G.R. No. 83523 , August 31, 1989
Grolier International, Inc. vs. Executive Labor Arbiter Arthur L. Amansec, The NLRC Sheriff, and Manuel L. Fernandez

FACTS

Manuel L. Fernandez was employed by Grolier International, Inc. in the Philippines as Comptroller and Executive Administrator with a monthly salary of P4,000. He left for Australia in July 1974 and worked for seven months for Grolier Society, Ltd. of Australia at an annual salary of AUS$8,000. Upon his return to Manila in February 1975 and after his Australian immigrant visa was denied, he sought reinstatement with the Philippine company. Grolier refused, leading Fernandez to file an illegal dismissal case. The Supreme Court, in a Resolution dated December 29, 1987, ultimately ruled in favor of Fernandez. The Court ordered Grolier to reinstate him with full backwages for three years from February 3, 1975, without deduction. If reinstatement was no longer possible, Grolier was to pay separation pay based on applicable law or company practice, whichever is higher, “effective as of the end of the aforementioned three (3) year period.”
Upon remand for execution, the NLRC Research and Information Unit computed the monetary award based on Fernandez’s Australian salary of AUS$8,000 per annum. The Labor Arbiter approved this computation in an Order dated May 19, 1988. Grolier filed a motion for reconsideration, arguing the award should be based on his last Philippine salary of P4,000 per month, not the Australian rate. The Arbiter denied the motion, prompting Grolier to file this Petition for Certiorari, alleging grave abuse of discretion.

ISSUE

1. Whether the backwages and separation pay should be computed based on Fernandez’s last salary with Grolier in the Philippines (P4,000/month) or his salary in Australia (AUS$8,000/year).
2. Whether the separation pay should cover his entire period of service from July 1964 to February 1978, or only from February 1978 onward.

RULING

The Supreme Court partially granted the petition. On the first issue, the Court ruled that the Labor Arbiter committed grave abuse of discretion by using the Australian salary rate. The legal logic is anchored on the concept of reinstatement, which means restoration to the former position from which one was dismissed. Since Fernandez sought reinstatement to his old position in the Philippines, his entitlement is limited to the salary attached to that position—P4,000 per month. Salary scales reflect the local cost of living and purchasing power; he could not reasonably expect to receive a foreign salary for domestic work. Therefore, backwages and separation pay must be computed using his last Philippine salary.
On the second issue, the Court affirmed the Labor Arbiter’s interpretation that separation pay should cover Fernandez’s entire period of service, including both actual service and the three-year period of putative service for which backwages were awarded. The phrase “effective as of the end of the above three (3) year period” in the Court’s earlier Resolution meant that the three-year backwages period should be included in the total length of service for computing separation pay, not that separation pay accrues only from that endpoint. Thus, his service is reckoned from July 1, 1964, to February 2, 1978. The Court modified the Arbiter’s Order by directing recomputation using the P4,000 monthly rate, while upholding the service period for separation pay.