Picture this: an employee wins an illegal dismissal case at the Labor Arbiter, wins again at the NLRC, and the NLRC decision becomes final and executory at that level. The employer, however, still has a Petition for Certiorari pending at the Court of Appeals. The employee moves for execution of the monetary award as it then stands, and gets paid. Everyone assumes the matter is settled.

But an illegal dismissal judgment really has two parts: the finding that the dismissal was illegal, and the computation of what's owed because of it. The second part can still be adjusted while the case remains under review — and if the case is ultimately decided in a way that orders separation pay in lieu of reinstatement "until finality of this decision," that earlier payout may turn out to be incomplete. Not because it was wrong when made, but because it used a cutoff that hadn't yet become the controlling one. Some employers push back when workers ask for the difference, arguing the worker already got separation pay and the relationship must already be over. That argument doesn't hold up — and it's worth walking through exactly why.

First, an important distinction

Not every illegal dismissal award works this way, so it helps to be precise about when the "compute until finality" rule actually applies. The Supreme Court laid out the framework clearly in Bani Rural Bank, Inc. v. De Guzman (G.R. No. 170904, November 13, 2013): if reinstatement is ordered and actually carried out, backwages generally run until actual reinstatement. It's specifically when separation pay is awarded in lieu of reinstatement — whether from the start, or later because reinstatement became impossible — that the relevant cutoff becomes the finality of the decision ordering that separation pay. That's the scenario this article focuses on.

Why an earlier computation isn't necessarily the final one

In Session Delights Ice Cream and Fast Foods v. Court of Appeals (G.R. No. 172149, February 8, 2010), the Supreme Court explained that the monetary consequences of an illegal dismissal ruling — as opposed to the underlying finding of illegal dismissal itself — can, in the proper case, still be recomputed during execution. So paying out based on an interim computation doesn't freeze the numbers if the case is still being litigated and the eventual decision changes or confirms a later cutoff. The earlier payment stands; it just may not be the last word on the amount.

What Bani Rural Bank clarified about "finality"

Bani Rural Bank is also the case that explains why finality is the cutoff, and it's a narrower and more precise point than "the case is still on appeal, so the clock keeps running." The logic is this: the monetary computation follows the legal status declared by the decision that actually orders separation pay. Until that specific decision becomes final, the employment relationship has not yet been conclusively terminated for purposes of that award. It isn't about how many courts the case passes through — it's about the finality of the particular decision ordering separation pay in lieu of reinstatement.

When the worker already received a payment: McConnell Dowell v. Bernal

The Supreme Court has directly addressed what happens when an employee already received a separation payment before the final award of separation pay in lieu of reinstatement. In McConnell Dowell Phils., Inc. v. Bernal (G.R. Nos. 224685 & 224692, November 10, 2021), the employee had already received separation pay in connection with his earlier termination. When the Court ultimately ruled that he was illegally dismissed and awarded separation pay in lieu of reinstatement — computed at one month's salary per year of service until finality of the decision — it ordered that award paid less the amount he had already received. The earlier payment wasn't disregarded, and it didn't cap the claim either. It was simply credited against the corrected, final total.

The facts in McConnell Dowell involved an earlier separation payment tied to the employee's original termination, rather than an NLRC-execution payment made mid-appeal as in the opening scenario above. While the factual setting is different, the case illustrates an important point for this discussion: an earlier separation payment does not necessarily become the controlling cutoff for the later award; where applicable, the amount already received is credited against the final amount due.

Practical implications

For employers: paying out based on an NLRC-level computation while a Petition for Certiorari is still pending doesn't necessarily close your exposure. If the case is decided in a way that orders separation pay in lieu of reinstatement computed until finality of that decision, budget for the possibility of a recomputation — with your earlier payment credited against the new total.

For employees: accepting payment through execution while the case is still under review doesn't automatically waive your right to the difference once the case is finally resolved in your favor, provided the final decision itself orders separation pay computed until its finality.

For both: the date that matters is the actual date the decision ordering separation pay in lieu of reinstatement becomes final and executory, as reflected in the Entry of Judgment or other official record of finality — not the date of an earlier writ of execution.

The bottom line

The finish line isn't necessarily the date of the first computation, the first payment, or even the date the judgment first became final at the NLRC level. When separation pay is awarded in lieu of reinstatement, the controlling cutoff is generally the finality of the specific decision ordering that separation pay — and an earlier payment made along the way is credited against that total, not treated as the end of the story.