Backwages: Meaning in Philippine Labor Law

It comes from the security-of-tenure rule of the Labor Code, Article 294 (Article 279 before the 2015 renumbering), as quoted by the Supreme Court in Keng Hua Paper Products v. Ainza (2023). An employee who is unjustly dismissed is entitled to reinstatement without loss of seniority rights and to full backwages, inclusive of allowances, and other benefits or their money value. These are computed from the time the pay was withheld up to actual reinstatement.

Backwages are one of the two main remedies for illegal dismissal. See Illegally dismissed: what can you get?

• If the worker goes back to work: from the dismissal until actual reinstatement.
• If going back is no longer possible: the labor tribunal or court orders separation pay instead. Then backwages run from the dismissal until the decision ordering separation pay becomes final (Keng Hua).

In Keng Hua, the Court also ordered 6% legal interest per year on the money awards, from the finality of the decision until full payment.

As a general rule, no. In Bustamante v. NLRC (1996), the Court read the words "full backwages" in the Labor Code as amended by Republic Act No. 6715 in 1989. It held that backwages "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 Court explained that a worker must still earn a living while the case is pending.

No. They follow a finding of illegal dismissal, meaning there was no valid cause. If there was a valid just cause but the employer skipped the notice steps, the dismissal stays valid and the employer pays nominal damages instead, as the Court held in Agabon v. NLRC (2004). See Fired without notice?

Probationary employees who are illegally dismissed also get backwages, as the Court held in C.P. Reyes Hospital v. Barbosa (2024). See Can a probationary employee be terminated?

Made-up illustration: Rhea, a sales clerk in Cebu City, is told to stop reporting for work without any reason. Two months later she finds a part-time job while her case is pending. Later, the labor arbiter finds her illegally dismissed and orders her back to work. Her backwages cover the whole period from the day her pay stopped until she is actually reinstated, and her part-time earnings are, as a general rule, not deducted.

An employer who keeps a worker without any assignment for too long may also be found to have dismissed the worker: see floating status. For separation pay for authorized causes such as redundancy, use the separation pay calculator.