When a dismissal is found illegal, the employee is generally entitled to two things: reinstatement to the former position without loss of seniority rights, and full back wages from the time compensation was withheld up to actual reinstatement. Reinstatement is the primary remedy. However, where reinstatement is no longer viable — for example, because of strained relations between the parties, the abolition of the position, the closure of the business, or the long passage of time — the court may award separation pay in lieu of reinstatement (typically one month pay per year of service), plus back wages. A reinstatement order by a labor arbiter is immediately executory even pending appeal, meaning the employer must reinstate the worker (physically or on payroll) while the appeal is decided. The choice between the two remedies is generally the court's, guided by feasibility and the interests of both parties.
You won your illegal dismissal case — now what do you get? Two main things: your job back and your lost wages. But sometimes money replaces the job.
The Two-Part Primary Remedy
An illegally dismissed employee is generally entitled to:
- Reinstatement to the former position without loss of seniority rights; and
- Full back wages from the time compensation was withheld until actual reinstatement.
Reinstatement is the primary remedy — the law's default is to put the worker back where they were.
When Separation Pay Replaces Reinstatement
Where reinstatement is no longer viable, the court may award separation pay in lieu of reinstatement — typically one month pay per year of service — plus back wages. Reasons that make reinstatement unfeasible include:
- Strained relations between the parties (especially in positions of trust);
- Abolition of the position or reorganization;
- Closure of the business; and
- The long passage of time making reinstatement impractical.
Reinstatement Pending Appeal
A powerful feature: a reinstatement order by a labor arbiter is immediately executory, even pending appeal. The employer must, while the appeal is decided, either:
- Physically reinstate the worker; or
- Reinstate on the payroll (payroll reinstatement).
This protects the worker's income during the appeal, and wages received are generally not returned even if the employer later wins.
Who Chooses?
The choice between reinstatement and separation pay is generally the court's, guided by the feasibility of reinstatement and the interests of both parties — not simply the employee's or employer's preference. The mere filing of a case does not, by itself, establish “strained relations.”
Practical Takeaways
- Illegal dismissal generally means reinstatement + full back wages — reinstatement is the primary remedy;
- Where reinstatement is not viable (strained relations, closed business, abolished post), separation pay is awarded in lieu, plus back wages;
- A labor arbiter's reinstatement order is immediately executory even on appeal — physically or on payroll.
Frequently Asked Questions
What is an illegally dismissed employee entitled to? Generally reinstatement to the former position without loss of seniority rights, plus full back wages from the time compensation was withheld until actual reinstatement. Reinstatement is the primary remedy.
When is separation pay given instead of reinstatement? When reinstatement is no longer viable, such as due to strained relations, abolition of the position, closure of the business, or the long passage of time. Separation pay in lieu (typically one month per year of service) is then awarded, plus back wages.
Does the employer have to reinstate during an appeal? Yes. A labor arbiter's reinstatement order is immediately executory even pending appeal. The employer must physically reinstate the worker or reinstate them on the payroll while the appeal is decided.
Who decides between reinstatement and separation pay? Generally the court, guided by the feasibility of reinstatement and the interests of both parties. The mere filing of a case does not, by itself, establish strained relations.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
If you have questions about your rights or options under Philippine law, our firm is available to assist. You may reach us via Viber or WhatsApp, call us at 0995 433 5550, or send an email to vivasnobles@gmail.com. We look forward to hearing from you.