for lack of merit. Private
respondent filed a motion for reconsideration dated 1 April
1993. Acting on said motion, public respondent issued a second
resolution on 3 May 1993 affirming its earlier resolution on
illegal dismissal but deleting the award of backwages on the
ground that the termination of petitioners employments was the
result of the latters (private respondent) mistaken interpretation
of the law and that the same was therefore not necessarily
attended by bad faith, nor arbitrariness, x x x. [2]
In their present petition, petitioners argue that the public
respondent gravely abused its discretion in rendering the
second resolution which removed the award of backwages in
their favor.
We rule in favor of petitioners.
It is undisputed that petitioners were illegally dismissed from
employment. Article 280 of the Labor Code, states:
ART. 280. Regular and Casual Employment. - The provisions
of written agreement to the contrary notwithstanding and
regardless of the oral agreement of the parties, an employment
shall be deemed to be regular where the employee has been
engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer, except
where the employment has been fixed for a specific project or
undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or
where the work or services to be performed is seasonal in
nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not
covered by the preceding paragraph: Provided, that, any
employee who has rendered at least one year of service,
whether such service is continuous or broken, shall be
considered a regular employee with respect to the activity in
which he is employed and his employment shall continue while
such activity exists.
This provision draws a line between regular and casual
employment, a distinction however often abused by
employers. The provision enumerates two (2) kinds of
employees, the regular employees and the casual
employees. The regular employees consist of the following:
1) those engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the
employer; and
2) those who have rendered at least one year of service
whether such service is continuous or broken.
 The law distinguishes between the two (2) kinds of
employees to protect the interests of labor. Thus, in the case
of Baguio Country Club Corporation vs. NLRC, the Court
[3]
declared: Its language evidently manifests the intent to
safeguard the tenurial interest of the worker who may be denied
the rights and benefits due a regular employee by virtue of
lopsided agreements with the economically powerful employer
who can maneuver to keep an employee on a casual status for
as long as convenient x x x.
In the case at bar, petitioners were employed at various
periods from 1985 to 1989 for the same kind of work they were
hired to perform in September 1989. Both the labor arbiter and
the respondent NLRC agree that petitioners were employees
engaged to perform activities necessary in the usual business of
the employer. As laborers, harvesters or sprayers in an
agricultural establishment which produces high grade bananas,
petitioners tasks are indispensable to the year-round operations
of respondent company. This belies the theory of respondent
company that the employment of petitioners was terminated due
to the expiration of their probationary period in June 1990. If at
all significant, the contract for probationary employment was
utilized by respondent company as a chicanery to deny
petitioners their status as regular employees and to evade
paying them the benefits attached to such status. Some of the
petitioners were hired as far back as 1985, although the hiring
was not continuous. They were hired and re-hired in a span of
from two to four years to do the same type of work which
conclusively shows the necessity of petitioners service to the
respondent companys business. Petitioners have, therefore,
become regular employees after performing activities which are
necessary in the usual business of their employer. But, even
assuming that the activities of petitioners in respondent
companys plantation were not necessary or desirable to its
business, we affirm the public respondents finding that all of the
complainants (petitioners) have rendered non-continuous or
broken service for more than one (1) year and are consequently
considered regular employees. [4]
We do not sustain public respondents theory that private
respondent should not be made to compensate petitioners for
backwages because its termination of their employment was not
made in bad faith. The act of hiring and re-hiring the petitioners
over a period of time without considering them as regular
employees evidences bad faith on the part of private
respondent. The public respondent made a finding to this effect
when it stated that the subsequent re-hiring of petitioners on a
probationary status clearly appears to be a convenient
subterfuge on the part of management to prevent complainants
(petitioners) from becoming regular employees. [5]
Reliance by public respondent on the case of Manila
Electric Company vs. NLRC is misplaced. In that case, the
[6]
Court ordered the reinstatement of an employee, without
backwages because, although there was a valid cause for
dismissal, the penalty was too severe for an employee who had
rendered service for an uninterrupted period of twenty (20)
years with two commendations for honesty. In the case at bar,
there is no valid cause for dismissal. The employees
(petitioners) have not performed any act to warrant termination
of their employment. Consequently, petitioners are entitled to
their full backwages and other benefits from the time their
compensation was withheld from them up to the time of their
actual reinstatement.
WHEREFORE, the Resolution of the National Labor
Relations Commission dated 3 May 1993 is modified in that its
deletion of the award for backwages in favor of petitioners, is
SET ASIDE. The decision of the Labor Arbiter dated 26 April
1991 is AFFIRMED with the modification that backwages shall
be paid to petitioners from the time of their illegal dismissal
on 25 June 1990 up to the date of their reinstatement. If
reinstatement is no longer feasible, a one-month salary shall be
paid the petitioners as ordered in the labor arbiters decision; in
addition to the adjudged backwages.
SO ORDERED.
Bellosillo, Vitug, Kapunan, and Hermosisima, Jr.,
JJ., concur.
[1]
Rollo, pp. 37-38.
[2]
Rollo, p. 71.
[3]
G.R. No. 71664, 28 February 1992, 206 SCRA 643, citing the case of De
Leon vs. NLRC, G.R. No. 70705,21 August 1989, 176 SCRA 615.
[4]
Rollo, p. 70.
[5]
Rollo, p. 71.
[6]
G.R. No. 78763, 12 July 1989, 175 SCRA 277.