The core rule in one sentence

When the Supreme Court (SC) reverses earlier rulings and finally declares a worker’s dismissal illegal, backwages are computed from the date the employee’s pay was withheld (the date of dismissal/termination)—not from the date of the SC decision—up to the point the law treats the employee as having been made whole (usually actual or payroll reinstatement, or the finality of the decision when separation pay is awarded in lieu of reinstatement).

That “start date” rule is anchored in the Labor Code’s illegal dismissal remedy (now found in Article 294 [formerly Art. 279]), as shaped by R.A. 6715 and a long line of Supreme Court decisions.

1) Legal foundation: why backwages “relate back” to the date of dismissal

A. Article 294 (Labor Code): reinstatement + full backwages

For illegally dismissed employees, the Labor Code provides the twin remedies:

Reinstatement (without loss of seniority rights and other privileges), and
Full backwages (including allowances and other benefits or their monetary equivalent)

Conceptually, backwages are restitutionary: they restore what the employee should have earned had the illegal dismissal not occurred. Because the injury is the loss of wages starting on the termination date, the computation starts there.

B. R.A. 6715: “full backwages” (no more “qualified” backwages)

Before R.A. 6715 (1989), older doctrine sometimes limited backwages (e.g., capped periods, or deductions). R.A. 6715 reinforced the “full backwages” approach, and jurisprudence thereafter generally treats backwages as:

Full (not capped by a fixed period), and
Not reduced by supposed “mitigation” earnings elsewhere (as a general rule)

So once the SC finally pronounces the dismissal illegal, the judgment typically applies the full backwages framework to the entire period that wages were unlawfully withheld—even if the employer previously won in the NLRC or Court of Appeals.

2) The key question: if the employer won below, do backwages start only from the SC reversal?

The short answer: No.

Even if the employer obtained favorable decisions from the Labor Arbiter (LA), NLRC, or CA, the final SC ruling controls. When the SC says the dismissal was illegal, backwages are computed from the date of dismissal, because that is when the wage loss began.

Why interim “wins” don’t reset the clock

In illegal dismissal, the SC’s final judgment does not treat the loss of wages as beginning only upon reversal; it treats the employee as having been unlawfully deprived of compensation from the time the dismissal happened. Good faith reliance on earlier rulings generally does not eliminate or truncate backwages in illegal dismissal cases, because backwages are designed to restore the worker’s lost earnings, not to punish or excuse the employer.

3) The start date: what exactly counts as “the date pay was withheld”?

In most cases, the start date is straightforward:

Date of termination/effective dismissal stated in the notice, memo, or final decision of management; or
Date the employee was barred from working (e.g., refused entry, removed from schedule, told not to report) and stopped receiving pay

Common variations

Preventive suspension vs. dismissal: if the employee was preventively suspended and later dismissed, the start for illegal dismissal backwages is typically the effective date of dismissal (not necessarily the first day of preventive suspension), unless the ruling treats the earlier exclusion as constructive dismissal or otherwise orders backwages for that earlier period based on the case facts.
Constructive dismissal: start is the date the employee was effectively forced out (e.g., demotion with unbearable conditions), usually tied to resignation/last day worked shown to be involuntary.

4) The end date: backwages don’t run forever—what stops them?

The end point depends on the remedy and what happens after judgment.

A. If reinstatement is ordered and actually happens

Backwages run from the date of dismissal up to actual reinstatement, because once the employee is back and being paid, wages are no longer being “withheld.”

If the employee is physically reinstated, the cut-off is the date of return to work.
If the employer opts for payroll reinstatement, the cut-off is the date payroll reinstatement starts (because the employee begins receiving wages again).

B. If separation pay is awarded in lieu of reinstatement

When reinstatement is no longer feasible (e.g., strained relations, position abolished, closure, or other valid reasons the tribunal recognizes), the court may award separation pay in lieu of reinstatement.

General rule used in many cases: Backwages are computed from the date of dismissal up to the finality of the decision awarding separation pay in lieu of reinstatement (because reinstatement will never occur, and finality is treated as the practical end of the employment relationship under the judgment).

C. Supervening events that can cut off backwages earlier

Even if the dismissal is ruled illegal, courts recognize practical/legal impossibility points that can cut off backwages:

Company closure/cessation of business (depending on circumstances and findings)
Employee’s death (backwages typically up to date of death; then claims pass to estate/heirs)
Compulsory retirement age reached during litigation (often backwages up to retirement date, with retirement consequences handled separately depending on eligibility/rules)
Employee refuses reinstatement or fails to report back after a bona fide offer/notice (backwages can be limited to when reinstatement was effectively available)

5) Interaction with reinstatement pending appeal (important, even if your scenario is an SC reversal)

Under the Labor Code (reinstatement aspect of an LA decision is immediately executory), if an LA orders reinstatement and the employer appeals, the employer must still reinstate (actual or payroll).

This produces two distinct scenarios:

Scenario 1: LA finds illegal dismissal; employer reinstates pending appeal; later higher courts reverse and uphold dismissal

A well-known doctrine is the no-refund rule: wages paid during reinstatement pending appeal are generally not recoverable from the employee even if the dismissal is later declared valid.

Scenario 2 (your focus): employer wins below; SC finally finds illegal dismissal

Because there was no reinstatement order implemented (or none existed), backwages typically cover the entire period from dismissal until the proper endpoint (reinstatement/payroll reinstatement, or finality if separation pay is ordered).

6) What is included in “full backwages” in Philippine illegal dismissal cases?

“Full backwages” commonly covers the compensation package the employee would have received during the backwages period, including:

Basic salary
Regular allowances (e.g., COLA, guaranteed monthly allowances)
Benefits that are part of regular compensation, or their monetary equivalent (context-dependent)
13th month pay (typically computed proportionally across the period)
Wage increases mandated by law (e.g., wage orders) and sometimes those granted by company practice or CBA, if proven applicable

Not automatically included (often litigated)

Items usually requiring specific basis/proof (and sometimes awarded as separate money claims rather than baked into backwages) include:

Overtime pay, night differential, holiday pay (unless there is a fixed, guaranteed component established by policy/practice)
Performance bonuses that are discretionary or conditional
Fringe benefits dependent on actual work performance or specific eligibility conditions

7) Deductions, offsets, and “earnings elsewhere”

A. Earnings from other employment/business during the case

As a general post–R.A. 6715 approach, backwages are not typically reduced by the employee’s interim earnings elsewhere. The idea is that full backwages are a statutory relief tied to the illegal dismissal, not a tort-style “mitigation” calculation.

B. Amounts already paid by the employer

However, double recovery is avoided. Amounts the employer already paid that cover the same period/entitlement may be credited or offset, such as:

Salaries already paid under payroll reinstatement (for the overlapping period)
Some employer-paid benefits already received covering the same time frame
Separation pay or final pay previously released may be treated depending on the judgment’s directives and equities

Offsets are detail-sensitive; the tribunal’s computation order matters.

8) Interest on backwages: when does interest run?

Philippine labor judgments often apply the Supreme Court’s framework on legal interest on monetary awards (commonly associated with Nacar v. Gallery Frames doctrine): legal interest (often 6% per annum) is typically applied from the finality of judgment until full satisfaction, unless the decision specifies a different start point.

Practical takeaway: even if backwages are computed starting from the dismissal date, interest often begins at finality (unless otherwise stated in the dispositive portion).

9) How computation is actually done (the mechanics)

Step 1: Fix the start date

Effective date of dismissal / date wages stopped due to termination

Step 2: Fix the end date (depends on remedy)

Actual reinstatement date, or
Payroll reinstatement start date, or
Finality of decision awarding separation pay in lieu, or
Supervening cut-off date (retirement, death, closure, refusal to return)

Step 3: Identify the wage base

Monthly basic salary at dismissal
Add fixed/regular allowances
Apply lawful wage increases (as supported by evidence)

Step 4: Add statutory/regular components

Pro-rated 13th month pay during the period
Other regular benefits proven included in compensation

Step 5: Apply credits (if any) and compute interest (if awarded)

Credit overlapping payments
Apply legal interest as directed by the decision or prevailing doctrine

10) Worked example (simple illustration)

Facts (hypothetical):

Dismissed: January 15, 2020
Monthly salary: ₱25,000
Fixed allowance: ₱2,000/month
SC decision (final): finds illegal dismissal; orders reinstatement
Employee actually reinstated: April 30, 2025

Backwages period: Jan 15, 2020 → Apr 30, 2025

Monthly base: ₱27,000 (salary + allowance)

You would compute:

₱27,000 × number of months (plus proportional days)
Add proportional 13th month pay across the covered years
Adjust for any proven wage increases
Apply credits (if employer paid any overlapping payroll reinstatement wages)
Apply legal interest from finality (if applicable)

The critical point: the start is still January 15, 2020, even though the employee only “won” definitively at the SC in 2025.

11) Practical drafting notes (for pleadings, decisions, and computations)

When courts or labor tribunals order “full backwages,” computation disputes usually turn on:

The precise end date (reinstatement date vs. finality vs. supervening event date)
Whether separation pay in lieu was awarded (and whether backwages cut off at finality)
Which allowances/benefits are part of backwages
Proof of wage increases and employment status during the period
Whether the employee declined reinstatement or was unavailable to return

Because of these recurring disputes, SC decisions often either:

Provide a cut-off rule and remand the actual arithmetic to the labor arbiter, or
Affirm the computation method used below if supported by records

12) Bottom line

Default doctrine after an SC reversal

If the Supreme Court finally holds the dismissal illegal, backwages generally run from the date of dismissal (when pay was withheld), not from the SC decision date.

The real battleground is the cut-off

The computation usually turns not on the start date, but on what event legally ends backwages:

Actual/payroll reinstatement, or
Finality of judgment awarding separation pay in lieu, or
A supervening event making reinstatement impossible

If you want, paste a short timeline (dismissal date, what each tribunal ruled, what the SC ordered—reinstatement or separation pay, and whether/when reinstatement happened). I can apply the doctrines above to that fact pattern and identify the most defensible start/end dates and inclusions for computation.