G.R. No.

140689
February 17, 2004
BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS, petitioner, vs.
NATIONAL LABOR RELATIONS COMMISSION and BANKARD, INC., respondents.
FACTS:
Bankard, Inc. classifies its employees according to level: Level I, Level II, Level III, Level IV and Level V
(See Note #1 for corresponding salary rates). On May 28, 1993, the directors of respondent Bankard,
Inc. approved a new salary scale for the purpose of making its hiring rate competitive in the labor
market. The new salary scale increased the hiring rates of new employees, to wit: Levels I and V were
increased by P1,000.00 while Levels II, III and IV were increased by P900.00 (see Note # 1). The
salaries of employees who fell below the new minimum rates were also adjusted accordingly to reach
such rates under their levels. As a result, Bankard Employees Union-Workers Alliance Trade Unions
(Bankard Union) demanded for salary increase of its old, regular employees. Bankard refused on the
ground that it had no obligation to grant all its employees the same increase. Bankard Union filed a
Notice of Strike on the ground of discrimination and other acts of Unfair Labor Practice. This was
initially treated as a preventive mediation case on the ground that the issues raised were not strikable.
Upon the second notice of strike, the dispute was certified for compulsory arbitration. The NLRC
dismissed the case for lack of merit, finding no wage distortion. The CA denied the same for lack of
merit. Hence, this petition.

ISSUE:
Whether the unilateral adoption by an employer of an upgraded salary scale that increased the hiring
rates of new employees without increasing the salary rates of old employees resulted in wage
distortion within the contemplation of Article 124 of the Labor Code.
RULING:
No. The Court held that wage distortion does not exist in this case as all the elements were not met.
There are four elements of wage distortion (See note #2), namely: (1) An existing hierarchy of
positions with corresponding salary rates, (2) a significant change in the salary rate of a lower pay
class without a concomitant increase in the salary rate of a higher one, (3) the elimination of the
distinction between the two levels and (4) the existence of the distortion in the same region of the
country. In a problem dealing with "wage distortion," the basic assumption is that there exists a
grouping or classification of employees that establishes distinctions among them on some relevant or
legitimate bases. Various factors such as the degrees of responsibility, the skills and knowledge
required, the complexity of the job, or other logical basis of differentiation are involved in such
classifications.
According to the NLRC, to determine the existence of wage distortion, the "historical" classification of
the employees prior to the wage increase must be established. In this case, the employees of Bankard
have been historically classified into levels (I-V), and not on the basis of their length of service. New
employees are automatically placed under any of these levels upon their entry. This is the wage
structure formulated by Bankard, a recognized management prerogative which Bankard Union may not
encroach upon by creating their own independent classification (ie, based on newly hired and old
employees) to use as a basis for demanding an across-the-board salary increase. According to
established jurisprudence, the formulation of a wage structure through the classification of employees
is a matter of management judgment and discretion.
Based on the wage structure, there is no hierarchy of positions between the newly hired and regular
employees of Bankard since it is a structure which is based on level, not seniority. The first element of
wage distortion is therefore lacking.
Second, the third element of wage distortion ie the elimination of the distinction between the two
levels, is also missing. Even if there was indeed a resulting decrease in the wage gap between the
salary of the old and new employees, the gap was held to be insignificant as to result in severe
contraction of the intentional quantitave differences in the salary rates between the employee group
as the classification under the wage structure is based on rank, and not seniority.

Third, pursuant to Article 124 of the Labor Code, Bankard cannot be legally obligated to correct the
alleged wage distortion, should it have existed in this case, because the increase in the wages and
salaries of the newly-hired was not due to a prescribed law or wage order. (See Note #3) The
fixing of hiring rates which resulted to wage increases was a voluntary and unilateral increase made by
Bankard. The Court held that Article 124 is to be construed in relation to minimum wage fixing, the
intention of the law being that in case of an increase in minimum wage, the distinctions in the wage
structure will be preserved. The case of Metro Transit Organization Inc. v. NLRC (See Note #4) is not
applicable in this case as in the former, there was no CBA but instead, an existing company practice
"that whenever rank-and-file employees were paid a statutorily mandated salary increase, supervisory
employees were, as a matter of practice, also paid the same amount plus an added premium. The
mere existence of a wage distortion does not ipso facto result to an obligation to rectify it, absent a law
or other source of obligation which requires its rectification. Furthermore, Bankards right to increase
its hiring rate, to establish minimum salaries for specific jobs, and to adjust the rates of employees
affected thereby is embodied under the parties CBA (See Note #5). The CBA is a valid and legally
enforceable source of rights between the parties and as such, will not be interfered with by the Courts
absent any bad faith on the part of the employer.

ADJUDICATION:
WHEREFORE, the present petition is hereby DENIED.
SO ORDERED.