You are on page 1of 50

THIRD DIVISION

[G.R. No. 131247. January 25, 1999]

PRUBANKERS ASSOCIATION, petitioner, vs. PRUDENTIAL BANK &
TRUST COMPANY, respondent.
DECISION
PANGANIBAN, J.:

Wage distortion presupposes an increase in the compensation of the lower ranks in an office
hierarchy without a corresponding raise for higher-tiered employees in the same region of the
country, resulting in the elimination or the severe diminution of the distinction between the two
groups. Such distortion does not arise when a wage order gives employees in one branch of a
bank higher compensation than that given to their counterparts in other regions occupying
the same pay scale, who are not covered by said wage order. In short, the implementation of
wage orders in one region but not in others does not in itself necessarily result in wage distortion.
The Case

Before us is a Petition for Review on Certiorari, challenging the November 6, 1997
Decision[1] of the Court of Appeals in CA-GR SP No. 42525. The dispositive portion of the
challenged Decision reads:

WHEREFORE, the petition is GRANTED. The assailed decision of the Voluntary
Arbitration Committee dated June 18, 1996 is hereby REVERSED and SET ASIDE
for having been issued with grave abuse of discretion tantamount to lack of or excess
of jurisdiction, and a new judgment is rendered finding that no wage distortion
resulted from the petitioners separate and regional implementation of Wage Order No.
VII-03 at its Cebu, Mabolo and P. del Rosario branches.
The June 18, 1996 Decision of the Voluntary Arbitration Committee, [2] which the Court of
Appeals reversed and set aside, disposed as follows:

WHEREFORE, it is hereby ruled that the Banks separate and regional implementation
of Wage Order No. VII-03 at its Cebu, Mabolo and P. del Rosario branches created a
wage distortion in the Bank nationwide which should be resolved in accordance with
Art. 124 of the Labor Code.[3]

The Facts

The facts of the case are summarized by the Court of Appeals thus:

On November 18, 1993, the Regional Tripartite Wages and Productivity Board of
Region V issued Wage Order No. RB 05-03 which provided for a Cost of Living
Allowance (COLA) to workers in the private sector who ha[d] rendered service for at
least three (3) months before its effectivity, and for the same period [t]hereafter, in the
following categories: SEVENTEEN PESOS AND FIFTY CENTAVOS (P17.50) in
the cities of Naga and Legaspi; FIFTEEN PESOS AND FIFTY CENTAVOS (P15.50)
in the municipalities of Tabaco, Daraga, Pili and the city of Iriga; and TEN
PESOS (P10.00) for all other areas in the Bicol Region.
Subsequently on November 23, 1993, the Regional Tripartite Wages and Productivity
Board of Region VII issued Wage Order No. RB VII-03, which directed the
integration of the COLA mandated pursuant to Wage Order No. RO VII-02-A into the
basic pay of all workers. It also established an increase in the minimum wage rates for
all workers and employees in the private sector as follows: by Ten Pesos (P10.00) in
the cities of Cebu, Mandaue and Lapulapu; Five Pesos (P5.00) in the municipalities of
Compostela, Liloan, Consolacion, Cordova, Talisay, Minglanilla, Naga and the cities
of Davao, Toledo, Dumaguete, Bais, Canlaon, and Tagbilaran.
The petitioner then granted a COLA of P17.50 to its employees at its Naga Branch,
the only branch covered by Wage Order No. RB 5-03, and integrated the P150.00 per
month COLA into the basic pay of its rank-and-file employees at its Cebu, Mabolo
and P. del Rosario branches, the branches covered by Wage Order No. RB VII-03.
On June 7, 1994, respondent Prubankers Association wrote the petitioner requesting
that the Labor Management Committee be immediately convened to discuss and
resolve the alleged wage distortion created in the salary structure upon the
implementation of the said wage orders. Respondent Association then demanded in
the Labor Management Committee meetings that the petitioner extend the application
of the wage orders to its employees outside Regions V and VII, claiming that the
regional implementation of the said orders created a wage distortion in the wage rates
of petitioners employees nationwide. As the grievance could not be settled in the said
meetings, the parties agreed to submit the matter to voluntary arbitration. The
Arbitration Committee formed for that purpose was composed of the
following: public respondent Froilan M. Bacungan as Chairman, with Attys. Domingo
T. Anonuevo and Emerico O. de Guzman as members. The issue presented before the
Committee was whether or not the banks separate and regional implementation of
Wage Order No. 5-03 at its Naga Branch and Wage Order No. VII-03 at its Cebu,
Mabolo and P. del Rosario branches, created a wage distortion in the bank nationwide.

The Arbitration Committee on June 18, 1996 rendered the questioned decision.[4]
Ruling of the Court of Appeals

In ruling that there was no wage distortion, the Court of Appeals held that the variance in the
salary rates of employees in different regions of the country was justified by RA 6727. It noted
that the underlying considerations in issuing the wage orders are diverse, based on the distinctive
situations and needs existing in each region. Hence, there is no basis to apply the salary increases
imposed by Wage Order No. VII-03 to employees outside of Region VII. Furthermore, the Court
of Appeals ruled that the distinctions between each employee group in the region are maintained,
as all employees were granted an increase in minimum wage rate.[5]
The Issues

In its Memorandum, petitioner raises the following issues:[6]
I

Whether or not the Court of Appeals departed from the usual course of
judicial procedure when it disregarded the factual findings of the Voluntary
Arbitration Committee as to the existence of wage distortion.
II

Whether or not the Court of Appeals committed grave error in law when it
ruled that wage distortion exists only within a region and not nationwide.
III

Whether or not the Court of Appeals erred in implying that the term
establishment as used in Article 125 of the Labor Code refers to the regional
branches of the bank and not to the bank as a whole.
The main issue is whether or not a wage distortion resulted from respondents
implementation of the aforecited Wage Orders. As a preliminary matter, we shall also take up the
question of forum-shopping.
The Courts Ruling

The petition is devoid of merit.[7]
Preliminary Issue: Forum-Shopping

Respondent asks for the dismissal of the petition because petitioner allegedly engaged in
forum-shopping. It maintains that petitioner failed to comply with Section 2 of Rule 42 of the
Rules of Court, which requires that parties must certify under oath that they have not commenced
any other action involving the same issues in the Supreme Court, the Court of Appeals, or
different divisions thereof, or any other tribunal or agency; if there is such other action or
proceeding, they must state the status of the same; and if they should thereafter learn that a
similar action or proceeding has been filed or is pending before the said courts, they should
promptly inform the aforesaid courts or any other tribunal or agency within five days
therefrom. Specifically, petitioner accuses respondent of failing to inform this Court of the
pendency of NCMB-NCR-RVA-04-012-97 entitled In Re: Voluntary Arbitration between
Prudential Bank and Prubankers Association (hereafter referred to as voluntary arbitration case),
an action involving issues allegedly similar to those raised in the present controversy.
In its Reply, petitioner effectively admits that the voluntary arbitration case was already
pending when it filed the present petition. However, it claims no violation of the rule against
forum-shopping, because there is no identity of causes of action and issues between the two
cases.
We sustain the respondent. The rule on forum-shopping was first included in Section 17 of
the Interim Rules and Guidelines issued by this Court on January 11, 1983, which imposed a
sanction in this wise: A violation of the rule shall constitute contempt of court and shall be a
cause for the summary dismissal of both petitions, without prejudice to the taking of appropriate
action against the counsel or party concerned. Thereafter, the Court restated the rule in Revised
Circular No. 28-91 and Administrative Circular No. 04-94. Ultimately, the rule was embodied in
the 1997 amendments to the Rules of Court.
As explained by this Court in First Philippine International Bank v. Court of Appeals,
forum-shopping exists where the elements of litis pendentia are present, and where a final
judgment in one case will amount to res judicata in the other. Thus, there is forum-shopping
when, between an action pending before this Court and another one, there exist: a) identity of
parties, or at least such parties as represent the same interests in both actions, b) identity of rights
asserted and relief prayed for, the relief being founded on the same facts, and c) the identity of
the two preceding particulars is such that any judgement rendered in the other action, will,
regardless of which party is successful amount to res judicata in the action under consideration;
said requisites also constitutive of the requisites for auter action pendant orlis pendens.[9] Another
case elucidates the consequence of forum-shopping: [W]here a litigant sues the same party
against whom another action or actions for the alleged violation of the same right and the
enforcement of the same relief is/are still pending, the defense of litis pendentia in one case is a
bar to the others; and, a final judgment in one would constitute res judicata and thus would cause
the dismissal of the rest.[10]
[8]

The voluntary arbitration case involved the issue of whether the adoption by the Bank of
regionalized hiring rates was valid and binding.
On the other hand, the issue now on hand revolves around the existence of a wage distortion
arising from the Banks separate and regional implementation of the two Wage Orders in the
affected branches. A closer look would show that, indeed, the requisites of forum-shopping are
present.

First, there is identity of parties. Both cases are between the Bank and the Association,
acting on behalf of all its members. Second, although the respective issues and reliefs prayed for
in the two cases are stated differently, both actions boil down to one single issue: the validity of
the Banks regionalization of its wage structure based on RA 6727. Even if the voluntary
arbitration case calls for striking down the Banks regionalized hiring scheme while the instant
petition calls for the correction of the alleged wage distortion caused by the regional
implementation of Wage Order No. VII-03, the ultimate relief prayed for in both cases is the
maintenance of the Banks national wage structure. Hence, the final disposition of one would
constitute res judicata in the other. Thus, forum-shopping is deemed to exist and, on this basis,
the summary dismissal of both actions is indeed warranted.
Nonetheless, we deem it appropriate to pass upon the main issue on its merit in view of its
importance.
Main Issue: Wage Distortion

The statutory definition of wage distortion is found in Article 124 of the Labor Code, as
amended by Republic Act No. 6727, which reads:

Article 124. Standards/Criteria for Minimum Wage Fixing - xxx
As used herein, a wage distortion shall mean a situation where an increase in
prescribed wage results in the elimination or severe contraction of intentional
quantitative differences in wage or salary rates between and among employee groups
in an establishment as to effectively obliterate the distinctions embodied in such wage
structure based on skills, length of service, or other logical bases of differentiation.
Elaborating on this statutory definition, this Court ruled: Wage distortion presupposes a
classification of positions and ranking of these positions at various levels. One visualizes a
hierarchy of positions with corresponding ranks basically in terms of wages and other
emoluments. Where a significant change occurs at the lowest level of positions in terms of basic
wage without a corresponding change in the other level in the hierarchy of positions, negating as
a result thereof the distinction between one level of position from the next higher level, and
resulting in a parity between the lowest level and the next higher level or rank, between new
entrants and old hires, there exists a wage distortion. xxx. The concept of wage distortion
assumes an existing grouping or classification of employees which establishes distinctions
among such employees on some relevant or legitimate basis. This classification is reflected in a
differing wage rate for each of the existing classes of employees[11]
Wage distortion involves four elements:
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

In the said branches. the hierarchy of positions based on skills. for example. expansion and growth. 6727 (the Wage Rationalization Act). The difference in wages between employees in the same pay scale in different regions is not the mischief sought to be banished by the law. to enhance employment generation in the countryside through industry dispersal. and to allow business and industry reasonable returns on investment. A wage parity between employees in different rungs is not at issue here. It bears emphasis that wage distortion involves a parity in the salary rates of different pay classes which. The existence of the distortion in the same region of the country. . In other words. In the present case. Several tables are presented by petitioner to illustrate that the employees in the regions covered by the Wage Orders are receiving more than their counterparts in the same pay scale in other regions. Put differently. In fact. The Court is not persuaded. as a result. the employees in the affected regions have higher compensation than their counterparts of the same level in other regions. as a result of the two Wage Orders. recognizes existing regional disparities in the cost of living. was not eliminated as a result of the implementation of the two Wage Orders in the said region. it cannot be said that there was a wage distortion. Put differently. eliminates the distinction between the different ranks in the same region. the distinction between Pay Class 1 and Pay Class 2. it is the hierarchy of positions and the disparity of their corresponding wages and other emoluments that are sought to be preserved by the concept of wage distortion. to guarantee the rights of labor to its just share in the fruits of production. Petitioner argues that a wage distortion exists because the implementation of the two Wage Orders has resulted in the discrepancy in the compensation of employees of similar pay classification indifferent regions. there was an increase in the salary rates of all pay classes. a wage distortion arises when a wage order engenders wage parity between employees in different rungs of the organizational ladder of the same establishment. the quantitative difference in compensation between different pay classes remained the same in all branches in the affected region. petitioner maintains that.4. Hence. Different Regional Wages Mandated by RA 6727 Petitioners claim of wage distortion must also be denied for one other reason. it is clear that no wage distortion resulted when respondent implemented the subject Wage Orders in the covered branches. but a wage disparity between employees in the same rung but located in different regions of the country. a disparity in wages between employees holding similar positions but in different regions does not constitute wage distortion as contemplated by law. Section 2 of said law provides: SEC 2. Contrary to petitioners postulation. It is hereby declared the policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families. Republic Act No. Hence. Furthermore. As previously enunciated. length of service and other logical bases of differentiation was preserved.

RA 6727 also amended Article 124 of the Labor Code. From the above-quoted rationale of the law. among other relevant factors. xxx it does not insist that the [B]ank should not implement regional wage orders. In the determination of such regional minimum wages. Standards/Criteria for Minimum Wage Fixing. and the purchasing power of the peso. consider the following: (a) The demand for living wages. petitioner has apparently misunderstood both the meaning of wage distortion and the intent of the law to regionalize wage rates. to decongest the metropolis. and whenever necessary. (I) Effects on employment generation and family income. (g) The prevailing wage levels. thus: Art. and (j) The equitable distribution of income and wealth along the imperatives of social and economic development.The regional minimum wages to be established by the Regional Board shall be as nearly adequate as is economically feasible to maintain the minimum standards of living necessary for the health. So also. considering existing regional disparities in the cost of living and other socio-economic factors and the national economic and social development plans. (h) Fair return of the capital invested and capacity to pay of employers. In insisting that the employees of the same pay class in different regions should receive the same compensation. It must be understood that varying in each region of the country are controlling factors such as the cost of living. supply and demand of basic goods. hence. (d) The needs of workers and their families. Petitioner claims that it does not insist that the Regional Wage Boards created pursuant to RA 6727 do not have the authority to issue wage orders based on the distinctive situations and needs existing in each region. the Regional Board shall.The State shall promote collective bargaining as the primary mode of settling wages and other terms and conditions of employment. services and necessities. 124. (e) The need to induce industries to invest in the countryside. Other considerations underscore the necessity of the law. (b) Wage adjustment vis-a-vis the consumer price index. (f) Improvements in standards of living. (c) The cost of living and changes or increases therein. as well as the criteria enumerated. . efficiency and general well-being of the employees within the frame work of the national economic and social development program. the minimum wage rates shall be adjusted in a fair and equitable manner. a disparity in wages between employees with similar positions in different regions is necessarily expected. Neither does it seek to penalize the Bank for following Wage . what the petitioner herein bewails is precisely what the law provides in order to achieve its purpose.Therefore. Wages in some areas may be increased in order to prevent migration to the National Capital Region and.

and standard of living. we stress that RA 6727 mandates that wages in every region must be set by the particular wage board of that region. though only in Pay Class 4 in Mabolo. among others. xxx What it simply argues is that it is wrong for the Bank to peremptorily abandon a national wage structure and replace the same with a regionalized structure in violation of the principle of equal pay for equal work. because the socioeconomic conditions in the two regions are different. it is wrong to say that its act of abandoning its national wage structure is mandated by law. the establishment which is the whole bank. who was already in Pay Class 5 in Subic. Equal Pay for Equal Work Petitioner also avers that the implementation of the Wage Order in only one region violates the equal-pay-for-equal-work principle. And.Order VII-03. We must consider. merely enforces the law. this Court. At the risk of being repetitive. and not onlythose of employees in the same region or branch. In effect. The objective of the law also explains the wage disparity in the example cited by petitioner: Armae Librero. in its decisions. based on the prevailing situation therein. under RA 6727. This is not correct. specifically Section 13 thereof which speaks of workers working in branches or agencies of establishments in or outside the National Capital Region. while insisting. The last part of the sentence was omitted by petitioner in its . As already discussed above. the minimum wage in Region 1 may be different from that in Region 13. a uniform national wage structure is antithetical to the purpose of RA 6727. we cannot sustain this argument. Section 13 provides that the minimum wage rates of workers working in branches or agencies of establishments in or outside the National Capital Region shall be those applicable in the place where they are sanctioned. Necessarily. on a national wage structure for the whole Bank. petitioner argues that wage distortion covers the pay scales even of employees in different regions. such factors as cost of living. on the other hand. receiving more than Bella Cristobal. To reiterate. but are simply branches of. It has no power to pass upon its wisdom or propriety. the wages in different regions will not be uniform.Thus. to the right of the regional wage boards to impose a regionalized wage scheme. as a result of the Wage Order. fulfillment of national economic goals. We disagree. Petitioner infers from this that the regional offices of the Bank do not themselves constitute. Petitioner contradicts itself in not objecting. It quotes the RA 6727 Implementing Rules. In any event. The fact that a person is receiving more in one region does not necessarily mean that he or she is better off than a person receiving less in another region. on the one hand. Meaning of Establishment Petitioner further contends that the Court of Appeals erred in interpreting the meaning of establishment in relation to wage distortion. [12] RA 6727 recognizes that there are different needs for the different situations in different regions of the country. was.

[8] [9] 252 SCRA 259. 134 SCRA 341.. Further negating petitioners theory is NWPC Guideline No. JJ..argument. J. 91 SCRA 275. 1985. Jr. 1985. Arceo v. pp. Oliveros. 1. . pp. thus. [2] Composed of Dean Froilan M. and Gonzaga-Reyes. the petition is DENIED and the assailed Decision is AFFIRMED. p. 1996. 1. [4] CA Decision. rollo. members. 134 SCRA 308. [6] Petitioners Memorandum p. Salacup v. it is estopped from implementing a wage order for a specific region only. the Bank at the time was still uncertain about how to follow the new law. 1998 of respondents Memorandum. CA. the Bank was mandated to regionalize its wage structure. Attys. 18. 41-42. Vitug. citing Moran.. Anonuevo and Emerico O. Punongbayan v. Management Practice Petitioner also insists that the Bank has adopted a uniform wage policy. which has attained the status of an established management practice. August 30. Bacungan. Lopez Jr. 1-2. January 24. per Narvasa. Given the entire phrase. per Panganiban. 484-485 and cases therein collated. concur. Buan v. Domingo T. WHEREFORE. Ninth Division.. Guia. rollo. rollo. January 31. 1979. 1984. Delilah Vidallon-Magtolis. 1979 ed. 169. pp. [1] Penned by J. Pineda. 43-44. Laroza v. Buzon. Comments on the Rules. Purisima. NCR-01 and NCR-02 nationwide instead of regionally even after the effectivity of RA 6727. it is clear that the statutory provision does not support petitioners view that establishment includes all branches and offices in different regions. Madela. June 25. p. [7] This case was deemed submitted for resolution upon receipt by the Court on September 9. 1992) entitled Revised Guidelines on Exemption From Compliance With the Prescribed Wage/Cost of Living Allowance Increases Granted by the Regional Tripartite Wages and Productivity Board. Costs against petitioner. In any event. We are not persuaded. Said nationwide uniform wage policy of the Bank had been adopted prior to the enactment of RA 6727. p. pp. Although the Bank implemented Wage Order Nos.. which states that establishment refers to an economic unit which engages in one or predominantly one kind of economic activity with a single fixed location. chairman. Aquino and Marina L. 98 SCRA 207. CJ. de Guaman. members. pp. After the passage of said law. 1980. Vol. 131 SCRA 496. Romero. with the concurrence of JJ. January 31. [5] Ibid. rollo. 1 (S. 41. PNB v. June 29. acting chairman. that single instance cannot be constitutive of management practice. [3] CA Decision. 145 SCRA 34. 3-4. Hilarion L. SO ORDERED.

supra. 195 SCRA 92. vs. No. and the MANILA MANDARIN HOTEL. July 21. rollo. 1994. 1992 Resolution denying reconsideration of said decision. See also Metropolitan Bank and Trust Company Employees Union-ALU-TUCP v. On October 30. September 10.J. as exclusive bargaining agent of the rank-and-file employees of the Manila Mandarin Hotel. 108556. 10-4336-86 and dismissing the case for lack of merit. Associated Labor Unions-TUCP v. NLRC. DECISION NARVASA. NLRC. 226 SCRA 268. 1986. 10. per Feliciano. March 11. 161. November 19. [12] Petitioners Memorandum. filed with the NLRC Arbitration Branch a complaint in its members behalf to compel MANDARIN to pay the salary differentials of the individual employees concerned because of wage distortions in their salary structure allegedly created by the upward revisions of the minimum wage pursuant to various Presidential Decrees and Wage Orders. 234 SCRA 311. NLRC. the Manila Mandarin Employees Union (hereafter UNION). p. Second Division. NLRC. [11] National Federation of Labor v. 1993. Inc. 1994. respondents. as well as of the Commissions November 24. The relevant Presidential Decrees and Wage Orders were specified by the UNION as follows: . NATIONAL LABOR RELATIONS COMMISSION. Court of Appeals. 235 SCRA 395. (hereafter MANDARIN). and the failure of MANDARIN to implement the corresponding increases in the basic salary rate of newly-hired employees. petitioner. 1992 Decision of the Second Division of the National Labor Relations Commission reversing the judgment of the Labor Arbiter in NLRC NCR Case No.[10] First Philippine International Bank v.: The petitioner in this special civil action of certiorari seeks nullification of the September 11. 1991. 1996] MANILA MANDARIN EMPLOYEES UNION.R. J. Cardona v. August 16. p. THIRD DIVISION [G. C.

800.00 starting May 1. Wage Order No. increasing the mandatory emergency living allowance of all workers with salaries or wages of P1.00 a day as minimum wage and P1. mandating an increase in the statutory minimum wage by P3. 1981. and P1. P1. 1981.00 and providing that all private employers shall pay their employees with wages or salaries not exceeding P1.00 in their statutory minimum wage effective April 1. PD 1389. 2) For plantation agricultural employees.500. 2 issued on July 6. P1.00 spread out over a period of three years. 1979.00 mandatory allowance under PD 525 and PD 1123 into the basic pay of all covered workers.00 a month for non-agricultural workers.00 for plantation workers and P30. 1978. f. receiving not more than P1. P1. b.50 a day as cost of living allowance subject to the same salary ceiling provided in the immediately preceding section. issued on august 18. issued on December 14. P1.00 starting July 1. increasing the statutory daily minimum wages by integrating the P4.00 a day for agricultural nonplantation workers. 1980 providing an increase in the minimum daily wage rates and for additional allowance. and .00 a month for agricultural non-plantation workers.a. 1. increasing the minimum daily wage rates by P1. 1983 increasing the mandatory basic minimum wage and living allowance for non-agricultural and agricultural workers in the following manner: 1) For non-agricultural employees. P1.00 a day for non-agricultural workers. Wage Order No.00. c. effective March 22. should receive an increase of P2. PD 1713. an additional mandatory living allowance of P60.00 a day as minimum wage and P0. 1980.50 a day as cost of living allowance. issued on March 26. the same representing an acceleration of the remaining increases under PD 1389.00 a month.00 monthly. d. providing that workers covered by PD 1389.00 starting May 1. PD 1614. 1979. amending PD 928. as follows: P1.00 a month by P2. whether agricultural or non-agricultural.P45.500. PD 1751.50 a day for agricultural plantation workers. 1980. e. and that all non-agricultural workers in Metro Manila shall receive a minimum wage of P12.

1983 increasing the statutory minimum wage rates for workers in the private sector by P1. the UNION filed its Position Paper amplifying the allegations of its complaint and setting forth the legal bases of its demands against MANDARIN.3) For non-plantation agricultural employees.as well as underpayments amounting to P1. and on March 25. and j. 1983.25 -. 1634. holding that there were in fact wage distortions entitling its members to salary adjustments totalling P26. after integrating the mandatory living allowance under PDs 1614. effective December 1. 1983. -.00 per day. 6. 4 issued on May 1. 1984 increasing the statutory daily minimum wages. 1678 and 1713 into the basic pay of all covered employees. Wage Order No. and also increasing the statutory wage rates by P1. 1984 -. The Labor Arbiter eventually ruled in favor of the UNION.00 per day effective November 1.00 effective June 16. Wage Order No.00 per day. On January 15. allegedly resulting from underpayment of wages. effective November 1. Wage Order No. 1984 increasing the statutory daily minimum wage rates and living allowances of workers in the private sector by P3.the minimum daily wage rates became P35. 5 issued on June 11. 1987. it filed an Amended Complaint presenting an additional claim for payment of salary differentials to the union members affected. P1. effective May 1. increasing the statutory minimum wage rate by P2. judgment is hereby rendered ordering the respondent Hotel to pay the individual complainants who are members of the respondent Union .00 for outside Metro Manila. the minimum daily wage rate was increased by P11. the living allowances rates as adjusted in the preceding section shall be further increased subject to the same salary ceiling.00 for non-agricultural workers. i. 1984.18 -.after the integration. g.173. 1987. 1983.00.00 for Metro Manila and P34.00 a day as minimum wage.978. 1984.296. The dispositive portion of his decision reads:[1] WHEREFORE. providing that effective October 1. and also. h.601. 3 issued November 7. Wage Order No.for 541 employees -. by P1. for non-agricultural employees.182 employees.

and fatal defect in their supersedeas bond. and Presiding Commissioner Edna Bonto-Perez) rendered the dispositions already referred to and now assailed -. whether or not it gravely abused its discretion in setting aside the Labor Arbiters judgment and dismissing the UNIONS complaint.setting aside the Labor Arbiters judgment and dismissing the UNIONs complainant.173. 1983 up to October 31.296. the respondent Hotel is ordered to pay an amount equivalent to ten percent (10%) of the total awards granted to individual complainants.25 representing their salary adjustments by way of correcting the wage distortions in their respective salary structure. and continuously thereafter to pay the corresponding amounts due them as such salary adjustments until the same are properly and finally restored in their basic monthly rates. for the period from October 30. and continuously thereafter to pay the corresponding amounts due them as such salary differentials until the same are properly and finally restored into their basic monthly rates. 1991).601. Zapanta. The issue of jurisdiction is grounded on the posited tardiness of private respondents appeal from the Labor Arbiters judgment to the NLRC. but filed its appeal and paid the appeal fee only on February 4. to pay the aggregate amount of P1.[2] The principal issues raised in this Court are: (1) Whether or not the NLRC had jurisdiction to take cognizance of MANDARINS appeal from the Labor Arbiters decision. 1990. The UNION contends[3] that the records indubitably show that MANDARIN received on January 22. 1990. the aggregate amount of P26. by way of and as attorneys fees. the Second Division of respondent Commission (composed of Commissioner Domingo H. 1991 its copy of the Labor Arbiters Decision (of January 15. ponente. Presidential Decrees and Wage Orders for the period from March 25.whose names appear on the respective computations embodied in this Decision.18 representing their salary differentials resulting from underpayment of wages in violation of the minimum wage laws. 1991. Likewise.978. and later denying the UNIONs motion for reconsideration. three (3) days beyond the reglementary ten-day period for . On appeal. 1984 up to October 31. and (2) if so.

the replacement bond of the Commonwealth Insurance Company -. 1991 at 4:50 p. the Insurance Commissioner having in fact issued a Cease-and-Desist Order against said company for issuing bonds of no little magnitude without authority. Manila Mandarin on Friday. Jr. as aforesaid -.was just as defective because the latter company had an authorized maximum net retention level in the amount of only P686. at 4:40 P. Commissioner Zapanta requested Atty. to the effect that MANDARINs lawyer had approached Hon. Jr. 1991. Domingo H.which had pending obligations and liabilities at the time. Godofredo Labay filed the appeal in NLRC NCR Case No. NCR. Demaisip. way below the monetary award subject of MANDARINS appeal to the Commission. Zapanta.80. Zapanta for assistance and to have the appeal including the appeal bond in said case duly received on February 1. Jr.doing so.. NLRC. .M.Plaridel Surety & Insurance Company -. 1991. February 1. The UNION finally argues that MANDARINS appeal was not only tardy but also fatally flawed in that its supersedeas bond had been issued by a surety company -. with respect to the appeal fee.: This is to certify that when Atty.m. to receive said pleadings and allowed Atty. Labay to pay the appeal fee on Monday. February 4.subsequently filed by order of the NLRC -.[5] above mentioned. and that moreover. It also condemns as anomalous the certification of Deputy Executive Clerk Gaudencio P. Gaudencio P. the Cashier and the Docket Section. The circumstances attendant upon the filing of the appeal and supersedeas bond are clearly set forth in the Certification of Deputy Executive Clerk Demaisip. were not around. Demaisip. viz. a member of the Second Division. for assistance to have the appeal including the appeal fee in said case duly received and acknowledged on February 1. 1991. He therefore approached Commissioner Domingo H. The Court rules that respondent Commission acted correctly in accepting and acting on MANDARINs appeal. since no one was authorized to act as substitute for the Cashier of the NCR for purposes of receiving the appeal fee and issuing a temporary receipt and/or official receipt therefor. 10-4335-86 entitled Manila Mandarin Employees Union vs.582.despite the UNIONS motion for his disqualification and/or inhibition. and claims that the anomally was aggravated when it was Commissioner Zapanta who wrote the Decision for the Second Division [4]-reversing the Labor Arbiters judgment. NLRC. that no one would receive the pleadings and the appeal fee.

this Court has invariably ruled that Article 223 of the Labor Code. (SGD.as later pronounced by respondent NLRC -. in compliance with the Order of the respondent Commission dated December 10. The contention concerning MANDARINs ostensibly defective appeal bond. but was unable to do so because the NLRC Cashier or any other employee authorized to receive payment in his stead. deserves short shrift. not mandatory. More important. ready to pay said fee. At any rate. 1991. the issue was mooted when MANDARIN posted a new surety bond. 1991.967. the new bonding company being duly accredited by this Court and licensed by the Insurance Commission. 1991. must be liberally construed. JR. to be exercised with circumspection in light of all the relevant facts. is inconsequential. in line with the desired objective of resolving controversies . was no longer around. through Commonwealth Insurance Company. too. 1991. This is why Commissioner Zapanta allowed payment of the appeal fee to be made on the next business day. 1992 -. Deputy Executive Clerk Second Division MANDARIN cannot be faulted for paying the appeal fee only on February 4. and the meritoriousness of MANDARINs appeal -. February 4. DEMAISIP.This certification is issued upon request of Atty. Labay for whatever purpose it may serve him.[6] In view of these considerations. requiring a bond in appeals involving monetary awards.declaring said surety company to be of doubtful solvency.) GAUDENCIO P. power to dismiss an appeal.the interest of justice was quite evidently served when MANDARINs appeal was given due course despite delayed payment of the docketing fee.087. The UNIONs contention that this new bond was equally defective because the bonding company had an authorized maximum net retention level lower than the sum of P30.to which the attention of respondent NLRC had been invited by the UNION -. as in fact the appeal fee was paid on. issued by Plaridel Surety and Insurance Company. This Court has ruled that the failure to pay the appeal docketing fee within the reglementary period confers a directory. its lawyer was in the NLRC premises.17 involved in this dispute. The fact is that on February 1. The issuance of the bond antedated this Courts resolution of January 15.

provided as follows: Section 6. Any dispute arising from wage distortions shall be resolved .What the Wage Orders and the Implementing Rules did was simply to recognize that implementation of the Wage Orders could result in a distortion of the wage structure of an employer. Thus. 1992. constitute impropriety or pre-judgment of the case and a ground for his disqualification as a member of the Second Division to which the case was thereafter raffled. in the circumstances already related.[9] a case involving the same subject Wage Orders: We note that neither the Wage Orders noted above. 3. filed more than a year after the occurrence of the incident on which it was based. the UNIONs motion for his inhibition. the employer and the union shall negotiate to correct the distortions. Where the application of the minimum wage rate prescribed herein results in distortions of the wage structure of an establishment.on their merits. Commissioner Zapanta did inhibit himself from taking part in the resolution of the UNIONS motion for reconsideration of the assailed decision of September 11. In any case. among others. 1989 of Republic Act No. the UNION mentioned that the case was assigned particularly to the late Commissioner Rustico Diokno ** (but) that upon the latters demise. becomes suspect as a mere afterthought. NLRC. So it was observed by this Court in National Federation of Labor vs. As to the alleged partiality of Commissioner Domingo Zapanta. prior to the effectivity on June 9. Section 6 of Wage Order No. in its motion to inhibit. Coming now to the issue of wage distortion. the case was reassigned to Commissioner Domingo Zapanta as the new ponente. 6727 which. Significantly. amended Article 124 (Standards/Criteria for Minimum Wage Fixing) of the Labor Code. dated 7 November 1983.[7] The circumstance under which the bond was filed in this case adequately justify such liberal application of the provision. and to direct the employer and the union to negotiate with each other to correct the distortion. set forth a clear and specific notion of wage distortion. the Court finds that his intervention on February 1. thus dispelling what doubts might linger about his impartiality.[8] As Commissioner Zapanta had always been a member of the Second Division. nor the Implementing Rules promulgated by the Department of Labor and Employment. 1991 in the matter of payment of the appeal docketing fee did not. the concept to wage distortion was relatively obscure.

through the grievance procedure under their collective bargaining agreement of through conciliation. There are. [10] as follows: (a) The concept of wage distortion assumes an existing grouping or classification of employees which establishes distinctions among such employees on some relevant or legitimate basis. however. the wage distortion arose because the effectivity dates of wage increases given to each of the two (2) classes of employees (rank-in-file and supervisory) had not been synchronized in their respective CBAs. (In the present Metro case. (d) The re-establishment of a significant difference in wage rates may be the result of resort to grievance procedures or collective bargaining negotiations. in the rectification of that distortion by re-adjustment of the wage rates of the differing classes of employees. as already noted. the gap which had previously or historically existed be restored in precisely the same amount. (Underscoring supplied) It is therefore opportune to re-state the general principles enunciated in that case. there is no legal requirement that. correction of a wage distortion may be done by re-establishing a substantial or significant gap (as distinguished from the historical gap) between the wage rates of the differing classes of employees. In other words. Any dispute arising from wage distortions shall be resolved through conciliation by the appropriate Regional Office of the Ministry of Labor and Employment or through arbitration by the NLRC Arbitration Branch having jurisdiction over the work-place. This classification is reflected in a differing wage rate for each of the existing classes of employees. other causes of wage distortions.) (c) Should a wage distortion exist. In case where there is no collective bargaining agreement or recognized labor organization. et al. Inc. NLRC. the employer shall endeavor to correct such distortions in consultation with their workers. like the merger of two (2) companies (with differing classification of employees and different wage rates) where the surviving company absorbs all the employees of the dissolved corporation. vs. (b) Wage distortions have often been the result of government-decreed increases in minimum wages. . summarized in Metro Transit Organization.

is a question of fact. Any dispute arising from the wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement and. The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to certain employees. shall be referred to the appropriate branch of the National Labor Relations Commission (NLRC). upon the enactment of R. if it remains unresolved after ten (10) calendar days of conciliation. or other logical bases of differentiation. the employer and the union shall negotiate to correct the distortions. 1989. 6727 (Wage Rationalization Act. through voluntary arbitration. [12] and . length of service. amending. among others. viz. It shall be mandatory for the NLRC to conduct continuous hearings and decide the dispute within twenty (20) calendar days from the time said dispute is submitted for compulsory arbitration.: Where the application of any prescribed wage increase by virtue of a law or Wage order issued by any Regional Board results in distortions of the wage structure within an establishment. No. if it remains unresolved. Any dispute arising therefrom shall be settled through the National Conciliation and Mediation Board and. such dispute shall be decided by the voluntary arbitrator or panel of voluntary arbitrators within ten (10) calendar days from the time said dispute was referred to voluntary arbitration. In cases where there are no collective agreements or recognized labor unions. Article 124 of the Labor Code). The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of any increase in prescribed wage rates pusurant to the provisions of law or Wage Order. The same provision lays down the procedure to be followed where wage distortion arises from the implementation of a wage increase prescribed by law or ordered by a Regional Wage Board. [11] that the term wage distortion came to be explicitly defined as: ** a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills.A. the employers and workers shall endeavor to correct such distortions. Unless otherwise agreed by the parties in writing.It was only on June 9.

Section 1 of Presidential Decree 1389 provides that Presidential Decree 928 is hereby amended by increasing all existing statutory minimum wages in the country by Three Pesos (P3. opens the door to a review thereof by this Court. a disharmony such as exists here. There were no across-the-board increases to all employees. the statutory minimum daily wage rates workers in the private sector shall be increased by P2. factual findings in labor cases. as follows: 1)One Peso (P1.00) starting May 1. between the factual findings of the Labor Arbiter and those of the NLRC. respondent Commission declared in its decision[16] that there was no wage distortion arising from the implementation of said Presidential Decrees and Wage Orders such as warranted across-the-board increases to all employees: On the issue of wage distortion. are not reviewed. Also.[13] However. it is clear that the presidential decrees and wage orders merely provide for a floor wage to be observed by the employers in the private sector. across-the-board.as a rule. and One Peso (P1. Section 1 of Wage Order No. we have examined the various presidential decrees and wage orders referred to by the complainant and in the Labor Arbiters decision and we found nothing therein that would justify the award of across-the-board increases to all employees.[17] It was therefore incorrect . It indeed appears that the clear mandate of those issuances was merely to increase the prevailing minimum wages of particular employee groups. so that employees whose salaries are above the minimum set by law who have already been long in the service will not be discriminated against. where grounded on substantial evidence. increases were required only as regards those specified therein. 1978.00.00) starting July 1. and that the only and logical way to correct ** (it) in the salary structure of the employees of respondent Hotel is to apply the corresponding increase made by way of revising upward the minimum wage or integration of the ECOLA into the basic wage as embodied in the various Presidential Decrees and Wage Orders. 1979. 1980.00) spread equally over a period of three years. 6 provides that effective November 1. The apparent intention of the law is only to upgrade the salaries or wages of the employees receiving lower than the minimum daily wage set therein. 1984.Thus.[14] The Labor Arbiter ruled that a wage distortion existed.00) starting May 1. For example.[15] On the other hand. 2)One Peso(P1.

This it failed to do.4/15/85 P 968 .300 2. to thresh out the controversy through the grievance procedure in the collective bargaining agreement.: SAMPLE COMPARISON OF SALARY RATES OF COMPLAINANTS AFFECTED BY WAGE DISTORTION F & B DEPT. what. the appropriate remedy thereunder prescribed is for the employer and the union to negotiate to correct them.8/1/83 P 954 4.375 3.Busboy -. incumbent on the UNION to prove by substantial evidence its assertion of the existence of a wage distortion. which is not the case here.Waiter -. Camilo Sanchez -. if the dispute be not thereby resolved.Busboy -. Name Position Date Hired Basic Rate (12/30/85) 1. It was. were the designed quantitative differences in wage or salary rates between employee groups.7/19/84 P1. or through conciliation or arbitration.10/16/80 P1. if any.Busboy -. Pablo Trinidad -.[18] viz.9/1/78 P1. Buenconsejo Monico -.for the UNION to claim that all its members became automatically entitled to across-the-board increases upon the effectivity of the Decrees and Wage Orders in question. and if there were any severe contractions or elimination of these quantitative differences.Waiter -.096 5. The UNIONs effort to prove wage distortion consisted only of the presentation of an unverified list of thirteen (13) employees denominated a Sample Comparison of Salary Rates Affected by Wage Distortion. to be sure. And even if there were wage distortions. Renato Solomon -. It presented no such evidence to establish. A review of the records convinces this Court that respondent NLRC committed no grave abuse of discretion in holding that no wage distortion was demonstrated by the UNION. or. Eduardo Vito -. as required by the law.

6/19/76 P 984 2.Linen Uniform Att.1/16/80 P1. -.Houseman Attn. E. Nemesio Matro -. Aurella Kilat -. or that the union did not get the correct data on salaries. Ruben A. Renato Guina -. deposed that the employees named in this list were the more or less (13) persons found to have suffered wage distortion.Cloakroom Attn.) ATTY. or that an employee was hired initially at a position level carrying a hiring rate than the others. -. -.238 3.9/1/80 P 946 5. -.3/8/82 P1.[19] and the UNION pointed out that while these thirteen employees occupied similar positions.Linen Uniform Att.HOUSEKEEPING DEPT. to wit:[20] ANNEX2 .Houseman Attn. ESPINOSA 9/17/87.Cloakroom Attn. Respondent Commission however found that as explained by respondents. The Commission accepted as more accurate the data presented by MANDARIN respecting the same employees. The UNIONs Internal Vice-President.Linen Uniform Att. David Pineda -. 1.5/2/79 P1. R. -. such disparity was due simply to the fact that the employees mentioned had been hired on different dates and were thus receiving different salaries.8/24/81 P1.142 7. Rogelio Molaco -. -. -.272 4. Arnulfo Castro. or that an employee failed to meet the cut-off date in the grant of yearly CBA increase.9/14/81 P1. -.194 6.Houseman Attn. Domgo Sabando -. Hubert Malolot -. Rillo -. they were receiving different rates of salary.6/10/76 P1.194 8.194 SUBMITTED: (SGD.

while some of these . Domingo Sabando Houseman Attn.00 5.e.00 5.00 4. 1.272.213. 09/14/81 1.00 7. 06/19/76 1.194. 05/02/79 1.00* 2. 08/24/81 1. Hubert Malolot Linen Uniform Att. Rogelio Molaco Cloakroom Attn. Renato Solomon Busboy 07/19/84 1. Camilo Sanchez Busboy 08/01/83 1. 01/16/80 1.375.417. While Trinidad at P301/mo.194. Vito was hired at P366/mo.302. Vito already worked as a waiter at the Metropolitan Club. 09/01/80 1. The Court agrees that the claimed wage distortion was actually a result of the UNIONS failure to appreciate various circumstances relating to the employment of the thirteen employees.00 2.00 8.342. Eduardo Vito Waiter 10/16/80 1. Pablo Trinidad Waiter 09/01/78 P1.00 6.194.00 Housekeeping Dept. i. 03/08/82 1. Buenconsejo Monico Busboy 14/15/85 968.00 3.F & B Dept. Renato Guina Houseman Attn. Ruben A. Aurella Kilat Linen Uniform Att. David Pineda Cloakroom Attn.For instance. NAME Position Date Hired Basic Rate per Hotel Records as of 12/30/85 1.238. Nemesio Matro Houseman Attn. Rillo Linen Uniform Att.096.00 * Vito was hired at a higher position with a higher hiring rate than that given to Trinidad. Prior to hiring.00 4.00* 3.272. 06/10/77 1.

2. i. Vito was originally hired in 1980 already a Busboy at the Food and Beverage Department with a starting salary of P366. There is therefore no reason to compare the remuneration of these two employees as the circumstances attendant to their employment are different. five of these Decrees and Wage Orders took effectafter the lapse of the three-year . Labor Code.e. with monthly salaries of P2. 1979. Clearly.217. Trinidad was originally hired in 1978 as a mere Houseman at the Banquet Department with a basic starting rate of P301.5. while they were both occupying the position of waiter in 1987. Vito had already been working as Waiter at the Metropolitan Club.[22] to nevertheless order the computation of salary differentials retroactive to the effective dates of PDs 1389.00 a month. these two employees achieved the same position as Waiter. May 1984. respectively. respectively. they were hired by the Hotel on different dates and at different salaries. after first acknowledging that some of the money claims had prescribed under Article 291 of the Labor Code.. as amended). or other logical basis of differentation. Not long after.044.00. it was wrong for the Labor Arbiter. Before he was hired at the Mandarin Hotel. 1980.1713. [21] Respondent Commission correctly concluded that these did not represent cases of wage distortion contemplated by the law (Article 124. The headway in rate was carried by Vito although at some point in their careers. On the other hand.00 and P2. length of service. Rrecords also show that it was only after some time that Trinidad was promoted to Busboy but still with the smaller Banquet Department. even assuming arguendo that there was really a wage distortion. July 1983. a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employees groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills.4. As explained in part by MANDARIN: With respect to the case of Pablo Trinidad and Eduardo Vito. June 1981 and November 1984. a comparative study of the records of these employees shows one of them was initially hired at a higher position level which naturally carried a higher hiring rate. Moreover. Vito was promoted to Captain Waiter while Trinidad remained Waiter.3.1614. 1980.and 6: in 1978. November 1983.00 a month. 1751 and Wage Orders Nos.employees mentioned by UNION Vice-President Arnulfo Castro occupied the same or similar positions.

4 and 6 as well as P. 1634 into the basic wages of its employees as called for under Wage Order No. 1984.prescriptive period for litigating claims for wage distortion differentials. 3. 1985. on March 25. 1986 and the amended complaint for underpayment of wages. That the respondent shall implement Wage Order No. That as soon as the respondent shall have complied with the above terms of this Compromise Agreement. without prejudice to the outcome of the application for exemption as distressed employer filed by said respodent with the National Wage Council as regards benefits that might be due between November 1. the records show that the matter of wage distortion. 1985 and June 30.00 a month cost of living allowance under P. 6 effective July 1.D. including those involving labor standard laws. including Wage Orders No. 6.[23] The Compromise Agreement pertinently states: 1. 1985. 1985 the integration of the P90. On that day they executed a Compromise Agreement with the assistance of the then Regional Director of the National Capital Region. 4 and 6. Severo M. 2. 1985. . 4 in accordance with the Guidelines contained in the Explanatory Bulletin issued by the Bureau of Working Conditions on August 8. The Labor Code recognizes the conclusiveness of compromises as a means to settle and end labor disputes. the latter was deemed for all legal and purposes to have fully satisfied all its legal and contractual obligations to its employees under all presidential issuances on wages. inclusive. the applicable cut-off dates. respectively. and Article XI of the collective bargaining agreement. said respondent shall be deemed for all legal intents and puposes to have fully satisfied all the legal and contractual obligations to its employees under all presidential issuances on wages. for purposes of prescription. the original complaint for wage distortion having been filed on October 30.D. Article 227 provides that (a)ny compromise settlement. 1987. Pucan in which they affirmed that with the implementation by MANDARIN of Wage Order Nos. 1634. The the respondent shall also implement effective August 1. had been settled by the parties as early as July 30. actual or imputed under the various issuances up to Wage Order No. were October 30. Consequently. Finally. 1983 and March 25.

and again assuming arguendo the existence of a wage distortion. excluding from 365. In the same manner. it is now estopped from claiming that a distortion still subsists. the 52 unpaid rest days in a year. [25] and such correction having been explicitly acknowledge by the UNION. it is deemed to have thereby settled any remaining question of wage distortion. In Olaybar vs. misrepresentation or coercion. and not 365. on the other hand.voluntary agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor. NLRC.[26] Neither did respondent Commission gravely abuse its discretion in ruling against the UNION on the issue of underpayment of wages. for the purpose of deriving salary related benefits of its employees who are paid by the month. the applicable increase in daily wage must be multiplied by 365 and then divided by 12 to determine the equivalent monthly rate. Thus. this was corrected under the fully implemented Compromise Agreement. following the formula for daily paid employees under Group II category as prepared by the Bureau of Labor Standards:[27] AR x 313 days = EMR ____________ 12 . in a labor dispute. This appears to have been the consistent practice of MANDARIN. shall be final and binding upon the parties. since the subject of wages and wage distortions were plainly and unavoidably an economic issue and the proper subject of collective bargaining. to apply the rule that compromises and settlements have the effect and conclusiveness of res judicata upon the parties. was that it had consistently been using the multiplier 313. when the UNION entered into a new collective agreement with MANDARIN. The UNIONs theory was that since the employees of MANDARIN are paid on a monthly basis under the Group III category. providing for wage increases in 1987. MANDARINs position. [24] this Court had occasion. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of noncompliance thereof or if there is prima facieevidence that the settlement was obtained through fraud.

In his explanatory Bulletin on the payment of Holiday Pay -.[28] The admission confirms that the hotel employees pertain to Group II category under the Bureau of Labor Standards Guidelines for computing the equivalent monthly minimum wage rates. instead of multiplying the applicable minimum daily wage by 365 and dividing the result by 12 to derive the applicable minimum monthly salary. composed of 303 actual working days and the 10 unworked but paid regular holidays in a year. Actual working days . he found that the divisor used in arriving at the daily rate of the hotel employees was 313 days. 85-08 dated 6 November 1985 -.[30] stated: 6. which meant that the days-off or rest days are not paid. MANDARIN presented evidence of its practice regarding the use of the factor 313 in computing the monthly equivalent of the minimum daily wages and other related benefits of its employees.Ref.e.Where: 313 days = 303 actual working days a year plus the paid 10 unworked regular holidays. Monthly Paid Employees Oftentime confusion arises from the different interpretations as to who is a monthly-paid employee. A monthly-paid employee is one whose monthly salary includes payments for everyday of the month although he does not regularly work on his rest days or Sundays and on regular and special .then Secretary Augusto Sanchez of the Department of Labor and Employment. the factor used is 313. of Days 313. 1991. who admitted during cross-examination that in his research and study. i. No. Arnulfo Castro.[29] Thus. Annexes 3 and 4 of its Supplemental Appeal dated November 12. This was corroborated by the UNIONs Internal Vice President. expatiating on the implications of the Chartered Bank case. 303 10 legal holidays 10 _____ Total No..

1983 20. that an employee is regularly paid a fixed monthly rate does not necessarily mean that he is a monthly-paid employee as defined above. Effectivity Equivalent Lowest Salary Monthly Rate in the Hotel PD 1389 01 July 1978 P 286. (Italics supplied) As applied to the UNION. 1984 37. The fact. Employees falling under Group I.00 365. II and IV are in reality daily paid employees but whose daily rate is translated into its monthly equivalent.96 PD 1614 1 March 1979 13.17 WO # 2 06 July 1983 19.92 WO # 6 01 Nov. the monthly pay of the Hotel employees and their hiring rate may be illustrated as follows: PD/WO NO. 1984 35.92 P 350.00 PD 1813 18 Aug.08 On the other hand. Effectivity Minimum Daily Equivalent Wage Rate Monthly Rate PD 1389 01 July 1978 P 11.00 .58 WO # 3 01 Nov. the monthly equivalent of the minimum wage under the various Presidential Decrees and Wage Orders based on the above formula should be as follows: PD/WO NO. therefore.00 495.00 912.67 WO # 5 01 Nov.00 834.00 PD 1614 01 March 1979 339.67 WO # 4 01 May 1984 32. Group III in the above illustration covers monthly paid employees. 1980 14.holidays.00 521.08 411.00 339.00 965.00 P 286.

00 WO # 4 01 May 1984 834. concur.are hereby AFFIRMED in toto.00 WO # 6 01 Nov. and Panganiban. 1983 521. as well as said Commissions Resolution dated November 24. A comparative analysis of the wages of the Hotels employees from 1978 to 1984 vis a vis the minimum wages fixed by law for the same period reveals that at no time during the said period was there any underpayment of wages by the respondent Hotel. THIRD DIVISION [G. On the contrary. 140689.58 960.08 1.. Melo. 2004] .denying reconsideration -.00 WO # 2 06 July 1983 495. Jr. Davide. No.being based on substantial evidence and in accord with applicable laws and jurisprudence. Francisco.R.00 WO # 5 16 May 1984 912. the prevailing monthly salaries of the subject hotel employees appear to be and above the minimum amounts required under the applicable Presidential Decrees and Wage Orders.17 562. SO ORDERED.92 960. 1984 965. 1992 -.00 WO # 3 01 Nov.. JJ.reversing the judgment of the Labor Arbiter and dismissing the UNIONS complaint . 1980 365.015.. 1992 -. February 17. the assailed Decision of respondent Commission promulgated on September 11.67 960.PD 1813 18 Aug.00. WHEREFORE.67 960.

Petitioner filed another Notice of Strike on October 8. however. III and IV by nine hundred pesos (P900. As the continued request of petitioner for increase in the wages and salaries of Bankards regular employees remained unheeded. Level III. Bankard. the duly certified exclusive bargaining agent of the regular rank and file employees of Bankard. Accordingly. its Board of Directors approved a New Salary Scale. Level II. INC. finding no wage distortion. by Resolution of July 28. the salaries of employees who fell below the new minimum rates were also adjusted to reach such rates under their levels.00). 1995.BANKARD EMPLOYEES UNION-WORKERS ALLIANCE TRADE UNIONS. regular employees. petitioner. to press for the increase in the salary of its old. The strike was averted. for the purpose of making its hiring rate competitive in the industrys labor market. 1993.. The Second Division of the NLRC.: The present Petition for Review on Certiorari under Rule 45 of the Rules of Court raises the issue of 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.union busting. 1993 on the grounds of refusal to bargain. Level IV. to wit: Levels I and V by one thousand pesos (P1. The New Salary Scale increased the hiring rates of new employees. however. and other acts of ULP . vs. respondents. it filed a Notice of Strike on August 26. to wit: Level I. 1993 on the ground of discrimination and other acts of Unfair Labor Practice (ULP). A director of the National Conciliation and Mediation Board treated the Notice of Strike as a Preventive Mediation Case based on a finding that the issues therein were not strikeable. Bankard took the position. Inc. Petitioners motion for reconsideration of the dismissal of the case was. discrimination. that there was no obligation on the part of the management to grant to all its employees the same increase in an across-the-board manner. . Bankards move drew the Bankard Employees Union-WATU (petitioner). and Level V. denied. On May 28. dismissed the case for lack of merit. J. by Order of May 31. (Bankard) classifies its employees by levels. 1995.000. when the dispute was certified by the Secretary of Labor and Employment for compulsory arbitration.00). NATIONAL LABOR RELATIONS COMMISSION and BANKARD. and Levels II. made retroactive to April 1. DECISION CARPIO MORALES. 1993.

the present petition which faults the appellate court as follows: (1) It misapprehended the basic issues when it concluded that under Bankards new wage structure. Public respondent National Labor Relations Commission (NLRC) refutes petitioners position. 121970. Article 124 of the Labor Code) on June 9. by October 28.) An existing hierarchy of positions with corresponding salary rates. and not between and among the different levels or ranks in the salary structure. The differing wage rate for each of the existing classes of employees reflects this classification. essays in its Comment of April 12. the skills and knowledge required. Martin Funeral Homes v. which conclusion is manifestly contrary to law and jurisprudence. amending. [1] Hence. NLRC. the complexity of the job. the basic assumption is that there exists a grouping or classification of employees that establishes distinctions among them on some relevant or legitimate bases. the petition was referred to the Court of Appeals which. 1989. (3) The elimination of the distinction between the two levels. [5] Normally. and (4) The existence of the distortion in the same region of the country. It. a situation where an increase in prescribed wage rates results in the elimination or severe contraction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills.R. in each and every level. or other logical basis of differentiation. 6727 (WAGE RATIONALIZATION ACT..Petitioner thereupon filed a petition for certiorari before this Court. In a problem dealing with wage distortion. 1999. through the Office of the Solicitor General. among others. [4] Prubankers Association v. [6] Involved in the classification of employees are various factors such as the degrees of responsibility. In accordance with its ruling in St. the old salary gaps between the different classification or level of employees were still reflected by the adjusted salary rates[2]. or other logical bases of differentiation. denied the same for lack of merit. to wit: (1. and (2) It erred in concluding that wage distortion does not appear to exist. length of service. a company has a wage structure or method of determining the wages of its employees. docketed as G. 2000 as follows: . the term wage distortion was explicitly defined as: . however. (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. the classification is not one based on levels or ranks but on two groups of employees. Petitioner maintains that for purposes of wage distortion. No.[3] Upon the enactment of R.. Prudential Bank and Trust Company laid down the four elements of wage distortion.A. the newly hired and the old.

their jurisdiction being confined to specific matters. Likewise.500 3. they must be respected.400 4. it cannot be made the sole basis in cases where the nature of their work differs.800 Maximum From To 7. 1993. I to V. . the first element of wage distortion provided in Prubankers is wanting. thus: Level I II III IV V Hiring From 3. it must be shown that as between the different classification of employees. as are the findings in the case at bar. 1993.100 3.100 4.500 9. employees cannot create their own independent classification and use it as a basis to demand an across-the-board increase in salary. one based on level.200 4. for purposes of determining the existence of wage distortion. like the NLRC. 1993. (Emphasis and underscoring supplied) [7] The issue of whether wage distortion exists being a question of fact that is within the jurisdiction of quasi-judicial tribunals.500 8.200 9.500 9. the historical classification of the employees prior to the wage increase must be established.To determine the existence of wage distortion.100 4. i. Put differently. While seniority may be a factor in determining the wages of employees.400 4.700 Minimum From To 3. are generally accorded not only respect but at times even finality if they are supported by substantial evidence.700 To 4. there exists a historical gap or difference. retroactive to April 1. [8] [9] It is thus clear that there is no hierarchy of positions between the newly hired and regular employees of Bankard.300 3.600 4.250 7.500 3. in this case.000 10. and not on the basis of their length of service. the entry of new employees to the companyipso facto place[s] them under any of the levels mentioned in the new salary scale which private respondent adopted retroactive [to] April 1.e.000 8. For these agencies have acquired expertise. hence. which provides.300 4.300 3.200 4.800 4.000 Thus the employees of private respondent have been historically classified into levels.000 11. and it being a basic rule that findings of facts of quasi-judicial agencies.200 3.200 3. xxx The classification preferred by petitioner is belied by the wage structure of private respondent as shown in the new salary scale it adopted on May 28. Moreover.500 10.200 3. Petitioner cannot make a contrary classification of private respondents employees without encroaching upon recognized management prerogative of formulating a wage structure.

242.550.100 (Sammy Guce) Level II P6.00 P1. a subject matter for bargaining negotiations between employer and employees.00 P4.518.390. perhaps.330. petitioner union presented a list of five (5) employees allegedly affected by the said increase: Pay of Old/ Pay of Newly Regular Employees A.242.00 P4.339.142. teaches. et al.00 P650.As National Federation of Labor v. Lourdes Dee) B. For.00 P939.00 P4.75 P3.00 P3.75 P3.700 (Ma. NLRC.69 P418.042.200 (Nazario Abello) Level III P4. and ultimately.500 Melissa Cordero) Level V P7. Effective April 1.00 P3.100 Sammy Guce) Level II P6. It is assuredly something that falls outside the concept of wage distortion. 1993 Level I P4.090. 1993 Level I P4.100 (Nazario Abello) Level III P4.300 (Arthur Chavez) Level IV P5.69 P3.850. Lourdes Dee) Difference Hired Employees P1.200 (Arthur Chavez) Level IV P5.700 (Ma. to Our mind said gap is not significant as . Prior to April 1.090.390. as the appellate court explained: In trying to prove wage distortion.418.400 (Melissa Cordero) Level V P7.839.518. (Emphasis and underscoring supplied) [11] As did the Court of Appeals.00 P3. [10] [W]hether or not a new additional scheme of classification of employees for compensation purposes should be established by the Company (and the legitimacy or viability of the bases of distinction there embodied) is properly a matter of management judgment and discretion.75 P4. the formulation of a wage structure through the classification of employees is a matter of management judgment and discretion.69 P4. this Court finds that the third element provided in Prubankers is also wanting.00 P3.00 P2.75 P2.850.00 P1.69 Even assuming that there is a decrease in the wage gap between the pay of the old employees and the newly hired employees.

The wordings of Article 124 are clear. It is found in CHAPTER V on WAGE STUDIES. or as in the present case. . through voluntary arbitration. WAGE AGREEMENTS AND WAGE DETERMINATION which principally deals with the fixing of minimum wage. (Emphasis and underscoring supplied) [12] Apart from the findings of fact of the NLRC and the Court of Appeals that some of the elements of wage distortion are absent. If it was the intention of the legislators to cover all kinds of wage adjustments. As already stated. . If the compulsory mandate under Article 124 to correct wage distortion is applied to voluntary and unilateral increases by the employer in fixing hiring rates which is inherently a business judgment prerogative. or other logical bases of differentiation will be preserved. not on seniority. For this reason. the employer and the union shall negotiate to correct the distortions. if it remains unresolved. the need to increase the competitiveness of Bankards hiring rate. the distinctions embodied in the wage structure based on skills. especially if the financial conditions of the business cannot address an acrossthe-board increase.to obliterate or result in severe contraction of the intentional quantitative differences in the salary rates between the employee group. not restrictive as it is currently phrased: Article 124. petitioner cannot legally obligate Bankard to correct the alleged wage distortion as the increase in the wages and salaries of the newly-hired was not due to a prescribed law or wage order. Article 124 should thus be construed and correlated in relation to minimum wage fixing. then the hands of the employer would be completely tied even in cases where an increase in wages of a particular group is justified due to a re-evaluation of the high productivity of a particular group. Any dispute arising from the wage distortions shall be resolved through the grievance procedure under their collective bargaining agreement and. the classification under the wage structure is based on the rank of an employee.wage distortion does not appear to exist. the intention of the law being that in the event of an increase in minimum wage. x x x (Italics and emphasis supplied) Article 124 is entitled Standards/Criteria for Minimum Wage Fixing. length of service. An employer would be discouraged from adjusting the salary rates of a particular group of employees for fear that it would result to a demand by all employees for a similar increase. Standards/Criteria for Minimum Wage Fixing. then the language of the law should have been broad. xxx Where the application of any prescribed wage increase by virtue of a law or Wage Order issued by any Regional Board results in distortions of the wage structure within an establishment.

as a matter of practice. the reduction or elimination of the normal differential between the wage rates of rank-and-file and those of supervisory employees was due to the granting to the former of wage increase which was. which is based on legitimate business-judgment prerogatives of the employer. also paid the same amount plus an added premium. NLRC to support its claim that the obligation to rectify wage distortion is not confined to wage distortion resulting from government decreed law or wage order. to wit: Section 2. who then (i. . ipso facto result to an obligation to rectify it. In fine. . (Emphasis supplied) [14] Wage distortion is a factual and economic condition that may be brought about by different causes. is a valid and legally enforceable source of rights between the parties. however. by giving the supervisory employees a corresponding salary increase plus a premium. however. Inc. Any salary increase granted under this Article shall be without prejudice to the right of the Company to establish such minimum salaries as it may hereafter find appropriate for specific jobs. 1989) had. as the obligation therein to rectify the wage distortion was not by virtue of Article 124 of the Labor Code.. and to adjust the rates of the employees thereby affected to such minimum salaries thus established. on April 17. Unlike in Metro Transit then where there existed a company practice. but on account of a then existing company practice that whenever rank-and-file employees were paid a statutorily mandated salary increase. absent any indication that the voluntary increase of salary rates by an employer was done arbitrarily and illegally for the purpose of circumventing the laws or was devoid of any legitimate purpose other than to discriminate against the regular . Article V (Salary and Cost of Living Allowance) of the parties Collective Bargaining Agreement (CBA). v. . Bankards right to increase its hiring rate. to establish minimum salaries for specific jobs. had the right to rely on the company practice of unilaterally correcting the wage distortion effects of a salary increase given to the rank-and-file employees. (Italics and underscoring supplied) [15] This CBA provision. supervisory employees were.e. denied to the latter group of employees. [13] Reliance on Metro Transit is however misplaced. The mere factual existence of wage distortion does not. unlike the rank-and-file employees. and to adjust the rates of employees affected thereby is embodied under Section 2. no CBA governing the terms and conditions of their employment. no such management practice is herein alleged to obligate Bankard to provide an across-theboard increase to all its regular employees. Thus this Court held in said case: We conclude that the supervisory employees. absent a law or other source of obligation which requires its rectification. In Metro Transit.Petitioner cites Metro Transit Organization.

Employees are of course not precluded from negotiating with its employer and lobby for wage increases through appropriate channels. for employers correspondingly have rights under the law which need to be respected.R. dela Fuente for private respondents. WHEREFORE. Antonio V. raise the issue of whether or not the implementation by the Metropolitan Bank and Trust Company of Republic Act No. concur.: In this petition for certiorari. 1993 METROPOLITAN BANK & TRUST COMPANY EMPLOYEES UNION-ALU-TUCP and ANTONIO V. It does not mean. VITUG.employees. that every dispute should be decided in favor of labor. vs. Vitug. this Court will not step in to interfere with this management prerogative. Balinang. Gilbert P. respondents. .petitioners. Lorenzo for petitioners. SO ORDERED. JJ. the present petition is hereby DENIED. 6727. NATIONAL LABOR RELATIONS COMMISSION (2nd Division) and METROPOLITAN BANK and TRUST COMPANY. and Corona. No. time and again. the Metropolitan Bank & Trust Company Employees Union-ALU-TUCP (MBTCEU) and its president. Marcial G. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G. J. (Chairman). This Court. created a distortion that would require an adjustment under said law in the wages of the latter's other various groups of employees. however. Sandoval-Gutierrez. has shown concern and compassion to the plight of workers in adherence to the Constitutional provisions on social justice and has always upheld the right of workers to press for better terms and conditions of employment. such as through a CBA. 102636 September 10. BALINANG. mandating an increase in pay of P25 per day for certain employees in the private sector..

Consequently. xxx xxx xxx (d) If expressly provided for and agreed upon in the collective bargaining agreements.00) shall also receive an increase of twenty-five pesos (P25. . . granting a monthly P900 wage increase effective 01 January 1989. only regular employees as of 01 January 1989 were given the increase to the exclusion of probationary employees. to its probationary employees and to those who had been promoted to regular or permanent status before 01 July 1989 but whose daily rate was P100 and below. such dispute shall first be settled voluntarily between the parties and in the event of a deadlock. That those already receiving above the minimum wage rates up to one hundred pesos(P100. and for other purposes. where such increases are less than the prescribed increases in the wage rates under this Act. . pertinent to this case. The pendency of a dispute arising from a wage distortion shall not in any way delay the applicability of the increase in the wage rates prescribed under this Section. the bank entered into a collective bargaining agreement with the MBTCEU. state: Sec. The bank refused to give the same increase to its regular employees who were receiving more than P100 per day and recipients of the P900 CBA increase. or on 01 January 1989. Barely a month later. provided that. . fixing new wage rates. . . and P200 wage increase effective 01 January 1991. the same shall be finally resolved through compulsory arbitration by the regional branches of the National Labor Relations Commission (NLRC) having jurisdiction over the workplace. 4. Its provisions. shall be increased by twenty-five pesos (P25) per day.: Provided. The MBTCEU had also bargained for the inclusion of probationary employees in the list of employees who would benefit from the first P900 increase but the bank had adamantly refused to accede thereto. (a) Upon the effectivity of this Act. whether agricultural or non-agricultural. . the employer shall pay the difference. Republic Act 6727. the bank gave the P25 increase per day. Where the application of the increases in the wage rates under this Section results in distortions as defined under existing laws in the wage structure within an establishment and gives rise to a dispute therein. providing wage incentives for industrial dispersal to the countryside. "an act to rationalize wage policy determination be establishing the mechanism and proper standards thereof. all increase in the daily basic wage rates granted by the employers three (3) months before the effectivity of this Act shall be credited as compliance with the increases in the wage rates prescribed herein. merit wage increase and those resulting from the regularization or promotion of employees." took effect. Such increase shall not include anniversary wage increases. Pursuant to the above provisions. It shall be mandatory for the NLRC to conduct continous hearings and decide any dispute arising under this Section within twenty (20) calendar days from the time said dispute is formally submitted to it for arbitration. . the statutory minimum wage rates of all workers and employees in the private sector. . or P750 a month.00) per day.On 25 May 1989. . P600 wage increase 01 January 1990.

he added." Thus. the NLRC said: . Carpio. the MBTCEU sought from the bank the correction of the alleged distortion in pay. 2 The bank appealed to the NLRC. the bank petitioned the Secretary of Labor to assume jurisdiction over the case or to certify the same to the National Labor Relations Commission (NLRC) under Article 263 (g) of the Labor Code. reversed the decision of the Labor Arbiter. He stressed that "it is not necessary that a big number of wage earners within a company be benefited by the mandatory increase before a wage distortion may be considered to have taken place.8% of the bank's population of a total of 2.00) Pesos monthly increase effective July 1.00 to barely P150. the respondent is hereby directed to restore to complainants and their members the Nine Hundred (P900. In his decision of 05 February 1991." Otherwise. he said.00. there emerged a substantially reduced salary gap. and that. whose pay was over P100 a day. . and (b) the regular employees as of 01 July 1989.Contending that the bank's implementation of Republic Act 6727 resulted in the categorization of the employees into (a) the probationary employees as of 30 June 1989 and regular employees receiving P100 or less a day who had been promoted to permanent or regular status before 01 July 1989. Zapanta. through Commissioners Rustico L. In order to avert an impeding strike. SO ORDERED. that such increase "result(s) in the severe contraction of an intentional quantitative difference in wage between employee groups.00 wage gap intentionally provided in a collective bargaining agreement as a quantitative difference in wage between those who WERE regular employees as of January 1. since the "subjective quantitative difference" between wage rates had been reduced from P900." it being enough. or other logical basis of differentiation and such differences or distinction are obliterated (In Re: Labor Dispute at the Bank of the Philippine Islands. 1989 and those who WERE NOT as of that date. 1The parties ultimately agreed to refer the issue for compulsory arbitration to the NLRC. . 1989. premises considered. 1989 by granting them a Seven Hundred Fifty (P750. by a vote of 2 to 1. between the two groups. length of service. with perceived stability. correction of the wage distortion pursuant to Section 4(c) of the Rules Implementing Republic Act 6727 should be made. a P900. is definitely a logical basis of differentiation (that) deserves protection from any distorting statutory wage increase. On 31 May 1991.108 regular employees" benefited. the labor arbiter disregard with the bank's contention that the increase in its implementation of Republic Act 6727 did not constitute a distortion because "only 143 employees or 6. Speaking.00) Pesos CBA wage gap they used to enjoy over non-regular employees as of January 1. the NLRC Second Division. The case was assigned to Labor Arbiter Eduardo J. Diokno and Domingo H. "a minimum wage statute that seek to uplift the economic condition of labor would itself destroy the mechanism of collective bargaining which. a wage distortion can arise only in a situation where the salary structure is characterized by intentional quantitative differences among employee groups determined or fixed on the basis of skills. has been labor's constitutional and regular source of wage increase for so long a time now." The labor arbiter concluded that since the "intentional quantitative difference" in wage or salary rates between and among groups of employees is not based purely on skills or length of service but also on "other logical bases of differentiation. The labor arbiter disposed of the case. . thus: WHEREFORE.

00 a month or P25. For that matter. WHEREFORE. IV-02 issued on 21 May 1991 by the Regional Tripartite Wages and Productivity Commission for correction of pay scale structures in case of wage distortion as in the case at bar which is: Minimum Wage = % x Prescribed = Distortion —————— Increased Adjustment Actual Salary . RA 6727? It is may considered view that the quantitative intended distinction in pay between the two groups of workers in respondent company was contracted by more than fifty (50%) per cent or in particular by more or less eighty-three (83%) per cent hence. Nonetheless. They are only entitled to the relief granted by said law by way of correction of the pay scale in case of distortion in wages by reason thereof. the award of P750.00 per day granted to the workers covered by the said law in the sense that they are not covered by the said increase mandated by RA 6727. Hence. 3 In her dissent. Secretary of Labor and Employment. and Levels 4 and 5. there is nothing in the law which would justify an across-the-board adjustment of P750. SO ORDERED. the reduction in the wage gaps between said levels is not significant as to obliterate or result in severe contraction of the intentional quantitative differences in salary rates between the employees groups. and levels 6 and 7 (sic) were maintained. the formula offered and incorporated in Wage Order No. there is no doubt that there is an evident severe contraction resulting in the complained of wage distortion. Levels 3 and 4. the wage gaps between Level 6 and 7 levels 5 and 6. Would such contraction be severe as to warrant the necessary correction sanctioned by the law in point.00 per month to all of herein individual complainants as ordered by the Labor Arbiter below. We noted that in the new wage salary structure. Presiding Commissioner Edna Bonto-Perez opined: There may not be an obliteration nor elimination of said quantitative distinction/difference aforecited but clearly there is a contraction. herein complainants cannot by right claim for the whole amount of P750. February 18. dismissing the complaint for lack of merit. the appealed decision is hereby set aside and a new judgment is hereby entered. While there is a noticeable decrease in the wage gap between levels 2 and 3.00 as ordered by the labor Arbiter. For this reason.NCMB-RB-7-11-096-89. Moreover. the basis requirement for a wage in this case. to my mind is not the most equitable remedy at bar. for the same would be an across the board increase which is not the intention of RA 6727. 1991). As applied in this case. premises considered.

does not go beyond the evaluation of the sufficiency of the evidence upon which the labor official's findings rest. 6727. by and large." 10 aforequoted. The "intentional quantitative differences" in wage among employees of the bank has been set by the CBA to about P900 per month as of 01 January 1989. thus: (p) Wage Distortion means a situation where an increase in prescribed wage rates results in the elimination or severe contradiction of intentional quantitative differences in wage or salary rates between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills. factual findings of the NLRC are generally accorded not only respect but also finality provided that its decision are supported by substantial evidence and devoid of any taint of unfairness of arbitrariness. a question of fact the determination of which is the statutory function of the NLRC. It is intentional as it has been arrived at through the collective bargaining process to which the parties are thereby concluded. the MBTCEU and its president filed the instant petition for certiorari. The issue of whether or not a wage distortion exists as a consequence of the grant of a wage increase to certain employees. as a result of an increase in the prescribed wage rate. the law did not require that there be an elimination or total abrogation of quantitative wage or salary differences. As has been aptly observed by Presiding Commissioner Edna Bonto-Perez in her dissenting opinion. the contraction between personnel groupings comes close to eighty-three (83%). is. The definition of "wage distortion. we agree. they do differ. 9 When. shows that such distortion can so exist when. For this very reason. 8 As such. length of service. which cannot. the members of the same labor tribunal are not in accord on those aspects of a case. 4 The MBTCEU filed a motion for reconsideration of the decision of the NLRC. we may add. an "elimination or severe contraction of intentional quantitative differences in wage or salary rates" would occur "between and among employee groups in an establishment as to effectively obliterate the distinctions embodied in such wage structure based on skills. 5 We agree with the Solicitor General that the petition is impressed with merit. length of service.would be the most equitable and fair under the circumstances obtaining in this case. under the Rules Implementing Republic Act 6727. having been denied. however. however. be considered less than severe. this Court is well cautioned not to be as so conscious in passing upon the sufficiency of the evidence. 11 The Solicitor . as well as its dissenting member. on the extent of the distortion that can warrant the adoption of corrective measures required by law. 6 The term "wage distortion". by any stretch of imagination. or other logical bases of differentiation. agree that there is a wage distortion arising from the bank's implementation of the P25 wage increase. 7 Judicial review of labor cases. In this case. let alone the conclusions derived therefrom. a severe contraction thereof is enough. is defined. the majority of the members of the NLRC." In mandating an adjustment. as in this case. charging the NLRC with gave abuse of discretion by its refusal (a) "to acknowledge the existence of a wage distortion in the wage or salary rates between and among the employee groups of the respondent bank as a result of the bank's partial implementation" of Republic Act 6727 and (b) to give due course to its claim for an across-the-board P25 increase under Republic Act No. I register my dissent from the majority opinion and opt for the modification of the Labor Arbiter's decision as afore-discussed. or other logical bases of differentiation.

" particularly in this case where both Republic Act 6727 and the CBA allow a credit for voluntary compliance. however. would be to penalize employers who grant their workers more than the statutorily prescribed minimum rates of increases. As the Court. . finding merit in the instant petition for certiorari.. v. this would be counterproductive so far as securing the interests of labor is concerned. . concur. Such assumption or certification shall have the effect . Bidin. in his opinion. . 12 In keeping then with the intendment of the law and the agreement of the parties themselves. Feliciano. # Footnotes 1 This provision states: (g) When. we are also of the view that giving the employees an across-the-board increase of P750 may not be conducive to the policy of encouraging "employers to grant wage and allowance increases to their employees higher than the minimum rates of increases prescribed by statute or administrative regulation. Inc. NLRC: 14 . We. . whether the benefits under a collective bargaining agreement should be equated with those granted by law or not. along with the often repeated rule that all doubts in the interpretation and implementation of labor laws should be resolved in favor of labor. the same is GRANTED DUE PROCESS. This decision is immediately executory. JJ. the Secretary of Labor and Employment may assume jurisdiction over the dispute and decide it or certify the same to the Commission for compulsory arbitration.General. WHEREFORE. (T)o compel employers simply to add on legislated increases in salaries or allowances without regard to what is already being paid. in recommending the grant of due course to the petition. unless there are compelling reasons otherwise. which has also been the standard considered by the regional Tripartite Wages and Productivity Commission for the correction of pay scale structures in cases of wage distortion. there exists a labor dispute causing or likely to cause a strike or lockout in an industry indispensable to the national interests. is on leave. Romero and Melo. We also view it as being just and equitable. SO ORDERED. 13 we must approximate an acceptable quantitative difference between and among the CBA agreed work levels. must prevail and be given effect. Like the majority of the members of the NLRC. has correctly emphasized that the intention of the parties. do not subscribe to the labor arbiter's exacting prescription in correcting the wage distortion. We find the formula suggested then by Commissioner Bonto-Perez. also pointed out in Apex Mining Company. the questioned NLRC decision is hereby SET ASIDE and the decision of the labor arbiter is REINSTATED subject to the MODIFICATION that the wage distortion in question be corrected in accordance with the formula expressed in the dissenting opinion of Presiding Commissioner Edna Bonto-Perez. Clearly.. . J. through Associate Justice Florentino Feliciano. 15 to well be the appropriate measure to balance the respective contentions of the parties in this instance. .

National Wages and Productivity Commission. . 201 SCRA 759.of automatically enjoining the intended or impending strike or lockout as specified in the assumption or certification order.Arellano Law Foundation FIRST DIVISION [G. August 23. 14 G. G. 206 SCRA 497. 49-50. p. 176 SCRA 625. 8 Philippine Overseas Drilling and Oil Development Corporation v. 100138.R. 3 Ibid. The Lawphil Project . pp. 1992.. G. G. NLRC..R. Secretary of Labor. 1. Rollo.R. p. . February 25. 13 International Pharmaceuticals. v. 12 Filipinas Golf & Country Club. 146 SCRA 79. pp. No.. 212 SCRA 225. 195 SCRA 92. 1992. 86200. 501. 96169. v. March 11.R. June 1. 187 SCRA 611. Nos. 134. G. 1986.R. 128845. 55-56.R. Ministry of Labor. 124 of the Labor Code as amended by Rep.. 35-37. No. 2 Rollo. 615. 1989. Inc. 2000] .R. April 19. 92981-83.R. NLRC. No. Inc. 7 Cardona v. 172 SCRA 580.R. 10 This is now under Art. 9 Artex Development Co. 1991. No.R. 12. NLRC. No. 55703. No. 1992. NLRC. 81176. 205 SCRA 59. Five J Taxi v. August 5. November 27. v. Act 6727. G. 15 See: Employers Confederation of the Philippines v. 767. 61918. 6 Manifestation in lieu of Comment. January 9. 88. p. No. G. July 20. G. 632. 5 Ibid. 1989. Inc. 1991. 1990. p. 4 Ibid. NLRC. 585.. . No. September 24. 11 Plastic Town Center Corporation v. No. 89007. 65045. G.

. DR. petitioner. except laws that have been or will be enacted for the protection of employees. Inc.INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE). To enable the School to continue carrying out its educational program and improve its standard of instruction.. from Philippine or other nationalities. That is a principle long honored in this jurisdiction.. HON.To which country does one owe economic allegiance? d. We agree. INC. The point is that employees should be given equal pay for work of equal value..Where is one's home economy? c.. J. BRIAN MACCAULEY in his capacity as the Superintendent of International School-Manila. The School employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire: a..Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that individual to the Philippines? [2] . DECISION KAPUNAN. of course... LEONARDO A..: Receiving salaries less than their counterparts hired abroad.. classifying the same into two: (1) foreign-hires and (2) local-hires. Section 2(c) of the same decree authorizes the School to [1] employ its own teaching and management personnel selected by it either locally or abroad.What is one's domicile? b. (the School. mostly Filipinos. That is the principle we uphold today. cry discrimination. respondents. Accordingly. the School hires both foreign and local teachers as members of its faculty. That the local-hires are paid more than their colleagues in other schools is. Private respondent International School... vs.. the local-hires of private respondent School.. beside the point. for short). and INTERNATIONAL SCHOOL. such personnel being exempt from otherwise applicable laws and regulations attending their employment.. is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents. HON. CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and Employment. pursuant to Presidential Decree 732.. QUISUMBING in his capacity as the Secretary of Labor and Employment. That is a principle that rests on fundamental notions of justice..

Should the answer to any of these queries point to the Philippines. allowance for the education of one's children. leave his family and friends. and of course the primary benefit of a basic salary/retirement compensation. Because of a limited tenure. and take the risk of deviating from a promising career path-all for the purpose of pursuing his profession as an educator. adequate insurance against illness and death. transportation. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19. This issue. the faculty member is classified as a local hire. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to endure. Trajano. as well as the question of whether foreign-hires should be included in the appropriate bargaining unit. petitioner filed a notice of strike. 1995. 1997. 1996. Crescenciano B. namely: (a) the "dislocation factor" and (b) limited tenure. The School grants foreign-hires certain benefits not accorded local-hires. taxes. effective means of transportation. otherwise. Foreign-hires are also paid a salary rate twenty-five percent (25%) more than localhires. The School explains: A foreign-hire would necessarily have to uproot himself from his home country. petitioner International School Alliance of Educators. issued an Order resolving the parity and representation issues in favor of the School. the DOLE Acting Secretary. he or she is deemed a foreign-hire. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. Petitioner now seeks relief in this Court. but this time in a foreign land. [3] When negotiations for a new collective bargaining agreement were held on June 1995. and home leave travel allowance. . Then DOLE Secretary Leonardo A. shipping costs. These include housing. On June 10. eventually caused a deadlock between the parties. contested the difference in salary rates between foreign and local-hires. [4] On September 7. "a legitimate labor union and the collective bargaining representative of all faculty members" of the School. The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent professionals in the field of international education. the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable employment after a long period in a foreign land.

with nationalities other than Filipino. who have been hired locally and classified as local hires. under terms and conditions that are consistent with accepted international practice. Truth to tell. Furthermore. The School disputes these claims and gives a breakdown of its faculty members. To apply parity therefore. The Acting Secretary of Labor found that these nonFilipino local-hires received the same benefits as the Filipino local-hires: [5] The compensation package given to local-hires has been shown to apply to all. there are foreigners who have been hired locally and who are paid equally as Filipino local hires. we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the international market. We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. The international character of the School requires the hiring of foreign personnel to deal with different nationalities and different cultures. Appendix C of said CBA further provides: . A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree as follows: All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad.Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos and that the grant of higher salaries to foreign-hires constitutes racial discrimination. regardless of race. [6] The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates: The principle "equal pay for equal work" does not find application in the present case. numbering 38 in all. among the student population. in wages and other benefits would also require parity in other terms and conditions of employment which include the employment contract.

the former enjoying only a limited tenure. economic. based on the test of what is reasonable.e. [9] [10] [11] [12] [13] [14] [15] [16] . hence." The very broad Article 19 of the Civil Code requires every person.all embody the general principle against discrimination. give everyone his due. The 25% differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS). has incorporated this principle as part of its national laws. It is an established principle of constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. the International Covenant on Economic. which springs from general principles of law. the International Convention on the Elimination of All Forms of Racial Discrimination. Our Constitution and laws reflect the policy against these evils." [8] International law. having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the teaching faculty of the School. Verily. the general principles of fairness and justice. The Universal Declaration of Human Rights. [to] act with justice. these provisions demonstrate the parties' recognition of the difference in the status of two types of employees. and Cultural Rights. the Convention against Discrimination in Education. [7] We cannot agree. To our mind. and observe honesty and good faith. the difference in their salaries. The Philippines. the very antithesis of fairness and justice. reduce social. through its Constitution. That public policy abhors inequality and discrimination is beyond contention.The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The Union cannot also invoke the equal protection clause to justify its claim of parity. likewise proscribes discrimination. and political inequalities. A classification is reasonable if it is based on substantial distinctions and apply to all members of the same class. "in the exercise of his rights and in the performance of his duties. the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation . General principles of law include principles of equity. there is a substantial distinction between foreign hires and local hires. The Constitution in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity. i.. Social.

where the relations between capital and labor are often skewed in favor of capital. with: i. the International Covenant on Economic. The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work. [22] The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires.Fair wages and equal remuneration for work of equal value without distinction of any kind. its "international character" notwithstanding. closes its eyes to unequal and discriminatory terms and conditions of employment. [18] [19] [20] Discrimination. provides: The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work. Article 135.In the workplace. Social. the office or the field . [17] The Constitution also directs the State to promote "equality of employment opportunities for all. prohibits and penalizes the payment of lesser compensation to a female employee as against a male employee for work of equal value. which ensure. for example. skill. as a minimum.. particularly in terms of wages. [21] Notably. If an [23] . race or creed. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization. is frowned upon by the Labor Code.Remuneration which provides all workers. with equal pay for equal work. in Article 7 thereof. under similar conditions. This rule applies to the School. in particular: a." Persons who work with substantially equal qualifications." Similarly.. x x x. in spite of its primordial obligation to promote and ensure equal employment opportunities... effort and responsibility. The Constitution specifically provides that labor is entitled to "humane conditions of work..the factory. in particular women being guaranteed conditions of work not inferior to those enjoyed by men..but include as well the manner by which employers treat their employees." It would be an affront to both the spirit and letter of these provisions if the State. inequality and discrimination by the employer are all the more reprehensible. supra. and Cultural Rights." These conditions are not restricted to the physical workplace .. should be paid similar salaries. the Labor Code provides that the State shall "ensure equal work opportunities regardless of sex. The Court finds this argument a little cavalier..

transportation. There is no evidence here that foreign-hires perform 25% more efficiently or effectively than the local-hires. it carries with it the fundamental idea of compensation for services rendered. the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of services." the pay of the Roman soldier. Whether it be derived from "salarium. The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the principle of equal work for equal pay. This presumption is borne by logic and human experience." "to afford labor full protection. The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires. shipping costs.employer accords employees the same position and rank. has the right and duty to regulate the relations between labor and capital. [25] [26] [27] [28] In this case." or more fancifully from "sal. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. taxes and home leave travel allowances." In Songco v.) as "a reward or recompense for services performed. Should such contracts contain stipulations that are contrary to public policy. the presumption is that these employees perform equal work." Similarly. courts will not hesitate to strike down these stipulations. it is for the employer to explain why the employee is treated unfairly. collective bargaining agreements included. That would be adding insult to injury. (Emphasis supplied. Both groups have similar functions and responsibilities. The Constitution enjoins the State to "protect the rights of workers and promote their welfare. The employer in this case has failed to discharge this burden. we said that: [24] "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. it is not for that employee to explain why he receives less or why the others receive more. salaries should not be used as an enticement to the prejudice of local-hires. which they perform under similar working conditions. "Salary" is defined in Black's Law Dictionary (5th ed. For the same reason.) While we recognize the need of the School to attract foreign-hires. National Labor Relations Commission. such as housing. the "dislocation factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates." The State. must yield to the common good. These relations are not merely contractual but are so impressed with public interest that labor contracts. The employer has discriminated against that employee. If the employer pays one employee less than the rest. we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local hires to be an invalid . therefore.

. SO ORDERED. Puno. The Orders of the Secretary of Labor and Employment dated June 10. transportation. such as housing. on official leave. 1997." The factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine). A bargaining unit is "a group of employees of a given employer. that foreign-hires do not belong to the same bargaining unit as the local-hires.classification. taxes. J. These benefits. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. and (4) similarity of employment status. . local-hires enjoy security of tenure. The practice of the School of according higher salaries to foreign-hires contravenes public policy and.. Although foreignhires perform similar functions under the same working conditions as the local-hires. (Chairman). Davide. Ynares-Santiago.. The collective bargaining history in the School also shows that these groups were always treated separately. concur. (3) prior collective bargaining history. or similarity of compensation and working conditions (Substantial Mutual Interests Rule). WHEREFORE. We agree. The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights. To include foreign-hires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights. Jr. JJ. and home leave travel allowance. (2) affinity and unity of the employees' interest. on leave. C. certainly. however. and justify the exclusion of the former from the latter. comprised of all or less than all of the entire body of employees. such as substantial similarity of work and duties. foreign-hires are accorded certain benefits not granted to local-hires. are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent School of according foreign-hires higher salaries than localhires. consistent with equity to the employer indicate to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law. 1996 and March 19. [29] [30] [31] It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining.J.. are reasonably related to their status as foreign-hires. Foreign-hires have limited tenure. the petition is GIVEN DUE COURSE. shipping costs. does not deserve the sympathy of this Court. The petition is hereby GRANTED IN PART. and Pardo.

The States Parties to the present Covenant undertake to guarantee that the rights enunciated in the present Covenant will be exercised without discrimination of any kind as to race. Under Article 3..." Article 2 provides. Article 2 provides: "2. religion... political or other opinion. sex. p. "to abrogate any statutory provisions and any administrative instructions and to discontinue any administrative practices which involve discrimination in education. [10] M. at 39. The breakdown is as follows: American s Australian Belgian British Burmese Canadian Chinese French German Indian Japanese Malaysian New Zealander Spanish . the States Parties undertake. "The States Parties to this Convention undertake further more [6] [7] . national or social origin. colour. [9] Statute of the International Court of Justice. at 324. art. to Donate Its Real Properties to the Government of the Republic of the Philippines and Granting It Certain Rights. 50 ILR 2 (1968) [12] Adopted by the General Assembly of the United Nations on December 10. A/B No. birth or other status. 328. DEFENSOR-SANTIAGO. at 8. Everyone is entitled to all the rights and freedoms set forth in this Declaration. language. national or social origin.. at 38-39. birth or other status. [11] Ibid.17 -2 -1 -2 -1 -2 -2 -1 -1 -5 -1 -1 -1 -1 Id. December 14. citing Judge Hudson in River Meuse Case. without distinction of any kind. [3] Id. [4] Id. Article XIII thereof. 38. at 325. Inc. political or other opinion. International Law 75 (1999). [8] In Section 1. citing Rann of Kutch Arbitration (India vs. (1937) Ser. among others. 1948. religion. Id. colour. [1] [5] Id." [13] Adopted by the General of the United Nations in Resolution 2200 (XXI) of 16 December 1966. property..) [2] Rollo. 70." Under Article 4.Issued on June 19. property." [15] Adopted at Paris. 1960. Article 2 of the Convention states: "States Parties condemn racial discrimination and undertake to pursue by all appropriate means and without delay a policy of eliminating racial discrimination in all its forms and promoting understanding among all races xxx. language. Article 1 thereof states: "All human beings are born free and equal in dignity and rights. 1975 (authorizing International School. "1." [14] Adopted by the General assembly of the United Nations in Resolution 2106 (XX) 21 December 1965. sex. Pakistan). such as race.

the government employs this rule in fixing the compensation of government employees. supra. by methods appropriate to the circumstances and to national usage. Thus. See also the Preamble of Presidential Decree No. but also as a condition for the continuation of employment.. Constitution. June 25. Laguesma. Section 3 thereof. by methods appropriate to national condition and practice. equality of opportunity and treatment in respect of employment and occupation. "Each Member for which this Convention is in force undertakes to declare and pursue a national policy designed to promote. [31] Belyca Corporation vs. [19] In Article 3 thereof. 1958. with a view to eliminating any discrimination in respect thereof. [26] In Section 3. [21] In relation to Articles 288 and 289 of the same Code. Article 2 provides that.to formulate. and qualification requirements of the positions. [22] Indeed. 6758 (An Act Prescribing a Revised Compensation and Position Classification System in the Government and for Other Purposes) declares it "the policy of the State to provide equal pay for substantially equal work and to base differences in pay upon substantive differences in duties and responsibilities." [17] In Article XIII. Laguesma. p. and Integrating the same) [23] Rollo. [29] Toyota Motor Philippines Corporation vs. See also Article 3 of the Labor Code. Civil Code. Republic Act No. that a woman shall not get married. [27] See Sec. Ferrer-Calleja. Article XIII thereof. Article XIII. develop and apply a national policy which. Article 3 of the Labor Code. Article 135 of the Labor Code declares it unlawful for the employer to require. 491. not only as a condition of employment. 985 (A Decree Revising the Position Classification and Compensation Systems in the National Government. Toyota Motor Philippines Federation Labor Union and the Secretary of Labor and Employment. 168 SCRA 184 (1988) .g." [16] Adopted by the General Conference of the International Labor Organization at Geneva. 236 SCRA 595 (1994) [30] San Miguel Corporation vs. San Miguel Corporation vs. 268 SCRA 573 (1997). will tend to promote equality of opportunity and of treatment in the matter of education xxx. [18] Id. Article II thereof. [24] 183 SCRA 610 (1990) [25] In Section 18. 3. [20] E. [28] Article 1700.