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VOL. 454, MARCH 31, 2005 357

Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

*
G.R. No. 137863. March 31, 2005.

BANK OF THE PHILIPPINE ISLANDS EMPLOYEES

UNION and ZENAIDA UY, petitioner, vs. BANK OF THE
PHILIPPINE ISLANDS, CARLOS FRAGANTE, DELFIN
SANTOS, ALBERTO JUGO and/or OSCAR CONTRERAS,
respondents.

Labor Law; Backwages; Mercury Drug Rule; The rule

providing for the entitlement of an illegally dismissed employee to
only three years backwages “without deduction or qualification” to
obviate the need for further procedings in the course of the
execution, otherwise known as the “Mercury Drug Rule,” has long
been abandoned.—The rule providing for the entitlement of an
illegally dismissed employee to only three years backwages
“without deduction or qualification” to obviate the need for further
proceedings in the course of execution, otherwise known as the
“Mercury Drug Rule,” has long been abandoned. In a long line of
cases, we have stated that the case of Mercury Drug, Co., Inc. v.
CIR, is no longer applicable. To preclude the recurrence of the
situation where the employee, with folded arms, remains inactive
in the expectation that windfall would come to him and to speed
up the process of execution, the aforementioned Mercury Drug
case provided a remedy by ruling that an employee whose illegal
termination had lasted some years was entitled to backwages for
a fixed period “without further qualifications,” i.e., without need
of taking account of whatever he might have earned during such
period, and deducting it from the amount of recovery, by
providing a base period of three years. The three-year-limit
doctrine has been consistently and uniformly applied by this
Court over many years until the promulgation of Republic Act No.
6715 which amended Article 279 of the Labor Code in 1989.
Same; Same; Same; Statutes; R.A. No. 6715; Statutory
Construction; A closer adherence to the legislative policy behind
R.A. No. 6715 points to “full backwages” as meaning exactly that,
i.e., without deducting from backwages the earnings derived

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elsewhere by the concerned employee during the period of his

illegal dismissal—the provision calling for “full backwages” to
illegally dismissed employees

_______________

* SECOND DIVISION.

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358 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands Employees Union vs. Bank of the

Philippine Islands

is clear, plain and free from ambiguity and, therefore, must be

applied without attempted or strained interpretation.—Verily, the
evident legislative intent as expressed in Rep. Act No. 6715,
above-quoted, is that the backwages to be awarded to an illegally
dismissed employee, should not, as a general rule, be diminished
or reduced by the earnings derived by him elsewhere during the
period of his illegal dismissal. The underlying reason for this
ruling is that the employee, while litigating the legality (illegality)
of his dismissal, must still earn a living to support himself and his
family. Corollary thereto, full backwages have to be paid by the
employer as part of the price or penalty he has to pay for illegally
dismissing his employee. Thus, a closer adherence to the
legislative policy behind Rep. Act No. 6715 points to “full
backwages” as meaning exactly that, i.e., without deducting from
backwages the earnings derived elsewhere by the concerned
employee during the period of his illegal dismissal. In other
words, the provision calling for “full backwages” to illegally
dismissed employees is clear, plain and free from ambiguity and,
therefore, must be applied without attempted or strained
interpretation.
Same; Same; Absent any exceptional circumstance, it is now
settled that an employee who is unjustly dismissed from work shall
be entitled to full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent from the time his
compensation was withheld from him up to the time of his actual
reinstatement.— Under the factual circumstances of the case, the
law and jurisprudence prevailing, therefore, we find that the
Court of Appeals committed a reversible error in limiting the
award of backwages for a fixed period of three years. The illegal
dismissal of petitioner Uy was effected in 1995, or after Rep. Act

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No. 6715 took effect on 21 March 1989. Absent any exceptional

circumstance, it is now settled that an employee who is unjustly
dismissed from work shall be entitled to full backwages, inclusive
of allowances, and to his other benefits or their monetary
equivalent from the time his compensation was withheld from
him up to the time of his actual reinstatement.
Same; Same; Strained Relations Doctrine; Mere allegation of
strained relations to bar reinstatement is frowned upon; The
doctrine of strained relations should be strictly applied so as not to
deprive an illegally dismissed employee of his right to
reinstatement—every labor dispute almost always results in
“strained relations” and the phrase cannot be given an overarching
interpretation, otherwise, an

359

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Bank of the Philippine Islands Employees Union vs. Bank of the

Philippine Islands

unjustly dismissed employee can never be reinstated.—We have oft

said that mere allegation of strained relations to bar
reinstatement is frowned upon. In the case of PLDT, et al. v.
Tolentino, we reiterated our ruling in Quijano v. Mercury Drug
Corp. wherein we propitiously said that the strained relations
doctrine should be strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement. We further
stated that: Well-entrenched is the rule that an illegally
dismissed employee is entitled to reinstatement as a matter of
right. Over the years, however, the case law developed that where
reinstatement is not feasible, expedient or practical, as where
reinstatement would only exacerbate the tension and strained
relations between the parties, or where the relationship between
the employer and employee has been unduly strained by reason of
their irreconcilable differences, particularly where the illegally
dismissed employee held a managerial or key position in the
company, it would be more prudent to order payment of
separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of
this doctrine of “strained relations” by using it as a cover to get
rid of its employees and thus defeat their right to job security. To
protect labor’s security of tenure, we emphasize that the doctrine
of “strained relations” should be strictly applied so as not to
deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in
“strained relations” and the phrase cannot be given an
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overarching interpretation, otherwise, an unjustly dismissed

employee can never be reinstated.

PETITION for review on certiorari of the decision and

resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Carlo A. Domingo for petitioners.
          Benedicto, Versoza, Gealogo & Burkley for
respondents.

CHICO-NAZARIO, J.:

This petition for review on certiorari under Rule 45 of the

1997 Rules on Civil Procedure, as amended, seeks to
partially
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360 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

1
reverse the 2
Decision of 28 October 1998 and the
Resolution of 08 March 1999 of the Court of Appeals, in
CA-G.R. SP No. 3
47363, which affirmed with modification
the Decision rendered by the Accredited Voluntary
Arbitrator dated 31 December 1997, in VA Case No. 08-
001-97. The case before the Voluntary Arbitrator was for
illegal transfer and termination, with the latter ruling in
favor of the petitioners herein.
The facts as narrated by the Court of Appeals are quoted
hereunder:
4
On 26 October 1995, respondent Zenaida V. Uy, former teller of
the Escolta5
Branch of BPI, shouted at her Senior Manager,
petitioner Delfin D. Santos (Santos for brevity). Uy was told to go
to the office of the petitioner Carlos B. Fragante, BPI’s area head
and Assistant Vice President, to discuss her complaint. On the
same date, AVP Fragante told Uy to transfer to the nearby Plaza
Cervantes Branch of BPI and report to its operations manager to
defuse (sic) the tense situation prevailing at the Escolta Branch.
On 27 October 1995, AVP Fragante received the report of the
Escolta Branch Manager (Santos) on the shouting incident,
together with the written letter-reports of some branch personnel.
On the same day, AVP Fragante ordered Uy to transfer to the
Plaza Cervantes Branch. Upon receipt of the order, Uy
commented that she will not transfer and will await the result of
the grievance meeting. The respondent BPI Employees Union
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initiated a grievance proceeding against the BPI Management for

the transfer of Uy to the Plaza Cervantes Branch. A meeting was
set for 30 October 1995. On 30 October 1995, AVP Fragante sent
Uy a letter . . . directing her to explain within 24 hours why no
disciplinary action should be taken against her for
insubordination, for not paying heed to the order to

_______________

1 Penned by Associate Justice Delilah Vidallon-Magtolis with Associate Justices

Artemon D. Luna and Rodrigo V. Cosico, concurring; Rollo, pp. 32-38.
2 Rollo, p. 30.
3 Rendered by Voluntary Arbitrator Samuel Entuna; Rollo, p. 39.
4 Now one of the petitioners herein.
5 Now one of the respondents herein.

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transfer. Uy sent a reply on the same date . . . explaining that she

could not transfer from Escolta Branch because there was no
proper turnover of her accountabilities; that she was not able to
do so on October 27, 1995 because she was not allowed to open (as
a teller); and, that since then she has been barred from entering
the bank premises. On the same day, a meeting was held to hear
Uy’s grievance relative to her transfer, but no agreement was
reached. On 31 October 1995, AVP Fragante sent Uy another
letter . . . asking her to explain why no disciplinary action should
be taken against her for uttering disrespectful, discourteous,
insulting and unbecoming language to her superior, Senior
Manager Delfin Santos. Uy sent an undated reply thereto . . .
reiterating why she could just not leave her position at the
Escolta Branch, and requesting that she be considered on leave
starting November 2, 1995. On 13 November 1995, AVP Fragante
wrote Uy another letter . . . directing her to show cause on or
before 16 November 1995 why no disciplinary action, including
possible termination, should be taken against her for the October
26, 1995 incident, for insubordination or defiance to the transfer
order, and for going on absence without leave. A copy thereof was
furnished the Union. Uy sent a reply letter dated November 20,
1995, asking for particulars relative to the alleged “highly
disrespectful, discourteous, insulting, threatening, and
unbecoming language and behavior towards your Manager, Delfin
San-tos” and on the alleged “past instances when she was
involved with quarrels with your co-employees,” and alleging that

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she felt “binabastos mo ako” (I was being sexually harassed) when

he uttered “Dito ka na lang, marami and [ang] lalaki dito” (You
just stay here, there are plenty of men here), and when she
answered “Hindi ako mahilig sa lalaki” (I am not fond of men), he
retorted, “Maski dito ka na lang sa kuwarto ko” (You may just
stay here in my room . . .). The union asked for a suspension of the
grievance machinery and for investigation of the “sexual
harassment” charge. On November 24, 1995, Uy requested
Management through Mr. Oscar L. Cervantes, for transfer to the
Taft Avenue Branch to save on gasoline expenses. Two meetings
were held between the union side and the management side,
represented by Mr. Fragante’s superior, Senior Vice President
Alberto Jugo and Senior Manager Efren Tuble. When no
agreement was reached, the management advised Uy and the
Union as well as their counsel that the management had no
choice but to terminate Uy. Both the union and Uy were sent
copies of the Notice

362

362 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands Employees Union vs. Bank of the
Philippine Islands

of Termination . . . dated December 8, 1995, which had the

following tenor:

NOTICE OF TERMINATION

Dear Ms. Uy:

This is to advise you of the termination of your

employment effective December 14, 1995 on the
grounds of gross disrespect/discourtesy towards an
officer, insubordination and absence without leave.
It has been established that you used highly
disrespectful, discourteous, insulting, threatening and
unbecoming language and behavior towards your
branch manager, Delfin Santos, last October 26.
Despite being given the chance to explain or justify
your actions, you chose to skirt the issue by pointing
out that I am in no position to make a conclusion as I
was not around when the incident happened. You
know fully well that as Sales Director of North Manila
area having supervision over Escolta Branch, such
incident was reported to me. Mr. Delfin Santos
appropriately inhibited himself from conducting the
investigation for obvious reasons. We disagree with
you when you dismissed the incident as trivial.
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Moreover, the explanations you gave at our Head

Office were found wanting in circumstances that would
absolve you or mitigate your wrongdoing as said
explanations in fact confirmed the findings at the
branch level. With regard to quarrels with your
officemates, you can be considered as recidivist. You
can of course recall your quarrels, using very strong
and insulting words, with your co-employees Ms.
Teresa Manalang last year and with Jocelyn Ng this
year.
You refused to follow the transfer instruction to
report to Cervantes Branch last October 27 alleging
failure to properly turn over your accountabilities
despite being in the branch for practically the whole
day on October 27. We have adequate procedure for the
opening of ‘pico’ boxes in the presence of witnesses in
cases of refusal and AWOL.
In a further manifestation of your contempt towards
managerial authority, you went on absence without
leave starting October 30. After refusing to receive all
communications sent to your residence, you tried to
rectify this AWOL by

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sending an undated letter received by us last

November 6 wherein you declared yourself to be on
leave beginning November 2. You have since refused to
report for work.
Under the circumstances, you left us with no
alternative but to terminate your employment with us.
(SGD.) CARLOS B. FRAGANTE
Asst. Vice President

Uy filed a case for illegal transfer and termination. On June 29,

1996, Labor Arbiter Manuel R. Caday who initially heard and
decided the case issued a decision declaring the dismissal of Uy as
illegal and ordering her reinstatement with full backwages and
10% attorney’s fees . . . BPI appealed the said decision to the
National Labor Relations Commission (NLRC) which rendered a
decision on May 28, 1997, setting aside the Labor Arbiter’s
Decision for lack of jurisdiction, and ruling that the case falls
under the jurisdiction of a Voluntary Arbitrator.

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The case was raffled to respondent Arbitrator Entuna, who 6

requested the parties to submit their respective position papers.

The Voluntary Arbitrator, in his disputed Decision of 31

December 1997, adjudged:

“WHEREFORE, premises considered, judgment is hereby

rendered declaring the dismissal of complainant Zenaida Uy as
illegal and ordering the respondent Bank of the Philippine Islands
to immediately reinstate her to her position as bank teller of the
Escolta Branch without loss of seniority rights and with full
backwages computed from the time she was dismissed on
December 14, 1995 until she is actually reinstated in the service,
and including all her other benefits which are benefits under their
Collective Bargaining Agreement (CBA).
For reasonable attorney’s fees, respondent is also ordered to
pay complainant
7
the equivalent of 10% of the recoverable award
in this case.”

_______________

6 Rollo, pp. 32-35.

7 Rollo, p. 44.

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364 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

The Motion for Reconsideration of the herein respondents

BPI, et al., was subsequently denied.
Aggrieved, they then filed a Petition for Review before
the Court of Appeals assailing the aforestated decision.
On 28 October 1998, the Court of Appeals issued the
assailed decision affirming the finding of the Voluntary
Arbitrator that indeed Uy’s employment was illegally
terminated. The appellate court, however, modified the
award for backwages by limiting it to three years as well as
finding that there was strained relations between the
parties, to wit:

“WHEREFORE, the judgment appealed from is AFFIRMED with

the MODIFICATION that instead of reinstatement, the petitioner
Bank of the Philippine Islands is DIRECTED to pay Uy back
salaries not exceeding three (3) years and separation pay of one
month for every year 8of service. The said judgment is AFFIRMED
in all other respects.”

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Both parties seasonably filed their respective motions for

partial reconsideration of the aforesaid decision but the
appellate court denied them in a Resolution dated 08
March 1999.
Hence, the parties individually went to this Court via a
Petition for Review
9
on Certiorari.
The petition filed by herein respondents BPI, et al.,
however, was denied for their failure to submit a
certification duly executed by themselves that no other
action or proceeding involving the same issues raised in
this case has been filed or is pending before this Court, the
Court of Appeals, or in the different divisions thereof, or in
any other tribunal or quasi-judicial agency, with the
undertaking to inform the Court of any similar case filed or
pending in any court, tribunal or quasi-judicial agency that
may thereafter come to their knowledge in accordance with
Section 4(e), Rule 45 in relation to Section 5, Rule 7,
Section 2, Rule 42, and Sections 4 and

_______________

8 Rollo, p. 38.
9 G.R. No. 137856.

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5(d), Rule 56 of the10

Rules of Court. The corresponding
Entry of Judgment was entered in the Book of Entries of
Judgments on 22 September 1999.
For the reason above stated, only the following errors
imputed by herein petitioners Bank of the Philippine
Islands Employees Union (BPIEU) and Uy to the appellate
court are in issue:

WITH DUE RESPECT, THE QUESTIONED RESOLUTION AND

DECISION OF THE HONORABLE COURT OF APPEALS ARE
CONTRARY TO LAW INSOFAR AS THEY LIMITED THE
AWARD OF BACKWAGES TO THREE (3) YEARS; AND

II

WITH DUE RESPECT, THE HONORABLE COURT OF

APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN

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HOLDING THAT STRAINED RELATIONS EXIST BETWEEN

THE BANK AND PETITIONER UY DESPITE THE FACT THAT
THE SHOUTING INCIDENT IS NOT SO SERIOUS AND IT
INVOLVED ONLY 11
PETITIONER UY AND RESPONDENT
DELFIN SANTOS.

Anent the first issue, the petitioners contend that the

decision of the appellate court limiting the award of
backwages to three (3) years is contrary to law and
jurisprudence.
The petition is meritorious.
The rule providing for the entitlement of an illegally
dismissed employee to only three years backwages “without
deduction or qualification” to obviate the need for further
proceedings in the course12of execution, otherwise known as
the “Mercury Drug Rule,” has long been abandoned.

_______________

10 Rollo, p. 165.
11 Rollo, p. 22.
12 Mercury Drug Co., Inc. v. Court of Industrial Relations, G.R. No. L-
23357, 30 April 1974, 56 SCRA 694, 709.

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Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

13
In a long line of cases, we have
14
stated that the case of
Mercury Drug, Co., Inc. v. CIR, is no longer applicable. To
preclude the recurrence of the situation where the
employee, with folded arms, remains inactive in the
expectation that windfall would come to him and to speed
up the process of execution, the aforementioned Mercury
Drug case provided a remedy by ruling that an employee
whose illegal termination had lasted some years was
entitled to backwages for a fixed period “without further
qualifications,” i.e., without need of taking account of
whatever he might have earned during such period, and
deducting it from the amount of recovery, by providing a
base period of three years. The three-year-limit doctrine
has been consistently and uniformly applied by this Court
over many years until the promulgation of Republic Act No.
6715 which amended Article 279 of the Labor Code in 1989.
With the new law before us, we clarified the
computation of backwages due an employee on account of
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his illegal dismissal from employment in the case of

Osmalik
15
Bustamante, et al. v. NLRC and Evergreen Farms,
Inc. We held that the passing

_______________

13 Ferrer v. National Labor Relations Commission, G.R. No. 100898, 05

July 1993, 224 SCRA 410; Pines City Educational Center v. National
Labor Relations Commission, G.R. No. 96779, 10 November 1993, 227
SCRA 655; Osmalik Bustamante, et al. v. National Labor Relations
Commission, G.R. No. 111651, 15 March 1996, 255 SCRA 145 & 28
November 1996, 265 SCRA 61; Metro Transit Org., Inc. v. National Labor
Relations Commission, 367 Phil. 259, 267; 307 SCRA 747, 31 May 1999;
Rutaquio v. National Labor Relations Commission, G.R. Nos. 97652-53, 19
October 1999, 317 SCRA 1, 11; University of the Immaculate Concepcion v.
U.I.C. Teaching and Non-Teaching Personnel and Employees Union, G.R.
No. 144702, 31 July 2001, 362 SCRA 242; and Perpetual Help Credit
Cooperative, Inc. v. Faburada, G.R. No. 121948, 08 October 2001, 366
SCRA 693.
14Supra, note 12.
15Supra, note 13.

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16 17
of Republic Act No. 6715, particularly Section 34, which
took effect on 21 March 1989, amended Article 279 of the
Labor Code, which now states in part:

ART. 279. Security of Tenure.—. . . An employee who is unjustly

dismissed from work shall be entitled to reinstatement without
loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his
compensation was withheld from him up to the time of his actual
reinstatement.

Verily, the evident legislative intent as expressed in Rep.

Act No. 6715, above-quoted, is that the backwages to be
awarded to an illegally dismissed employee, should not, as
a general rule, be diminished or reduced by the earnings
derived by him elsewhere during the period of his illegal
dis-

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_______________

16 AN ACT TO EXTEND PROTECTION TO LABOR, STRENGTHEN

THE CONSTITUTIONAL RIGHTS OF WORKERS TO SELF-
ORGANIZATION, COLLECTIVE BARGAINING AND PEACEFUL
CONCERTED ACTIVITIES, FOSTER INDUSTRIAL PEACE AND
HARMONY, PROMOTE THE PREFERENTIAL USE OF VOLUNTARY
MODES OF SETTLING LABOR DISPUTES, AND REORGANIZE THE
NATIONAL LABOR RELATIONS COMMISSION, AMENDING FOR
THESE PURPOSES CERTAIN PROVISIONS OF PRESIDENTIAL
DECREE NO. 442, AS AMENDED, OTHERWISE KNOWN AS THE
LABOR CODE OF THE PHILIPPINES, APPROPRIATING FUNDS
THEREFOR, AND FOR OTHER PURPOSES.
17 SEC. 34. Article 279 of the Labor Code is hereby amended to read as
follows:

“ART. 279. Security of Tenure.—In cases of regular employment, the employer

shall not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges
and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.”

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Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

missal. The underlying reason for this ruling is that the

employee, while litigating the legality (illegality) of his
dismissal, must still earn a living to support himself and
his family. Corollary thereto, full backwages have to be
paid by the employer as part of the price or penalty he has
to pay for illegally dismissing his employee. Thus, a closer
adherence to the legislative policy behind Rep. Act No.
6715 points to “full backwages” as meaning exactly that,
i.e., without deducting from backwages the earnings
derived elsewhere by the concerned employee during the
period of his illegal dismissal. In other words, the provision
calling for “full backwages” to illegally dismissed employees
is clear, plain and free from ambiguity and, therefore, must
18
be applied without attempted or strained interpretation.
Consequently, in accordance with Section 34, Rep. Act
No. 6715, employees illegally dismissed after 21 March
1989 are entitled to their “full backwages,” inclusive of
other benefits or their monetary equivalent, from the time

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their actual compensation was withheld from them up to

the time of their actual reinstatement.
Under the factual circumstances of the case, the law and
jurisprudence prevailing, therefore, we find that the Court
of Appeals committed a reversible error in limiting the
award of backwages for a fixed period of three years. The
illegal dismissal of petitioner Uy was effected in 1995, or
after Rep. Act No. 6715 took effect on 21 March 1989.
Absent any exceptional circumstance, it is now settled that
an employee who is unjustly dismissed from work shall be
entitled to full backwages, inclusive of allowances, and to
his other benefits or their monetary equivalent from the
time his compensation was withheld19
from him up to the
time of his actual reinstatement.

_______________

18 See note 15.

19 Rutaquio v. National Labor Relations Commission, et al., supra, note
13.

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Apropos the issue of non-reinstatement of petitioner Uy,

the Court of Appeals held that “in a number of cases, the
High Court had allowed mere payment of severance pay,
when reinstatement would no longer be beneficial to20either
party in view of strained relations between them.” And,
thus, in lieu of reinstatement, it ordered the payment of
separation pay instead.
The petitioners, on the other hand, posit that the
material incidents of the case at bar are but confined or
personal to the individual respondents Delfin Santos and
Carlos Fragante. The other respondents, namely Alberto
Jugo and Oscar Contreras were impleaded merely because
of their position in respondent BPI’s Human Resources
Department. In the words of the petitioners, “the
controversy was a personal matter between21 Ms. Uy and
Messrs. Delfin Santos and Carlos Fragante.” In addition,
they bolstered their position by relying on what this Court
had to22 say in Globe-Mackay Cable and Radio Corp. v.
NLRC:

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Obviously, the principle of “strained relations” cannot be ap-plied

indiscriminately. Otherwise, reinstatement can never be possible
simply because some hostility is invariably engendered between
the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid and
legal act of asserting one’s right; otherwise an employee who shall
assert his right could be easily separated from the service, by
merely paying his separation pay on the pretext that his
relationship with his employer had already become strained.

Petitioners’ reliance is well placed.

We have oft said that mere allegation of strained
relations to bar reinstatement is frowned upon.

_______________

20 Rollo, p. 38.
21 Rollo, p. 229.
22 G.R. No. 82511, 03 March 1992, 206 SCRA 701, 712.

370

370 SUPREME COURT REPORTS ANNOTATED

Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

23
In the case of PLDT, et al. v. Tolentino, we24reiterated our
ruling in Quijano v. Mercury Drug Corp. wherein we
propitiously said that the strained relations doctrine
should be strictly applied so as not to deprive an illegally
dismissed employee of his right to reinstatement. We
further stated that:

Well-entrenched is the rule that an illegally dismissed employee

is entitled to reinstatement as a matter of right. Over the years,
however, the case law developed that where reinstatement is not
feasible, expedient or practical, as where reinstatement would
only exacerbate the tension and strained relations between the
parties, or where the relationship between the employer and
employee has been unduly strained by reason of their
irreconcilable differences, particularly where the illegally
dismissed employee held a managerial or key position in the
company, it would be more prudent to order payment of
separation pay instead of reinstatement. Some unscrupulous
employers, however, have taken advantage of the overgrowth of
this doctrine of “strained relations” by using it as a cover to get
rid of its employees and thus defeat their right to job security.

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To protect labor’s security of tenure, we emphasize that the

doctrine of “strained relations” should be strictly applied so as not
to deprive an illegally dismissed employee of his right to
reinstatement. Every labor dispute almost always results in
“strained relations” and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed
employee can never be reinstated.

The said case went on further to quote our pronouncement 25

in the case of Almira v. B.F. Goodrich, Philippines, Inc.:

This Court is cognizant of management’s right to select the people

who will manage its business as well as its right to dismiss them.
However, this right cannot be abused. Its exercise must always be
tempered with compassion and understanding. As former Chief
Justice Enrique Fernando eloquently put it:

_______________

23 G.R. No. 143171, 21 September 2004, 438 SCRA 555.

24 G.R. No. 126561, 08 July 1998, 292 SCRA 109, 116-117.
25 G.R. No. L-34974, 25 July 1974, 58 SCRA 120.

371

VOL. 454, MARCH 31, 2005 371

Bank of the Philippine Islands Employees Union vs. Bank
of the Philippine Islands

Where penalty less severe would suffice, whatever missteps may

be committed by labor ought not to be visited with consequence so
severe. It is not only because of the law’s concern for the
workingmen. There is, in addition, his family to consider.
Unemployment brings untold hardships and sorrows on those
dependent on the wage-earner. The misery and pain attendant on
the loss of jobs then could be avoided if there be acceptance of the
view that under all the circumstances of a case, the workers
should not be deprived of their means of livelihood. Nor is this to
condone what has been done by them.

Moreover, it has been almost a decade since the incident

that led to the dismissal of petitioner Uy occurred.
Petitioner Uy contends, and the respondents do not
contradict, that respondent Carlos Fragante has long been
assigned in another area and Messrs. Alberto Jugo and
Oscar Contreras are no longer connected with respondent
BPI. Considering, thus, that there now appears no more
basis for strained relations between the present
management and petitioner Uy, reinstatement is possible.
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WHEREFORE, the instant petition is GRANTED. The

assailed 28 October 1998 Decision and 8 March 1999
Resolution of the Court of Appeals are hereby MODIFIED
as follows: 1) respondent BPI is DIRECTED to pay
petitioner Uy backwages from the time of her illegal
dismissal until her actual reinstatement; and 2) respondent
BPI is ORDERED to reinstate petitioner Uy to her former
position, or to a substantially equivalent one, without loss
of seniority right and other benefits attendant to the
position.
SO ORDERED.

          Puno (Chairman), Austria-Martinez, Callejo, Sr.,

and Tinga, JJ., concur.

Petition granted, assailed decision and resolution

modified.

Notes.—The doctrine on “strained relations” cannot be

applied indiscriminately since every labor dispute almost
in-

372

372 SUPREME COURT REPORTS ANNOTATED

Guevarra vs. Sandiganbayan, Fourth Division

variably results in “strained relations.” (Capili vs. National

Labor Relations Commission, 270 SCRA 488 [1997])
The refusal of the complainants to be reinstated is
indicative of strained relations. (Sentinel Security Agency,
Inc. vs. National Labor Relations Commission, 295 SCRA
123 [1998])

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