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P.I. Manufacturing Incorporated v. P.I Manufacturing Union G.R. No. 167217, 4 February 2008, FIRST DIVISION (Sandoval-Gutierrez, J.

) In 1987, the President signed into law Republic Act (RA) No. 6640 providing, among others, an increase in the statutory minimum wage and salary rates of employees and workers in the private sector. Thereafter, P.I. Manufacturing Incorporated (P.I), petitioner, and P.I. Manufacturing Supervisors and Foremen Association (PIMASUFA), respondents, entered into a new Collective Bargaining Agreement (1987 CBA) whereby the supervisors were granted an increase of Php 625 per month and the foremen, Php 475 per month. In 1989, PIMASUFA and the National Labor Union filed a complaint with the National Labor Relations Commission (NLRC) charging P.I. with violation of RA No. 6640, contending that the implementation of the said statute had resulted in a wage distortion. The Labor Arbiter rendered a Decision in favor of PIMASUFA, ordering P.I. to pay all the members of PIMASUFA (across the board) wage increases equivalent to 13.5%of their basic pay. On appeal, the NLRC rendered a Resolution affirming the Labor Arbiter's judgement. Thereafter, P.I. filed a petition for Certiorari with this Court, which the Court referred to the CA. The CA rendered a Decision affirming that of the NLRC's with modification by raising the 13.5% wage increase to 18.5%. A motion for reconsideration was filed by P.I. but it was denied. ISSUE: Whether the implementation of RA No. 6640 resulted in a wage distortion and whether such distortion was cured or remedied by the 1987 CBA HELD: Wage distortion means the disappearance or virtual disappearance of pay differentials between lower and higher positions in an enterprise because of compliance with a wage order. In this case, the Court of Appeals correctly ruled that a wage distortion occurred due to the implementation of R.A. No. 6640. Notably, the implementation of R.A. No. 6640 resulted in the increase of P10.00 in the wage rates of Alcantara, supervisor, and Morales and Salvo, both foremen. They are petitioners lowest paid supervisor and foremen. As a consequence, the increased wage rates of foremen Morales and Salvo exceeded that of supervisor Buencuchillo. Also, the increased wage rate of supervisor Alcantara exceeded those of supervisors Buencuchillo and Del Prado. Consequently, the P9.79 gap or difference between the wage rate of supervisor Del Prado and that of supervisor Alcantara was eliminated. Instead, the latter gained a P.21 lead over Del Prado. Like a domino effect, these gaps or differences between and among the wage rates of all the above employees have been substantially altered and reduced. It is therefore undeniable that the increase in the wage rates by virtue of R.A. No. 6640 resulted in wage distortion or the elimination of the intentional quantitative differences in the wage rates of the above employees. However, while we find the presence of wage distortions, we are convinced that the same were cured or remedied when respondent PIMASUFA entered into the 1987 CBA with petitioner after the effectivity of R.A. No. 6640. The 1987 CBA increased the monthly salaries of the supervisors by P625.00 and the foremen, by P475.00, effective May 12, 1987. These increases re-established and broadened the gap, not only between the supervisors and the foremen, but also between them and the rank-and-file employees. Significantly, the 1987 CBA wage increases almost doubled that of the P10.00 increase under R.A. No. 6640. The P625.00/month means P24.03 increase per day for the supervisors, while the P475.00/month means P18.26 increase per day for the foremen. These increases

were to be observed every year, starting May 12, 1987 until July 26, 1989. Clearly, the gap between the wage rates of the supervisors and those of the foremen was inevitably re-established. It continued to broaden through the years. Interestingly, such gap as re-established by virtue of the CBA is more than a substantial compliance with R.A. No. 6640. We hold that the Court of Appeals erred in not taking into account the provisions of the CBA viz-a-viz the wage increase under the said law. It has not escaped our attention that requiring petitioner to pay all the members of respondent PIMASUFA a wage increase of 18.5%, over and above the negotiated wage increases provided under the 1987 CBA, is highly unfair and oppressive to the former. Obviously, it was not the intention of R.A. No. 6640 to grant an across-theboard increase in pay to all the employees of petitioner. Almost all of the members of respondent PIMASUFA have been receiving wage rates above P100.00 and, therefore, not entitled to the P10.00 increase. Only three (3) of them are receiving wage rates below P100.00, thus, entitled to such increase. Now, to direct petitioner to grant an across-theboard increase to all of them, regardless of the amount of wages they are already receiving, would be harsh and unfair to the former. In fine, it must be emphasized that in the resolution of labor cases, this Court has always been guided by the State policy enshrined in the Constitution that the rights of workers and the promotion of their welfare shall be protected. However, consistent with such policy, the Court cannot favor one party, be it labor or management, in arriving at a just solution to a controversy if the party concerned has no valid support to its claim, like respondents here.